What your membership meant in 2017/18

As many of you will know, Green Angel Syndicate has recently celebrated its one-year anniversary, a perfect time to review what we have achieved so far and, most notably, what we have done for our members.

Those of you more familiar with the history will be aware that Green Angel Syndicate pre-dates last Summer.  However, at that point we re-constituted the company, created a new team, re-defined the process, reformed the Membership, and essentially started the Syndicate again from scratch, which is why we are treating this anniversary as the completion of our first year, and measuring our results to test what we have achieved for our members.
​
Ultimately, we will judge ourselves on the success of the businesses that we will collectively have funded. It is clearly too early for any meaningful track record, notably in terms of exits, but we can already report on our investment process– in particular, how many proposals we have received, how we have selected those that we have invested in, and how we are adding value.

A year in numbers

Having dug deep into our deal log, here are a few statistics that we find really enlightening:

• From early 2017 to the end of June 2018, we have received 341 pitches. That’s 4-5 per week or roughly one each working day – and the pace has been accelerating.
• The typical amount that they were seeking was £700k.
• All sectors of the green economy were covered, from all different types of renewable energy to agritech, energy efficiency, materials, recycling and, of course, transportation.
• Of the 41 companies that we put forward to our Advisory Group of cornerstone investors, 24 were selected to pitch and 17 attracted sufficient investment interest to lead to a formal, in-depth due diligence work – see more on this below.

• So far, we have invested in six companies, representing less than 2% of the total number of projects received.

​
There are many things that we can do better and faster, but we are proud that these figures already speak to the hard work that we do and the value that we add for Green Angel Syndicate members.

A median raise of £700k
On average, the companies were pitching for £1.8m, but this figure was distorted by a few very big deals (£10m+) which shouldn’t really have made it to our deal log. After all, we are early stage investors. As such, the median is more representative, at £700k. As shown in the chart below, the largest number of deals were in the £250-500k range.

Source: Green Angel Syndicate

For most of these companies, we obtained data on the valuation that they have been seeking, showing an average of £5.5m and a (more representative) median valuation of £4m.

All sectors of the green economy were represented, including:

• Renewable energy – of which wind, solar and biofuels are the largest contributors, but heating, wave, tidal and other forms of energy harvesting feature in good numbers as well;
• Transport – in which electric vehicles are the largest subset (in this we include engine technologies as well as charging stations and e-bikes), but also strong showings from hydrogen technologies, autonomous vehicles, and a few in aerospace and ships;
• The ‘Agritech, food, water, monitoring and conservation’ cluster includes all innovative farming technologies, water treatment and distribution, as well as remote monitoring and data gathering solutions (e.g. from drones or satellites) and conservation-related initiatives;
• In the ‘Materials & circular economy’ block, we have included new greener materials, recycling and circular economy as well as carbon capture technologies;
• In ‘Smart grid, energy storage and utility’, the largest contribution by far is from energy storage technologies, including batteries but also other types of storage;
• Finally, ‘Energy efficiency, smart cities’ is dominated by technologies and solutions to monitor and reduce energy consumption in buildings and cities.

Source: Green Angel Syndicate

​​A harsh sieving process

Of the 341 received, we have sent 41 to our Advisory Group of cornerstone investors. Of those, 24 attracted sufficient investment interest from the Advisory Group members and were subsequently invited to one of the six pitch events that the syndicate has organised in the past twelve months.

After the pitches, 17 investment opportunities proceeded to in-depth due diligence. In other words, almost three quarters of those who were invited to pitch have raised sufficient investment interest from our angel members to lead to a formal due diligence process. This is a key feature or our process.
​
Finally, thus far, we have completed six investments, representing a quarter of those which have pitched. This lower number reflects two realities: 1) some deals have yet to complete; and 2) for some others, we have decided not to pursue the investment on the back of our detailed due diligence work – and, with early stage companies, it is inevitable that due diligence reviews can lead to positive or negative outcomes.

