Renewable energy innovation and Israel’s ‘team of teams’ climate tech investing approach

Kaloyan Andonov, GCV Analytics: First and foremost, please tell us a bit about your corporate parent. Doral is a relatively newly listed Israeli company operating in the renewables space. What is its culture like?

Roee Furman, Doral Energy-Tech Ventures: Doral is a global renewable energy leader, holding hundreds of long-term revenue-generating renewable energy assets. With over 9.5 GWdc under development, Doral Group is active in Israel, Europe and the United States.

Doral was founded by Doron Davidovich (Dori) and Alon Kesel in 2007, hence the name Dor-Al. It was one of the first renewable energy developers in Israel. The first photovoltaic (PV) installation in Israel was built by Doral back in 2008. The company is very entrepreneurial by heart and soul. Our DNA is, I would say, unique in the way that we do business with a still fully entrepreneurial mindset, even though we are already listed on the Tel Aviv stock exchange. But even after going public, we strive to keep that entrepreneurial spirit. One of the first slogans of Doral was “energy of innovation”. So, to me, innovation was fully embedded into the company culture and the thinking process of the executive team of Doral from the outset.

When the company was founded, the interest in solar energy was high and our thinking went along the lines of: how can we promote real estate so that houses can be sold with zero mortgage payments made by consumers? It was to be done in such a way that the solar panels and whatever they generate and sell to the grid would effectively pay people’s mortgage. So, we would build rooftop solar panels on top of houses and connect them to the grid and what they would get in exchange for the electricity sold at the time would largely cover the mortgage payments.

KA: It sounds like a really great idea. Did it work?

RF: Yes, there was an official delegation from China’s Ministry of Energy on a visit to Israel. They had read about this PV installation and the delegation came to our site to see it in action. There was a lot of publicity, with government officials interested in our solution at the time. So, this gave a boost to Doral at the time but what makes us unique today is the wide variety of renewable energy projects we are involved in. We are doing solar PVs at all scale – from rooftops through industrial and up to 1.6GW utility scale projects. We are also involved in projects related to waste to energy, water treatment, biogas and windfarms as well as in the agrovoltaics space, which we see as one of our growth engines. The latter involves a dual use of solar energy, not just to produce electricity but also to be used in agricultural processes for crops. In Israel, we are very diverse when it comes to size of projects. Overall, we have more than 9.5 GW under development across Israel, Europe and the United States. In Israel, we won a very interesting tender for a project involving PV and energy storage, with more than 1.4 gigawatt hours of storage facilities.

KA: I have read about your deal in Phinergy and it seems that has whetted your appetite for additional early stage investments. However, was that successful transaction the catalyst for further interest in venture investments?

RF: Phinergy is a company that is developing energy generation and storage solutions based on aluminium-air and zinc-air technology. When we won the energy storage tenders I just mentioned, it opened the floodgates for energy storage solutions to be embedded within our renewable energy assets. It was something we had acknowledged around two years ago and the tender sparked our interest in such solutions. When you look into the future, you find different types of applications of energy storage technologies and you also find there is a global shortage of lithium-ion. The lithium-ion technology is less favourable for every type of application, like the medium-long duration storage solutions. Phinergy was a good match for us because it was at a pre-IPO stage, after having raised more than $71m from strategic investors like Alcoa, Indian Oil and others. Not only did we become investors but also their strategic partner in the development and design of the zinc-air technology. Since we are well positioned in the Israeli capital markets, with all the institutional investors, I believe we played a significant role in their going public, as we brought several investors along and sent the right signal to markets. The company also collaborates with Indian Oil, Tata Motors and other strategics. According to the World Economic Forum, they were considered one of the most promising technology companies in 2021.

KA: Had Doral done investments before?

RF: Yes, but not in a structured way. The Phinergy deal, which brought along other investors, created an internal success story which led to the official launch of Doral Energy-Tech Ventures, which is our corporate innovation and investment arm now. I like to define it that way, because my team and I are the head of innovation and investments. We are on top of anything from internal innovation and spinning out companies from within the organisation, through striking partnerships and joint ventures with other companies. For example, we have signed agreements with several universities in Israel, such as the Technion – the Israeli MIT, and Bar-Ilan University. These universities have global programmes in energy, climate and electrochemistry, two areas we are very interested in. We believe innovative solutions may come out of there in our core fields of interest such as energy storage, green hydrogen, waste-to-energy as well as agrovoltaics. We are running several applied research projects with global lead scientists.

