Spring Lane Capital distinguishes itself as a sustainability-focused private equity firm dedicated to helping early and growth-stage climate-tech companies accelerate deployment through a combination of both project and corporate capital. This article, which includes insights from Noah Lerner of Spring Lane, digs into the complexities of project capital and its critical role in helping companies bridge the gap between early-stage innovation and billion-dollar-scale deployment in the cleantech sector.
About Spring Lane Capital
Spring Lane’s mission is to support early and growth-stage businesses, with a particular emphasis on accelerating the deployment of assets critical to sustainable development. Lerner emphasizes the long-term goal of enabling emerging sustainable technologies to reach the same degree of maturity and financial support that wind and solar energy have achieved. Spring Lane closed its $300M second fund in the summer of 2023, and today is focused on financing real asset deployment in the food, water, energy, transportation, and waste sectors.
Project Capital: A Comprehensive Approach
Project finance is a financing mechanism that enables companies to fund assets off balance sheet. Project capital can come in a mix of debt and equity. The proceeds of project capital primarily fund project capital expenses, but can also cover project working capital or reimbursement of project development expenses. Companies will seek out project finance capital for a variety of reasons:• Lower cost of capital compared to venture capital
• Non-dilutive financing, maintaining founder equity
• Project debt can be non-recourse, shifting risk to the project assets rather than the parent firmSpring Lane’s approach is unique in that it provides both corporate and project capital for companies and sectors that are earlier in their maturity. Historically, most infrastructure investors have targeted mature industries and technologies (i.e. where they are financing the >50th of a kind of a particular technology) and tend to only be interested in large minimum check sizes (i.e. in the hundreds of millions of dollars). Spring Lane works to fill in the “missing middle”, working with companies to fund their early deployments so that they can “graduate” on to access the larger, more traditional infrastructure capital market. Spring Lane also invests corporate capital to further help these businesses scale their teams and project development capabilities.
Eligibility For Project Capital
Securing project capital can require significantly longer timelines than securing more traditional venture capital, and as such it’s important for the business to be at the right stage of development.Spring Lane seeks to partner with high quality teams that are working to deploy scalable, proven technologies. Technologies that are still at the lab, pilot, or demonstration phase typically will have a difficult time securing project capital. It’s important for project investors to be able to diligence and validate operational data for technologies at or near commercial scale. This ensures that the technology is ready for large-scale adoption.Risk mitigation is an important part of project finance. Ideally, project finance investors will want to see risk contracted away through fixed price EPC contracts, feedstock and offtake contracts, and O&M agreements where applicable. These contracts help to shift risk to service providers who are most capable of managing that risk, which all contribute to putting together an under-writable project.
The Process of Acquiring Project Capital
The process of obtaining project capital entails a thorough review of the project’s financial models and as well as a project data room. Contracts impacting the project’s finances, such as those for feedstock and offtake, are thoroughly reviewed. Often, project financiers will bring in independent engineering firms to help validate the technology and assumptions that are baked into the project financial forecasts.
The Critical Role of Project Development
Given how much of the climate and energy transition is tied to physical infrastructure, there is a critical need for a growing project development talent pool to help accelerate deployment at scale. As a team with many former project developers, project engineers, and project finance professionals, Spring Lane is committed to helping “develop” the developer – and to growing the clean-tech project development ecosystem. Spring Lane hosts a semi-annual Developer U seminar for clean-tech entrepreneurs and is eager to partner with others to help bring project development skills to the early-stage clean-tech venture community.
