Making money out of cleantech the venture capital way

Getting a healthy return from a cleantech investment has often been hard work, but for David Mott and his Oxford Capital Partners firm, it's made them award winners.

Oxford Capital Partners, the specialist investment manager set up by father and son team Edward and David Mott in 1999, has had a particularly busy year.

Its 2012 totals, which saw £15.9 million injected into nine companies (including a number of new additions to the portfolio), saw the firm pick up Investor of the Year at the New Energy & Cleantech Awards 2013.

The three key themes of communications, healthcare and sustainability dominate its investment mandate, and it’s the final sector which was lauded at the sixth annual New Energy & Cleantech Awards.

For Mott, cleantech has been ‘really rough ride’ for a lot of investors. ‘A lot invested in wave power and wind turbine technology, as well as waste energy projects, and have not seen returns they were expecting,’ he explains.

‘Our focus has, on the one hand, been about the roll out of projects. So that’s involved building various solar farms, and we’ve also very interested in anaerobic digestion and energy efficiencies technologies.’

Mott says that Oxford Capital Partners remains ‘fairly cautious’ on wind-related technologies and hydro wave power technologies which, he says, are really nice things but not necessarily suitable for venture capital as they tend to be more capital intensive.

In 2012, the firm continued to invest in solar assets across the South West of the UK, and launched a new infrastructure fund dedicated to providing finance to a broad range of renewable energy and energy efficiency companies.

In the first quarter of 2012 Oxford Capital financed a further £6.5 million of solar installations, concluding a six-month period in which £20 million and 7MW of capacity was financed and installed. The installations were built on more than 2,500 homes in the UK and will provide 6.5 million kWh per year, which should produce an annual CO2 saving of more than 1,700 tonnes.

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Looking back over last 12 months, Mott says that the firm has achieved three successful exits. Furthermore, through investing across cycles, it has captured some ‘exceptional opportunities’ during a period when most investors have been focused solely on their existing portfolio.

Oxford Capital Partners now has some £100 million of assets under management, a figure which grew last year by 32 per cent. Its three 2012 exits all came about in different ways and reflect the way in which the firm looks for innovative ways to divest interests.

Its most recent divestment involved Arieso, a mobile network optimisation business which was sold to US-headquartered JDSU for $85 million in March.

‘We backed the company when it had a million pound of revenue by leading a Series B round. We brought in a strategic investor and grew the company to over £12 million of revenue before it was acquired,’ Mott reveals.

‘It was a classic growth capital situation for us. We are not necessarily looking to get in on day one and make 100x our money – these situations don’t happen in Europe anymore.

‘Rather, we are looking on consistently take 3-4x money on deals and without taking too much risk.’

It’s a frank admission from the investor, who is operating in an industry where it has long been believed that the one mega return an investment will bring will more than off-set the number of other failures that will crop up along the way.

Mott says that Arieso is a ‘great example’ of an innovative UK business that has developed world-leading technology.

He adds, ‘We backed the management and business at a key point in its development to enable it to scale up and roll out its proven technology on a global basis.’

With 2012 and the beginning of 2013 securing a number of key exits for Oxford Capital Partners, Mott reveals that the rest of the year will be about completing a number of new investments, around four he predicts.

The firm is still very interested in the mobile phenomenon that is going on and, combined with being active in big data and the cloud, is somewhere it expects to make returns.

Hunter Ruthven

Bernard Williamson

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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