Morning Daphne,

I’ve written a lot about the new cohort of infrastructure startups in Europe, which are too capital-intensive for VC but often too early-stage for infrastructure funding or private equity.

This week I chatted to Zenobe — a UK energy storage startup that’s part of this new wave — which has managed to reel in cash from big infra funders KKR and Infracapital (a Mubadala-backed infrastructure fund). The two secured joint control of Zenobe in 2023 when they ploughed £870m into the business. Cofounder Stephen Meersen told me how they got KKR interested without taking a penny from VC.

Elsewhere, we’re a few weeks out from elections in the UK and France. Last week I went to see Cleantech for UK, a group of climate investors and startups, launch their manifesto — a list of asks for the incoming UK government. 

Top of the agenda? Public funds need to do more to unlock more private capital, the group says. For example, through first loss guarantees for climate tech (agreeing to bear losses incurred up to a certain point) and contracts for difference — where the government guarantees a price for greener companies, protecting them from wholesale price volatility.

Reliable phaseout timelines for existing fossil-dependent processes, and making it easier for green infrastructure projects to get permits, are also on their list.

— Freya Pratty, senior reporter

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UK startup Zenobe bypassed VC — and then bagged £600m from KKR

One of the biggest startup fundraises of 2023 went to a company that has never taken any VC cash: UK-based Zenobe. The energy storage startup secured £870m from US investment firm KKR and Infracapital, an infrastructure fund backed by Abu Dhabi sovereign wealth fund Mubadala. 

“We skipped the VC stage,” says Zenobe’s cofounder Stephen Meersen. “We were too small for private equity, we were too new for infrastructure; but we were too capital intensive for venture capital.”

Zenobe, which builds energy storage batteries and provides electric buses to bus companies, is part of a new cohort of startups building climate infrastructure in Europe. The companies are increasingly turning to private equity and infrastructure funders over VC, which has long been the lifeblood of the software-dominated startup scene. 

What does it do?

Zenobe deploys grid-scale energy storage batteries to capture spikes in power generation from wind farms and solar parks. The company also helps businesses with their transition to electric — starting with bus companies. 

Transitioning to electric vehicles is expensive for bus companies because banks typically only offer finance solutions over an eight to 10-year horizon, meaning big monthly payments at the start of a vehicle’s life — which can be as long as 25 years.

To help, Zenobe provides companies with the upfront capital to buy both charging infrastructure and electric buses. 

Zenobe finances the loans through debt financing secured from banks and other financial institutions. By aggregating loans together into a larger debt package and by sharing the risk across a portfolio of contracts, it’s managed to convince the banks to offer longer pay-back times. 

That then allows the bus companies to pay Zenobe, and in turn its debt financing facility, back over a longer period — and with lower monthly payments — than if the bus company went directly to a bank. 

In May, Zenobe secured £410m in debt financing from Aviva, Lloyds, Natwest and Societe Generale. 

Aligning with KKR’s new strategy

Zenobe’s first debt deals came from banks Santander, Natwest and Rabobank. In 2020, it raised £150m from Infracapital.

In September last year, KKR and Infracapital took joint control of the company when they put in £870m (KKR put in £600m). The deal saw the two funds buy out £500m of existing shareholder capital. 

KKR’s investment in Zenobe follows a new climate strategy launched by the firm in 2023, through which it plans to back climate infrastructure bets earlier than it did before. 

“Most capital in climate is at the low end of the risk-return spectrum, focused on operating assets, or at the high end in venture capital or breakthrough technologies,” KKR’s head of infrastructure Raj Agrawal told an investor day earlier this year. “We’re planning to attack the middle with an infrastructure-led mindset.”

Infrastructure funders will hope that betting early on newer business models will have more growth potential, and therefore greater returns, than traditional infrastructure bets.

Zenobe fits the bill: it’s deploying proven technology but with an innovative financing approach. 

“We were always the odd ones out,” says Meersen. “It's sort of ‘growth infrastructure’: we're building infrastructure projects — but we’re a company that doubles or triples in size every year and does, what I like to think, are groundbreaking things driving industries forward.”

Zenobe’s now active in the UK, Belgium, Ireland, Finland, Spain, Netherlands, Australia and the US. KKR’s strong brand in the US will help the company expand further there, Meersen says. 

Want to get a deeper look at Europe’s energy storage ecosystem? Sifted Pro subscribers can access our run-through of the most promising earlier stage companies in the space.

17x more funding needed for adaptation solutions

The majority of climate tech funding goes to mitigation technologies, which remove or reduce emissions to try and help prevent climate change. Then there’s adaptation tech — solutions which help us adapt to the world climate change is rapidly creating. 

Adaptation tech includes tech to make housing and workplaces more liveable in a changing climate, agritech solutions like drought-resistant crops and water tech to expand access to clean drinking water in areas with shortages. 

The category receives minimal funding in comparison to mitigation. A new report from VC firm PT1 Ventures and consulting agency DWR eco, suggests that globally we need $1.1tn in adaptation funding — just $63bn was invested in 2021. The maths on that? We need 17 times more funding annually. 

While there’s not much VC backing for adaptation hardware and infrastructure, VCs do have a soft spot for software-based adaptation tech — a dynamic I dug into here.

It’s not easy being green

As our collective reliance on data, AI and machine learning continues to impact the climate, how are startup chief data officers scaling responsibly whilst building up their business? Join the conversation with Atom Bank and Kry on July 3 to hear how European startups are remaining sustainable in a data-driven world.

☀️ France’s Smart Energies, which specialises in financing, constructing and operating medium-sized solar projects, raised €87m in funding from investors including Plenium Partners, Swen Capital Partners and Rgreen Invest. Smart Energies aims to create solar parks with a minimal land footprint, thereby ensuring land is reserved for food production and rewilding. 

📈 Gorilla, a Belgian company which provides real-time data and analytics to the energy sector for pricing and forecasting, raised a €23m Series B round led by Headline, a US VC firm. 

🏠Paris-based kelvin, which builds software to assess home energy renovation projects, raised €5m in funding. Racine led the round and was joined by investors including Seedcamp, Raise Capital, Kima Ventures and Motier Ventures.

🔋CeLLife Technologies which specialises in diagnostics and quality control for the battery industry, raised €2m in seed funding. Ventech led the round and was joined by investors including Grid.VC. The company is based in Finland. 

⚡ Grenoble, France-based Entroview, which develops battery diagnostics software for gigafactories and automotive companies, raised $1.6m in funding. AFI Ventures and Rethink Ventures led the round and were joined by investors including Exergon, Holnest, Kima Ventures, Wind Capital and Linksium.