Answers some of the most commonly asked questions about Nucleation Capital.
Nucleation Capital is an emerging venture capital fund that will be investing in private ventures that best enable the carbon-managed economy. The fund utilizes state-of-the-art venture technology which enables it to democratize access and allow more investors to pariticipate at lower capital levels through a quarterly subscription model called a “Rolling Fund.”
Yes, Nucleation Capital is actively meeting with individuals who are interested in participating in the fund’s first quarter of operation, which will be in Q2. First close is anticipated on April 1, 2021.
Like most traditional ventures funds, Nucleation Capital will operate under an exemption to SEC registration rules. This limits us to being able to accept investments solely from Accredited Investors. Unlike many traditional venture firms, however, we are able to accept smaller investment amounts from a greater number of individual accredited investors, allowing far more investors to access these key sectors of innovation.
We invest in ventures developing the most scalable technological solutions to climate change, namely advanced nuclear and deep decarbonization ventures, along with a range of support and supply ventures. We chose to focus on advanced nuclear energy and carbon capture, utilization and sequestration (CCUS) ventures because we wanted to invest in these areas and there were no existing vehicles providing investors with diversifed access. We also consider opportunities within vertical industries supporting these technologies, including suppy chain, advance materials, manufacturing, storage, waste processing, services and grid integration and enhancement ventures, as well as technologies that can provide additional revenue streams.
Primarily because the world’s focus on deploying renewables has failed to yield any reduction in global emissions. To date, what emissions reductions we have seen appear to be the result of cheap natural gas taking market share from coal. Yet natural gas’ growing market share spells disaster for climate. Only nuclear deployments have provided a competitive type of reliable and clean power that has retired large fossil fuel plants. Importantly, we are on the cusp of a new generation in nuclear technologies, which are targeting not just traditional grid base load demand but also off-grid decarbonization needs, with offerings that aim to solve most all of the “hard-to-decarbonize” challenges we face for which there are no other good solutions.
The traditional cleantech area has an abundance of investors competing for the most attractive deals. In contrast, the advanced nuclear and CCUS sectors have an abundance of attractive, if higher risk, opportunities but a dearth of knowledgeable investors willing to invest.
Many venture investors take their cues from environmental advocates who favor renewables and have garnered both preferential energy policies and favorable tax treatment for wind and solar. These have vastly improved the investment profile for renewables. In contrast, nuclear energy has been discriminated against under policies that promote and buttress the expansion of “renewables,” so does not offer guaranteed returns. Plus, most venture investors don’t invest in hardware innovation because it poses higher risk. Those that do accept hardware risk are unlikely to invest in ventures with regulatory risk as well, as is the case with nuclear innovation.
If you define an “Impact” investment as one made with the intention of generating a positive measurable social or environmental impact alongside a financial return, then the answer is definitely “yes.” We are investing with purpose specifically in those companies working to directly reduce carbon emissions alongside an array of supporting and related ventures. A technology like nuclear energy—which could reduce grid emissions down to next to nothing—qualifies as “impact” on a first order magnitude. Nuclear energy powering carbon sequestration, which together provide what may be our best hope for restoring the health of our climate, comprises “Impact” on a much different scale than most “impact” funds.
ESG investors are those seeking to evaluate the “Environmental, Social and Governance” characteristics of their investments. Environmental factors typically include: climate change, carbon emissions, energy efficiency, air and water pollution, waste management, water scarcity, biodiversity and deforestation. Social factors evaluate: gender and diversity policies, human rights, labor and employment standards, customer and community relations. Governance metrics include: board composition, executive compensation, lobbying activity, political contributions and anti-bribery and corruption policies. As a fund, Nucleation is focused on ventures addressing the “E” component, increasing sources of clean energy, reducing carbon impacts and air pollution in particular. However, we ourselves are a woman-led fund and we also evaluate our ventures on their social and governance performance and plans, recognizing that for next-generation nuclear to be broadly embraced by the communities it serves, companies will need to operate at the highest levels of sustainable and equitable practice, customer accountability, environmental justice and community transparency.
No, we are targeting standard venture capital returns. Climate change poses an existential risk to humanity and Nucleation Capital is focused on solving that, through the commercialization of scalable, cost-effective technological solutions. Yes, there are risks to technology investments but these pale against the risks of failing to meet decarbonization timeframes. The world and the U.S. are ready and motivated to solve this problem and know that there is a limited window to act—so there are many groups focused on getting critical solutions to market. We believe the urgent need to address climate change and the “whole of technology” approach that the Biden Administration knowsmust be taken if we are to meet our carbon reduction goals, more than compensates for the additional risks encompassed by our thesis.
