Published on September 28th, 2012 | by Erica Landin0
André Heinz finding sustainable profit in the Nordics
In his native USA, André Heinz might be known to many as part of the prominent Heinz family and son to Teresa Heinz-Kerry, wife of former presidential candidate Senator John Kerry. However, André Heinz has created his profile outside of pure politics – as an environmentalist and long time advocate of sustainability.
Heinz first started working with Sweden in 1995 when he opened the US branch of the Swedish non-profit organization The Natural Step. His move to Stockholm came in 1999, with the same organization, and ever since then he has maintained a presence in the country’s capital. In 2007, in the midst of the first cleantech hype of the new century, André Heinz stepped up his game by opening Scandinavia’s first dedicated Venture Capital fund. The Sustainable Technologies Fund I (STF) was created to invest in early-stage cleantech companies in the Nordic countries.
LIFETIME ADVOCATE OF SUSTAINABILITY
We meet André Heinz in new offices, in a protected heritage building on the beautiful inner city island of Skeppsholmen in Stockholm. Over a black cup of coffee and his American intern’s homemade banana bread, he explains why he made the decision to set up the Sustainable Technologies Fund together with investment directors Anders Frisk (former CEO of The Natural Step and Speed Ventures), Klas Gustafsson (formerly responsible for venture investments at Traction AB) and Hans Lundgren (former VP for Strategy of Vattenfall).
“I have been a lifetime advocate of sustainability and felt it was time to put my money where my mouth is,” Heinz says with a broad smile. He was already a board member of The Heinz Endowment where he had overseen the creation of a program of environmental grants, but he wanted to do more. Heinz himself is a major co-investor in the fund, which raised 58M before it closed fundraising in 2008. “The biggest argument I kept hearing against sustainability at the time was that green technologies cost more and that green energy can only function with government subsidies. I don’t believe it and saw this as an opportunity to show that green technology development can be profitable.”
POSITIVE ATTITUDE IN SWEDEN
So with his strong us connections, why set up the fund in Sweden? “There were several reasons,” says Heinz. “Having worked in Sweden before I had first-hand knowledge of the positive attitude toward sustainability. Attitudes, law and leadership in the field equaled interesting green practices and expertise.” He pauses. “In addition, the us market was fairly saturated but in the Nordics I did not get the same impression,” says Heinz.
“We definitely had a bubble in the cleantech field in the us and eu in 2007-2008,” he emphasizes, in regards to the time when the fund was set up. “Still, there were many valuable companies around and good reasons for investing in cleantech.” The fundamental market drivers were – and are – there but now the cleantech investment market has matured. “There are always bumps along the road in the development of a new sector,” he explains, “The company failings we are seeing now are to be expected.”
CLEANTECH IN NEXT STAGE OF DEVELOPMENT
We discuss the similarities to the IT bubble. When looking back, many of the futuristic plans from the IT hype have become reality, it just took a little more time than expected. Additionally, it was not always the initial companies that profited from the development.
The cleantech field seems to have stepped through the door of the next development stage.
“One of the main things going on right now is that prices for solar energy are coming down drastically, which hasn’t been pain-free for all players,” says Heinz. He credits the German system of feeding tariffs with providing a progressive manner to make “green” energy more cost efficient and competitive, driving the development forward. Green energy prices in some parts of the world are soon competitive with the grid. A technology revolution is in the works.
THE QUESTION OF RISK
However, for a venture capital fund, the most interesting technologies and the most interesting investments are not necessarily the same thing. There is the question of stage, risk and timing.
“Risk often means something else to an entrepreneur than to an investor,” says Heinz. “For us ‘risk’ is not only the chance of the product being developed or making it to the market. It is also a question of the ability to meet deliverables, timelines and to run the finances effectively. Or, a great inventor might have a challenge in being able to work well with other people,” he expounds.
If those factors do not match with the funds requirements, it might not be a good investment case. This difference in risk perception between entrepreneurs and investors leads to the biggest set-backs according to Heinz. But it is clear that he cherishes the meetings with the creators of the next generation of clean technology solutions.
“The worst part about running a vc is having to say no to so many cool things,” he smiles. “But unfortunately, our job is not just to help companies succeed – it’s to find the ones with management teams that are most likely to do it.”
The fund has now allocated its finances and it now remains to be proven if the investment strategy was effective. Companies like Triventus, Eco2Energy and Reac Fuel are part of the first fund. Heinz is quite positive and says the team will start raising money for a second fund in fall. Obviously, if André Heinz continues to ‘put his money where his mouth is’ it is because he sees continued opportunity in Nordic cleantech. And this, we’d say, is the very best of reviews.