EnergySpin

My father raised me with the golden rule, “The one who has the gold makes the rule”. This idiom must sound like a foreign language to alternative energy companies. Working on a biofuel ROI project for a group of German and Chinese Private Equity investors, I contacted just about everyone in the biofuel space. I expected that representing vast sums of readily deployable capital and clearly conveying this position to executives on the phone would open many doors. While some doors were opened, most were closed without their even asking who was knocking!

This is actually another example of “what comes first, the chicken or the egg?” Companies require investors to finance their R&D and market penetration, and investors require information on those investments to decide where and when to deploy capital. The thread unravels the moment potential investment companies are not transparent or forthcoming with their investment opportunity. There is no competitive advantage derived from withholding this type of information from investors. An investor’s inquiry about a target’s ROI in a certain technology should immediately be viewed as a sales opportunity. How else will you attract equity? We are not asking for any type of intellectual property information, we simply want to know if this is a worthwhile investment.

Let’s take my interaction with an Alternative Energy IP Holding Company a month ago. I was recommended to get in touch with this company through my friends in the energy industry. This company supposedly has a revolutionary gas-related technology and is backed by Goldman Sachs among other notable investors. While my clients were not interested in gas-related investments, I thought it was worth looking into for them regardless. After the typical game of phone-tag, I managed to get the Managing Director on the phone. I told him who I was and that I was representing some German and Chinese Private Equity clients interested in the idea of alternative energy investments. I expected an open door and what I received was a slap in the face, “What do you know about gas?” he asked me? Besides the 50,000 BTUs I have in my gourmet kitchen, I do not know all that much about it. I responded that I knew very little, and that my expertise was in renewable fuels such as ethanol and biodiesel.

The conversation continued to go downhill as the Managing Director felt he had to assert his dominance and knowledge of the gas industry. This did not seem like a company interested in equity investors at all. I reminded him that I was representing clients with deep pockets, and he cut me off demanding to know who my clients were. As an ethical businessman, I reminded him that the nature of my clients is very confidential, as well as the investments they currently hold. I told him that I would be very happy to sign an NDA to look over his technology and investment plan.

I should let all of you know that not every Private Equity company is a Carlyle or a KKR, some are closely held funds run by business geniuses who prefer to fly under the radar and live anonymous lives. Needless to say the conversation was cut short and he told me he would get back to me if his due diligence provided any information on which Private Equity companies DeParis Redinger works with, which I knew would not happen for the reasons mentioned above. For the wasted time and negative attitude I encountered I will definitely not be calling upon this company when my clients are looking for investments, even if they are demanding gas-related technologies!

Relationships are ultimately built on trust, respect and ethics. The foundation of every successful company in the world has these elements, and the ones that don’t eventually fall, hard.

To all of the alternative energy executives out there, I suggest when money comes knocking on your door, you welcome it with open arms. Invite it in, offer it a glass of champagne, and make it fall in love with you by proving you are a worthy investment. There are a far greater amount of companies seeking equity than the investors who can provide it. We are very busy and constantly bombarded with investment opportunities. I am not trying to make us out to be the Prom Queen, just providing the simple facts. If we propose a blind-date, we have only the best intentions. Cheers to the first-date!