Dec 13, 2018
| 7 min read

Insight Vector #55

Investing in Energy, Connectivity and Blockchain - Lee Carter

In this interview, we talk to Momenta's Lee Carter who shares his experience investing in remote connectivity, distributed energy, mobile payments and blockchain technology. Lee was most recently Principal at Reflective Ventures where he was responsible for full-lifecycle investing in early-stage companies. He also has a wealth of experience in operational roles.

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Lee Carter 

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Associate Partner
Momenta Parters 

 

What in your experience shaped your views of Connected Industry?

I started my career focusing in distributed energy and remote connectivity, investing in East Africa and India.  The view of investing in those areas was that there is a lot of opportunity. These opportunities in energy were typically leapfrogging technologies, where we could create a distributed energy grid that didn’t have to deal with being compatible with an existing centralized grid. The other area we focused on was payments - especially mobile money notably in Kenya, where mobile payments are leapfrogging the traditional banking system. This experience led to a lot of work in cryptoassets and blockchain with implications for Connected Industry.

 

How do you compare emerging market investing to investing in developed markets?

If you compare the dynamics of a greenfield market where you can develop whatever you want, in developed markets you have established companies, startups, and mid-tier suppliers to deal with. In the energy sector, it’s incredibly complicated to understand who is getting the money you are paying into the system. For investors it’s harder to understand the complexities of the value chain; you need to know the big industry players.  Additionally, there are typically a lot of other people doing what you are doing in the developed world, and the business and technology problems are well known. Differentiation is important and success requires a lot of experience. What I found interesting about joining Momenta Partners is that a lot of people are looking at the Industrial IoT space, but not that many do have the breadth of knowledge Momenta Partners does.

 

Are there any underappreciated technologies or sectors that stand out to you?

At my first fund, we started investing in Agriculture and Agtech. This is a space that’s really exciting – it’s an old industry that has not been disrupted as much as you might think - as you create these new efficiencies in agriculture. It’s important to be able to feed all the people in the world. Some of the best innovations come from being able to sense how crops are doing and track everything that’s happening on the farm.

Energy is exciting as well. I worked for the startup Geli for a few years. There is still a long way to go in terms of disrupting current models. When you look at microgrids and blockchain projects, once the pilots are complete and up and running, they don’t really tell you what you will need for a completely decentralized energy system.  I don’t think there will be one distributed energy solution that dominates the market.

 

There’s no silver bullet for energy?

If you look at Geli which had a Distributed Energy Resource platform to build applications for whatever energy tariff billing structure – demand charges, demand response or other – you can create applications and maybe create a peer-to-peer trading system over time. That vision will take years to realize, and as you add more functionality you find there are more and more pieces that need to be made better such as more reliable smart meters and monitors at the substation level to ensure that we can fully realize the vision of platforms.

 

What are your thoughts on the promise of blockchain versus hype as applied to Industrial IoT?

The dynamics of blockchain are very similar to energy platforms – there are lots of platforms and hype but it will take time for the energy to mature. For industrial use cases you have supply chain and data sharing, and the analytics around consortium sharing of data are promising. The issue is that a lot of investors or advisors that entered the market last year were expecting an overnight moonshot success – that’s generally not how technology works. Even in the marketing materials presented by blockchain companies, they are re-inventing systems that have been around for decades or even hundreds of years, so you have to re-invent every little piece

There’s a lot of potential for Supply Chain when there are assets that have a high level of obfuscation. There is a startup called Expansive that does tracking for barrels of oil. What’s not appreciated is that one barrel is not the same as another, based on where and how it’s extracted. If you understand the characteristics more specifically, you can create specific markets that are better correlated to the quality of the oil itself rather than treating everything as a commodity. In an industry that’s obfuscated by a few large incumbents, it’s hard to disrupt.

 

What are you optimistic about?

I am really excited about connectivity in different forms. Whether its’s LPWA networks or opening up cellular networks to a lot of new devices and people. I think this is becoming low hanging fruit, we’ve gotten good hardware and networking technologies at price points that mean a lot more people can gain access. There’s a big difference in the outcomes between similar types of people depending on how connected they are or not.  The differences are huge for businesses and factories that can differentiate themselves through connectivity.   In contrast to the energy sector, opportunities around connectivity for industry, agriculture and manufacturing are low hanging fruit.

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Momenta Partners encompasses leading Strategic Advisory, Talent, and Investment practices. We’re the guiding hand behind leading industrials’ IoT strategies, over 100 IoT leadership placements, and 17+ young IoT disruptors. Schedule a free consultation to learn more about our Connected Industry practice.