Source: Green Angel Syndicate

When looking at the overall picture, it is evident that our selection process is stringent – as it should be. Our six investments so far represent less than 2% of the 341 companies that have entered our deal log.
​
However, a key lesson from these stats is that a backing by our Advisory Group, leading to a pitch, means a high probability of a successful investment taking place over the following weeks or months. This illustrates the highly value-added process that Green Angel Syndicate has put in place.

​Our due diligence process

Green Angel Syndicate has developed a thorough due diligence process which is applied to all companies which attract sufficient interest at a pitch event to move through to this stage. First a deal manager is appointed. Their first step is to arrange a due diligence visit to the company, to which all Green Angel Syndicate members who have expressed potential interest in investing are invited. Questions are gathered from all of them and an agenda prepared.

The company visit aims to identify the key areas of focus for our due diligence. After the visit we prepare a script of questions. This script is loosely used to provide the structure for the reference checking telephone calls that we then make. These will include the target company’s key collaborators, some customers and potential customers, and advisers and personal referees. Some of these are “on the list”, i.e. provided by the target company; some are “off the list”, as we tap into our membership base and their extensive network of contacts. These conversations are written up and posted on our secure web platform so that potential GAS investors can access them.

In parallel, we will review the target company’s intellectual property, patents applied for and granted, and trademarks and licence arrangements. We review the financial history, projections and funding strategy, and if the company is selling its product, look carefully at the sales pipeline. We examine the legal structure to ensure that GAS investors along with other external investors will have satisfactory, industry-standard protections, and to make sure that the relationship between the target company and its management team is appropriate (with normal good leaver/bad leaver provisions, for example). We will also undertake a web-based analysis of the competitive landscape. Again, all relevant documents are posted on the GAS web platform.
​
Due diligence progress is discussed by the GAS management team weekly, and deals will only be completed if positive answers on balance are received to all the key questions.

​Post-investment Management

One member of the GAS team will take on the responsibility for managing each deal on behalf of GAS members once the investment has been made. Sometimes this will involve a board seat (Simon Acland and Nick Lyth on Powervault, Roger Simpson on Shields Energy Services, John Hinnigan on NatureSpace Partnership, for example); sometimes observer rights (Cam Ross on Rovco), or liaison outside the board meetings (Chris Joly on Spinetic, Simon Acland on Vantage Power). Progress of portfolio companies is reported and discussed regularly at weekly GAS management meetings.

What next?

We believe we are witnessing a transformation in our economy that places a greater and greater importance on the urgent requirement for commercially viable solutions to the most pressing resource use problems faced by human life in our world. 

Our plans for 2018/19 will build on these strong foundations.  We would like to double the membership (currently standing at 70) in order to double the bandwidth in terms of investment size, and number of investments.  We welcome all your suggestions and introductions of potential new members.

We are introducing a diversity programme, starting with gender diversity, so we will particularly welcome the introduction of potential new women members.  We also include age and ethnic diversity as well, so younger and multiracial introductions are also welcome.

We are overhauling our data management systems, and will soon be launching a new improved website for your use, which will remove the rather clunky registration systems for access to data that you currently are required to use.

We also will be reviewing our selection process, and will be drawing more of you into the screening panels that we require in order to ensure that the most effective and productive filters are used in order to select the very best deals for our Pitch Events.

And we are expanding our deal management and Due Diligence teams, so will welcome all offers of support and engagement through the DD process.  The quality of our DD must continue to be of the highest order.

We believe we are witnessing a transformation in our economy that places a greater and greater importance on the urgent requirement for commercially viable solutions to the most pressing resource use problems faced by human life in our world.  The pressure on our Syndicate’s resources to satisfy that need is crucial to the success in meeting it.  We are the only angel investment syndicate in the UK specialising in this sector.  As Chris Stark, CEO of the UK Committee for Climate Change said at our anniversary meeting in June, Green Angel Syndicate is at the fulcrum of change.

Are you interested in joining the only Angel Syndicate that specialises in investments that are of benefit to the green economy? If so, contact Nick Lyth: nick@greenangelsyndicate.com