We Prefer to Know Companies Early in Their Startup Journey…

EIF’s high success rate with mobility businesses intrigues us. They have been a prolific investor and have multiple successful exits under their belt. This Friday, we had the opportunity to ask questions to Amanda Bamberger, Vice-President EIF, and Jessica Singh, Sr. Vice President-EIF, on the fund’s investment philosophy, how they evaluate companies, and what exactly clicks with them.

EIF on Identifying Opportunities

When EIF looks at opportunities, what is your perspective? Are there any specific types of opportunities you’re looking at? Within the mobility ecosystem, is there a section of companies that you want to look at? What makes those companies tick with you?

JESSICA: EIF invests in early to growth stage companies focused on sustainability and the efficiency of systems. We have been actively investing since 2010, across sectors and geographies.

One of our primary investment theses since inception has been decarbonizing all forms of transportation. We recognize that transportation accounts for about 15% of all global greenhouse gas emissions and touches nearly every aspect of our lives. It’s inherently a really important part of our work. We’ve invested across the value chain – in battery testing, battery freight, logistics, and a range of vehicle types, including bicycles, scooters, motorcycles, cars, and buses.

We continue to systemically analyze factors affecting EV adoption and look at specific applications in specific markets that have strong potential for both growth and impact, because what works in the US doesn’t always make sense in emerging markets and vice versa.

Broadly,  we believe that EVs will be the lowest-cost vehicles to operate long term. They’re often 20-40% cheaper than ICE vehicles to date, already in many parts of the world. As batteries continue to get cheaper, and grid electricity moves toward renewables, we’re confident EVs represent the future of transportation.

A few of our investments in this sector include Battery Smart, India’s largest battery swapping network for E3W, with 90,000 drivers and 1,600 swap stations. We’ve also invested in Vecmocon, another Indian company leading in EV component manufacturing, with over 100 customers today.

Another one of our investments is Ampersand, which is an electric motorcycle and energy network platform in Kenya and Rwanda. They’ve sold ~7,000 motorcycles to commercial drivers and manage a fleet of  ~10,000 batteries, realizing one of the most efficient battery-to-moto ratios globally.  Ampersand owns and operates a comprehensive battery swap network in each of its cities. 

In the U.S., we recently invested in BetterFleet, which provides fleet management software solutions for heavy-duty vehicles, like delivery vans and municipal buses.

We’ve also had a lot of successes in this industry itself. More, I would say, than most.

Auto Motive Power (AMP), an industry-leading advanced energy management solution, was acquired by Ford in 2023. EV Connect was another of our investee companies, supporting large-scale EV deployments, and was acquired by Schneider Electric in 2022. eMotorWerks, with its JuiceNet platform, aggregates distributed storage facilities, including electric vehicle batteries, to provide grid balancing and energy management services. It was acquired by Enel in 2017.

So I would say that we bring both technical and industry expertise to this sector. We have played across the value chain and understand the dynamics that drive adoption, and have built one of the most experienced mobility-focused investment teams in the industry.

AMANDA:  I would like to talk about some of the things that we are most excited about in the transportation and e-mobility sector going forward. There are three aspects that we think about when it comes to vehicle electrification that are particularly exciting and worth investing in.

First, commercial-use vehicles are important. They rank really high in our internal analysis because they have high utilization that drives a fast and simple payback, and an overall lucrative return on investment. EVs are CapEx-intensive, so that’s a key factor. These commercial use cases can span a lot of different sectors and vehicle types. We take an interest in different vehicle classes and applications, so everything from municipal transportation, buses, and micromobility for food delivery to passenger vehicles, ride-hailing, and taxis.

Boda Boda and e-rickshaw operations fall into that same category.  These drivers have high utilization, completing 100-180km per day. The e-commerce and quick commerce sectors are growing quickly across several countries, and that growth is also driving demand for cheaper mobility solutions.

Another component of this is that those drivers see a big benefit in switching to electric.  From our investments and due diligence, we’ve seen drivers’ take-home pay increase by anywhere from 30% to up to 200% in some cases with EV adoption. It’s really a win-win, delivering both environmental impact and social benefit.

The second point is about emerging markets. In EV adoption, we’re looking for companies that can serve a large mass market of drivers where incumbent fueling is expensive or slow.  For example, this is often true where petrol is expensive, say in a landlocked country due to high logistics costs, or where slow-charging, lead-acid battery packs are deployed.

