The future of energy: Different horses for different courses

A year ago, Tom Whitehouse and I interviewed Geert van de Wouw about Shell’s venturing unit (back then still dubbed Shell Technology Ventures) and the technological challenges for the industry, in light of falling oil prices and damages from hurricane Harvey. In the interview, van de Wouw commented on the future of energy: “The oil and gas industry does not need to be saved. Fossil fuels are here [to stay] for decades. Today, electricity accounts for only 20% of total energy demand. This will increase with the electrification of our societies, including auto-mobility, but still the fact is that hydrocarbons are a part of the future, whether people like it or not.”

That statement struck me as a rather bold one in a time when many only like to talk about a carbon-free future of the planet when in polite company. With the impending massification of electric vehicles and battery technologies becoming more efficient, I could not help but ask him if his position has changed. “Well, I do not change my mind and my position so quickly and easily,” he said and laughed.

“We have got emerging solutions in electric mobility, penetrating the customer segment, biofuels being increasingly commercialised and an ever more convincing case for hydrogen as an energy carrier for long-term storage and long-haul trucking, along with developments in solar and wind energy. There is certainly going to be quite a mosaic of energy sources available and I think they will co-exist and be used each for a specific purpose. Different horses for different courses.”

One thing that has changed, however, is the brand name of the venturing unit van de Wouw heads. “The rebranding is quite easy to explain. We have been doing investing in business model innovation rather than strictly technologies, as the old name implied. People would just get very confused as our mandate expanded and the name implied a focus on technology only.”

Van de Wouw has also been expanding the team significantly since the beginning of 2017. Currently, Shell Ventures has six offices across different relevant geographies – three in the US (Houston, Boston and San Francisco) with teams of three to five people in each, in addition to the unit’s offices in London, Shanghai and Amsterdam, where Van De Wouw himself is based, alongside his CFO Robert Linck.

“In terms of finding talent for our venturing unit, we doubled the size of the team since the beginning of 2017 and there has been no shortage of excellent professionals applying to work at Shell Ventures. Many of them come from outside the company [Shell], from corporate venturing units, financial VC’s or private equity firms, bringing their unique external perspectives to Shell Ventures.” Van de Wouw also added: “I believe this is thanks to our reputation as a professional and faithful co-investor, which we have been building over the years. The combination between these seasoned VC professionals and the people in my team that know Shell from the inside has proven to be very effective.”

However, pressed by the need to diversify his team, he said: “Diversity of thought is very important to any professional venture capital unit. Through challenging each other’s deals, we avoid deal-bias and sharpen our decision making. While at Shell Ventures we already have diversity in terms of geographic and cultural backgrounds, we would like to do better in terms of gender diversity. However, what we found quite difficult in the recruitment process was finding experienced female talent in the Venture Capital ecosystem, which is – unfortunately – still very male-dominated. So, I would like to use your magazine as a platform and say that if there are women working in venture capital interested in working for Shell, they should contact me. With closing 22 deals last year, we are one of the most active and diversified corporate investors in the Energy industry and otherwise a very diverse and fun team to work in”.

Although most of the top 50 corporate venture investors have women in their senior investment ranks, there is still much work to be done to bolster diversity throughout the corporate venture capital community and beyond. Van de Wouw recognised it and added: “I therefore fully embraced and supported the initiative taken by Wendell Brooks, President of Intel Capital during the 2018 GCVI Summit, when he called us out to hire and mentor the best and the brightest women and under-represented minorities as part of our growth plans”.

When asked about China and the rising innovation scene there, Van De Wouw said: “Shell Ventures sees investment opportunities in China in areas like the future of mobility and the scaling of new solar and battery technologies. In many ways, China is at the forefront of electric and autonomous mobility, EV charging, battery swapping and new mobility concepts. With Shell’s downstream businesses, for example, we made a minority investment in HuiBao, an automotive e-commerce platform that links insurance companies with the insured, offering a range of aftermarket product and service from car maintenance, financing and auto parts.”

