S2G Ventures believes that a transition to renewable energy will require significant investments in capital-intensive and asset-oriented businesses, which doesn't interest a significant number of investors.
Venture capital firms, for example, tend to focus on their core assets, according to Sanjeev Krishnan, S2G’s senior managing director and chief investment officer. And capital intensive business models often end up being out of favor as VCs face higher interest rates.
S2G is taking a different approach. The Chicago-based VC, which started in 2014, has launched a $300 million Special Opportunities fund that will be credit and asset heavy. The fund will focus on three areas: food, energy and oceans.
“We felt like the market needed things that allowed for more customized capital solutions where we can address these three transitions that are occurring in the marketplace with more unique capital solutions,” Krishnan told Chicago Inno.
The fund brings S2G’s assets under management to $2 billion.
The Special Opportunities fund will operate a little differently than others funds, however, with more flexibility around risk profile, tenor and structure, enabling the firm to invest across the capital spectrum via debt, equity, or hybrid investments with a focus on businesses with assets, cashflows, contracts, or leases to provide downside protection.
"What is exciting is there's going to be no typical investment. And that's, frankly, what I think the energy transition needs. It needs more of a customized bespoke solution to the problem," Krishnan said.
These industries are capital intensive and low margin, and Krishnan thinks that the transition to a more resilient and efficient economy will require significant investments in these kinds of businesses. The Special Opportunities fund is grounded in helping companies with creative financing solutions to support them in scaling as efficiently as possible.
S2G has already made six investments out of the fund, most recently in Circululs, a low-density polyethylene recycler that converts plastic waste for use in commercial and industrial applications.