We’re also looking for places where cities face a lot of unbearable pollution, and countries can benefit from reduced dependency on foreign oil. It’s also a plus when there’s increased renewable energy on the grid, making electric vehicles a lower-emissions form of transportation. These characteristics often hold true in many emerging market countries.  EIF has been studying countries like India, Brazil, Rwanda, and countries in Southeast Asia for several years now, which has led to our ultimate investment in some of those geographies.  EIF now has three investments in the two- and three-wheeler battery swap sector.

The last point is the importance of good battery management.  It creates a lot of value and is often taken for granted. At least half of the vehicle’s value is locked up in the battery, and any company that can maximize the return on capital by managing the battery well can deliver profit and competitive positioning.

That is what Battery Smart and Ampersand do well. They’re maximizing the number of kWh from each battery while minimizing the upfront cost of that battery. It takes real technical skill to achieve both across the asset lifespan. In the long run, we think companies that manage batteries effectively will deliver stronger profitability and have better market positioning than anyone else.  Conversely, a company that comes into the market with a cheap battery that doesn’t last very long will not get a very good return on that battery.  A company can’t be financially sustainable long-term with that approach.

The other difficulty in doing this well is that battery chemistry is constantly changing.  It’s not as simple as having one solution that works in perpetuity. The battery packs are essentially living systems, continuously being updated with new technology. So you really need to have a team that understands that, who knows how to diligence it, integrate it, etc.

Those are the three areas we’ve been focused on recently, and we’ll continue to look for opportunities that align with those three points.

For Startups: How to get on EIF’s radar

I think as a fund, you have made a large number of investments. When I look at the various companies that you put money into, I’m wondering what would make a startup catch your attention? How do I, if I am an e-mobility startup, how do I get on your radar?

AMANDA: First thing, EIF prefers to get to know companies early in their lifecycle and startup journey. We like to follow companies from an early stage and stay connected as they grow.  We keep a close eye on the sectors we care about.

That involves doing due diligence on companies that are raising, and talking with investors,  operators, and practitioners. We’re of the mindset that if an EV startup is successfully solving real-world problems, we will hear about it through our network.

We recommend leveraging your investor or customer network to make connections and get on our radar. You can always do a cold LinkedIn outreach, but it’s often more powerful if the company comes through a warm channel introduction.

The Most Important Factors for EIF…

Interesting. When you are investing in a company, and I understand you already made a point that you see an impact that the company would make in the real world in terms of helping people do better in life, what do you think are the most important factors when you consider investing in any of these companies? Is it the technology they’re working on, or is it the team, the management quality, or is it the market potential, or a mix of everything?

JESSICA: It’s definitely a mix of everything. They are all important factors in the overall success of the company. One of the big things we look at is the market problem itself. How big is it? How urgent is it? And is the timing right for that opportunity?

We look for evidence. Customer traction and commercial revenue are great indicators of whether the company is solving a real problem. That includes looking at the customer’s willingness to pay, market dynamics, and product market fit.

We also want to understand the timeframe in which the market solution becomes attractive. Is it today? Maybe the market will actually develop in two years from now, and we’re a little bit farther off from that inflection point. Having the right technology is important, but the wrong timing can be expensive for that company. For the investors, it is important because we have an investment time horizon.

We do focus a lot on the technology, especially in this sector. We look for clear points of differentiation in technology and want to understand how the company is the best at what they do.  It’s not just technology for technology’s sake, but it’s about meeting market needs and doing it better than other people.

Another important factor is the unit economics of the company and whether the company can deliver profitability over time. That goes back to customer willingness to pay. If you have a product that is important for the market, then you should be able to deliver that profitably, and customers should be willing to pay for it.

From a VC point of view, we also look closely at exit opportunities and potential pathways.. In some markets, like India, IPOs are viable and potentially lucrative. In some other markets, we may be focused on more synergistic opportunities and how a strategic buyer might see the company and the value it will generate.

So these are all important factors. The team, as you mentioned, is a big part of the way we analyze companies. Happy to go into that if you want.

EIF on Quality of Management…

Yeah, that was my follow-up question here. I keep hearing that the quality of the management, the team, is one of the most important factors. I think last time when we were chatting, you mentioned one of your investee companies, and you said you really like the team quality there. But when you say team quality, what exactly are you looking at?

JESSICA: We value leaders who have a good combination of domain expertise, entrepreneurial spirit and an all-in mindset. It cannot be one or the other. It has to be a combination of all these different things: you understand the technology, but you also need to understand the market, and what the customer actually wants. And you have to have the mindset to give everything to making the company successful.