This type of investments is obviously done strategically – to explore new sales channels, as China is one of Shell’s largest growth markets for lubricants. And this is not the only such business model that Shell Ventures has invested in with the lubricants business: US-based online marketplace for auto services and repair Openbay is another investment of this kind and so is the UK-based WhoCanFixMyCar.com, a platform that helps customers compare prices and reputation of garages and mechanics, with over 8,500 repair shops registered.

Asia Pacific is undoubtedly one of the most interesting innovation regions for Shell Ventures. Aside from China, van de Wouw also speaks fondly of countries like India and Singapore: “We have, for example, committed capital to Singapore-based solar power utility and retailer Sunseap.” Sunseap operates solar energy systems, providing renewable power to its clients through solar farms. The company is also working on an energy management platform and is looking into the use of batteries and floating solar.

Another country from the Asia Pacific region, the Philippines, will be the launching pad for one of Shell’s soon-to-be-revealed logistics and supply chain spinoffs dubbed Connected Freight. “The startup from our Digital Businesses unit uses Tiramizoo’s software platform to remove inefficiency in the inner-city freight movement through the optimisation of goods delivery: allowing dispatchers and logistics companies to share loads, minimise paperwork and optimise their routes. The team is based in the region and is looking to bring expansion to Singapore, multiple cities in the Philippines and across Asia Pacific.”

With a global focus geographically, Shell Ventures and its investment thesis has undergone a notable transformation over the years. As van de Wouw put it: “We relaunched Shell Ventures back in 2012 as concentrated primarily on core oil and gas technologies. Two years later we began looking at renewable energy technologies and in 2016 we started to include novel business models in the renewable power domain. In 2017, we further expanded our scope to include business models and technologies in the Future of Mobility space. A good example of that is our recent investment in Ample, a rapidly deployable EV battery charging solution proposition from California for operators of electric fleets, allowing slow charging and 24/7 availability of battery powered vehicles. To achieve this, Ample uses autonomous robotics and smart-battery technology.”

Ample is not the only commitment of Shell’s in this space. NewMotion, a Netherlands-based EV charging station operator backed by vehicle distributor AutoBinck, was acquired by Shell for an undisclosed amount. Founded in 2009, NewMotion enables EV owners to charge their cars at more than 80,000 charging points across several countries.

Shell Ventures support for providing more and cleaner energy has gone global. This includes investing on behalf of Shell’s Energy Access business to back distributed power startups which bring renewable energy resources to under-served regions in Asia and Africa. A case in point is Husk Power Systems, a rural distributed utility company that installs and operates hybrid solar PV and biomass mini-grids in Tanzania and India.

Despite the broader investment mandate, Shell Ventures does not betray its core oil and gas realm. In March 2017, Shell spun out Salamander Solutions, a cable-based heater systems developer which can bring electric heat over very long distances exceeding 10km. For the oil and gas operations, it provides functions such as enhanced oil recovery of heavy oil wells or stopping the plugging of wells and flowlines that produce high amounts of wax, hydrates or other types of scaling. Van de Wouw described it as nothing less than “the largest IP portfolio Shell has ever spun out”. The technology is essentially an enhancer of the viscosity in heavy oil wells, which has shown in test wells to improve 5 times the flow of oil. The solution also has applications in deep-water developments. Van de Wouw described it as “reel-able and very easy to install through conventional methods”. He also commented on investments and initiatives in the oil and gas realm in general as mainly geared to drive “cost reduction and the environmental impact of reducing CO₂ and methane emissions”.

When it comes to new energy sources, van de Wouw said Shell Ventures is looking to back technologies and businesses models that would “give Shell competitive edge on solar and offshore wind, whether in terms of technologies or business models”. “This includes propositions on the customer side that can help Shell’s power traders to reach more customers.” Indeed, there has been no shortage of investments. Earlier this year, Shell Solar acquired a stake US-based Silicon Ranch – a developer, owner, and operator of solar energy plants. Germany-based solar energy storage system developer Sonnen (formerly Sonnenbaterie) raised a €60m round that was led by Shell Ventures in May. Another portfolio company, Innowatts, has built a software platform that uses data generated from more than 12 million smart meters to measure and analyse energy consumption, helping users optimise costs, forecast energy use patterns and create specialised energy products or services across the value chain.

