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Inside Elemental

Exits & Equity: What Does It Mean to Be a Nonprofit Investor?

March 29, 2022

· 4 min read
Avra van der Zee
Avra van der Zee COO

At Elemental, we want our companies to succeed and their technologies to scale. Recently, a portfolio company SPAC’d (went public via a special acquisition company) for a record-breaking $2 billion valuation. Of our 130+ portfolio companies from a decade of investing, Heliogen marked our 22nd exit. Heliogen joined Stem, AMPLY Power, Opus One, and others who all had successful exits in the last year.

For us, as a nonprofit, it is all about sustainable growth and scale. When we select each cohort, our standard approach is to take a small amount of equity relative to standard VCs and accelerators. We do this not so we can return capital to investors (we don’t have investors in the traditional sense), but so that we can reinvest in future entrepreneurs and our mission of redesigning systems at the root of the climate crisis.

Being a nonprofit allows us do things differently

How we support our portfolio companies. As a nonprofit investment platform, we have the privilege of taking risks when others might not be ready or willing. We fill a critical gap around funding for first-of-their-kind projects, as more times than not, our portfolio companies experience a fundamental, game-changing evolution after their first deployment. To help turn those projects from one-off learnings into pivotal company-defining moments, we provide deep structural support to our companies as they deploy and grow — embedding a bottoms-up approach to equity and community in technology deployments, forging public and private partnerships across the ecosystem, and centering diversity, equity, and inclusion in startup leadership.

How our business model has evolved. We’ve built a business model that aligns with our mission. And as entrepreneurs know, business models go through many iterations. When we started in 2009 in Hawaii with seed funding from the U.S. Department of Energy, we funded clean energy technologies to help transition the state’s entire energy system off of fossil fuel. We learned that the traditional government grant model, while extremely effective in certain cases, could benefit from incentive structures to get entrepreneurs out of the lab and into the real world. So we borrowed from the best of VC and accelerators, and added that to the best of government grants, to create a investment structure with holistic support, growth and project milestones, and aligned incentives — all with the goal of building a vibrant entrepreneurial community that would change the face (and many of the practices) of climate innovation.

How we are funded. Today, our equity positions in our portfolio companies are one among many sources of our funding that allow us to provide interdisciplinary support and build this entrepreneurial community in a way that centers social equity:

  • Government funders, like the Office of Naval Research, inform innovation that advances U.S. strategic objectives.
  • More than 30 corporate leaders, such as Amazon and Ford, help us identify innovation for commercial markets and act as transformational strategic investors and/or early customers.
  • Philanthropy, such as Emerson Collective, empowers systemic change and community-based impact.
  • Two VC funds spun out of Elemental — Earthshot Ventures, a $60M+ VC fund launched in 2021, and EEx Fund One, a $3M proof-of-concept follow-on fund for Elemental portfolio companies — allow for follow-on investments and bring additional capital into climate tech. Their success also supports the nonprofit financially.
  • Our equity stakes in portfolio companies allow us to recycle financial upside into our program and pay it forward when they succeed. We’re starting to see the fruits of this now.

Why it matters

We hear the value of this kind of support again and again from our cohort companies. Recently, Numina, a portfolio company, announced that it is deploying its city data platform in Kuala Lumpur. In the CEO Tara Pham’s words: “[Elemental] believe[s] that our planet and cities deserve better solutions and are not afraid to back what other investors consider too hard. Thanks to their strategic guidance as much as their funding, we took an innovative technology with long sales cycles from bleeding-edge to profitable business in 2 years of working together.”

How to get involved?

We’re glad you asked. If you’re a startup, apply. And if you want to be part of our mission and our next nonprofit fund, you can donate here. If you’re a corporate and want to get closer to climate tech innovation and accelerate your decarbonization journey, get in touch here.

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