Interview | Seif Belhani, partner at impact investment firm Amplify Capital
BXVentures speaks with Seif Belhani, a seasoned energy operator and investor and currently a seed-stage impact VC investor. We discuss topics such as impact investing, scaling climate technologies, the Montreal cleantech innovation ecosystem, and the venture studio model.
What are the main attributes of a cleantech business model that impact investors look for?
The answer would depend on the stage you’re investing at. As early-stage investors in cleantech, our involvement often starts before significant revenue generation, but we still have to make sure that the economics make sense over the long run. As impact investors, we are looking for technologies that can bring a broad and deep incremental impact. Without economic longevity, the additional contribution from clean innovation would be short-lived which defies the very purpose of impact investing.
In terms of cleantech project typology, we are witnessing a growing coexistence between infrastructure-like projects and ‘lighter’ technologies that can be better suited for VC investors. Despite significant improvements in unit economics over the last decade, the first category remains relatively capex-intensive and often represents a better fit in later-stage / private equity portfolios. On the other end of the spectrum, we have recently seen the rise of purely digital climate technologies such as carbon reporting platforms and carbon credits marketplaces. Where we see greater complementarity between the two is that decades of infrastructure investment have created opportunities to disrupt and optimise specific segments of pre-exiting value chains rather than attempting to reinvent the entire chain.
As an early stage investor, how do you navigate the risks of investing at the pre-seed and seed level?
Early-stage investors take thought-through risks, ideally just before the commercial inflection point of the companies they invest in. An important part of their conviction is underpinned by the belief that the technologies under consideration solve material real-world problems in a unique and significant manner. However, the complementarity and skillset - and thus legitimacy - of the founding team remain critical in moving the technology from concept to commercially viable solutions at scale. From an impact perspective, the incremental positive contribution of such technologies – referred to as additionality – should translate into quantifiable metrics that can be accurately tracked over the investment’s lifecycle. In an environmental context, an archetypal example of such a metric would be GHG emissions avoided or displaced. While most financial outcomes are ‘volatile’ at the seed stage, these fundamentals are essential to manage risk and ensure impact is sustained over a long period of time.
In your experience, what clean technologies have you found to be the most promising in today’s market? What makes these technologies successful or more likely to develop into successful busines ventures?
My career in cleantech is somewhat unusual in that it began on the "dark side of the force.". Jokes aside, having worked on some of the world's largest and most complex oil and gas projects earlier in my career gave me a granular understanding of how energy markets function from a socioeconomic standpoint. It's difficult to predict which specific technologies will be the most commercially successful, but I believe that in order to achieve governmental and corporate net-zero objectives - in line with COP21 targets – we will need the complementary interplay of a wide range of innovations. CCUS at industrial scale, optimised grid-scale storage, applied synthetic biology, and climate-related risk management software are a few examples.
In general, the most promising clean technologies are those that add immediate and significant value to their target market. As a corollary, they must be economically competitive with existing incumbents and alternatives.
Early-stage investors also provide strategic guidance alongside financial investment. How does this strategic guidance help cleantech companies effectively scale their solutions?
That’s probably a personal take, but I envisage a seed-stage investor as a financier, psychologist, a cheerleader, and a friendly guide to their entrepreneurs. Being successful in the space entails guiding founders through the process of structuring business models, creating an appealing company culture, capturing and retaining customers, structuring subsequent fundraisings, and providing the necessary psychological support for founders to thrive throughout their journey. When it comes to cleantech companies in particular, an important role is to ensure that companies can articulate their impact thesis clearly. Portfolio companies must explain how they materially improve the environment and how they measure their impact. Having a tangible environmental impact that can be effectively measured and reported is becoming increasingly important in raising funds for early-stage companies. As a result, it is critical to collaborate with founders from the start to define relevant and reasonable impact KPIs.
You mentioned having a preference for ‘hard science’ technologies in comparison with to purely digital climate solutions. What does hard science mean to you and how can this translate into cleantech business ventures?
