The business proposition of Burnaby-based General Fusion sounds a bit like science fiction: solve the challenge of fusing hydrogen isotopes together and sustaining that reaction to harness the source of energy used by the sun.
“People often refer to fusion of the holy grail of clean energy,” said Bruce Colwill, General Fusion’s acting CEO and chief financial officer. Tapping it would be groundbreaking, unlocking nearly unlimited, non-polluting power.
Its promise makes General Fusion a star in B.C.’s so-called clean technology sector, a cluster of about 200 companies worth some $12 billion in total.
The firms are aiming to make advances in renewable energy, more energy-efficient buildings or create innovations to help clean up some of industry’s thorniest problems. The sector is growing in both size and clout as a sub-sector of B.C.’s technology industry, but needs increased investment to continue.
To date, General Fusion has raised enough capital — $40 million in 2015 alone — to develop the sub-components it will need to build a prototype reactor in the next couple of years.
To take it further though, General Fusion will need more investment, at the same time that the investment landscape is shifting.
“It continues to be a bit of a funding challenge out there,” Colwill said.
By one measure, the interest of venture-capitalist investors in clean tech appears to be waning.
The Seattle research firm PitchBook has tracked a decline of venture-capital investments in B.C. clean-technology startups from a peak of $53 million in 2013 to $34 million in 2014 and $30 million in 2014.
For the first nine months of 2016, the number of deals cut by clean-tech startups with high-risk, high-reward venture capitalists bounced back, according to the PitchBook analysis, but the amount of money devoted to them was just $21 million.
However, as clean-technology matures, the spending of venture-capital funds is no longer a reliable measure of investor interest in the sector, according to Tony Van Bommel, the senior managing partner that oversees the Business Development Bank of Canada’s industrial, clean and energy technology venture fund.
“Investors are getting more sophisticated,” Van Bommel said in an interview.
And clean tech has reached something of a turning point.
Some of its innovations, such as wind and solar power, have matured enough that they are mainstream rather than high-risk venture investments.
And other next-generation innovations are too-capital intensive and being developed on timelines that are too long to attract traditional venture capital, which has shrunk in recent years anyway.
“I think it’s correct to say there are many venture investors that do not exist anymore that were around 10 years ago,” Van Bommel said. “What’s happened to fill the void is foundations, family (funds) and strategic investors.”
The foundations and family funds come from wealthy benefactors who have a particular interest in environmental causes, such as Bill Gates or Amazon founder Jeff Bezos, who is an investor in General Fusion along with the Business Development Bank.
Strategic investors tend to be companies that are potential customers of the technology being developed, said John McPherson, sector development manager for clean tech at the Vancouver Economic Commission.
“Their money is more patient (than venture capitalists),” McPherson said.
McPherson pointed to Teck Resources Ltd., which has invested in ventures such as the water treatment firm Saltworks and battery developer Zincnyx Energy Solutions, as an example in the local market.
Global retail giant Ikea is another company that has put its support into the B.C. clean technology sector, McPherson said. The Ikea GreenTech Investments subsidiary put money last fall into Terramera Inc., a Vancouver-based firm involved in developing greener methods of pest control.
“The clean tech space is a lot different from technology or wireless,” McPherson said. “It’s about hard science that takes years to develop and a long time to perfect.”
But if that new battery or water-treatment system becomes an industry standard, “it’s harder to displace from the market.”
McPherson added that while venture capital might have shrunk over recent years, the number of strategic investments in the local clean tech sector has increased, though the amounts aren’t tracked in the same way to be easily visible.
The state of financing for clean tech is particularly important for the City of Vancouver, which has a policy goal of making it a key component of economic growth, promising to double employment in the sector by 2020 as part of its pledge to become the world’s “greenest city.”
B.C.’s clean-tech sector represents about one quarter of Canada’s overall clean-tech industry, McPherson said, so “we punch above our weight.”
And he is encouraged by the amount of attention Vancouver and B.C. is getting from interests outside of the province.
Calgary-headquartered oil producer Cenovus Energy and Suncor Energy, for instance, chose Vancouver as the location to launch their $100-million clean-tech investment fund under the name Evok Innovations.
And a consortium of Chinese investors, led by the Hanhai Zhiye Group, picked Vancouver to launch a clean-tech accelerator, the China Canada Cleantech Innovation Centre, in partnership with the Vancouver Economic Commission.
“We’re seeing an uptick in investment opportunities coming from China,” McPherson said. “That’s another highly positive note.”
Clean-tech companies are also doing better at appealing to the bottom line of potential corporate partners, said Wal van Lierop, CEO of Chrysalix Venture Capital, one of Canada’s biggest venture investors.
“Clean technology, 10-15 years ago, was people developing a lot of technology in the hope somebody would have a use for it,” van Lierop said.
Today, however, clean technology has become part central to a lot of companies because more corporations see the economic potential of reducing their environmental impact.
Van Lierop pointed to the Vancouver firm MineSense, a Vancouver-based company that Chrysalix has invested in that is using advanced sensors and advanced computing to help mining companies reduce the amount of waste rock they need to deal with.
That doesn’t just reduce the effect of tailings facilities at mine sites, it improves mine productivity, van Lierop said.
“That’s how clean tech is now in the core business of many companies,” he said. “It’s not a cost, it’s become a profit centre.”
However, van Lierop said, clean technology needs additional support to allow its many small companies to become bigger.
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