For entrepreneurs with a provocative vision for energy & IT; NGP is the only utility venture & innovation fund that taps into the global network of National Grid, accelerating companies with investment, innovation, incubation & biz dev; realizing the full potential of energy.

National Grid Partners

Our warming world faces a capital conundrum. On one hand, we must decarbonize—and quickly—to address a climate crisis spurred by the burning of fossil fuels. That means humanity needs to invest a massive amount of capital on new technologies for heating, transportation and other essential needs.

On the other hand, capital markets aren’t charities: Investments flow naturally to opportunities that offer the greatest return. And today’s capital markets can’t rationally price the long-term impacts of decarbonization. 

Think of it this way. You’re asked to invest $1 million—or $100 million—in emerging technologies. You’re likely to ask, “How much money will I make, and over what period of time?” The trouble is, when it comes to decarbonization, no-one can provide a bullet-proof answer, so it’s impossible to understand the risk.

Are you ready to trade a logical decision for a leap of faith?

This quandary is especially difficult for utility companies, which are crucial to global decarbonization because of their energy transmission and distribution networks. But they’re also, by design, not set up for disruptive innovation: Their regulators incentivize them to provide energy reliably, safely and affordably for their customers. 

I’m happy to report that National Grid Partners (NGP) has established a proven way to move beyond these equally unappealing choices and to rationally address the disconnect between capital markets and the decarbonization imperative.

In a conventional venture capital scenario, a startup develops an innovative technology, then seeks funding. That funding is contingent upon investors believing in the startup’s pitch, market opportunity, competitive advantage and leadership team.

Sometimes investments in startups pay off; sometimes they don’t. But the math for venture capital, like the math for batters in baseball, doesn’t require investors to hit a home run every time. They just need to do well enough to justify the risk.

One proven way to improve the flow of capital to innovative startups—and to improve the performance of investments in those startups—is to aggregate the capital-to-startup pipeline. Those baseball players increase their odds of hitting home runs by getting more at-bats.

Aggregation produces repetition, which removes much of the inefficiency and risk of error that exist in one-off investment decisions. Aggregation is why we saw Silicon Valley play such an important role in the establishment of the technology industry. Aggregation is also why a startup accelerator like Y Combinator, which over the past 15 years has helped launch more than 4,000 companies, can be such a powerful catalyst for investment success.

In his seminal work From Good to Great, the American writer and researcher Jim Collins refers to this aggregated cycle of repetition as “the flywheel effect.” Collins argues that, despite appearances, transformations rarely happen in one fell swoop. There’s usually no single defining action, no one innovation, no solitary lucky break. Instead, transformation occurs when a cohesive team keeps pushing a big, heavy flywheel over and over again—building momentum until a breakthrough results.

A great example is the way Amazon founder Jeff Bezos believed lower prices and wider product selection would lead to more customer visits to its website. More customers, in turn, increased the volume of sales—and attracted third-party sellers to the site. More sellers meant more customers, while also letting Amazon spend less on fulfillment centers. And this greater efficiency then enabled Amazon to lower prices even further.

National Grid Partners has created a flywheel for effectively allocating capital to decarbonization – while delivering financial returns (Figure 1). We’ve gotten very good at finding innovators solving real problems, and we’ve learned from repetition how to get innovation off the drawing board and scaling, fast. 

The Flywheel Effect

Got an early-stage company in need of seed funding and support infrastructure? We’ve got a Pathfinding & Incubation team ready to help. Got a mature startup looking for someone to lead your Series C or D round? Check out our Corporate Venture Capital team. Need help getting in the door at one of the world’s leading utilities companies? Our business development team has a stellar track record. 

In fact, more than 80 percent of the startups we’ve invested in since 2018 have strategic engagements with National Grid. As one of the world’s largest utilities, we provide a gigantic, real-world test lab of electric networks and gas pipelines. 

Oh, and when you’re ready for an intro to that next utility company – and the next – we’ll gladly introduce you to the NextGrid Alliance, which includes senior executives from 100 forward-thinking energy utilities all over the world.  

Because our flywheel is spinning with plenty of momentum.

With looming deadlines to reach net-zero carbon emissions and little ability to cover the cost of new technologies, the utility industry needs a trusted translator who understands startups and can vet and nurture innovations. 

National Grid Partners provides a working, ready-made vehicle for utilities to become active partners with an all-star collection of energy innovators. Our investment team brings 100 years of collective experience to venture capital; our operations team has more than 125 combined years in the utility industry. There’s simply no other group on the venture capital landscape with that combination. 

That’s a big reason why we’ve achieved seven successful exits, with a 33 percent IRR, in just five years – and why, according to PitchBook data, we have a higher percentage of billion-dollar “unicorns” in our portfolio than the vast majority of other venture capital firms. This work is unique, and we know how to do it well. 

We have a well-tuned set of processes for selecting and scaling our portfolio companies—as evident from our ever-growing list of successes.

Our portfolio companies aren’t just innovators looking for a problem to solve—but are specifically selected for the real-world needs of utilities that are engaged in decarbonization.

We understand the particular challenges utilities face when it comes to regulatory oversight of their capital investments—and we provide a vehicle for collectively addressing those strictures.

By working with NGP and the NextGrid Alliance, utilities can concretely influence the development of energy innovation in the directions they see as most important. This mitigates their investment risk and accelerates startup maturity to provide sustainable business relationships.

If you haven’t yet explored the opportunities offered by National Grid Partners, I encourage you to give us a call—whether you manage capital for a regulated utility or have other reasons to pursue investments in decarbonization. 

The flywheel is turning. Let’s make the most of its momentum together.

Steve Smith is Group Head of Strategy, Innovation and Market Fundamentals at National Grid, one of the largest publicly traded energy utilities in the world, and President of National Grid Partners (NGP), its Silicon Valley-based venture investment and innovation arm.

Capital and Climate