New Jigar Shah finance venture puts business benefits first, tech second

Investments will focus on enabling implementation rather than technical innovation. It will work with developers to open up new sales opportunities by helping organisations overcome the initial costs of long-term money saving measures. Generate has coined the expression “infrastructure as a service” to describe its model.

“We believe that the biggest impacts in sustainability will be found in scaling the adoption of existing technology,” said Greg Neichin, director of Ceniarth, one of Generate’s investors.

“While significant capital has flowed to inventing new venture-backed technologies, we believe that the best risk-adjusted returns are available in financing the deployment of proven products and services. Generate Capital is a purpose-built firm filling a critical gap in the financing landscape that we believe is poised to be a leading capital partner to the sustainable infrastructure world,” added Neichin.

Generate Capital has identified US$500 million of opportunities that fit its criteria.

“Many innovative companies have technologies that deliver compelling value to their customers, but they lack a financial partner to help them achieve their sales goals – few sources of that capital exist today for energy and resource-related project opportunities under US$20 million in size,” said Shah, who will serve as Generate’s president. “Companies and project developers recognise that most customers simply don’t want to pay cash up-front for technology that saves them money over time.”

Efforts to unlock energy efficiency measures have been particularly stunted. The UK government’s Green Deal, that allows loans for work on homes and business premises to be repaid through electricity bills, received early praise. An unattractive interest rate and a poor marketing campaign have limited its take-up.

The absence of feed-in tariff revenues or tax credits for many resource efficiency projects means they have failed to attract capital in the same way as renewable energy generation. Even in that sector, scale can often dictate the appeal to investors. Financial innovations, such as SolarCity’s securitisation of rooftop solar, have been required to pool smaller assets.

The so-called infrastructure as a service model is designed to invest in smaller projects that can cut the end users resource costs without them having to allocate swathes of their own capital up front. The company claims to have assembled the largest pot of funds for this type of investment ever assembled, but did not provide figures.

“From my own experience, I have seen how challenging it is for banks to underwrite smaller projects efficiently, and new, often non-bank lenders have entered the marketplace to fill that void,” said Jason Fish, the new venture’s chairman. “Generate Capital will apply well-proven financial products to the smaller scale renewable energy and energy efficiency assets which have lacked this capital historically, and this team is capable of doing it profitably and at scale.”

Fish and Shah’s fellow co-founders are Scott Jacobs, who will serve as CEO, and Matan Friedman, who will be chief investment officer.