Helping portfolio companies finesse their go-to-market strategies is a focal point for most venture capital firms. For climate tech start-ups, particularly those geared toward sustainable infrastructure projects, that can entail the added complications of securing buy-in from local communities where these projects will be located.
That’s something that MUUS Climate Partners has been able to make a little easier for the companies it backs. An affiliate of MUUS Asset Management, which invests in public equities, alternative funds, real estate, commodities and debt, MUUS Climate Partners was founded in 2016 by veteran renewables investor Michael Sonnenfeldt and Ben Wolkon, who had recently earned an MBA in finance and sustainability at MIT’s Sloan School of Management. Sonnenfeldt had previously served as chairman of Carmanah Technologies, a solar systems manufacturer, and is the founder and chairman of TIGER 21, a leading peer-to-peer network for ultra-high-net-worth individuals.
MUUS leverages its far-reaching network to introduce founders to other investors, strategic advisers and policymakers who can alleviate some of the roadblocks known to prevent some renewable infrastructure projects from moving forward. Some of its portfolio companies have recently taken big strides to scale renewable capacity, which is central to MUUS Climate Partners’ thesis around investing at the nexus where climate solutions meet technology in order to aid early-stage companies’ efforts to accelerate decarbonization.
One portfolio company, BrightNight, has developed a software platform that sites projects intelligently so they can dispatch power at times and locations that offset fossil fuel generation. BrightNight was founded in 2019 by Martin Hermann, who previously founded 8minutenergy and then built it into North America’s largest independent solar developer. MUUS invested an undisclosed amount of development capital in BrightNight in February 2021.
This spring, the Florida-based company announced it had signed its second long-term power purchase agreement with two Kentucky utilities for a 115MW solar project, roughly the capacity of a large coal-fired power plant. “[It] didn’t just work closely with utilities in Kentucky to understand their needs and design solar projects that met those needs, but they also took the additional step that a lot of their peers don’t, which is working closely with the community to make sure they understood and met the local needs,” Wolkon tells Venture Capital Journal.
The solar project will help replace nearly 1,500MW of coal-fired generation that the Kentucky utilities plan to retire between 2024 and 2028, as reported by PV Magazine last month.
BrightNight has a 2GW project development pipeline, says Wolkon.
“We’re seeing not only these PPAs being signed but also strong buy-in from the local community and even things like considering agrivoltaics – the combinations of photovoltaics (solar) and agriculture, which is something the community is interested in,” he notes. “Overall, the estimates are that these projects are bringing in $400 million of investments into these communities that otherwise wouldn’t see that level of investment.”
MUUS Climate Partners has backed more than 30 companies since 2016. MUUS Convergence Fund II closed on $50 million in January and has backed 13 climate tech companies so far, the last of which joined the portfolio in mid-June.
Convergence Fund I closed on $30 million in 2016 and has backed 25 companies. There is some overlap between Funds I and II, the latter of which includes some follow-on investments. Initial checks range from $500,000 to $1.5 million.
Another portfolio company, Energetic Insurance in Boston, focuses on fintech and enables the financing of renewable energy infrastructure. MUUS participated in Energetic’s $2.9 million seed round in 2019 and helped behind the scenes when a later funding round hit a snag, CEO and co-founder Jeff McAulay tells VCJ.
“We’ve enabled $500 million of clean energy projects through our insurance programs,” he says. “We cover the risk of the buyer not paying for their electricity and that enables more businesses, housing complexes [and other entities] to buy renewable energy. That does have a community impact in terms of energy savings, carbon avoidance, resiliency.”
In March, City National Bank and KeyBanc Capital Markets wrote Energetic into their loan agreements with Scale Microgrids, an Energetic client, for a $225 million debt facility that will fund the construction and operations of dozens of microgrid projects, community solar and other infrastructure across the US. Energetic helps Scale enable financing for a broader pool of commercial customers.
Marshalling local resources
MUUS has also leveraged its network to help N-Drip, a portfolio company based in Israel, set up demonstration projects of its drip irrigation technology with farmers in Arizona and more recently in New Mexico. MUUS participated in N-Drip’s Series B round which closed on $16 million last November.
Drip, or gravity-enabled, irrigation, works anywhere that flood irrigation is used, which accounts for roughly 85 percent of global crop irrigation, N-Drip’s chief sustainability officer, Seth Siegel, tells VCJ. N-Drip’s goal is “to make flood irrigation as obsolete as the horse and buggy,” he says. Siegel stumbled on the technology, which was under development at the time, while doing research for a book on the sustainable use of water in agriculture.
Drip irrigation is a much more efficient use of water for agriculture, consuming anywhere from one-third to two-thirds less water than flood irrigation, Siegel notes. Drip irrigation also increases crop yields by as much as one-third, cuts the use of fertilizers by about half and reduces carbon emissions associated with irrigation by 50 percent to 85 percent. One way in which it cuts emissions is that, unlike flood irrigation, it can use muddy water, eliminating the need to bring energy into the field to filter the water.
N-Drip’s technology is being used across tens of thousands of acres of farmland from Arizona, New Mexico and Florida to 15 other countries worldwide, Siegel says. The company plans to set up demonstration projects in Utah, Colorado and California over the next few months.
When N-Drip partnered with Arizona’s water utility and the University of Arizona a few years ago to provide drip irrigation to local farmers, the state was facing a crisis, with the entire Colorado River basin running out of water, largely due to wasteful agricultural use. N-Drip got the water utility to cover some of the installation costs relate to the demonstration projects, while the University of Arizona conducted studies of the technology’s effectiveness.
“It ended up being a win-win-win because Arizona needed this solution,” says Wolkon at MUUS. The funding by the state “was dramatically better than the alternatives they were facing in light of the crisis, and N-Drip was able to deliver a real solution to farmers that really needed it. So it’s a great example of how companies can partner on the local level in multiple ways.”