Aside from deep relationships with academia, we also launched an accelerator programme along with 8200 Impact and Bank Hapoalim, one of the largest banks in Israel. It is one of the first accelerators in Israel dedicated exclusively to early-stage climate and energy tech companies. One of the motives for that was our desire to develop and contribute to the ecosystem in Israel, to see more and more companies and entrepreneurs tackling issues in the climate and energy fields. We have shortlisted the first cohort of companies and the programme started in October this year. We are really excited about it –not only to be able to provide financial support to early-stage companies like that but to also give them a platform that could potentially build unicorns (or even decacorns) in the energy and climate tech domain. Some of these companies are more hardware-related rather than just being software solutions, so they require something a bit different in terms of mentoring and guidance. 8200 is the technological division of the Israeli military intelligence. Lots of Israeli unicorns are alumni of this unit. It is where a lot of Israeli innovations began and where a lot of talent from the Israeli ecosystem is concentrated. When we came up with the idea, they were super excited about it. We believe building this platform will sow the seeds for future entrepreneurs in this domain. Doral can provide very quick access to one of its facilities for many projects across Israel or abroad, so that founders can test their solutions and fail until their success.

KA: Do you look at later-stage companies as well?

RF: We also set up a bootcamp with The European Institute of Innovation & Technology (EIT) Hub, dubbed “Calling to scale” for growth-stage companies in the climate tech domain. We are sponsors of the bootcamp and we host companies from Israel and Europe. It is all about bringing together the Israeli and European ecosystem, from both the innovation and corporate side. A Finnish startup from the first cohort is now finalising a pilot project with Doral in one of our Israeli sites. So, it is amazing. Usually, a company based in Helsinki will not necessarily see Israel as its go-to market but giving them the ability to test and run interesting pilots for lithium-ion extension storage solutions brought us together.

KA: What is also amazing is the extent and scope of the various initiatives and programmes you at Doral are involved in. What is the structure of Doral Energy-Tech Ventures like? How is it set up?

RF: We are a separate entity that is fully owned by the Doral Group. As of today, we have done more than eight investments, five of which in Israel and the others worldwide, with a special focus on the US where we made some exciting deals. We are exploring opportunities in Europe – UK, Germany, Sweden, Austria and Finland. I myself, by the way, am a mentor in the Equinor TechStars programme because the Nordic region is an interesting one for the energy innovation ecosystem. We have done some investments with partners from Europe within syndicates. We are pretty broad and global in scope. We are also looking for opportunities at all stages – from research through pre-seed to pre-IPO. We are stage agnostic and I do not think we have the privilege to choose to specialise in a specific stage. There are not enough companies in the energy domain, so we cannot be super picky on a company’s stage. Furthermore, at the corporate level, we need to be widely open and interact with companies at all stages. I can see a trend that corporates are doing more early-stage investments because they can bring value in strategically shaping the business, its DNA and go-to market in such companies. It is a bit more difficult to do that at a later stage.

KA: How do you interact with startups within the context of your investment process?

RF: We come in rather modest when we meet a new company. We know there is a lot of disruption and much of the emerging technologies will come from outside. We start fresh with every new Zoom call, with every new interaction with startups and we try to educate ourselves in addition to developing discussions that bring value to the startups as well. It is only afterwards that we filter what we think may be viable and interesting. Sometimes investors need to have a very strong reasoning about doing what they are doing and sometimes they just have a hunch for a specific company or industry or a trend. We also try to filter such biases and we monitor 40 or so parameters, including team cohesion, technology and many others – assigning a score for each one. We also rely on in-depth analysis and market understanding of every potential investment. We believe that collaboration is a must in our industry. Therefore, we are in favour of global syndicates with other VCs and CVCs.

KA: How do you define the areas that you seek to invest in?

RF: In that respect, our first move was to mimic our core business operations and then we expanded our areas of interest that we should explore as potential growth engines for the company. And this is in line with our cultural DNA about looking for new initiatives. Thus, within the renewables space we are very broad. For example, when we launched the microgrid energy independence initiative in Israel that started to naturally involve a much broader scope of technologies that are needed to build a microgrid in, say, a kibbutz – from monitoring solutions to IoT sensors, short and long duration energy storage, AI-based solution to forecast generation, consumption and demand, the weather etc. It was much the same story in agrivoltaics, as it is one of our investment segments and areas of interest. Another such area was waste management and recycling processes, as Doral Group is a heavy consumer of storage solutions and solar panels that reach their end of life. Thus, recycling and waste to energy is an area of particular interest for us.

It is important to highlight that Doral knows how to develop projects. Startups do not necessarily know how to do it. If we take, for example, electrolysis and green hydrogen. If you want to produce hydrogen off solar assets, startups may not necessarily know how to go about this (in terms of project development). Our abilities come in when we see there is a technology with potential and we lay out a project to produce hydrogen with it. This is our strength and, as this industry is very much hardware-related, it is a truly important one. This is significant value added to each company we invest in.

KA: What is the one trend in the renewables space that you are excited about?

RF: There is a trend and hype around green hydrogen and green ammonia. We have declared our intention to enter this domain. We are an end-to-end solar energy developer, so to this is a new concept here. We go from selling electricity under power purchase agreements (PPA) to selling molecules for various applications. So, in this space, we would not necessarily connect to the grid and sell electricity but rather start selling green hydrogen, green ammonia or other products like green fertilisers. The source of energy would be from within our assets. This is definitely a transition that we envision. We will not only sell electrons, we will also sell molecules. The market is shifting and as a renewable energy developer, we are a very important enabler for this transformation.