We want to learn about what the management makes you the best at what you do. What do people in the industry know and respect you for? Do people want to work for you? Do you have the foresight to recognize market opportunities before others can? Are you that kind of leader who can attract and retain good talent? Do you also have the foresight to identify risks and the roadblocks before other people do? Can you problem-solve effectively both the existential risks but also the day-to-day roadblocks you will face?

We also look at how you treat people. We believe great leaders attract great employees, and that’s really important for maintaining a competitive edge over time.

At early stages, we also want to make sure that management can raise follow-on funding from the market because that’s critical. That includes clarity of thought, being able to deliver on the overall vision of the company, having charisma, and developing the right network.

Great management and great teams vary by sector and by business model. But I would say there are some universal elements:  leadership, coachability, high emotional intelligence, and a genuine eagerness to grow the business and realize that vision.

For Startups: What stage does EIF like to Invest…

Does EIF look at any prospective investees at the idea stage? Or do you want some traction before you get in?

AMANDA: We’re an early growth stage investor, so we prefer to come in at a stage where the company has proven its technology and demonstrated a product market fit, demonstrated customer willingness to pay, and has good unit economics. So the hurdle rate varies for us by sector and stage. You can’t really say you need X revenue or Y number of customers. It just really depends on the market.

For example, in the US market, the sector is really mature in level one and level two charging for electric vehicles. So any company operating in the sector – whether it’s selling software or hardware – should be able to show a significant amount of revenue before taking a Series-B investment.

The hurdle may not be as high for other companies working in a more nascent sector, like charge management for heavy-duty vehicles. There just aren’t as many large-format EV trucks and buses deployed today. It’s more of a green field, and we can probably build more conviction with less traction because the market is just not as competitive. So, it really depends there, I think.

We’re also just looking for commercial traction that is somewhat representative of the company’s long-term business model. Initial revenue, at times, could come in the form of significant pre-orders or paid pilots, but we tend to index on realized revenue. We are really looking for companies that can take capital and grow. They have a model that works, and we’re here to help scale it.

The Ticket Size…

What is the normal ticket size that you look at? Is there a boundary to that, or are you very flexible there?

AMANDA: Our initial check size is USD 5-15 million, and we reserve more for follow-on funding. This also depends on the market problem we’re targeting, the size of the company, the stage of the company, and the maturity of the sector. But that’s generally our range.

On EIF’s geographical focus

Are you focused on certain geographies? I’ve seen investments in Africa and India. Is there a geographical area or a certain geography that interests you more than the others?

JESSICA: We look at it more from an overall thesis perspective rather than individual geography.

I’d say we’re probably geography agnostic, but we like to say we’re students of sustainability, and so we’ve been tracking electric mobility for where it makes more sense in the world today. For instance, we study the cost of fossil fuels and electricity and look at government initiatives to decarbonize transportation.  We look at energy reliability, government support, and air quality to identify where electric mobility makes more sense today, and where the economics make more sense. That is what motivated us to make our first investments in Africa and India. It was coming at it more from a thesis point of view.

We did start as a US-only fund, but we also anticipated a political and economic shift away from the US in electric mobility. From just the total cost of ownership perspective, EVs started advancing significantly in emerging markets, and it just made more economic sense for millions of people. The founding Partners at EIF – Devin Whatley and James Everett – were instrumental in opening up EIF to new market opportunities with this thesis-driven approach. We studied many different countries as part of that overall thesis building, and many different EV applications, before taking a position. So, today we have several investments outside of the US, and have presence in Europe, India, Africa, the Middle East, and Latin America. I’d say for a US fund, EIF is early to this trend, and we followed our instincts on where opportunities lie. But we are hearing now that more and more fund managers are looking abroad for opportunities, especially as a result of recent political changes in the US.

The Process, and the Length…

How long does the process take, say from initial contact to the actual funding? What is the time period?

AMANDA: It depends. When EIF takes a thesis-based approach, and as Jessica was mentioning, we spend a lot of time looking at it, analyzing it, etc., so that when the right opportunity comes along, we can move quickly.

I would say that when we have already done our work on a sector, we can move very quickly in a matter of a few weeks to get to a preliminary Yes or No.  When a topic is relatively new to us, it might take longer, or if the company is not hitting all of the proof points that we’re looking for, then it can take longer.

Post-term sheet, we allocate 30-60 days for due diligence, which is pretty standard in the industry for legal and deeper management diligence.

This is also why we encourage companies to reach out sooner so that they can get on our radar and we can be more prepared when they are raising the kind of round for which we are a good fit.

