As part of its €1 billion climate action investment plan announced in 2021, Ireland’s Strategic Investment Fund (ISIF) invested €68 million earlier this year in two funds that are run by New York investment firm Energy Impact Partners (EIP).

EIP has an office in Dublin staffed by Arthur Pierse, an entrepreneur and experienced impact and climate investor, like all venture capital firms these days. The firm wants to help nurture the country’s nascent climate investment ecosystem.

It is doing so at a time when traditional tech VC is still down on a global basis. Between figures from both the Irish Venture Capital Association (IVCA) and tech group TechIreland, fundraises by smaller start-ups, in particular those that raised under €30 million, are down somewhere between 40 per cent and 52 per cent.

Pierse joined me on a Zoom call with Nazo Moosa, one of EIP’s managing partners who is based in London.

Between them, they bring a wealth of experience and expertise. Among various other roles, Moosa spent 12 years with private equity firm The Carlyle Group and was on the investment committee of a Middle East-focused tech VC firm.

She currently advises Paladin Capital and is on the board of a number of tech start-ups. With EIP since 2019, she is also an advisory board member of Imperial College London’s Centre for Climate Finance and Investment.

For his part, Pierse worked in various finance roles before founding and selling his own start-up, Borrowbox, which he sold in 2020.

He spent two and half years at Astanor Ventures, where he worked on climate, food and farming impact investments for the European VC firm. He has worked with EIP since late last year.

Investors are more cautious

I begin our conversation by asking about the current environment for climate tech VC. I also mention that last month Eric Archambeau, co-founder at Astanor where Pierse used to work, told Yahoo! Finance that investors are more cautious and seeking more proof of start-ups’ viability. 

Archambeau also said that he has told its investee companies that they may not raise any more money for the next two years. Funding activity is down at least 40 per cent, he added, while valuations are down as much as 70 per cent.

“If you look at the general economy, we’re 11 years into what was thought to be a seven-year  cycle. 2020/21 was unprecedented in valuations and the volume of deals done in terms of the wider VC environment. Clearly, that has all collapsed,” Moosa said.

“But if you look at sector fundamentals, the two brighter spots are AI and climate tech. The capital that the US government is pouring into the latter, with the Inflation Reduction Act (IRA), means there is a real momentum of support in the sector, in a way that isn’t there for others, and it’s multiple billions.

“It’s not right to say that companies are totally battening down the hatches. Volumes are down, yes. In what we are seeing get funded, the bar is a lot higher. You have to tick every single box in terms of investment criteria.

“Investors are scrutinising profitability more closely. Investees need to demonstrate not just that they’re growing, but that they’re doing so sustainably. Sales efficiency has to be in line with the market or better. Their burn rate has to be contained.”

Help to scale

EIP’s founder is Hans Kobler, a New York-based Munich native who sold his Nasdaq-listed business ICx Technologies, a developer of advanced sensors, for $268 million in 2010.

He founded EIP in 2014 and, with more than $4 billion in assets under management, it has made 110 investments to date. A notable senior advisor to the firm is Patrick McGrath, a former deputy director of the energy division of the US Advanced Research Projects Agency, ARPA-E.

In March, EIP was a leading investor in a £46 million funding round raised by Hometree, a supplier of green energy solutions to UK households led by Dubliner Simon Phelan.

Speaking about the ISIF investment in May, Kobler said: “Our model of bringing together brilliant entrepreneurs with key industrials across all sectors of the economy will make it easier for Irish technologies to scale in both Europe and North America.”

The €68 million was invested in two EIP funds. Half is in its European fund, focused on €10-to-25 million growth equity and later-stage investments. The other half is in its Frontier fund, which targets the early stage.

According to their latest US regulatory filings to the end of March, EIP’s European fund had $309 million in total gross assets and its Frontier fund $524 million.

I asked Pierse what he makes of the current climate tech VC landscape here. “By its nature, climate tech requires more capital upfront than most software businesses in which Irish VCs are accustomed to investing. So we need more climate tech VCs willing to finance the technology risk early on.

“The first €1 million you raise in Ireland will be extremely difficult here because the angel investment ecosystem is less well developed than in other countries. Something like a specific climate EIIS would be interesting. [Pierse was speaking before the angel investor CGT relief was announced in Budget 2024.]

