The Ministry of Employment and the Economy in Finland accepted Cleantech Invest into its Vigo accelerator program. The new cleantech start-up accelerator will provide funding for early-stage ventures and create growth stories by combining cleantech expertise, industrial know-how and capital. Cleantech Invest Vigo is lead by managing partner Ismo Rautiainen, accompanied by Cleantech Invest founders Tarja Teppo (in picture) and Timo Linnainmaa.  The team estimates that most of the Finnish deal flow will come from the clean energy area. The other promising sectors in Finland in terms of deal flow include energy efficiency, new materials related to energy technologies, recycling and waste management solutions.

The Cleantech Invest Vigo team has a proven track record both in the global manufacturing industry and venture financing. Ismo Rautiainen has a leadership experience from various industries including energy, raw materials and vehicle manufacturing. As CEO/business unit manager he has been responsible for strategy and global operations at several industrial companies. Cleantech Invest founders Tarja Teppo and Timo Linnainmaa have advised large institutional and industrial investors in direct and fund investments in the cleantech sector since 2005.  Through its global network, Cleantech Invest aims to provide start-ups with direct access to leading private equity investors active in cleantech.

The Cleantech Invest team has been one of the sponsors and facilitators of the annual Cleantech Venture Day Lahti since its inception in 2004.  Tarja will host the Cleantech investment strategy session at Cleantech Venture Day ‘09 Lahti (sold out).

Update: Other two new Vigo accelerators that have been announced are Food Process Innovations Ltd. and KoppiCatch Inc. Food Process Innovations focuses on innovative foodstuff and groceries, the ingredients and services in the food industry. KoppiCatch on its part focuses on ICT, web and mobile sectors.

Disclosure: ArcticStartup consults KoppiCatch clients in various aspects of developing their business further.

I had the pleasure of a telephone conversation with EB’s new CEO Jukka Koskinen, former CEO of the Finnish company Ensto Oy, last week regarding the issues behind the chosen strategy to be a vertical battery system manufacturer (meaning that EB operates the whole production process from cells to complete system, allowing full control over the quality of the products).

EB’s business model is clever: the demand for end-products, the large format lithium-ion battery systems, is based on cost-efficient, long-lasting and safe energy storage solutions. The energy content (Wh/kg) of lithium-ion batteries is about three times that of lead-acid batteries and double that of nickel-based batteries. The key customer group during the first phase is the transportation industry, EV car and delivery van producers.

EB’s manufacturing facility (9000m2) in Varkaus is ready to start the mass production of large lithium ion batteries in 2010 (it will be the first in Europe). European Batteries has built an automated production line for next generation lithium-ion batteries and battery systems. With a fully automated production line and well-defined strategic decision to focus only on large-scale battery systems, EB will be cost-efficient when compared to small cylindrical size battery manufacturing. Its competitive edge is supported by EB’s good clean-dry rooms. During the first phase, the annual capacity will be 100 MWh of battery systems meeting the needs of 3000 fully electric cars. The sales price for the battery systems will be around €1,000 per kWh in small quantities. EB will be one of the few companies globally with the ability to produce single large-format prismatic lithium-ion cells that are over 40Ah in capacity.

The technology itself is based on the development of the K2 Energy Solution and has been developed further for mass production by European Batteries. The weight of the lithium-ion battery is 8-10 kg and the current charging time of a battery is 1 hour per 2kWh in one phase output. However, as Jukka stated, more important than the current charging time is the development of the current power output, availability and grid capacity.

If the electric car is a hot topic in US, it could be even bigger globally if someone gets the economics right and makes a pure electric vehicle a real alternative to the combustion engine.

During our trip we visited the most talked about contender that has been claimed to be the future of car industry, Tesla Motors. I talked to Rachel Konrad, Senior Communications Manager at Tesla, in length about the car itself, the future of the industry and most interestingly is Tesla’s business model really working and making real profits for its visionary founders and investors.

