Loudspring - strategy update, next steps & outlook

In January 2015, we set out to become the leading European Cleantech accelerator by the end of 2017. As year-end is approaching we see a number of things we can do that would bring shareholder value but that are dependent on us updating our strategy. We have consequently taken the decision to already now publish this strategy update. This document sheds light on the background of the updated strategy, and sets the scene and targets for the coming three years.

Executive Summary

Traditional industrial companies typically consume more natural resources when they grow. Cleantech Invest (later referred to as: “Loudspring”) is unique in that, the more our energy and resource efficiency businesses grow the more natural resources (minerals, renewable resources, clean air and climate, clean water and biodiversity) we save. We have decided to transform from an investor-accelerator into a company saving natural resources through maximizing growth, with holdings varying from (the current) minority venture holdings to majority holdings forming the core of our group’s operations in the future. This means that instead of always seeking an exit for a portfolio company, we will also aim to consolidate selected companies into our group, resulting in majority ownerships or even wholly-owned business units. We may also consider acquiring external businesses into our company’s core. We will look to acquire a majority in companies that are profitable in the short to medium term, and that require relatively limited additional capital injections.

We will continue to invest into current and new firms, and in many cases, we will ultimately seek an exit. In our venture portfolio, we will accept higher risk, as returns when successful can be high, as we see in our current portfolio. As we have recently communicated, we have generated a 11,3x partial exit and we see potential for even higher returns among current holdings. But at the same time, out of our own operations, we will be creating a global enterprise focused on saving natural resources and which directly influences the vision, strategy and revenue of its businesses. We believe that building and managing our own businesses enables us to generate much more value in the long term, compared to a traditional investment company approach.

The transition will be gradual and we will work together with our current entrepreneurs and possible acquisition targets to see if there is an economic, strategic and cultural fit with our core business. Consolidation will generate a myriad of opportunities ranging from synergies in customer acquisition to efficient sourcing, cost of capital and talent acquisition.

Traditional industrial companies consume more natural resources, the more they grow. Loudspring is unique in that, the more we grow the more natural resources we save and as an end result, we seek to form a leading industrial actor in selected business areas, saving the maximum amount of natural resources while maximizing value to our shareholders.

Where We Are Coming From 

Ecosystem deterioration through human activity is a universal problem facing our generation. Cleantech Invest has been combating this through sourcing, investing in and deploying Nordic solutions on the global markets where they can have maximum positive impact. 

Since our last strategy update, we have already prioritized our current portfolio companies’ international growth. This approach has allowed us to get more involved with our portfolio companies, heavily influencing a wide range of managerial and strategic decisions made by our portfolio companies. We no longer take a high-level approach to our portfolio but get involved in tasks such as talent acquisition, business modeling, funding, and executing international growth and communications. Furthermore, our more focused approach has allowed us to allocate a more significant portion of our available capital to the current portfolio companies. We have been able to dramatically accelerate portfolio company growth (portfolio company combined annual revenue growth over 110% on average since 2014) thus maximizing also their positive environmental impact by saving maximal amount of natural resources according to our strategy.

The main form of shareholder value creation is the value appreciation of our share. Since Cleantech Invest IPO in 2014 the share price has increased more than 50% per year and we acknowledge that the market expects us to achieve high growth in value. In addition to shareholder value we aim to deliver societal value. The main form, which we also measure and communicate, is the positive environmental impact our companies have through achieving savings in natural resources; energy, carbon emissions and fresh water; decreased pesticide use; increased use of renewable energy; and decreased use of minerals and agricultural land.

In order to continue to achieve and exceed our ambitious growth targets,we are implementing the following strategic changes.

New Name and New Identity: Loudspring

We have published a separate release on the new name and identity on November 7th 2017. (http://www.cleantechinvest.com/whats-up/category/1/cleantech-invest-becomes-loudspring)

A new mode of operating: A company with its own vision for the future, saving natural resources

Our track record shows that our direct operational engagement in our portfolio firms has been crucial to their financing, management and successful growth. Our operational involvement has steadily increased over the years and we now intend to intensify it.

To date we have avoided owning more than 50% of any holding. We believe that this has not generated maximal returns for our shareholders, especially when seen in relation to our contribution in our companies. We have also been seen as a holding company, or an investment firm, with the related stigma of being valued as such, despite the pivotal role of our own operations in creating portfolio company success.

We are now changing strategy and will be actively looking to significantly increase our exposure in a number of fast-growing market opportunities and direct an increased portion of our focus and capital on our current portfolio of companies active in these markets. We have carefully identified those companies where we see the largest opportunity for growth and are actively looking for opportunities to increase our ownership in those firms.

This shift in policy and ownerships will over time result in Loudspring becoming an operational company that saves natural resources through revenue growth. The more we are able to grow, the more natural resources will be saved. Loudspring will no longer be a standard holding company with a portfolio of companies, but an operational company with business units (or daughter companies) as well as a venture investment arm.

In addition to increased ownership in select portfolio companies, we will also begin to work in parallel with the management teams and take a more hands-on approach to operations. From the portfolio companies’ perspective, through Loudspring they will gain crucial growth competences such as internationalization, sales, investor relations, and communications, as well as access to capital. In addition to executive support, consolidated portfolio companies will also benefit from resource sharing and collaboration between each other, as they will all operate closely together.

