Terra’s Barak Goldstein Discusses Investment Trends in Cleantech, Announces New “Impact” Incubator ProgramBy: Mickey Chesla, Blog Manager
Founded in 2007, Terra Venture Partners is one of Israel’s first venture capital firms to have invested exclusively in cleantech We spoke with CEO Barak Goldstein, who gave us a unique perspective on where the industry is going, and how Terra is working to create platforms to support the next wave of entrepreneurs.
“2007-2009 were peak years of cleantech investment,” explains Goldstein. “In those years, 40% of investments of American VC’s were in cleantech – that’s an astounding statistic. Then came the recession, which ultimately impacted the cleantech industry profoundly, especially since the average cleantech company requires eight years to achieve substantial sales, and VC’s shied away and sought out faster returns.” According to Goldstein, we are now on the verge of a wave of cleantech successes. “Those companies which received funding in 2007-2009, and which were able to weather the storm and push forward, should soon be reaching the level of significant sales.”
Terra VP is unique in that it has traditionally focused on the very early, seed stage companies, and the firm is moving even more strongly in this direction. Terra’s first fund, US$25M was invested in nine Israeli cleantech companies during 2007-2009, seven of which have grown and obtained follow-up investments. One outstanding example is Silentium, which developed a noise control technology, and which has alone raised $21M and is already selling to industry giants such as Boeing. Another standout Terra VP company is SmarTap, which brings innovative products to save both water and energy in home water appliances, for both the residential and hotel markets. Terra VC’s second fund was recently launched to invest in seed and early stage Israeli companies.
“We’re happy to see venture capital firms like Terra providing guidance and finance to early stage companies,” says Oded Distel, head of Israel NewTech, a government program which itself provides assistance to Israeli cleantech start-ups. “Israel is known for the number and quality of entrepreneurs it produces, and firms like Terra have the capability to find those with real promise and provide them the tools to bring that promise to fruition.”
So where is Terra VP focusing on now; what are the leading investment trends? “The two biggest trends in cleantech today are “impact” – ideas and technologies that have the potential to create a positive impact our plant and population – and “cleanweb”, which combines software capabilities to create water and energy savings, for example,” says Goldstein. In this view, a company like WAZE, is both an impact and cleanweb company, because when people drive shorter routes this aggregates into a major savings of energy, and lessening of pollution.
Terra VP is also unique in the level of support it provides for its seed companies. The initial investment is usually $1M, considered very high for seed investment in the arena, and the support for companies – from strategy, business plans and more – is provided on a daily basis.
With $50M under management, Terra VP recently won the tender for the Israeli Chief Scientist’s incubator program, a tender that is awarded once every eight years. The result is TerraLab Ventures, a unique and state-of-the-art incubator in which companies receive funding that comes 85% from the Chief Scientist’s Office and 15% from Terra VP.Moreover, Goldstein was able to give us a sneak preview into “CREATE” – the fund’s newest impact focused initiative. CREATE will bring promising entrepreneurs, who have not yet decided on a product or even an arena, together with international industry leaders, so that they learn about the needs and opportunities which have the potential to create positive impact. Terra VP will announce the details of this program, which will also include initial funding and is set to launch in February 2015, soon.
Terra has been cooperating with Israel NewTech for some time. “The team at Israel NewTech has expressed preliminary interest in working together on the Impact Program,” says Goldstein. “This would be a natural progression, as we have worked closely with the Israel NewTech team over the past few years. Since they are able to bring together resources and coordinate with different arms of the government, working with them is an extremely effective way to moving projects forward in Israel’s cleantech sphere,” he concludes.