I also asked about when Tesla is coming to the Nordic and Baltic countries and heard that they are already here. For example, last year people in Denmark bought a total of 92 new two-seat sports cars in the price range of a Tesla Roadster. Tesla sold 10 Roadsters in the same period in Denmark – This makes a rough sports car market share of 10 percent! Even thought the market for sports cars is tiny in this part of the world, I believe 10 percent market share is indicative and it might get really interesting when Tesla shifts more of weight to Europe and rolls out the Model S with up to 480 kilometer range.

An interesting and significant part of Tesla’s business model, which is many times over looked, is how Tesla runs its dealerships. Instead of being set up like most car dealerships as franchise, they keep tight control of the dealerships and run them themselves to guarantee the best possible brand experience and make sure the customer satisfaction is high. Tesla has modeled the stores on the much hyped Apple Stores. Equally interesting is to notice that where roughly more than 50% of the revenues for a normal car dealership comes from repair and maintenance, none of this applies to Tesla. It’s not that often you need to change the oils for a pure electric vehicle. This many times over looked detail consequentially changes the economics of the electric vehicle business radically. See the below video for more.

Do you know how much energy a data centre uses per year? No? Well, let me tell you that a data centre can use up to 40 times more energy than a conventional office building, thus most data centres start to automatically look for ways to cut down on energy costs. To look for renewable energy sources would be a first, smart step for any data centre to cut down on energy-related emissions and become greener. However, today most data centers which claim to be “green” do not actually use renewable energy to run their servers, they do purchase so-called carbon credits. Its a cheap way to claim to be green while not actually doing anything to improve your environmental performance.

Verne Global will differ in a number of ways. For example they plan to use the abundant hydro and geothermal power of Iceland to power their wholesale data center facility. Iceland also offers plenty of free cooling, which the facility will utilize to cool its server halls. They’re building it on a former Nato base, which is relatively save from earthquakes and other natural disasters. The building is being constructed to meet the Golden and Platinum LEED standard, and the company is a member of The Green Grid so all-in-all a thought out concept.

Verne Global wasn’t too open about their clients, but hinted that they will be found in the Fortune 200. Two minority investors, Novator and General Catalyst have invested in the venture, and they’re not looking for further ones at the moment. For those who need to know what Tier the facility will be, it is Tier 3 so if you have very high security needs you need to look somewhere else.

I like the idea of a truly green data center. Iceland seems like a good location with its abundant hydro and geothermal power sources, and the use of natural cooling. While they might be the first truly green wholesale data center facility, there are already a number of truly green web hosts out there. What’s positive is that Verne Global will be able to offer power pricing stability of up to 20 years, and that they can deliver the environmental benefits of the center to their customers at a lower cost than traditional data centers located in cities like for example New York, Berlin, and London. They were also open and told me that currently they only source 20% from geothermal sources, but look to increase that number over time. The facility will go online in 2010, so if you’re looking for a new home for your servers give Verne Global a ring.

Finland’s plan to introduce a biogas feed-in tariff is moving forward: the target price for the biogas feed-in tariff is €83.5 per MWh for power production and €50 per MWh when utilizing CHP (combined heat and power). According to the plan, this would only concern plants that produce more than 300 KVA of electricity. This supports fairly large plant sizes, which exceed the suggested parameters and provide adequate return on investments.

Biower, a turn-key supplier of biogas and waste water treatment plants, is a great example of a start-up which would get a boost from a feed-in tariff decision. Biower focuses on combined heat and power production with an annual processing capacity of between 10 000 tn and 275 000 tn.  The company was founded in 2008 and now has reference plants outside Finland, while the home market still seems to be in waiting mode.

Instead of developing entirely its own technologies,  Biower focuses on the commercialization of attractive technologies with system offerings. ”Our strong network of partners and our previous experience of sales, marketing and project management enables us to grow as a global player. Our waste-to-energy solution is based on the dry thermophilic fermentation process enabling improved process efficiency with a dry feed cocktail.”, says Kari Vanhalakka, CEO and co-founder of Biower.

Kari has over 20 years experience of project management on a global scale and his target is to keep Biower on a very rapid growth path over the next few years.” We hope that the new feed-in tariff enables us to test and develop the business practice in Finland with concrete projects.”

