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Liquidity for the Energy Transition

Liquidity for the Energy Transition

One of the glaring weaknesses of investing in the energy transition over the last 5 years has been the shortage of potential exit avenues. However, over the last 12 months, new options for liquidity have emerged.

SPACs gave energy transition firms a path to the public markets. Megafunds like those raised by General Atlantic, TPG, and Brookfield create new avenues for shares to trade hands in secondary transactions in addition to primary share investments. Lastly, private equity giant Vista Equity acquired Power Factors, signaling yet another shift in the exit landscape.

One natural effect of this transformation is the ability of market leaders to be more acquisitive due to the liquidity of the capital markets and share prices that are easier to confirm and compare.

Recently, Chargepoint acquired ViriCity and has-to-be with its newly strengthened balance sheet and public equity. This is a relatively new phenomenon for the energy transition, but one that is great for the entire ecosystem.

Startups and their investors now have an additional path to returns, and those returns often get recycled into the same thesis.  Firms like Chargepoint make the shift from niche to a holistic, established provider hardware and services package to accelerate the adoption of electric vehicles. Everybody wins.

There's never been a better time to be a founder or investor in the energy transition. Not only is capital flowing into the space at a record pace, but the availability of options for liquidity is expanding too.

This maturation of the financial ecosystem around the sector will create transactions that set precedents. These data points will give investors and acquirers more certainty, that certainty turns into confidence in returns, and confidence in returns equals more capital for the ecosystem. That's a flywheel we can all agree on being a net positive for everyone.