First published in Cleantech magazine 2011 Issue 3. Copyright Cleantech Investor Ltd

By Denis Gross

The recent Cleantech Cluster event, hosted by Burges Salmon in Bristol, focused on many of the aspects of Bristol and the South West that make the region a hot spot for cleantech. The panel, which was moderated by Anne McIvor of Cleantech Investor, comprised:

Alan Bailey: Chairman, Low Carbon South West
Denis Burn: Chair of the University of Bristol Council
Mark Preston: Principal, WHEB Partners
Nick Sturge: Centre Director, SETSquared
Philip Tellwright: Managing Director, SWAIN (South West Angel and Investor Network.

In response to the question “what is the cleantech edge” in the region, Alan Bailey, Chairman of Low Carbon South West, said that low carbon was a theme cutting across all activities, rather than being a separate sector in itself. With around 2,000 members in the region, Low Carbon South West is arguably the largest cleantech trade association in the UK, and exactly the sort of sector specialist body that Bailey believes will be vital in the era of public spending reductions. After further pressing, he pointed to waste to energy emerging as a major sector.

Nick Sturge, Centre Director of SETSquared (a collaboration between the universities of Bath, Bristol, Exeter, Southampton and Surrey which partners in enterprise activities) believes that the strength of the region lies in the platform of expertise extant around Bristol, particularly aerospace and marine. Consequently there is a strong presence of technological expertise which, when combined with innovation in an area having a density of knowledge from the several universities in Bristol and Bath, gives the region its particular strength.

As at many similar events, the role of Government was discussed – in this case as a response to a question regarding the recently announced DECC Renewable Heat Incentive. This was perceived as a key announcement and a major boost for many local companies. Phillip Tellwright , Managing Director of SWAIN, said that angel investors look for certainty with respect to government intervention and artificial guidance of the market.

On the issue of what more could be done, the consensus was that more could always be done – more money, more business guidance, and a way found around the problem of people working in too many silos. Two events should be useful to the cleantech community in Bristol – an upcoming regional investment fair and the Venturefest in November. Denis Burn, Chair of the University of Bristol Council, remarked that there was much to do with a five to ten year horizon in mind, and that it couldn’t all be left to the market. Rather, those with a vested interest in the sector should be prepared to influence the market.

Mark Preston, Principal at WHEB Partners, explained that his firm targets companies with revenues of £3-5 million which, if not yet profitable, have a clear timeline to profitability. Early stage cleantech companies pose problems for many venture capital firms because of the cost of R&D and proof of concept. Capital intensity also presents a barrier in the sector. Furthermore, there is a real shortage of early stage investors since funds of funds, pension funds, etc. will not invest in funds aimed at early stage investments. However, Preston underlined the fact that WHEB has a vested interest in the health of organisations such as SWAIN and SETSquared, which potentially provide a flow of deals for later stage venture funds.

Alan Bailey thought there was a need to move the model away from short term investments for flipping to long term investment – why not set up funds to unlock the trillions of pounds currently locked up in hedge funds? Bailey regrets the lack of expertise in investment funds and their lack of knowledge of the sector. Philip Tellwright suggested a solution could lie in angel investors working together in syndicates. Nick Sturge weighed in on the harshness of investors, and pointed out that the different types of funds work on different scales.

Is the Green Investment Bank (which might be located in Bristol) the answer? Alan Bailey felt that it was not likely to provide the sort of help needed for the companies with which he typically works – unless the GIB can lend to SMEs. He pointed out that UK investment has fallen over the past three years. However, within the overall picture the investment in infrastructure has increased while that in SMEs has been reduced. In fact, many Low Carbon South West companies have gone abroad for funding!  Philip Tellwright opined that the sort of banking seen three to four years ago is a thing of the past: banking is now risk averse/low margin.

Clearly some of the macro economic issues are hitting hard, but the strength and resourcefulness of the cleantech sector in the Bristol and South West region should see it through these challenging times and to future prosperity.