But Powerkiss is not really what it looks like on the surface. One could easily think their core offering is wireless charging. Think again. Increasingly in the future it will be centered around Near Field Communication (NFC) enabled service platform which acts as a glue between different consumer services. Think location based advertising, where the location has been pinned down to the level of a restaurant table, or really selling any other service that is tied to a location. The variations are endless.

I met Powerkiss on our Silicon Valley Crusade, where they had joined to raise an A-round of funding. I talked with them about the product and the new approach that they’ve been cooking up behind the scenes. See the video below.

The concept is as easy as it is beautiful: Farms, especially livestock farms, produce huge amounts of organic waste and manure. The manure and organic waste are usually collected in storage tanks, and might be used as class B fertilizers on fields. However, this “garbage” has more potential. It can, through the process of anaerobic digestion, be transformed into biogas, which consists of approximately 60% methane gas. The methane gas can be used to produce heat and electricity, or as fuel in cars.

Let me explain a bit more the beauty of this concept, and how far it can go. A normal livestock farm in Scandinavia has somewhere about 60 cows, which produce enough manure per year to equal 80.000 kWh. That in turn is enough energy to power three to four houses for a year. But it doesn’t stop with manure, you can take this concept further and smart farmers can open up new revenue streams. Organic waste from communities can also be digested by these plants, and as cities need to pay to have their waste on a landfill a smart farmer charges less than the landfill for taking the organic waste. A cycle in a Biowaz reactor takes 28 days, and the biggest one can process 2000 m³ per year. In case you’re wondering what happens with the solid waste which comes out of a reactor, well, that is class A organic fertilizer. Our clever farmer would use it on his fields or sell it. The gas he can use to heat and power his house, and if there’s a feed in tariff he even can make money with his electricity.

Which brings me back to Biowaz. The company was established in 2006 and employes four persons. In 2009 a turnover of EUR 300k is estimated, and for 2010 they aim to quadruple this number. While it may seem low, it are good numbers when one knows that they launched the first commercial reactors earlier this year. The biggest investors in the company are Gaviota Holding AS and Aic Holding AS, and The Research Council of Norway, Enova, Innovation Norway and UMB, the University of Live Sciences, are partners and supporters of the company. The company is looking for further potential investors, to facilitate a faster market penetration. What is special about Biowaz is that their technology has substantial lower investment cost, is easy to install and maintain, and here in the Nordics farmers can get a 30% investment grant to help them with financing of the reactor. The complete system consists of the tanks and a technique container, and a suitable Combined Heat and Power generator can be added. Usually these kind of plants need specialists for the building process, however, Biowaz developed their product in a way that the farmer himself can construct the reactor, and a local plumber can connect the pipelines.

Quite obviously I am very excited about this technology. I think its such great technology that I am surprised that only so few farmers in Finland pick up the technology, less then 20 is what I read the last time. Biowaz seems to have realized the potential of this technology, and made it easy for farmers to build a reactor, thanks to their module-based components. It seems they are targeting primarily the Nordics, and are planning to expand to China as well. Personally I think German, French and Polish farmers should be a good market as well, since they still do have substantial amounts of agriculture in these societies. Because the agricultural sector is struggling with low prices for their products, the possibility to enter the energy production market as a side business could mean that farmers could once again rise to valued members of the society. I do hope that Biowaz succeeds with their goal to make the view of a biogas reactor on a farm as common as a tractor.

Preseco, founded in 2002, is a turn-key solution provider for water and waste-to-energy management. In other words, the company provides a waste-to-energy solution to turn the previously high cost (bio waste) fractions into usable and marketable end products.

Preseco  has grown very rapidly in recent years and reached €10m in sales this year. In addition to organic growth, Preseco has also been very active in acquiring patented technologies and essential references, mainly in Finland. The company’s state-of-the-art technologies include biogas and biocarbon plants, biodiesel processors, composting plants and water and wastewater treatment plants, all of which are used in several market areas including Europe, China, Vietnam and Russia. Their new biocarbon technology is at the product development stage and the first commercial steps have been made.

