Structural change

20 March 2008

Jeppe Hansen is chairman of AirNatech Holdings, a London-based holding company for a group of energy and nanotechnology interests. He’s also CEO of AirNatech’s majority investor, Bridgehead Group. With its first prototype just out and fully functioning air conditioning products due on the market by the summer, AirNatech aims to significantly reduce energy consumption in the air conditioning, refrigeration and related nanotechnology markets.

You do things a little differently to other venture funds. Why is that?

Entrepreneurs tend to make the same mistakes others entrepreneurs have made. Everyone is good in one or two areas, but there’s always some area that’s lagging. What we do is we come in at a very early stage and see what pieces of the puzzle are missing. Then in our solution to fund the business, we can bring in the missing pieces, whether that’s management, marketing, or just infrastructure. In most cases we have control over that process for a period of time either by contract or because we buy a majority share in the company.

If you look at venture companies in general, sometimes their actions create more risk than they solve. For example, a lot of entrepreneurs who have been working on a project for a number of years have been borrowing from friends, family and the bank. If you go to a venture company, they will very rarely let you take any money off the table before they cash up themselves. So what happens is the company gets some money, but the entrepreneur who is really the leading force behind the whole idea is running around trying to solve personal issues with financing and in some cases getting in deeper.

That affects personal relationships and also the chemistry between the VC and the company. So we try to find out what the issues are and find a solution to them, so the entrepreneur can have peace of mind. We’re not making them rich overnight but just helping them focus on what they are good at.

How did you first get involved with building what is now AirNatech?

The whole thing came about a few years ago through a company we invested in called Celsius in the US. We took that firm from being close to closing its doors back on the road to recovery. One of the interesting technologies it had that we’ve continued with in AirNatech is air conditioning. It’s an area that really hasn’t changed much as a technology in close to 100 years. And it consumes 10% of the world’s energy. The technology we have developed should theoretically be able to save up to 90% of the energy in air conditioning.

We also invested some money in a Danish nanotech company called Nil. And what we’ve found is that when you put these technologies together, they are more than the sum of their parts. They have implications for each other that end up being beneficial for both companies, and they lead into different product sets.

How have you structured the companies within the group and funded AirNatech to make this happen?

AirNatech Holdings is more of a portfolio company. Each of the companies underneath it has separate management: we are on the boards and we have a majority stake. We’ve funded AirNacon (the air conditioning company) as one of the first ventures with $1m plus seed funding. In AirNatech itself we’ve invested a couple of million at this point. We are close to doing another round which will probably be around $25m-$30m.

Most of the funding so far has been from private investors. But for the next round, we’ve had a lot of interest from several VCs. We’ve also been working with the British government and UK Trade and Investment’s Global Entrepreneurs Programme.

Why have you decided to base operations in London?

The UK has quite a good holding company structure from a tax perspective. But also a lot of what we own and will be owning is Intellectual Property. One of the issues in the US is that if you have an organisation and one of the kids does something wrong, it affects the whole organisation. In Europe and the UK that’s not the case.

You’ve been pulled into markets you didn’t initially think of: how’s that?

We are working with existing air conditioning manufacturers, because government legislation is requiring them to be more energy efficient. And we’re focusing our direct business on the more upscale markets like a Bang & Olufsen or Apple computer, where we have some designs. But we are also in the process of setting up a consulting arm where we already have four or five projects in celebrity houses and outdoor stadia. It’s something we hadn’t even thought about but we got quite a few enquiries.

Is it difficult to decide where to focus your resources when there are a number of different outlets?

Because of the structure we have put together, it’s actually quite flexible. Let’s say Intel would like some cooling technology that would help make its processors faster. The technology is so broad that you wouldn’t want Intel telling you what to do with the core air conditioning. So we’ve said specific companies can have access to the technology in certain areas and they can go in and partner with players in that space. That way we have much more flexibility: we can make strategic partnerships, and also we can fund the different ventures separately.

What’s been your biggest challenge so far?

I would say putting this structure together and cleaning up some of the entrepreneurs’ mistakes is generally the most challenging. When you do go in and clean up you never know what skeletons are going to jump out at you.

Also, when you do something internationally, you need to understand that you’re dealing with different cultures, and to do it right.

Jeppe Hansen was talking to David Longworth of Webster Buchanan Research