Personally, I do not think that we will solve essentially physical problems solely through digital solutions, though they will play a role. A good example would be a company I became acquainted with through my most recent position at Amplify Capital. Carbon Upcycling Technologies, based in Calgary, converts CO2 into high-performance advanced materials additives. The company developed a unique process that sequesters CO2 emissions during the concrete production process, reducing the carbon footprint of the cement by up to 20%. Cement production is responsible for 8% of global GHG emissions. The company's process is expected to reduce industry emissions by 340 megatonnes per year, out of a total of 4 Gtonnes per year. It is, in my opinion, an excellent example of how deep and differentiated science can tangibly address the pain points of heavy-emitting industrial players on their path to Net-Zero.
As an impact investor, do you consider technologies currently developing inside university labs?
Yes, absolutely. Meaningful climate tech solutions solve for very complex problems from a technical, social, regulatory, and economic standpoint. Therefore, there must be solid fundamental research sustaining these solutions which typically comes from university labs. At the very early stage, the best opportunities arise from identifying diamonds in the rough and guiding them towards a better product-market-fit. Without pioneering research upstream, the innovation well may run dry at some point. To be honest, there is still some miscommunication between the academic and investment communities, but strengthening this link is critical for the establishment of more successful cleantech ventures.
Montreal is well known as a cleantech hub considering the high density of renown universities and labs producing new technologies. What are views on the current and future state of the Montreal cleantech innovation ecosystem?
Montreal not only has a high concentration of labs but also a strong socio-political interest in clean technologies with the budgets to match those ambitions. There is an acute societal awareness around the environment which has resulted in organic support for energy transition and electrification of mobility, for instance. All the ingredients for an efficient innovation ecosystem are there. That said, it can be further optimised through linking all of these protagonists together. The communication channels between universities and the rest of the ecosystem could certainly be improved to get the most out of the fantastic academic research and high-quality talent in Montreal. One practical solution is to multiply the outlets for these academics and researchers to be in constant flux with the rest of the cleantech ecosystem.
In what way can the venture studio model bridge the gap within cleantech ecosystems by providing a clear path to market for technologies emerging from university labs?
The venture studio model can leverage various dimensions of cleantech ecosystems to bridge this gap. Firstly, studios can bridge the gap between emerging technologies in a lab to being market ready, tangible solutions. Secondly, the venture studio model can act as a vector between fundamental research at universities and the investment community. It has a role to detect, filter, proof, and pass on the best innovations to the rest of the investment spectrum. Venture studios not only accelerate innovation, but they are also directly involved in building and shaping companies alongside their founders. In particular, venture studios play an important role in shaping deep science solutions, an area where disruptive innovation is still lacking. Studios would, to a certain extent, de-risk projects and increase quality deal flow to later stage investors. There are of course great traditional VC limited partnerships in the Montreal cleantech ecosystem, but there is definitely room for venture studios to coexist and possibly transition into being a mainstream part of the cleantech community in the future.
To finish up with, what advice would you give to aspiring entrepreneurs looking to develop clean technologies?
Many ideas come to mind, but if I had to pick one, it would be to be very clear on your commercial and environmental value propositions so that it is clear that you are solving a material and urgent problem. Investors review a large number of companies on a daily basis, so when seeking funding, make sure you can convey the uniqueness, impact, and business longevity of your solution in a way that sticks and stands out.
About Seif Belhani
Seif’s professional journey has been deeply rooted in the energy world. It started at the French energy major Total Energies where he took part in among the largest and most sophisticated energy projects around the world. In 2014, he was recruited by the energy arm of the Abu Dhabi SWF Mubadala to help the organisation to cope with the worst decline in hydrocarbon prices in many decades. Specifically, he led the foundation of the company’s energy market research team. After more than a decade in the realm of energy investments, Seif reached the unequivocal realization that not only the era of fossil-fuels dominance was outdated but that its running under survival mode was leading the whole planet towards catastrophic outcomes. He went on to pursue a graduate degree in sustainability at Harvard University. His success continued in North America, specifically Canada, where he led a seed-stage fund of funds mandated by CDPQ to Teralys Capital. More recently, he has been a partner at Amplify Capital a Canadian pioneer in early-stage impact investing. Seif now sits at the forefront of the environmental transition and is highly committed to shifting the conversation and capital allocation to technologies shaping a better tomorrow.