Traditional venture capital firms do need to avoid any suggestion of making a “public offering” if they don’t want to do a full registration statement. Fortunately, we are able to operate under a less restrictive exemption that allows us to make public-facing statements, in large part due to the requirement that all of our investors register on our technology platform and prove their status as accredited investors.
About Rolling Funds
Rolling funds are a relatively new structure for a venture capital fund which leverages a sophisticated technology platform to create a subscription model vehicle for raising and deploying pooled capital. As such, rolling funds expand the boundaries of the VC industry, creating opportunities for new, innovative managers to offer unique funds and for new investor communities to be able to access such funds. In this way, rolling funds are a form of democratization both because they enable more diverse general partners (GPs) to enter the market and because they make it possible for a broader group of accredited investors to serve as limited partners (LPs) by participating in what was previously a very exclusive asset class. The rolling fund has emerged as a result of changes in the law established by the “Jumpstart Our Business Startups (JOBS) Act” of 2012. The technology was developed by AngelList and first introduced in 2020.
Rolling Funds utilize a unique technology platform that faciliates a novel legal structure in which the fund is comprised of a series of consecutively-formed quarterly funds. This allows the fund manager to offer investors participation through a subscription to match the investor’s participation preferences. Unlike investing in a traditional venture fund, a Rolling Fund provides:
- A regular quarterly capital investment schedule rather than a one-time commitment with irregular capital calls.
- Flexible subscription terms, allows investors to select their own quarterly participation level and change it over time.
- An “evergreen” structure, with continuous access for new investors to join subsequent quarters.
- The bulk of fund administrative tasks are automated, freeing the fund managers to focus on finding great companies, investing, communicating with investors and supporting portfolio ventures.
- Reduced closing legal fees, making it economical to accept investors wishing to participate at far lower capital levels than are feasible for a traditional fund.
- Online accreditation of all subscribers, ensures that the fund qualifies for the rule 506(c) exemption to fund registration, enabling the fund to conduct broader outreach to the public.
- Substantially lower investment minimums means that rather than just the top 20% of accredited investors being able to access venture capital funds, the bottom 80% of accredited investors can also afford to allocate some of their assets to this class.
- Majority funding from diverse knowledgeable individuals rather than large institutions like pension funds or foundations, whose conservative investment decision-making protocols have long served as a preserver of the fossil fuel status quo.
LPs must subscribe to a Rolling Venture Fund through the AngelList platform. There are several steps to subscribing: 1) Let us know you are interested. 2) Receive our fund presentation and get answers your questions. 3) Request the fund subscription link, review and approve the fund’s legal documents and select your subscription level. 4) Determine your method of funding.
If you are new to AngelList, you’ll need to go through AngelList’s fraud prevention process. U.S. investors can simply enter a few pieces of information (Legal Name, Address, Social Security Number), and AngelList will verify your identity. If you’re a non-US investor, you’ll also need to upload a valid identity document from your country of residence. Then to invest in the Nucleation Capital rolling fund, you will need to submit your proof of investor accreditation. This may involve submitting account statements, tax returns or certifications from an investment advisor.
Investors (the Limited Partners or “LPs”) pay nothing to register as an investor on the AngelList platform or to access the Nucleation fund portal to review the fund documents. If you choose to go ahead and participate in our rolling fund, however, you will pay fees to compensate us as the fund managers and our fee includes the component of our costs associated with our use of the AngelList.
Yes, they can. There is tremendous flexibility built into this plattform, allowing investors to select the number of quarters and the amount they want to invest. LPs may cancel, increase or decrease their subscription at any time. Investor subscriptions are automatically renewing, unless cancelled.
Subscribing LPs get exposure to all deals in the quarters they’re subscribed to. For example, if an LP joins the fund in Q5 and remains subscribed for the next three quarters, then they would get exposure to the investments made in Q5, Q6, Q7, and Q8 but not Q1, Q2, Q3, Q4 or Q9.
You will receive annual tax documents for any investments that receive income in a given tax year. Tax returns and K-1’s are only required to be filed with the IRS if there is taxable income or loss to report. If none of the investments that were made during the period you subscribed generated taxable income or loss, no K-1 will be required.
Nearly all venture funds operate with a ten-year term. The reason for the long term is that the capital that is invested is put to work in private ventures that are illiquid investments which will not return that capital until there is a “liquidity event,” such as an acquisition, an IPO, a merger or an agreement to deploy a SPAC. It can take many years for even the most succesful private ventures to achieve “liquidity.” Of course, not all investments take that long to mature, so there is the prospect of getting funds distributed to investors prior to the tenth year, should a venture experience that liquidity event sooner. Needing to have long-term investment endurance is one reason why many smaller investors choose not to invest in venture capital.