Masterclass Finance: Offshore Wind Innovators can shop for finance
There is enough money for innovative entrepreneurs in the offshore wind industry who are looking for financing. It’s wise to go shopping and eventually combine multiple forms of financing. By doing so, they not only get money at the most favourable conditions, they are also less dependent on one lender and they can count on hundreds of potential ambassadors. These were the most important conclusion from the Masterclass Finance that Offshore Wind Innovators recently organized for the first time.
The entire range of possible financing forms was presented to a room full of offshore wind entrepreneurs at the Buccaneer in Delft. Ranging from subsidies, crowdfunding and regional government funds to venture capital, banc credits and business angels. Because the speakers invest themselves or are employed by a financial institution, the participants could immediately submit their questions and make the first contacts.
Especially in offshore wind, the road to the market is long and costly. It is not easy to choose the right one in the jumble of money flows. The good news is that they don’t have to. "Do not bet on one horse", advised Business Angel Bernd Mintjens. "Do not go out with one party but stack financing forms. There is enough money. Do not accept the first offer. Shop, compare and play us against each other. You're in the lead."
Subsidy: popular and unclear
Subsidies are popular because it’s a cheap form of financing. It is a donation and entrepreneurs do not lose control. However, there are numerous subsidy schemes that change regularly, that cannot be stacked. In addition there are all sorts of other instruments such as tax deductions, guarantees and loans. For this reason RVO’s Marcel Vos advised to contact a specialist to discuss the possibilities.
Due to the diversity, the lack of transparency, temporary nature and the paperwork, , many companies quit, according to Remco Klaassen of MRK-One. Because that is a missed opportunity, Offshore Wind Innovators join forces with Klaassen to form a Subsidy Service. The ‘Subsidy Menu’ including workshops, an online portal, a grant scan and a help desk, will be launched soon.
Crowdfunding: convertible loans and ambassadors
Especially crowdfunding is on an unstoppable advance. In 2012, this was mainly a sympathetic form of small-scale financing. Now, almost € 200 million per annum are involved In the Netherlands. That is still peanuts compared to the € 4 billion in Great Britain or the € 99 billion in Asia. According to Robert Breugelmans of OneplanetCrowd it is no longer about awards or donations but about loans, convertible loans and project financing; an attractive alternative for investing in the stock market. Generally speaking, the funding runs from a few tonnes to a few million euros. The advantage is that an entrepreneur does not lose control, gets a lot of exposure and he can count on numerous ambassadors.
Venture Capital: money and knowledge in exchange for control
Venture Capital - money in exchange for shares - usually involves investors with a technical or financial background. Venture Capital investors are looking for companies/start-ups with disruptive, high risk innovations that want to scale up their business. They share their money, knowledge and network but, in return, they want control. It involves considerable amounts. For example, David Cerda Salzmann, FORWARD.one is willing to invest between € 250,000 and € 2.5 million in industrial (offshore) products. "It has to be a working prototype of a product that you can put a kick on," says Salzmann, who has made his mark as founder of Ampelmann.
Regional Development Funds: projects the market leaves
Regional stimulation funds, such as EnergieIQ of the province of South Holland and PDENH of the province of North Holland’s, are also seeking cooperation with private investors for their knowledge and risk diversification. These funds provide from € 0,5 million to a maximum of € 4-5 million. They are particularly interesting for entrepreneurs at a higher TRL level who have difficulty in attracting the entire financing. A requirement is that there must always be a private co-financer. "We are focused on the difficult cases in the market," says Anthony Viellevoije of PDENH. "We pick up the projects that the market actually leaves." According to Jasper Gezelschap of Innovation Quarter, the value is "that the lines to the government are short. Entrepreneurs who have collected money from us once are seen as reliable." Up to now according to Viellevoije, no offshore wind projects have yet been financed, ''but do not be put off by that.”
Bank credit: move to small innovation funds
Banks are often not the most appropriate party for start-up or scale-up companies. Although Rabobank is investing millions in the offshore wind industry, it is all about huge wind farms. Because the bank is called to stimulate innovation, Rabobank Delft has been supporting incubator Yes! Delft for years and half a year ago the Innovation Loan was created. “An ultrasound loan according to Patrick de Ruiter with conditions that you do not see anywhere.” Of these loans from € 25,000 to € 150,000, 4-5 have now been provided. With innovation credit there is more possible in the field of innovation than outsiders might be expected to. The bank is also not a technical specialist and therefore likes to collaborate with private parties to make a good technical assessment.
Business Angels: away from early phase financing
According to René Reijtenbagh of Business Angel Connect, in an estimated 40% of the deals, the private investor has no experience with the core business of the company in which they invest. That does not have to be a problem. To spread the risk, at least two business angels are involved in 70-80% of the deals. In addition, he sees a trend that Business Angels are less interested in the early start-up phase and move into the € 50,000 - € 1 million segment, competing with Venture Capital. Because every deal is different, it is important to guide entrepreneurs in the process of working with Business Angels. That is why Offshore Wind Innovators and Business Angel Connect offer this Investor Service as a follow up of the masterclass.