Van de Wouw stressed that, despite being a strategic investor in SMEs, Shell Ventures runs very much like a financially-oriented one and seeks to help startups – and their VC backers – generate a financial return: “We need to be very conscious that a profitable exit is the only way in which a financial VC makes money. This is an area where corporate VCs can struggle, as their investments tend to be more strategically motivated, where the value comes from deployment economics or an acquisition. With the ever-changing strategies at corporates, the relevance of a portfolio company may lessen and follow-on funding may stop, even when it should be warranted based on the startup’s financial performance. The best way we, corporate VCs, can secure quality deal flow from our VC partners is by being 100% aligned with them on maximising exit proceeds and proving to be a predictable and consistent co-investor.”

In addition to supplying startups with funding, van de Wouw explains how such startups get connected with the corporate parents for business: “We have implementation managers in our team, who help those new companies to connect with various divisions, projects and business units of Shell, which eventually helps them become our partners or suppliers.” This integration into the corporate parent’s ecosystem also generates traction to attract other investors and enhance revenue prospects for the company. “The new energy domain depends heavily on new technologies and business models for its growth. As this domain is growing, so is Shell’s interest in these ideas as well. So, cooperating with those startups and making them part of our ecosystem is something quite natural.”

Does this mean some of those promising emerging companies are potential M&A targets, however? While not ruling out that possibility, van de Wouw spoke mostly of striking strategic partnerships and collaborating with them: “We usually aim to help them go past the “valley of death” and become one of our suppliers or forge a relationship which can be a building block for growth in one of our businesses.” He also underscored that in cases of potential acquisitions by the corporate parent, Shell Ventures follows and fulfils strictly its fiduciary duties, properly separating company interests from Shell´s interests. “Having proper information barriers in place, i.e “Chinese walls”, is paramount. Access to Shell Ventures’ IT systems, for example, is restricted to Shell Ventures personnel and separated from the rest of Shell in order to prevent leakage of competitively sensitive information. Furthermore, we separate board director roles from board observer roles. We regularly take both types of roles in a startup’s board. While director roles are typically taken by Shell Ventures’ personnel, we sometimes pick a Shell retiree or an independent domain expert to serve as board director on our behalf.”

With expanded mandate, Shell Ventures has also taken limited partnerships (LP) stakes in funds, currently holding eight such stakes: Autotech Ventures, specialising in early & growth-stage transport technology; Congruent Ventures, concentrating on early stage investments across hardware, software, enterprise, consumer, deep technology, fintech and business model innovation; Energy Ventures – specialising in growth-stage oil and gas companies; G2VP, focused on transport, manufacturing, energy, agriculture and logistics; GRC SinoGreen Fund III – a China-based fund focused on renewables and green technologies; SET Ventures – a Netherlands-based fund focused on renewables; ProVentures – a US/Norway-based fund; and Chrysalix, focused on high-growth energy companies. In addition, it also supports incubator program Greentown Labs in the US and Shell’s own incubation program E4 in India. The E4 incubator was launched in October 2017 at Shell’s research centre in Bangalore to attract the best Indian entrepreneurs from the energy domain.

Much like in other corporate VCs, Shell Ventures´ investments in new funds give it a great outlook on various innovations scenes: “We are constantly looking to invest in new and interesting funds that would give us an extended view in a certain geography or industry or lead us to new co-investment opportunities.” It is hardly surprising that Shell Ventures has, in some cases, co-invested with the venture funds it holds an LP stake in. For example, it committed capital to Kespry – a data analysis tool for industrial drones, which was also backed by G2VP and it co-invested in Bluware with Energy Ventures. Shell Ventures will undoubtedly continue to make direct and indirect venture investments for the rising multifaceted future of energy.