The Big Deal: Two utilities team up at Topell

Two European utilities which have each been operating for more than a hundred years have hatched their first corporate venturing deal together, backing Topell, a Netherlands-based biomass company that converts biomass into a substance which resembles charcoal.

As first revealed at Global Corporate Venturing’s Symposium in London in May, Topell has raised €13m ($16.3m) in its series B round. At that time it was only known the corporate venturing unit of Germany-based utility RWE’s clean energy unit Innogy had been joined by another backer in the deal. Yet it has now emerged that Innogy Ventures has teamed up with Yellow & Blue Investment Management, which is a venture firm set up by Netherlands-based energy company Nuon. Nuon was part-acquired by Sweden state-owned utility Vattenfall in 2009, a few years after press reports linked RWE to its Dutch peer as part of a strategic relationship.

Topell is very excited to have two big corporate backers behind it. Jules Kortenhorst, chief executive of Topell, said:  “They are two of the most committed utilities when it comes to biomass. To have both of those on our side is quite a honour and quite an opportunity. It is a great position for us to be in. When you get money from corporate investors they bring the expertise of the corporates to do analysis. The [fundraising] process is not a walk in the park, but we are very happy we went through it and came out like this, with a stamp of approval from two very tough, challenging, and very demanding utilities. Getting through that OK is quite something.”

According to Albert Fischer, managing director of Yellow & Blue Investment Management, Nuon and Vattenfall were relaxed about working with a large competitor like RWE. He said: “They are competition in the energy industry, but not in innovation. The reason why Nuon set up the fund is they need access to technology. They don’t need to own it. There is not a single utility that wants to be the sole customer of a technology. They all want to see companies becoming the industry standard.”

The involvement of Yellow & Blue marks another chapter in the corporate venturing history of Topell, which has had a fairly long period of corporate backing. Kortenhorst and RWE Innogy Venture Capital’s Crispin Leick talked at the Symposium of how the two companies had worked together since Topell was a small start-up of only four people.

The entire conversation describing Topell’s relationship with RWE at our conference is well worth a read – see related content below. Not only does it describe positives the two companies had experienced working together, revealing RWE was able to commit to Topell’s seed round in five months, the conversation is also frank, and has Kortenhorst and Leick revealing another strategic backer had been excluded from the syndicate for being pushy on terms.

Should Topell become the standard in the biomass industry – it uses a process of making charcoal called torrefaction, thereby making biomass transportable and easier to use for energy utility companies – its two utility backers hope it could become, it is likely corporate venturing will have played an important part in its success.

It will be interesting to see if more combinations in the energy utility sector take place between large corporates. As Kortenhorst said, one of the great things about its present round is that many companies in the biomass and wider clean tech sector are struggling to secure funding. There is a hope corporates can fill some of the gap the retreating European venture industry has left – many entrepreneurs will be looking to deals like this one in the hope that this is true.