KA: How big is your team?

RF: We are a team of three people and I would say it also includes 75% of our engineering team, as we are taking from their time. This is internally speaking but we are also building out a network of experts, which we call our “scientific task force” with people from multiple disciplines, including professionals and experts from academia. For every new deal, we are like a squad and we structure ourselves for it. General Stanley McChrystal authored the book “Team of Teams. New rules of engagement in a complex world”. He explains how special operation units in the US military used to be very hierarchical and then they removed that kind of hierarchy and created their “team of teams” concept. In our context, this means that there is a leader for the due diligence on a specific company who selects and reaches out to the relevant experts within Doral and externally. So, I am a huge fan of horizontal organisations. And this is one of the reasons why a small team is capable of moving fast and wisely to make smart timely decisions. We have open doors to any business unit within Doral and they are all in favour of making it happen and succeeding.

KA: What is the team spirit like?

RF: E.I.P or “Everything is possible” – that is our motto . We are all brutally honest and very open to new ideas and we act without ego. I think it requires a lot of maturity to do so this is really important. To me, it is all about collaborative team effort. I am more than happy to see one of my team members take the lead in a specific transaction. Then I move aside and serve them, I play the same role as any other team member. Before starting this role, I had to make sure, first, that we will walk the talk. I wanted to make sure that the executives would be willing to take some risks in this type of investments. I also wanted to make sure that we will move fast and that is one of the reasons why we have been working around the clock to become relevant. So, overall, we feel very strong because we are hands-on with our core business. I am glad to say that we do move fast.

KA: What kind of deals do you have in the pipeline?

RF: We have some deals from the green hydrogen, long duration energy storage solutions as well as something within the recycling field.

A lot has been written about Israel being the “startup nation” and its vibrant innovation ecosystem but few speak about Israeli venture investors and their investing culture. What are Israeli venture capitalists like?

The Israeli ecosystem, from the venture side, is mainly driven by investors who were entrepreneurs themselves, so in many cases the investor and the startup speak the same language, which is important. It is not just the financier’s perspective at play – how to build exceptional companies fast, go to market fast and create unicorns or decacorns. I have already stopped counting the number of Israeli unicorns that have been listed on the Nasdaq in 2021. You will find names like Monday.com and IronSource, among many other. The Israeli ecosystem is very competitive. We are very entrepreneurial and I think that goes both for startup founders and investors. But the Israeli “startup nation” is now facing the challenge to become the “scaleup nation”.

In terms of energy and climate tech space, in particular, there is growing interest from global and local investors. in the CVC side, it is not common to see renewable energy developers establishing this type of venturing arm and have the appetite to engage with new technologies and to host innovation. Other corporations interested to invest in Israel could collaborate with us as their ‘boots on the ground’ and to gain visibility in the Israeli ecosystem. And we would like to do so and participate in deals internationally.

In that train of thought, have you considered running a fund with traditional GP-LP structure, potentially with corporates from outside of Israel that may not know their way around yet?

Yes and we have received several enquiries, also from institutional players that would like to enhance their ESG investments efforts and to strengthen their exposure to the Israeli ecosystem. Needless to say, that we are open to any kind of collaboration.

KA: What is your background? Are you by any chance an entrepreneur-turned-investor?

RF: I would define myself as an intrapreneur. I never developed my own company, but I did a lot of things within organisations that I worked for. Before joining Doral, for example, I worked for a company that ran wildlife conservation projects across Africa and there was a small project related to a hospital in Canada – something that was not really in our core business, but I felt it was interesting. So, I delved into it. Fast-forward, I initiated a business unit under the group and we established a subsidiary in Canada. We ended up developing a technology for the purpose of health care digital transformation that was AI-driven and predicting patient flow. I developed everything from within the organisation, so I would define myself as an intrapreneur.

KA: What is an interesting company you have already invested in?

RF: Battery Resourcers, an advanced materials and lithium-Ion batteries recycling tech company that is a great example of a multinational syndicate, with investors from Silicon Valley, Boston, Israel, Germany, the UK, Japan and more. We had investors from the entire supply chain, which could give a vote of confidence to its technology. Orbia Ventures was leading the deal for them, along with wonderful investors such as TDK Ventures, Jaguar Land-Rover, At One Ventures, Hitachi Ventures and Trumpf Ventures, amongst others. As a result, we, the investors became actual friends and we collaborate a lot on other potential deals and within other syndicates. The company itself is developing a cutting-edge technology, with a strong positive impact for the world by reducing emissions and reviving valuable materials. To me, all this is an example on how we should invest and the kind of syndicates we want to enable energy and climate tech companies to grow. It is such a high bar for collaboration and engagement. The joint and collaborative effort is simply amazing of which, I believe brings a lot of strategic value and support to the startup.