Investment Landscape: Blockchain & Energy

Mark Bunting

24 Jun 2018

In this guest post Mark Bunting reflects on the nexus between blockchain and energy from an investor viewpoint. Mark is a fund raiser, mentor & advisor to growth businesses. He will be attending the NovAzure and Tilix Smart Energy Masterclass (19 July 2018, IdeaLondon). Buy tickets online at Eventbrite £200 + fees & VAT.

As an advisor and investor to several technology firms, I like to keep a close eye on emerging trends. I am acutely aware of the ongoing transformation in energy. In this category, I am actively involved with Logicor (who offer electric heating as a service) and others.

In this guest post, I share my observations about the blockchain investment landscape and its potential as a competitive weapon in smart energy.

Thoughts on Blockchain’s emergence

From Blockchain Adoption in Capital Markets - 2018 by financial market intelligence firm Greenwich Associates I see that reduced operating costs is a primary benefit of distributed ledger technology in financial markets.

The total annual budget for enterprise blockchain initiatives across capital markets and banking are a staggering $1.7B. So it is clear that blockchain is fuelling change in the FinTech sector. Whilst many believe that the advancements taking place are going to be game changing, I have a more guarded perspective.

Some use cases for blockchain in banking and other financial institutions map to the energy sector e.g. renewables project financing and commodity trading. However, its role in networks, retail and energy efficiency is more nuanced.

Key Value Propositions

Blockchain’s most important feature is immutability. It is important to note that immutability does not mean that the data can’t be changed. Rather it is very difficult to change without collusion it is easy to detect attempt.

This is particularly valuable in applications it’s critical that transactions are part of a permanent record. The example I hear most talked about is peer to peer energy trading.

Evaluating investment opportunities in the energy sector

People are a big deal. In particular I look at the quality of the leadership team and the partners behind the project. Staying power is important. I need to feel confident that they will survive the lean times on the roller coaster ride towards finding a product-market fit.

Raising the Likelihood of Startup Success

For me, the key metric is cash and the top priority for a startup CEO is not to run out of cash. Entrepreneurs and inventors often struggle with cash flow management and finding sources of investment. Thats where advisors like me can help.

How to Navigate the Competitive Landscape

Having first mover advantage is helpful but is neither necessary nor sufficient. Assuming cash is not a problem and there is a product-market fit, the key question is can they achieve enough momentum to reach escape velocity?

Ones to Watch

I am particularly intrigued by Electron and am delighted that they will be at the NovAzure and Tilix Masterclass.

I am keeping a close eye on R3, waiting to see when they may be ready to engage properly with the energy sector.

The Zero Carbon Project is another with exciting prospects. They are tackling climate change using blockchain and recently won two blockchain awards in London and Amsterdam. Zero Carbon Project is currently in the democratic private pre-sale round.

Final Thoughts

I believe blockchain will touch every element of the energy value chain in one way or another. The rationale is simple: the sector is moving from a static, linear structure of large generators -> monopoly networks -> disengaged consumer to a complex web of distributed, smart and clean system including a large number of engaged prosumers.

For many blockchain is a space for prospectors. For example, traditional investors with their rational thinking would not have invested in Ethereum a couple of years ago. It now has an eye-watering market cap! I think that blockchain is crossing the chasm from the world of prospectors to that of the investor. I am doing my homework and getting ready to make investments within the next year or two.