PAUL CHEEVER
October 5, 2016

Artesian’s new clean tech fund

CleanTech

Artesian’s new clean tech fund

Paul Cheever: The CEFC is seeking to lift the capital availability in the market, but also capability

In early September the Clean Energy Finance Corporation and Artesian Capital announced that CEFC was committing $10 million in investment capital to a new ‘Clean Energy Seed Fund’ with Artesian Capital to raise matching capital and manage the Fund.

The announcement received some postings in the startup press, but it deserves a closer inspection to appreciate its dual objective of funding cleantech startups and seeking to mobilise new capability in the market.

The new fund was developed in the context of the CEFC mission to facilitate the development of capital flows into cleantech innovation. And this mission operates within the mutual ambition of Arena and CEFC to support cleantech financing across the developmental spectrum from pre-seed to global growth.

Specifically, the $10 million cornerstone commitment is the first project to be financed through the new $1 Billion Clean Energy Innovation Fund.

What is interesting in this mandate for this Clean Energy Seed Fund is its embedded mandate for Artesian to get funds flowing though not only their current networks, but to use the availability of seed capital to encourage existing groups to broaden their capabilities to include cleantech and to support building two to three new cleantech incubator/accelerators.

So the CEFC is seeking not just to lift the capital availability in the market, but also to tie the program to an accountability for lifting the domain capabilities brought to the transactions.

This approach recognises the fact that an effective innovation system requires that both capital availability and the mobilisation of relevant capabilities be present in sufficient form, depth and location.

There are some hurdles inherent for this new Fund. While Artesian has broad connections with the incubator/accelerator communities, it does not have a substantial background in cleantech and so will need to make some investment to build knowledge to support its allocation judgements.

The CEFC faces the hurdle of having to develop progress metrics in real time in order to assess at early points whether the Fund is on a path that will meet its impact objectives, or that like all new ventures, whether it will need to pivot. Time will tell on both counts.

But one final observation is relevant here.

This process by which this New Fund has been developed appears to be more in line with the market facing interactions of the UK innovation programs as opposed to the rigidities of many past Australian programs.

This is a further reason for monitoring the outcome: To learn from the process itself about the potential for more flexible dual agency-market design of new initiatives.

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