The business model is to cover the whole value chain including planning, building, operating and now financing. The key customer groups include municipal and private waste managament companies as well as those in the food processing and energy production industry.

Pontos becomes the new minority shareholder for Preseco. The key people behind Pontos include the grand old man of the construction industry, the founder and key owner of the SRV Group, Ilpo Kokkila, as well as Rainer Häggblom, the ex-chairman of Pöyry Consulting and Olli Pohjanvirta who has a significant track record of mergers & acquisitions in the Russian markets. The key target for Pontos is to bring in significant know-how regarding the international project business, which is essential for both the construction industry and waste management value chain. In addition, Pontos brings expertise and support to enable penetration of the huge Russian market.

The company’s key innovation is the use of tiny semiconductor crystals made of copper, zinc, tin and sulfo-selenide, CZTS for short, where each crystal works as a tiny solar cell. This technology is the combination of decades of research for the Russian military and Philips semiconductor know-how dating back to the 1960s. The result: a new type of flexible photovoltaic module with a significant cost advantage compared to all currently known photovoltaic technologies. The modules are produced roll-to-roll – think paper manufacturing – which eliminates the scale-up issues that thin film producers usually face. Once production is up and running, which should be by mid 2011, Crystalsol forecasts production costs below €0.50 per watt, which should give them the lead in low cost PV modules.

The team behind Crystalsol consists of Wolfgang Ressler, Thomas Badegruber, Prof. Dieter Meissner and seven employees, as well as a dedicated team of ten scientists at the Technical University of Tallinn. Investors are Conor Venture Partners Oy from Finland and Energy Future Invest AS from Norway. Additionally, the company is supported by several other agencies. So far the company has received €3m in funding, and is seeking a further €7 to complete its product development.

I asked Wolfgang Ressler what makes them different to their competitors. Wolfgang told me that there’s no direct competition, as currently no other company is developing a similar technology to them, but if you take a broader view there are plenty of players, ranging from start-ups like Heliovolt and Nanosolar to established corporations like Q-Cells and First Solar. What makes Crystalsol’s technology different is that it is based on CZTS and thus there is no need for rare metals such as tellurium and indium. The production of the semiconductor is separated from the module production and their product opens up completely new ways to integrate solar cells into buildings, roofs and facades. Add in a cost reduction of 70 to 80% compared to the current industry average and you have a very attractive product which could revolutionize the photovoltaic market.

Established in 2008, the company started out during one of the worst recessions since the 1930s, and I asked Wolfgang, who’s one of the three managing directors of the company, how they coped during these tough times. He was very optimistic and proud that the company was able to complete its seed financing round successfully. He views the current situation as beneficial for Crystalsol, as it means an increase in available talent and lower prices for equipment and raw materials.

Given their unique technology, optimism and their outstanding management team, I believe Crystalsol has what it takes to succeed. Creating a product which does away with a harmful production process while driving down production costs is one thing, but to also aim to minimize the environmental impact of the product over its entire life-cycle shows that the company is thinking more deeply. To target the building integration industry for its first market is, in my opinion, a smart strategy, as I believe huge buildings with glass facades could benefit immensely from the ability to produce energy while minimizing the incoming sunshine. If you are curious about Crystalsol, come and meet them at the Cleantech Venture Day 2009. It takes place on November 26th in Lahti’s Sibelius Hall and tickets are still available here.

Seluxit, which was established in 2006 by Morten Frederiksen and Daniel Lux, develops and markets software and hardware solutions to monitor the energy consumption of buildings. The company is already marketing two different sensors which use the Z-Wave wireless standard, offer two different Gateways and are currently developing a Mobile Phone programme which will run on all mobiles that support GPRS and Java. The mobile phone app will allow you to monitor and control your house on the go, which could be useful if you’re traveling and aren’t sure if you switched off the heating system.

