- Spring Lane Capital’s Rob Day is betting on startups that build small plants that transform and on other sustainable infrastructure.
- COVID-19 isn’t expected to affect the impact investor’s projects in the energy, food, water and waste sectors.
- While sewage isn’t a sexy subject, developing sustainable methods to process it can both reduce the need for landfills and produce clean energy and other products.
Spring Lane Capital says it’s investing in niche companies impervious to the pandemic — those that turn organic waste into sustainable energy and products.
“Not everything has changed,” said Rob Day, a partner in the equity firm. “People still need water, still need their waste taken care of, and they still need energy.”
Day thinks backing sustainability projects in the energy, food, water sectors is a prudent strategy during the COVID-19 outbreak because these startups shouldn’t see any downturn in demand as the economy slows and unemployment rises. One is Aries Clean Energy, which offers technology that takes waste and turns it into green, renewable energy and soil conditioners, curbing both pollution and the need for landfills.
“Aries Energy has contracts in New Jersey to convert biosolids into energy,” Day told Karma. “Biosolids — which is a polite way to discuss what you flush down the toilet — people are still creating biosolids, even during the pandemic.”
Aries was one of three partnerships that Spring Lane announced in December when it closed its $156.5 million inaugural fund. The three companies share one attribute: they have developed processes for transforming different types of waste into something useful. Spring Lane takes on shares so that it’s alongside the startup’s founders and initial backers.
Crude oil, natural gas and coal prices have tumbled as policies meant to curb the spread of the coronavirus has slowed the economy and sapped demand. A growing part of that energy is coming from renewable sources, because of sustainability targets and lower costs. The companies backed by Spring Lane are well placed to benefit, Day said.
“Over the past couple of years, the energy and infrastructure world have discovered that traditional fossil fuel energy investments are actually the higher-risk ones,” he said. “It used to be that renewables were seen as the riskier options, now they’re seen as the safer ones.”
Spring Lane also backs Atlas Organics, a Spartanburg, South Carolina-based startup that processes food, yard trimmings and other waste into compost on behalf of municipalities. The company already operates composting sites in Durham, North Carolina, and Greenville, South Carolina, and recently won a contract to build a new composting facility in Indian River, Florida.
The global municipal solid waste management market is expected to pass $90 billion by 2026, according to Global Market Insights Inc. And handling that waste in a sustainable way will be in higher demand.
“People still need water, still need their waste taken care of, and they still need energy.”
“Atlas is taking care of a waste problem,” Day said. “Organic waste that isn’t correctly processed is problematic. and won’t result in high-quality compost. Atlas can fix it for a fee, and also sells high-quality compost.”
The third partnership Spring Lane announced was with Cambrian Innovation, which transforms wastewater into renewable energy and clean water. The company’s EcoVolt Reactor uses electrically-active microbes to treat wastewater, which allows its partners to cut the cost of wastewater management and help in meeting sustainability objectives. Cambrian also offers EcoVolt systems that allow for wastewater reuse.
The backing from Spring Lane will help Cambrian launch its WEPA service, which allows customers to turn over the management of their wastewater services. Cambrian builds and operates the system, and there’s no money down. The company then sells treatment services — and clean water and energy — to the consumer.
“Cambrian has a lot of potential customers for their wastewater treatment systems that don’t actually want to pay capital upfront and then have to run the system themselves, so using our capital, Cambrian can offer them wastewater-treatment as a service, with no money down. That’s really what many of them want.”
It will take many projects like Aries, Atlas and Cambrian to reach the critical scale needed to curb climate change, according to Day. The Ceres Clean Trillion project sets a target of spending an additional $1 trillion per year in clean energy investment through 2050 in order to mitigate the impact of climate change.
“To unlock significant mainstream capital, we need to demonstrate that sustainable solutions are lower risk and profitable,” Day said. “We are rolling out stuff that makes economic sense.”