We have carefully made this decision moving forward in order to fully capture the economic benefit that will be created as a result of the foundational work we have done with our current portfolio. We are confident that the timing to initiate this change is now.

Markets ready for disruption: High potential for saving natural resources

We believe there is a transitional change happening across several markets. This transition opens up opportunities to disrupt legacy industries with capital-light, innovative solutions. There are new modes of operating and a shift towards more environmentally-friendly solutions on the markets where our companies operate and are experiencing strong growth. During the last five years, the cost of more environmentally-friendly alternatives to traditional solutions have radically dropped and we clearly see through the growth of companies such as ResQ Club, Swap.com and Plugsurfing that consumer willingness to adopt these solutions has increased steadily.

Examples of markets ready for disruption are:

• Manufacturing, where the decreasing cost of sensors, processing power and Internet connectivity has made it possible to measure, manage and optimize energy use remotely, opening huge energy efficiency pockets that have not been available up until now;
• Real Estate, where the smart building is now finally replacing what was previously only regarded as ‘property’;

• Energy, where installing renewables is in several scenarios now the most economically viable option for much of the new power that is built [https://www.lazard.com/media/438037/lazard-lcoe-100-executive-summary.pdf], and where Africa, with increasing population and strong GDP growth coupled with extremely low access to electricity (currently 43% of population), is leading the way;

• Food production and distribution, where around a staggering 88 million tonnes of food is wasted annually in the EU alone, with associated costs estimated at 143 Billion Euros; and

• Fast fashion, where 85 billion worth of pre-owned clothing goes to waste every year in the US.

Our current portfolio is, and we state this with great pride, leading the charge on many of these fronts. We see (to mention a few) that Swap.com can lead the transition into a radically different way to shop, pro-longing the lifetime of clothes significantly. We also see ResQ Club offering flawless meals that would otherwise have been wasted; Nocart progressing rural electrification in Africa; and Nuuka, increasing property value while decreasing energy use.

We see similar growth in other focus areas within energy and resource efficiency and we continue to believe that by any metric, the Nordics are the technological growth engine of the world when it comes to environmentally-friendly technologies, rivalled only by California ( http://nordic.businessinsider.com/denmark-finland-and-sweden-are-the-worlds-best-at-clean-technology-innovation-2017-6/). The Nordic region provides us with a unique platform for our business operations.

Next steps and outlook

No single geographic location can tackle our global environmental challenges in isolation. Therefore, we have chosen to maximize our impact through making this a global effort in saving natural resources. Loudspring will continue to increase its international reach either through our own presence or partnerships. We will, however, remain Nordic-focused in our sourcing.

What you measure is what you get. We have started to measure and communicate the positive environmental impact we are having and we see Loudspring as a company where the core value proposition is tangible positive impact on our ecosystems in the form of saving natural resources, and where the business idea is to make that positive environmental impact as big as possible. 

Our shareholder base has grown to 5000 + and an increasing number of people are also followers of our activities. In 2018, we intend on focusing more time and effort reaching out to new potential investors and interested stakeholders. 

We have set among other things, the following strategic targets to be achieved by the end of 2020:

• Own businesses: Target global leadership in carefully selected market pockets by consolidating two or more portfolio companies into majority or fully-owned daughter companies/ business units;
• Turn one or more of our business units into high profitability and source of significant dividends;
• Venture portfolio: Achieve three or more successful exits with very high returns on invested capital.
• Impact: Continue to rapidly increase our positive environmental impact and transform Loudspring into an internationally recognized role model in impact creation;
• Shareholder value: Continued focus on share price appreciation as the main form of shareholder value creation;
• Evaluate a possible switch to the main list of Stockholm and/or Helsinki Stock Exchange;
• Establish a presence in additional growth markets around the globe; and
• Seek and quickly monetize new natural resource efficiency opportunities.

From looking at companies that we aspire to emulate we have seen that only by taking an active role have leaders in their respective space been able to dictate and create their vision for the future. Our new strategy allows us to do just that. Over time, the growth of a number of our companies has corresponded to the amount of influence we have had over them, and the amount of resources we have applied. Our record speaks for itself, and through increased ownership in a select number of our firms, we see that our record for growth and impact can even be further improved.

Through this strategy change we are now moving to the next level of growth by step-wise transforming into a group that directly influences the vision, strategy and revenue of its business holdings.

In 2020, Loudspring aims to be a company with one shared purpose: saving natural resources. We believe when we do this shareholder value will follow.

Contact information:

Alexander Lidgren, Managing Director of Cleantech Invest Plc. Tel. 46 73 660 1007, alexander.lidgren@cleantechinvest.com

Access Partners Oy, Certified Advisor. Tel. 358 9 682 9500

Cleantech Invest in brief

Cleantech Invest is the largest cleantech accelerator in the Nordic region, boasting several fast growing and high impact companies that solve global challenges. The portfolio companies are active in energy- and resource efficiency as well as decentralized renewable energy and are based in Finland, Sweden and Germany. The company management consists of company builders and investors who have been active within the cleantech space for over a decade.The company is listed on First North Finland under the ticker CLEAN and on First North Stockholm under the ticker CLEANT A.

www.cleantechinvest.com

LinkedIn: https://www.linkedin.com/company/cleantech-invest-oy

Twitter: @CleantechInves1

IG: @cleantechinvest

FB: www.facebook.com/cleantechinvest/