You can use Seluxit metering solutions to measure electricity, gas and water consumption; and because they’re wireless they’re easy to install and to move around. The sensors communicate to a viaSENS home controller, from where you can see and control the energy. You can also install a software on your PC (Windows; Mac and Linux coming soon) from where you can see your house’s energy usage at a glance.

Investors in the company are Lux and Frederiksen themselves, who have invested 320.000€ in the company, at equal shares. Currently they are looking for additional VC funds in order to accelerate the growth and raise awareness about the products. Seluxit had a turnover of 191.000€ in 2008 and are expecting a turnover of around 340.000€ for 2009, that’s close to 80 per cent growth – Good numbers for a company which has only four employees.

The company’s current clients include governments, power utility companies and other companies which develop Z-Wave equipment. Previous clients, which have used Seluxit’s consultancy services, have become partners and are now selling Seluxit products next to their own. Lux told me that they have also been in contact with Telcos as the remote surveillance and control of homes is interesting for them and suits their business model.

I find the Seluxit products very fascinating. The ability to check and control my house’s energy via my cellphone is brilliant: How often did you leave for holidays and wasn’t sure if you switched off the heating? Now a quick check with the phone is enough, and a click and its off in case you left it on. Also learning where your house is wasting energy is the first step towards improving energy efficiency. With a wide variety of income possibilities – from the products themselves over consultancy services to remote surveillance – I think they’re safe in case one would fail; and 80% growth in turnover for a company which is three years old and does business with the consumer is excellent.

Finnish wind turbine manufacturer WinWind raised €120 million in September 2008. Lassi Noponen, Chairman of WinWind at that time, agreed to share his experience building a successful investment strategy from the initial seed round to a successful exit.

During the early 90’s, Lassi worked for Neste Plc in various legal,technology and M&A positions and (with an MBA from London Business School)as VP and Group Controller at Neste. In the late 90’s he left Neste for investment banking and joined Evli Corporate Finance as a partner.

The story starts in the early 2000’s, when Lassi was co-founder and CEO at Proventia, a cleantech venture fund. Proventia made the first investment (of € 1 million) in WinWind’s first round. Later on, Lassi negotiated the later rounds with the Finnish pension fund Varma and Finnish Industry Investment. In 2006, Lassi managed the rounds with the Indian Siva Ventures as the Chairman of WinWind. Finally, he managed a €120 million round with Masdar of Abu Dhabi in 2008. 

How was WinWind’s financing strategy different to the other wind companies?

The development of large infrastructure technology such as wind turbines does not actually fit startups well. Time cycles are so long and the capital needs so large. WinWind has been venture funded for almost ten years now: it managed to break the essential entry barrier by selling the first pilot turbines for paying customers. In addition, the other key issue was to have an energy company (PVO) as a strategic shareholder enabling cash flow and vital references from the start.

How does the investment culture differ between Asia and North Europe?

One strategic decision in WinWind’s breakthrough was leapfrogging the technology to Indian markets via major and original Indian shareholders. An Indian presence and a global story backed by a major Indian owner was needed to get global investors interested in WinWind. India has a huge domestic market and growing export industry: major Indian players such as Siva Ventures think on a very large scale. They had much bigger plans for WinWind than we could have imagined a few years earlier. In my view, the defining characteristics of Indian investment culture are the ability to think big with a limitless availability of human resources.

What would be your tips to help a (cleantech) start up raise finance?

Do your homework with investment pitches. Investors have millions of investment options but you only have the one thing to sell.

First, choose the right market. Like for instance, the wind turbine technology market is maturing today and the global consolidation process is ongoing. However, there are still opportunities for sub-technologies offering a less competitive and less capital intensive business model for technology development. All renewable energy comes from the sun and will come from the sun ever more directly over time. The most interesting business opportunities are therefore not in the generation but in the storage, transportation and saving of energy as well an in the interphase between generation and use of energy.

Second, the fast will eat slow. Raise enough capital to allow technology development and market penetration in the shortest possible time frame - even at the expense of dilution.

Thirdly, try to come up with a business model that allows debt leverage as early as possible.

In your personal opinion, has the economic crisis set back cleantech?

