What kind of companies are you most likely to invest in?
Circulate Capital finances innovations, companies and infrastructure that scale solutions to the plastic waste and climate change crises in emerging markets.
We’re primarily interested in opportunities in India, Indonesia, the Philippines, Thailand and Vietnam, but can also selectively support opportunities in other Asian countries.
We invest across the entire plastic value chain, from innovative materials to advanced recycling technologies as well as deep tech in the circular economy.
What do you look for in a management team?
Importantly, we need to be aligned on the vision. Beyond this, a focus on the strategy of the organization and an ability to execute.
We also value diversity, agility, strong financial management capabilities and, ideally, a track record in building businesses.
We’re seeking partners who have a willingness to grow exponentially, as each investment must be scalable or replicable in other locations.
What level of financial information is essential in a pitch deck?
We look for a strong and concise financial plan that’s aligned with the business strategy.
We also ask for information on how financing will be used, any crucial factors that might impact future profitability, and a strategy on how the risks will be mitigated.
Even for early-stage companies, a strong finance function is instrumental in helping the CEO drive towards sustainable growth and cope with all the challenges the business will face as they operationalize and grow.
Cash management is key.
In addition to the financials, we want to understand the market the company is operating in, their competitors, partners and their pricing environment.
Of course, we also need to understand how they measure their environmental and social impact, a key pillar of our investment approach.
What criteria do you use to assess impact and sustainability?
Preservation of the environment and support of local communities are at the core of our ethos and our decision-making process.
Our investments should prevent plastic pollution by the tons, as well as mitigate climate change and improve livelihoods.
We undertake a detailed assessment of the environmental and social impact of a company’s operations, and we commit to working with portfolio companies to monitor impact and strengthen operational standards pre and post investment.
Given our mission, we have five criteria that we currently use to assess impact. These are: catalytic capital, or co-investment ratio; plastic pollution prevention; greenhouse gas reduction; social value and benefit to local communities; and contribution to growth and the principles of circularity.
Currently, there are no standard ESG/SI metrics for plastic waste investments. This is a new field that we’re pioneering and will continue to refine.
We are committed to open source our methodologies, data and insights for the wider sector through our mission-aligned non-profit partner, The Circulate Initiative.
Where do most applications and pitch decks fall down?
A lack of thoroughness is a problem. Often we find this relates to lack of financial capacity and capability.
Pitches that are light on the details or too bullish, with valuation expectations that are too high, are red flags.
We also often see a need to grow team capabilities with organizations that are not ready to go to market.
However, we will work closely with companies where we identify potential, to support them to develop sustainable business plans.
This has the added benefit of enabling us to get to know the team and the business owners, and allowing them to become comfortable with us as a potential investor and sparring partner.
Potential hiccups and delays in ramping up the business or going to market are thoroughly assessed and understood. Scenario building helps in the thinking process.
If you could say one thing to every startup, what would it be?
Before you submit your pitch, work to understand the landscape of investors and seek out those who are mission-aligned with your company.
Make sure any potential investor can provide added value beyond funding, for example by allowing you to tap into their network, or understand what additional technical assistance they can provide.