EIF on Tech Edge vs Management Quality

If I were to say that given a choice between a technology edge and the management quality, which one of these factors would get the upper hand?,

JESSICA: As I was saying earlier, we do love a good IP. It gets us very excited. We want to diligence the technology and understand the technical edge., But we also note that technology only remains an edge when you have an excellent management team that is eager to continue learning, continue iterating, and winning in that market. We know many companies that start with a clear winning technology, but would fall behind competitive approaches due to a number of reasons: inadequate funds, the ability to attract great talent, a mismatch between the solution and what the current market needs, the lack of a clear go-to-market strategy, or just not being able to see the key risks and roadblocks.

It is especially common in hard tech, where CEOs are often engineers and scientists at heart who want to continue building their tech and not necessarily the company, but you need that to happen in parallel to continue maintaining that edge over the medium to long term.

EIF on the Exit

In one of the previous answers, you mentioned that you, obviously as a fund, would like to look at an exit at some point. Normally, in the exits that you have made, are they through secondary transactions or an acquisition? What has been the trend till now?

AMANDA: To date, we have had several exits. Most of them are through corporate acquisitions. So the ones that I listed out before- EVConnect, eMotorwerks, AMP – they were all acquired by corporate strategics that had a commercial imperative to provide EV products and saw acquisition as the best path..

I think that is part of EIF’s playbook. We are looking for the companies that make it possible for the incumbents to actually adopt an electrified future. And that has played out really well, I would say, in the fund’s history.

That is not the only path, however. We had one company go public on the Nasdaq.  SunPower – formerly called Complete Solar – is now run by successful entrepreneur and businessman, TJ Rodgers.  In the Indian market, we expect more of the exits to come from IPOs since there is much higher liquidity there. We believe it will yield good exit outcomes, based on both recent examples and the forecasted growth rates of the market overall. 

That may not necessarily be true in other geographies. Outside of India, we would expect more M&As in Africa and more IPOs in Latin America. It really just depends on the market and geography. But to date, I think M&As have been good for us.

EIF on Do Funds have FOMO?

One final question, not specific to EIF, but I’ve always wondered, as investors, funds look at scores of opportunities but grasp just a few. Do you, at any time, feel that there was an opportunity you looked at it, and it did not materialize, but later you felt that you should have taken that opportunity? Is there any sense of regret ever as a fund manager?

AMANDA: Jess, who’s in our un-portfolio, as I sometimes call it?

JESSICA: I would say that FOMO is such a constant companion. You can’t make all the bets..

AMANDA: I would say that there are more times when we pass on a deal and then later we come back and we say, “I’m so glad we passed on that deal.” Usually, it’s because the valuations were very high and the proof points just weren’t there. So, we might have FOMO in the moment even though we passed. But we’ll check back in a couple of years, and it’s not a deal that still looks good. I would say that’s the more common scenario, and there are only a handful of companies where I’ve said, ”Oh gosh, I wish we could have gotten in that company earlier.”

JESSICA: I would agree. When we want to invest but don’t end up doing the deal, it is most likely because the valuation doesn’t match the fundamentals. But it really helps us that, firstly, we are very thesis-driven, so we do our homework before understanding what sectors and market problems make sense, and secondly, that we have a wide range of check sizes and entry stages, and we try to build relationships over time. We may pass someone on the Series A, but we could come back and engage in the Series B. We have that flexibility.

So not too many regrets?

AMANDA: I don’t think so. Jess, do you have any regrets in the EV sector?

JESSICA: Yeah, I can’t think of anything. I feel like anybody can go back and say, Ola had a great IPO. I wonder if I could have gotten into that deal. But, I don’t know if many people count that as a regret, given the journey.

AMANDA: Yeah, I would also say the same. I think I had an early look at Ather back when I was at a different, seed-stage firm. We recognized that Ather had a long way to go. So, it would’ve been exciting to be part of that company, but they had a long road. So, I don’t necessarily have regret about not being an investor.

EIF on Keeping Track

Their share price has been doing really well recently. Just to add on to that, the companies that you pass on and do not invest in, do you still keep on following them regularly, like you follow the entire sector as a fund? How does the research look on a day-to-day basis?

JESSICA: Yeah, we try to stay in touch with most of the companies. We start looking at companies typically at the seed stage, and then set up check-ins on a semi-annual basis. Even if a little later stage, say, Series C or Series D, we can always be a follow-on check or be part of a bigger round.

So, we do get multiple shots at a deal. We try to stay in touch and see how the market evolves and what companies or products make sense. What made sense a year ago may not make sense today, and companies continuously change their business models to adapt.

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