One of the biggest obstacles facing early-stage technology companies is funding — especially seed capital. This is true for most sectors, but even more so for energy-related businesses. The evolution of getting a new energy technology to the market-ready stage can be a risky process. However, the benefits we stand to gain from their success far outweigh the impediments.

To meet this challenge, the Northwest Energy Angel Group was created. This regional group of angel investors aims to provide the financial fuel to get these new power ventures up and running.

Helping energy technologies reach market readiness doesn’t just make good investment sense. It opens doors for economic growth, lessens reliance on foreign fuel, increases efficiency and decreases environmental pollutants.

These opportunities have not gone undetected by scientific researchers, business entrepreneurs or government officials. Exciting innovation and breakthrough scientific discovery is happening in biofuels, wind, solar and wave power, grid efficiency, and transportation — all of which hold tremendous potential for being the next generation of global energy sources. And energy is at the top of many government "hot lists," sparking everything from legislative standards that include new energy technologies to tax breaks as a means of moving it to the forefront of economic planning.

To harness this potential, energy technologies must advance beyond the development phase and mature into market-viable products and services.

Visualize the progression of a company from research and development to market as a staircase out of the “valley of death” — a common analogy for the perilous fate that can befall early-stage tech ventures. Each step represents a key stage in the company’s growth. To reach this step and progress to the next the company needs support, primarily financial support.

Venture capitalists tend to be later-stage adopters. They are more interested in funding companies that are further along in their business development. Utilities also inhabit the higher steps on the staircase, preferring to partner with more established companies. Therefore, angel investment is a critical step to the viability of these early-stage energy ventures. Without this seed funding, many would simply disappear into the abyss. 

Creating an energy angel investment community in the Northwest makes sense. The region has world-class entrepreneurs and researchers working in this space. There are passionate, knowledgeable investors interested in supporting the sector, and there are experienced technology leaders helping connect the two.

Northwest Energy Angels evolved from two Pacific Northwest programs: the Washington Technology Center’s Angel Network and the Northwest Energy Technology Collaborative (NWETC). There was a strong interest from Washington investors to explore industry-specific angel groups. At the same time, energy entrepreneurs working with NWETC expressed the need for easier access to seed capital and access to investors more in tune with the specific needs of their sector. A series of focus group meetings followed that solidified the desire and ability to form the regional angel investment group.

Northwest Energy Angels held its first meeting in January and to date has heard pitches from six energy companies. One company received funding, and a second deal is near completion.

One might caution that an industry-focused angel group has limited potential; that flushing out enough promising leads to stimulate deal flow will be difficult; or that there isn’t enough interest among qualified investors to provide funding and mentorship solely to energy ventures. This may be true if the group limited itself to one geographic area. By escalating this initiative to a regional scale, a wider net of opportunity is cast for both businesses and investors. It also positions the Northwest as a vibrant region in energy innovation and global hub of next-generation energy solutions.

Northwest Energy Angels currently has 15 active members in Washington, and it plans to expand in number and scope over the next year. NWETC’s regional alliance spans five U.S. states and two Canadian provinces. There has been strong interest from investors in this region, which consists of Washington, Oregon, Idaho, Montana, Alaska, British Columbia and Alberta, to be part of Northwest Energy Angels. The group plans to tap into the investor and energy entrepreneur communities and businesses in these states and provinces.

An angel group also complements the services that NWETC already provides energy entrepreneurs, including a venture forum and regional test bed that will yield new leads for investors and deals. Together, this portfolio of commercialization programs creates a more seamless path for energy companies to climb the staircase and emerge from the valley.

Northwest Energy Angels can serve as a model for other regions or technology industries looking to spark economic growth in a targeted sector. Pairing like-minded, knowledgeable investors with start-ups in an emerging industry can go a long way to helping cutting-edge technologies get the boost they need to penetrate the market and move us closer to realizing the benefits new energy sources hold for our global economy.

Jeff Morris is director of Seattle-based NWETC. He also represents Washington’s 40th Legislative District and is chairman of the state House Committee on Technology, Energy and Communications. His "Energy Innovation" column appears monthly in nwcurrent.