Dynamo Energy Hub celebrated its first event in our latest hub in Houston, Texas. Co-hosted with Pickering Energy Partners (PEP), this event brought together leaders from all sectors of the energy industry. This launch marks Dynamo’s third overall hub in Texas with more openings worldwide on the horizon. On the night, we also released our joint report with Alvarez & Marsal titled, Investing at the Vanguard of Climate Tech. 

Meade Harris, Co-Founder & CEO at Dynamo Energy Hub welcomed members to the event and to our Houston hub at the Ion. Meade remarked that “the Dynamo network is incomplete without being here, in the ‘Energy Capital of the World.’” 

Dan Pickering, Founder & CIO at Pickering Energy Partners (PEP), opened the event by asking why does PEP care about the energy transition. He emphasized that while energy previously referred to solely oil and gas, it’s more than that now with momentum swinging towards renewable energy–and continuing to grow around the world.  

Pickering stressed that Houston, a city known for its ties to oil and gas, is actually a pivotal city in this transition and quickly catching up as the United States works towards ambitious renewable energy goals. In the wake of recent legislation, such as the Inflation Reduction Act (IRA), the country will be investing trillions of dollars over the coming years. PEP has engaged early in this transition and is taking advantage of the business opportunities that lie in decarbonization. “If you’re not paying attention to the energy transition, you’re missing something,” Dan commented.  

Next, Dan emphasized how Pickering Energy Partners invests in the energy space through time, money, and people. PEP, along with their institutional partners, deploy capital in various technological advancements in the energy transition such as EV charging and battery storage. 

Additionally, PEP has a consulting practice on the ESG side and eight people focused on helping companies raise money in their space.  

Dan then turned the discussion to Dynamo as he stressed that Pickering Energy Partners are believers in connectivity and the role it will play in the energy transition. As Dan put it, “Dynamo is about more than space. It’s about connectivity and networking—bringing people together matters.” Whether it is in New York or San Francisco or Zurich, Dynamo brings people and opportunities together for the energy transition.    

Meade Harris, Co-Founder & CEO at Dynamo then introduced the fireside chat with Kristin Barbato, Co-Founder & President at Dynamo and Julie McLaughlin, Managing Director—Energy at Alvarez & Marsal to launch our new joint report. Under Julie’s leadership, Dynamo and Alvarez & Marsal came together to develop Investing at the Vanguard of Climate Tech. This report is a tool for anyone working in the energy sector who is investing in the energy transition – either large operating companies or as investors in the space. It is the lens through which companies can create a roadmap to approach their climate tech goals from a business model perspective. 

To begin the foundation of the paper, Julie asked a simple question: what’s different now in the climate world? To answer that, Julie looked back to the first wave of climate tech, Clean Tech 1.0. From 2006-2011, investors put about $25 billion to work and lost half of that amount. Examining the pitfalls of cleantech 1.0—macroeconomic headwinds, falling gas and PV prices, high cost of renewables, and an emphasis on the software business model—can give us an opportunity to look towards the future and rectify those mistakes.  

Kristin emphasized Julie’s point that during Clean Tech 1.0, people treated the clean tech industry with the same principles of investment as the tech boom; when in reality, the two industries require very different models of engagement. Kristin then asked Julie to explain “the flywheel effect” explored in the paper. Effectively, it’s how increasing capital deployment produces a flywheel effect to the market and why it’s so important to the new way of investing as the energy transition grows.  

Julie further explained how investing trillions of dollars into decarbonization creates its own economy and its own demands. The best example lies in EV vehicles. 15 years ago, there were only a couple models of EVs on the road; today, there are 179 models being produced. In other words, investing causes the total addressable market to grow and thus requires increased diversity of products and services.  

Kristin’s next question looked at corporate investment in newer technologies. Oil and gas majors are making massive investments in the energy space and will play a critical role in climate tech. However, Julie emphasized, that although money is important, it is not the only impact these corporations can make. How do oil and gas companies build systems or scale up their expertise? How do they enter new markets or manage risk? These are all processes that traditional energy companies have experience doing and can bring that expertise to the table. Kristin then reiterated Dan’s previous point that the market is moving in this direction (“skating to the puck” as he worded the analogy) and the big players are also moving in that direction fast. 

The next point Kristin shed light on was the idea of closing the gap between the earliest stage companies and their actual commercial success, avoiding the ‘Valley of Death.’ Julie describes the ‘Valley of Death’ as the period when companies emerge from their earliest stages and begin to approach commercial scalability, but are not yet profitable and investment washes up. Basically, this is the funding gap where many startups fail. What’s different now, Julie clarifies, is there are many more types of capital, government funding, and corporates that are willing to step in to invest in startups earlier. Kristin jumped in to add that a different type of entrepreneurs exist today who are more seasoned with business savvy backgrounds.  

Taking more lessons from Clean Tech 1.0, Julie stressed the importance of understanding that there are wildly different business models in any sector and to “invest in what you know.” Segmenting climate tech startups by business model allows investors to invest in the business models they understand and be better suited to enable a company’s success.  

Kristin concluded the Houston Hub Launch by thanking Dynamo’s co-host for the evening, Pickering Energy Partners as well as the team at Alvarez & Marsal team for their leadership on the paper as an innovative guide to investing in the energy transition.   

The report is available to download here. Dynamo would like to thank all contributors who made this report possible. On the Dynamo side, thank you to Meade Harris, Kristin Barbato, and Desean Taber. On the Alvarez & Marsal side, thank you to Julie McLaughlin, Rachel Burns, and Hedan Liu.