The recession carries the risk of a regulatory shift toward cleantech slowing down – examples can been seen in the forest industry’s demand for exemption from electricity tax. However, it does not look like this is happening on a major global scale and cleantech may well be one of the biggest drivers of economic recovery when it really starts. On the other hand the whole notion of cleantech will vaporize over time as any good science will capture the need to be environmentally friendly.

The global stimulus money flowing into cleantech also boosted private investment in the sector. The cleantech investments in North America, Europe, China and India totalled $1.59b in Q309. Cleantech is now the largest category for venture capital investment, eclipsing biotech and IT. According to the Cleantech Group, the sector already accounted for 27 percent of venture capital in the second quarter this year (see the graph above). Here is a link to the release.

The average round size in the third quarter was down to $12m (from $12.9m) while the average size of follow-on rounds increased to $16m (from $15m).

The leading investment sector was solar, which received $451m in Q309 with 24 deals. The second largest, transportation, received $383m for 27 companies in vehicles, biofuels and advanced batteries. This included an investment by the Finnish firm Valmet Automotive in Norwegian firm Think Global in a $46m round. The third top sector was green buildings, which attracted $110m.

The goal of the project is to manufacture and deploy the first grid-connected WaveRoller unit in Portugal (Peniche). The nominal capacity of the WaveRoller unit is around 300 kW (see the picture above) and the project also includes a one year testing period.  AW-Energy now has the site, grid connection permission, installation license and the technology itself ready for the demonstration.

The consortium, lead by AW-Energy, includes companies from Finland, Portugal, Germany and Belgium. Involved in this project are industrial giants like Bosch-Rexroth and ABB, the renewable energy operator Eneolica and the wave energy specialist Wave Energy Center.

According to the (as yet unconfirmed) rumours, the planned target price for the biogas feed-in tariff is 83.5 euros per MWh for power production (which equals the planned feed-in tariff for wind power in Finland) and around 30-40 euros per MWh for heating. In this system, a biogas producer is assured a certain long term (15-20 years) guaranteed price.  We do not yet know if there are plans to introduce feed-in tariffs for other biogas-based fuels, for example those used to run motor vehicles.

For combined heat and power plants (which are quite popular in Finland), this amounts to a feed-in tariff of around 110 – 120 euros per MWh.  Is this enough to promote biogas investment in Finland? Considering the Finnish national goal for the share of renewable energy is very high, 38 per cent by 2020, and that recent high renewable energy utilization in our country is largely based on by-products from the pulp & paper industry, we need an attractive model.  At these levels, the payback time for a typical biogas plant investment in Finland will be 8 – 10 years. Not very aggressive, but the full picture also depends on the length of the guaranteed price period.

AW-Energy

“The key difference between the demonstration unit and commercial scale unit is the nominal capacity. The demo focuses on validating our results from the prototype testing, CFD simulations and tank testing.” explains John Liljelund, the new CEO of AW-Energy. “After the demonstration project, around 2014,  we will launch the pre-commercial project with a focus on generating electricity with our partner ensuring the technology meets the economic targets measured by, for instance, net present value or internal rate of return. The most interesting market areas for us include the western coast of Europe, the USA, Chile and Australia.”

The patented WaveRollers are the first devices in the world to utilize surge for energy generation. The potential of this technology has been demonstrated in tank testing at Helsinki University of Technology and the University of Porto/IST Lisbon as well as in marine tests with very small scale model units conducted at EMEC in Orkney, Scotland in 2005. The WaveRoller Proto 1 was launched in 2007 and the Wave Roller Proto 2 in 2008.

The original concept was conceived by Mr Rauno Koivusaari in 1993. The first devices were installed in 2000 and AW-Energy was founded in 2002.

The pilot project is a step towards the launch of a demo project and site development activities in key market areas in Europe, the USA, Chile and Australia,which will lead to the release of the next financing round of 10 million euros in Q1/2010.  AW-Energy’s current investors include JN Uljas, Aura Capital, Sitra and Fortum, the Nordic utility company.