PRIME Coalition: Bridging the clean tech investment gap

21 December 2015 (Last Updated December 21st, 2015 18:30)

US-based company PRIME Coalition launched in summer 2015 to channel money from charities and foundations into clean energy projects, technology and start-ups. Director of Philanthropic Partnerships Nicole Systrom explains how the company connects promising new technologies to charitable funding, and whether philanthropy could help bridge the gap between investment and clean technology.

PRIME Coalition: Bridging the clean tech investment gap

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PRIME Coalition was launched by Sarah Kearney in summer 2015 with the aim of harnessing the power of philanthropy and finding funding for clean energy projects; particularly new start-ups. Non-profits aren’t known to often invest in green technology, so PRIME hopes to address this and turn innovative green ideas in to thriving companies..

Lindsay Dodgson: What is PRIME Coalition and what are your goals?

Nicole Systrom: Our mission is empower philanthropic foundations and family offices with the critical tools they need to support new ventures that promise vast reduction of global greenhouse gas emissions. We serve as a two-sided, purpose-built marketplace, connecting early stage entrepreneurs with philanthropists to provide promising companies with the capital needed to bridge the innovation ‘valley of death’.

For philanthropists, PRIME provides another avenue for philanthropists to achieve their social mission. We facilitate for-profit investments by identifying the most promising companies and projects with the largest potential to mitigate climate change through their products and services, and marshaling legal and financial expertise to lower transaction costs.

For entrepreneurs, PRIME serves as a conduit to our network of foundations, family offices, and seed investors – sources of long-term capital which entrepreneurs typically have difficulty accessing.

LD: What have you achieved so far?

NS: We have made tremendous progress so far, by facilitating our first proof-of-concept investment this summer, in Quidnet. The Quidnet deal included three different types of investments: a programme-related investment of philanthropic capital from a major foundation; a recoverable grant from a private foundation, and; straight convertible debt from conventional seed investors.

We’ve also built an Investment Committee of leading venture capitalists in the clean tech space. Over the past year, our Investment Committee has helped us survey the landscape of potential investment opportunities, screening over 1,300 companies for their potential impact on climate change, suitability for early stage philanthropic investment, and potential to attract follow on capital as they get to scale. The handful of companies that made it through this year long process will be announced in early 2016. PRIME will be working with them starting early next year to find aligned philanthropic investors.

LD: How do you believe that PRIME will play a role in a greener future, and in helping to reduce the threat of climate change?

NS: We are helping to unlock a new source of capital for early stage, clean energy innovation. We believe that this new source of capital will accelerate the development and deployment of the breakthrough technologies needed to fight climate change by addressing the gap in financing.

LD: What are some examples of the innovative tech ideas and start-ups that you’ve found funding for?

NS: One example is Quidnet, which is developing a radically cost-effective grid energy storage technology, ten times cheaper than batteries, that can take advantage of abandoned oil and gas wells. If successful, this technology will facilitate the integration of increasing amounts of renewables on the grid.

LD: What is the importance of philanthropy in green energy technology investment?

NS: Philanthropic capital has the ability to accept higher risks over a longer term than many conventional capital sources. At the same time, philanthropic capital is invested with a social purpose; in this case, to mitigate climate change. For early stage energy companies that want to impact climate change, but are unsuitable for mainstream financing due to many reasons; technical, regulatory etc. for-profit investment of philanthropic capital can provide early stage companies with the financing and time needed to address major risks, so that the company is eventually ready for commercial investment.

LD: Why have investors been put off green tech in the past?

NS: Green tech companies often require high amounts of capital over a long investment time period. Unfortunately, these characteristics make many clean energy companies inappropriate for venture capital; the traditional method of financing innovation in its early stages, because venture capital funds are typically structured to require outsize returns in a relatively short timeframe.

This doesn’t mean that clean energy companies aren’t worth investing in; it just means that investors need to have different expectations when investing in certain types of early stage clean energy companies.

LD: Do you foresee any future difficulties in obtaining investments?

NS: Programme-related investments have been used to make for-profit investments that also advance a social mission for a long time. Our main challenge is to translate this long track record of success to the clean energy sector, where PRIs have been used rarely to date. This will require education and capacity building to help both philanthropists and entrepreneurs get comfortable with using PRIs in this way.

LD: If a start-up gets money from a charitable foundation and private investors, will the foundation’s social mission be at odds with the goals of the profit seeking capitalists?

NS: Part of our role at PRIME is to screen potential investments to make sure that a company’s development is in lockstep with its potential impact on climate change. That is to say, the company’s incentive to achieve profitability and scale its products and services in the market is directly aligned with impacting climate change.