This week we caught up with Andrew Wordsworth, the Managing Director of Sustainable Accelerator, the investment fund led by the Sustainable Ventures management team, supporting the UK’s best SEIS and EIS sustainability startups.
What is Sustainable Accelerator? And how does it differ from Sustainable Ventures?
Sustainable Accelerator aims to provide investment funding and hands-on venture development support to early-stage companies in the Sustainability Sector. It is the UK’s only seed stage fund entirely focused on startups which are developing commercial solutions to the twin challenges of climate change and resource scarcity.
Delivery of the Accelerator is supported by the Sustainable Ventures team. Founded in 2011, Sustainable Ventures has founded 8 companies, including E-Car Club which was the UK’s first crowdfunding exit when acquired by Europcar in 2015. The team also run Sustainable Workspaces which has created Europe’s largest cluster of Sustainable start-ups in South London.
How does Sustainable Accelerator find the best businesses?
This tax year’s fund benefits from the work undertaken for last year’s fund, as well as our market presence since 2011. The infrastructure necessary to ensure quality dealflow, and attract co-investment partners, is already in place. Additionally, our sister company Sustainable Workspaces also manages the largest cluster of sustainability companies in Europe – with approximately 50 companies across two startup workspace sites near London Bridge. Operating from within that cluster further strengthens our network and reach.
Last year we sourced over 150 companies, undertook detailed due diligence on 20 of the best companies and made 7 investments during the tax year. Those sourced companies came from our close relationships with earlier stage sustainability incubators and accelerators, government and quasi-government bodies, and other venture capital investors.
In what industry do you think we need more innovative sustainable businesses the most?
Any product or service that uses energy or consumes materials has an impact on climate change and potentially faces risks of supply chain constraints on raw materials. We’re seeing a trend where most large corporates are moving beyond viewing Sustainability as part of their Corporate Social Responsibility reporting towards considering the risks and opportunities within their core operations. This in itself creates an opportunity for B2B data analytics – assisting Corporates to interpret and optimize operations and supply chains.
In particular, the food and drink sector is facing greater consumer pressure for sustainable solutions – ranging from reducing plastic packaging through to more local production. Fortunately, we’re seeing new agri-tech solutions emerging that will provide a step-change in the efficiency of food production (such as the SA 2017 investee company, DryGro) and have a number of companies in the 2018 pipeline that are reducing food waste and have sustainable packaging alternatives.
What have been the biggest success in the Sustainable Accelerator portfolio to date?
This is difficult to say as every company has achieved operational, commercial or funding milestones since investment. However, our first investment Rovco has already delivered on several fronts, including major sales growth and a new investment round at significant uplift. In six months, the Company has grown from a £1.2m pre-money valuation before its Sustainable Accelerator Seed Round, to a £4.25m+ post-money valuation after its most recent investment round – attracting significant industry interest.
Why are you raising capital through crowdfunding?
If we are to make the transition towards a sustainable future whilst maintaining economic growth, investment into a wave of new innovative technologies is fundamental. From speaking to investors, we understand that the sector can seem very complex relative to, say, Fintech. We believe that combining a portfolio/fund approach with crowdfunding allows more investors to ‘dip their toe’ into the sustainability sector.
We have a strong track record with crowdfunding as well. Over the last 6 years Sustainable Ventures have successfully raised £6m+ from over 2,000 investors across 9 crowdfunding rounds. And we delivered the world’s first crowdfunding exit when E-Car Club sold to Europcar a few years back.
Can you tell us a bit about your own background?
My first job was as a software programmer at the Esso refinery at Fawley, Southampton. I studied Chemical Engineering at Cambridge and have worked in the energy/sustainability sector for nearly 25 years.
I first made the jump away from ‘corporate’ to ‘startup’ whilst I was at Bain in 2001. I was assigned to bainlab (Bain’s start-up incubator) where I led the dealflow team and noticed a growing number of startups in the climate-change sector. I decided to move to the Carbon Trust, a UK Government sponsored NGO that works with businesses and innovators to accelerate the transition to a low carbon economy. I led one of the Carbon Trust’s commercial venturing arms (the other was led by Sustainable Accelerator’s CIO Peter Shortt) where we secured more than £250m of equity commitments for 10 new ventures. Then in 2011, I took that experience into my own start up, Sustainable Ventures.
What’s the best part about being an entrepreneur?
It’s always great to see the innovations you’ve developed being used and valued by customers – I remember the first time I saw an E-Car Club vehicle being driven down the street. In the Sustainability sector there’s also the added bonus that the products and services are also reducing pollution or reducing waste.
However, perhaps the best part is being able to return money to your investors. Back in July 2015 I had to contact all the investors in E-Car so we could transfer their share of the exit proceeds. It was extremely rewarding to be able to say ‘thank you for trusting us with your money’. Before we make any investments in Sustainable Accelerator we ensure that the entrepreneurs understand that taking external investment is a motivator in itself to return cash to their investors.
What advice would you give people who are eager to set up their own business?
Firstly it’s really important know your sector. Each of our 2017 SA portfolio companies were led by CEOs with relevant sector experience. You can fill functional gaps (like finance or operations), but it’s important that founders have an intrinsic grasp of the way the sector works.
It’s also important to understand why you’re starting a business. Though there is no right or wrong answer with this!
Where would you like to see Sustainable Accelerator in a year’s time?
I expect that the 7 companies in the current 2017 cohort will continue to grow revenues strongly and will have secured £3m-£5m in equity and non-dilutive grant funding (and possibly pick up a few industry awards as well). In doing so then we’ll further cement our relationships with follow-on funding partners and help raise the profile of the sustainable startup sector.
We’re already starting to see strong dealflow for the current 2018 cohort and are really looking forwards to investing in, and working with, some great companies. We’re also in discussions with a number of corporates and family offices that are keen to partner with Sustainable Accelerator either to co-invest or provide strategic support to our chosen startups.
Most importantly, we believe in the coming years many of the sustainability technologies we are seeing now will transform into vital and essential technologies for a resource-efficient world – we plan on supporting more of those companies this upcoming year with our 2018 fund.
If you’d like to ask Andrew your own questions, you can do so via the discussion forum on the campaign page, where you can also find out more about how the Sustainable Accelerator Investment Fund plans to support the next generation of sustainable businesses.
Investing in startups involves risks, including loss of capital, illiquidity, lack of dividends and dilution, and it should be done only as part of a diversified portfolio. This blog post has been approved as a financial promotion by Seedrs Limited.