A January report by PwC and SustainabilityWorks, The Climate Tech Opportunity in Ireland 2023, showed that Ireland is home to far more software-based climate tech start-ups than hard tech ones, I mention. What’s his view on that?

“Ireland has done very well in software. It’s obviously a lot cheaper to do than the hardware that climate orientates towards. Just to get off the ground, with R&D, patents, and everything, you need a lot of upfront capital. 

“Its availability has been an issue. Most investors here are generalists and not specialists. VCs have been more risk-averse and less likely to do that if they don’t fully understand the tech and the associated risks.

“More hard climate tech firms are now coming through the funnel. Ecocem, Exergen, and Supernode, to name just three.

“Up until now, Irish entrepreneurs in this space typically had to get funding in the US or UK. Most probably wouldn’t have the network that they needed to tap into. 

“But now ISIF is sending the signal that there will be funds for hard climate tech, so they no longer need to look outside the country as a prerequisite. I think that could help change the way entrepreneurs think about the sector.”

Shared outlook

EIP wants to play its part in nurturing the ecosystem here, Pierse and Moosa emphasise. It can help start-ups connect with 60 large corporations that are both investors and potential customers of the early-stage firms. Among them are GE, Microsoft, Aviva and US utility Duke Energy. European ones include EDF, Ferrovial and Finnish utility EWE.

“This isn’t just about energy. Climate tech touches every sector. It’s also transport, food and agriculture, manufacturing and construction,” Moosa said.

“These companies don’t just provide capital. We have an internal team doing business development with them for our portfolio companies. It’s about trying to get sales so they generate revenue, or have other types of partnerships. We like to think that’s quite unique.

“What we found with ISIF was that we had a meeting of minds. We consider that we are both platforms. They have a development mission and want to bring capital, skills and talent to benefit the Irish economy. They saw that we share that outlook.

“Every VC firm can open up their pipeline of opportunities. We like to think that Arthur scours the scene to find new technologies and opportunities that might be less obvious for our Frontier fund. They tend to be not so obvious or easy to source. The tech might still be in labs and not yet commercialised. 

“Investors need to understand the risk involved in them. Our Frontier team has investors and deep researchers that can help with the required due diligence.”

“I’m hands-on. I attend every sector event.”

Arthur Pierse

Pierse describes his role in helping to nurture the climate tech ecosystem here. “ISIF takes a holistic view of the sector. We share it and their vision. I’m based here to help grow the ecosystem. It’s not just about sitting on the sidelines and investing occasionally. I’m hands-on. I attend every sector event.

“One recent such event was the Climate Innovators Ireland event. It was a Y Combinator-style demonstration day. Five start-ups pitched their businesses. We hosted VC funds, their partners, other investors, and executives from utility companies. About 100 people attended.

“There are perhaps 100 active companies here in Ireland that are in this space. It’s about helping them all connect the dots and nurture relationships. Combined with that we have the backbone of EIP, which is the access we can provide in the US and to a lesser extent, Europe.”

UK home power and EV charging firm with Irish connections is investing here

EIP has invested €35 million in Grimsby-based home power and EV charging firm Myenergi, a company that has two Irish connections.

Terry Leahy, the former Tesco boss with Liverpool-Irish roots sits on the Myenergi board.

Furthermore, earlier this year, Myenergi became a partner of McMurtry Automotive, Dublin-born billionaire inventor and engineer David McMurtry’s UK-based electric car start-up and maker of the Spéirling.

Myenergi has had a presence in Ireland since 2020, and has quickly become one of the leading suppliers of Zappi-branded home EV chargers.

There are currently more than 70,000 EVs in Ireland, and the firm has supplied 30,000 home chargers, having seen annual growth of 125 per cent over the last three years, it said.

The company has operations in Dublin and in Ballycastle in Northern Ireland, and will use some of EIP’s investment to further invest in these. 

In addition, Moosa will join Leahy on the Myenergi board, on which Peter Richardson, a former COO of Dyson, also sits.

Commenting on the investment, Moosa said: “Transportation is responsible for nearly a quarter of energy-related CO2 and road transport makes up the lion’s share of it. EIP targets the largest sources of greenhouse gas emissions.

“Zappi is already one of the leading charger brands in the UK and Ireland. With the success of its Libbi home energy storage product, we believe Myenergi is in pole position to become the leading home energy management provider.”