When billionaire Sir Richard Branson needed someone to head up a multi-million-pound fund to invest in renewable energy, he turned to Israeli businessman Shai Weiss.
The duo had previously worked together when Mr Weiss, now 41, was managing director at cable company NTL:Telewest. He was instrumental in NTL’s purchase of Virgin Mobile, part of Sir Richard’s Virgin Group. The merger was rebranded Virgin Media. “After that was all said and done, Richard approached me to come and do something in the renewable sector, and I agreed,” says Mr Weiss.
With no previous experience in the sector, he admits the new venture was a gamble. But it has paid off.
Called the Virgin Green Fund, it has raised in excess of $200 million — including a $100m injection from Sir Richard — to invest in renewable energy technology and energy efficiency sectors.
“It was a good call,” says Mr Weiss, the fund’s managing partner. “Sir Richard saw that rising fossil fuel prices could potentially hurt his business dramatically. So he wanted to mitigate that risk. He had the timing spot on.”
He adds: “The economic environment is very tough out there but the one sector which I think will continue to show promising growth rates and success stories will be this one.”
Mr Weiss, who has a background in technology, telecommunications and finance, says his bet was based on two factors: “One was the sector. The need to secure an energy supply and the need to combat global warming have converged; there is a growing demand for new ways of dealing with waste and water, and sourcing energy.
“After doing a bit of research, it became very clear that this was to be the sector for the next 25 to 50 years.”
The second bet was on a partnership with Sir Richard Branson and the Virgin Group.
What is it like working with Sir Richard? “Great. He is very visionary. Sir Richard started the fund with the idea that we need to do many things to reduce climate change.”
In addition to investing in the supply side of energy, Mr Weiss acknowledges that the demand side, known as “resource efficiency”, is becoming an increasing part of the fund’s focus. “People forget that managing the way you consume energy is a fundamental way of seeing quicker returns on your investment.”
For someone who has only been in the energy game for the past three years, Mr Weiss has certainly got to grips with the sector. He explains: “Buildings consume around 40 per cent of the energy in large cities. Within buildings, approximately 35 per cent goes on lighting and 35 per cent on heating, ventilation and air conditioning (HVAC). So if you can find more efficient ways to manage these resources and reduce consumption, paybacks can be very attractive.”
Founded in 2007, the fund has grown to a team of 15 and has offices in London and San Francisco. It has so far invested 60 per cent of its pot in nine companies. These include two Israeli firms: Metrolight, an energy efficient lighting solutions company based in Tennessee; and Greenroad Technologies, a driver safety and fuel efficiency company based in California, in addition to the Germany-based solar energy company Odersun. Yet Mr Weiss says the fund’s biggest achievement to date was managing to change Virgin’s famously red logo to green.
The fund is actively seeking more opportunities, specifically in relation to products and services, and where investment is not predicated on leverage. “These companies tend to have revenues and may even be profitable. They require capital to grow, consolidate, and for working capital.
“We think the environment is conducive to some excellent transactions but we are being very patient.”
How tough is it to secure funding? “It is a tale of two parts. Investors will tell you they believe that this is probably the most exciting investment opportunity periods that one will face. Dislocation in markets creates great investment opportunities.
“However, we are working very strongly with our companies under the economic strain to make sure they make the right decisions, shore up their balance sheets, survive this period and ensure they are set for growth for when we emerge on the other side.”
Although the Virgin Group is the fund’s largest shareholder and anchor investor, Mr Weiss stresses that it runs as an independent business. “We are keen to retain a sense of independence because we manage funds of other investors, who want to know they are treated equally.”
He is also keen to point out that, within their chosen parameters, they are driven by returns, not social responsibility. “Within the green energy and renewables sector, we are financially driven.”
Where are the next big opportunities? He cites water as an interesting area. “One of our companies, Seven Seas Water, builds, owns and operates desalination services in the Caribbean. Resorts there are judged on the quality of hospitality and not on the water they supply. Hence, we take on this responsibility and provide water as a service to the resorts: the company takes no technology risk and provides great returns.”
He identifies opportunities in Israel as ones to watch. “Israel is a hotbed of innovation. We expect to invest in two or three companies there over the next few years.”
Prior to NTL, Mr Weiss established the European office of Jerusalem Venture Partners and was a member of Morgan Stanley’s corporate finance team. He serves on the board of Virgin Unite, the not-for-profit foundation of Sir Richard’s Virgin Group.