Nucleation Capital founder and managing partner, Valerie Gardner, joined an impressive roster of virtual speakers at the 2021 New Nuclear Capital conference, December 8-9, 2021, focused on the financing necessary for setting the foundation for the deployment of the next generation of advanced reactors.
Speaking on a panel entitled, “Perspectives on Private Financing: Emerging Financing Arrangements and the Role of Financial Institutions,” Ms. Gardner represented the voice of the first venture capital fund and its LP investors focused on investing in the advanced nuclear sector, which represents a major paradigm shift for the nuclear industry.
Ms. Gardner spoke of the “reframing” that becomes possible when, rather than trying to finance large, grid-scale projects, a bevy of small, private ventures are raising capital in order to design small, manufacturable, modular reactors. The fact that these ventures are developing technologies that will be meeting a huge need in the market from which they will generate profits, opens up financing mechanisms that were otherwise not possible, specifically venture capital, which invests in the equity of private, high-growth enterprises, which have set their sights set on meeting the demand of a huge and growing market for clean energy.
The fact that Climate Change is barreling down on the planet and forcing the widescale transition away from dirty sources of energy plays an important, critical part of the reason investors, especially climate investors, believe the future market for Advanced Nuclear is huge.
While it is not entirely clear that the nuclear community understands just how much of a paradigm shift this is for the future of the nuclear industry, investors are searching high and low for clean tech options. Experts have made it clear: we need nuclear to solve the energy problems, and nuclear may be the “greenest” investment there is. These factors together fundamentally shift nuclear’s relationship to venture capital, as investors will accept risks in order to achieve both climate solutions and returns. This forces the industry to look past “Alpha Particles to Alpha Generation.”
Generating “Alpha” is the term investors use for generating investment returns that beat the market. Venture capital seeks this type of outperformance. Given nuclear’s dense, always on clean energy, venture capitalists are taking note of the ability of top ventures to achieve alpha, particularly in light of the extraordinary risks.
Yes, every venture capitalist is wrong more than they are right and some 80% of returns are generally produced by a mere 5% of invested assets, which is why VCs must be very picky as to whcih ventures they invest in, and only select those they believe could be homeruns.
Once the exclusive purview of institutional investors and the wealthiest investors, disruption within the venture industry itself has made venture capital accessible to a much broader class of accredited investors.
Online investment platforms, such as that used by Nucleation Capital, now enables accredited investors to access and elect to support a much broader range of fund managers and fund types, invest at lower levels and see decreased costs and risks. This enables those who really understand the value proposition of nuclear to be able to invest in this next generation of private ventures. The demographic of potential investors has been effectively increased by these platforms, translating into nearly 15 million more investors and nearly a trillion dollars of private capital that can flow into worthy ventures.
Ms. Gardner noted that these combined trends—private ventures seeking to deploy smaller, manufactured systems, climate change and the democratization of venture—have important implications for Advanced Nuclear ventures and bodes well for the sector’s future ability to follow the more standard venture capital pathways for financing growth with equity fundraising rounds, and scaling their future deployments with access to the regular public markets and standard capital stack financing channels.