CarbonScape, a startup seeking to turn forestry waste to environmentally-friendly (green) coke for use in steel mills, has put itself on the map of clean tech technologies. It has turned the heads of investors after being under the radar in New Zealand prior to its campaign whiched raised over $700,000 through crowdfunding platform Snowball Effect.
Even after the close of the crowdfunding campaign, investors are still knocking on CarbonScape's doors. "We have had another 12 investors wanting to invest, and additionally, three large investors who are interested. This is really what's so exciting," executive director of CarbonScape Tim Langley told Idealog. The large investors are from Australia, China and the US, he says.
A total of 207 investors were allotted 3.8 million 20-cent ordinary voting shares recently in what Snowball Effect termed as its largest crowdfunding success story, surpassing Renaissance Brewing. Snowball Effect was also used by film-maker Lee Tamihori who raised $489,000 for ThePatriarch, his new fillm project.
CarbonScape's investors ranged from those putting $1,000 in the company to those staking $50,000; with the average size invested being $3,845. The company raised a total of $764,000 (against the $400,000 basic target). Its maximum target was $1.5 million.
Langley says CarbonScape managed to attract investors for various reasons, chief of which is the company’s highly compelling technology.
“It is a technology whose time has come. We are able to compete with a fossil-derived coke on quality, cost and it is green. That’s fairly compelling.”
He also credited the successful fund raising to the platform for crowd funding such as that provided by Snowball Effect.
“One of the biggest things hurting startups (trying to raise funds) is New Zealand’s compliance regulations. In the past, you needed $2 million or more, apart from a house, to invest in a startup.
“Numerous people we have talked to previously who were excited about our technology would say ‘that’s a great technology, can I invest’ but they couldn’t.
“The best move the government has made is importing the idea (crowdfunding), and allowing a party like Snowball Effect to absorb some of the corporate risk,” Langley adds.
Power of good information
Another reason for the fund raising’s success is the quality of information provided, he says. “There is a lot of information that’s comprehensive - that has created confidence. There were a lot of questions raised (by potential investors) on the technology, the supply agreements which we provided answers to, which were well received.
“The most important factor, in my opinion, is it is a real technology – not a social media thing, not an app – that has the potential to make a difference, globally - I know this might come across as sounding arrogant but people see the potential of the technology to make a difference,” Langley says.
Snowballl Effect's Shaun Edlin (head, company and pipeline services) says what worked well for CarbonScape was it had a strong strategy for commercialising their technology, with supply agreements in place with their first customer, NZ Steel.
"It’s extremely rare for the general public to have access to an investment opportunity in a clean tech company with commercialisation so close, and we believe many Kiwi’s saw the value in this," he says, adding CarbonScape also did a great job reaching out to their network through social media, while media coverage was also good.
Clean tech darlings
CarbonScape is competing in the same space as the current darling of green tech, LanzaTech. LanzaTech’s technology converts carbon waste (carbon dioxide) using a fermentation process, into fuels.
CarbonScape’s technology focuses on using waste, for example sawdust, to produce fuel through microwave heating. The company says it uses patented technology to short-circuit the carbon cycle, achieving in minutes what nature takes millions of years to do.
Like LanzaTech, CarbonScape’s success is contingent upon the technology being successfully applied on a larger scale.
Marlborough-based CarbonScape has a contract to supply its green coke to the New Zealand Steel mill at Glenbrook, south of Auckland. It also has a memorandum of understanding with New Zealand Steel’s parent company, BlueScope, to take green coke to the international steel industry.
The story of CarbonScape's green tech
Why gongs didn't initially help
Langley says having a great technology and winning accolades did not necessarily help the company gain widespread awareness among the public, until it used the Snowball Effect crowdfunding platform. Subsequent media coverage that resulted from that spun the company into the public's radar.
CarbonScape in 2009 won the Judges’ Choice award from 216 applicants in the prestigious Financial Times Global Climate Change Challenge in the UK.
In August 2012, CarbonScape was short-listed from 509 entries from around the world by the Dutch Postcode Lottery Green Challenge competition as one of the “green” technologies with the greatest potential to make a global impact. CarbonScape presented in Amsterdam and New York and won the Runner Up prize of US$155,000 (NZ$198,000).
“We were a bit surprised it was so difficult to get awareness in the New Zealand (investing) community. This was despite us having won international awards. We thought independent international recognition of our technology would get us the kudos in New Zealand but it didn't. I am not sure if that’s because we are in the South Island, in Marlborough, or that we were a bit under the radar, or that we were not marketing ourselves very well. ‘’
The crowdfunding process has shifted the curve for CarbonScape, Langley says. “You can say that Snowball Effect really ‘launched’ us. After the offer closed, we got enquiries from investors wanting to invest."
The money raised will be used to fund the recruitment of a new chemical engineer, a microwave engineer, and a process engineer.
The company will also use funds raised to build a small scale pilot plant to house trials for the technology under one roof, including tests for producing high value carbon, Langley adds.
CarbonScape Holdings (made up of 83 original investors in the company) has 75.29% share in the company. Other significant shareholders are: Clearworld Energy Singapore (7.3%); Faith Charter Company (5.2%); Crispstart Ltd (2.7%) and San Francisco-based Benjamin Chen (1.55%).