What do Atlas Power, HTEC Invinity Energy Systems and Takachar have in common?
To anyone following B.C.’s tech scene, the answer may seem obvious: All four are rising stars in the province’s clean energy sector. But dig a little deeper, and another similarity emerges: They’re all recent recipients of the kind of dynamic non-dilutive funding that is vital in this fast-growing and globally competitive industry.
Every innovative company wants to make money, but unlike those in more financially driven sectors – fintech, insurtech, retailtech and so on – the goals of clean energy firms are to balance business success with an altruistic benefit of the highest order: Reducing greenhouse gas (GHG) emissions and, in turn, combating climate change. Achieving that goal tends to require extensive and enduring research and development, yet when a cleantech company’s equity is diluted by venture capitalists (VCs) and angel investors looking for quick returns, its priorities can shift from innovating to reaching profitability as soon as possible.
Non-dilutive funding, on the other hand, allows companies to maintain more control over their R&D activities. It takes three main forms: Loans, government subsidies and grants. Typically provided by banks or VCs, loans require R&D-hindering interest to be paid, while the tax breaks and other longer-term financial assistance delivered by subsidies rarely fit the trajectories of early-stage ventures. Non-dilutive grants, however, strike the ideal balance between near-term funding needs and R&D independence.
Greater risks, greater rewards
Compared to private investors, banks and VCs, government and not-for-profit grant issuers are more tolerant of investment risk and extended investment timelines that may or may not yield game-changing results. This is especially true of clean energy solutions, given that all levels of government are focusing on accelerating Canada’s net-zero transition.
Like any investor, however, grant issuers have their own methods and strategic priorities. At the B.C. Centre for Innovation and Clean Energy (CICE), we leverage public and private partnerships and grants to fund clean energy solutions that have achieved a technology readiness level (TRL) between four and nine.
The former is the first step in determining whether the individual components of a cleantech solution will work together as a system, while the latter involves technology that is proven through successful deployment in an operational setting. We are focused on advancing funding recipients’ TRLs by at least two stages, boosting the project value gained through grants by a factor of 10 within three years, and supporting projects with the potential to reduce Canada’s carbon emissions by more than seven megatonnes per year. We are taking greater risks than many private investors would tolerate, and the rewards are much greater on the commercial, societal and environmental impact.
Non-dilutive funding is flowing fast
The good news for B.C.’s clean energy sector is that a growing number of startups are receiving this kind of flexible, innovation-friendly funding. This includes the introductory quartet, which recently joined five other clean energy innovators in sharing $5.2 million in non-dilutive CICE funding.
The diversity of these recipients is remarkable. Takachar, for instance, is making biomass-based chemicals and biofuels economically feasible by prototyping a small-scale, portable biomass conversion unit on tractors and pick-up trucks to process raw biomass on-site in remote communities. Invinity is accelerating the adoption of renewable energy by delivering vanadium flow battery storage for electrical grids worldwide, while HTEC is building hydrogen fueling stations that can withstand extreme weather conditions.
Then there’s Atlas Power, which is engineering and field-testing a unique supercapacitor system that provides fast electrical response and improves the reliability of utility systems to support renewable energy growth on power grids.
Funding with benefits
Beyond cash infusions, government and not-for-profit grants can also help cleantech startups overcome the challenges of early-stage development and commercialization by facilitating access to resources such as R&D labs and equipment, and by fostering connections and collaboration across the entire cleantech ecosystem. This includes tech accelerators and think tanks, companies of all sizes, government agencies, universities and other academic institutions, First Nations communities, inventors and entrepreneurs and, yes, private investors, banks and VCs that are ready to lend support when the time is right.
As Canada grapples with the global climate crisis, we cannot afford to waste the commercial, societal and environmental potential of our home-grown clean energy solutions. So long as we continue to provide non-dilutive capital at the intersection of breakthrough and real-word implementation, I have every confidence that this forward-thinking approach will be rewarded in ways that are on, and beyond, the cutting edge.
Todd Sayers is deputy executive director of the B.C. Centre for Innovation & Clean Energy.