Lassi Noponen, Chairman of board, Cleantech Invest, comments the Kauppalehti article (http://www.kauppalehti.fi/uutiset/jymymenestys-cleantech-invest-mukana-useammassa-kasvuraketissa/cvw4TUdH ) below as follows: After Finland’s largest business daily Kauppalehti today published this article on Cleantech Invest, I have been asked what do I mean by my comment (below) on digitalization vs. bio- and industrial circular economy. I am glad that this was asked and that I have an opportunity to explain myself as these phenomena are much debated and this touches one of the cornerstones of our business thinking: industrial circular economy in not a discontinuity although it is today receiving more attention than in the past. Same goes for bioeconomy. Bio based materials have throughout history been used and the aim has always been to produce more value added products out of raw materials such as timber, plywood and biofuels. Digital technology, however, is a true discontinuity because only a few decades ago it did not exist at all. The bioeconomy can over time well be even world transforming, but it’s impact is incremental. As an early stage investor, we are interested in discontinuities that transform industries at the speed of light. The opportunity for investors that follow is why it is important for me to make the distinction between the two.
Below Kauppalehti article 11.1.2017 translated by Cleantech Invest
Cleantech Invest’s portfolio companies reported impressive growth and the share price rose over 50% during last year. Since its IPO in 2014 Cleantech Invest share has climbed almost 200%. In addition to the developments of its share price the company takes the road less traveled. “Digitalisation with all of its dimensions, energiewende and consumer driven sharing economy are all world transforming discontinuities but administration driven “bioeconomy” and industrial “circular economy”, that get a lot of media coverage, are not.” Says Cleantech Invest chairman Lassi Noponen. “We concentrate perseveringly on energy and material efficiency and distributed renewable energy.”
From the investor’s point of view Cleantech Invest is not among the easiest to anylize. The company has 15 portfolio companies. It is harder to value these rapidly growing, technical and non-listed companies compared to stable dividend paying companies. Many portfolio companies are still clearly loss making and will need several funding rounds to finance their growth. Cleantech Invest’s ownership will dilute as a consequence of the funding rounds.
According to Lassi Noponen Cleantech Invest is not only there to help our in early growth. “Our investment horizon is long but perfectly free. There is concrete acquisition interest towards several of our portfolio companies but we aim to maximize shareholder value and according to our evergreen-model, we do not necessarily have to take an exit from an investment ever.” Noponen continues that the value appreciation of Cleantech Invest is the main form of shareholder value creation for shareholders but after major exits, dividend are also likely to be paid. Re-investing into new companies is also a possibility.
One of the portfolio companies with the greatest potential but also with the greatest risk is Swap.com. Finnish born Swap.com is an online department store in the United States for used pre-owned clothes. Unlike for example Finnish tori.fi, Swap collects merchindise into its logists center and fullfill orders from there. This is a huge logistics effort and the company needs a lot of capital to sustain growth. Even in case the current organization would not conquer the world, some internet giant such as Amazon or Ebay may swallow Swap for a high price. “The market size of inexpensive consumer products is much larger than that of pre-owned luxury products.” Noponen says.
Another pearl in Cleantech’s portfolio is Nocart that supplies power management systems to developing countries. The company grows at an incredible pace and, according to its financial statements, it has been surprisingly profitable for a growth company. The nature of its target markets makes estimation of its value more difficult. The company has signed significant letter of intent for deliveries and it has an active project pipeline of 600MEUR. There is however some distance from an African letter of intent into cash in the register.
Third company worth mentioning is Enersize that is planning IPO at Stockholm First North market. Enersize specializes in energy efficiency for industrial compressed air systems and is also experiencing rapid growth.
Cleantech invest market capitalization is approximately 30 million euros. Last years share price development has eaten out largest undervaluation from the share price but on the other hand situations change rapidly for the portfolio companies.
Malminrinne 1 b, 00180
Joshua B. Kirkman