The challenge to decarbonise our economy brings opportunity for those building businesses as well as for those investing in them, and Kilara Capital is doing both.
It’s a growth-stage private-equity (PE) investor, the company also develops wind and solar energy projects, and it’s rebuilding Australia’s refrigeration infrastructure.
It’s an impact investment firm, and it’s attacking the decarbonisation challenge from all angles.
Onimpact spoke with founder and CEO, Ben Krasnostein, about their project focus, the current fund raise, and how the team fared (and grew) during the pandemic.
Impact Private Equity
Ben founded the firm in 2017 with the intention of driving rapid decarbonization through both investing in innovative companies, but also through establishing his own operations that reboot high-emitting industries.
He’s an impact investor, but that’s not always explicit in how the firm presents itself. The team has built a high-performing portfolio of investee companies and operating businesses, the returns are competitive, and positive impact doesn’t require a concession.
Ben sees his impact approach as an inherent advantage, and he doesn’t feel the need to wave the brand at every opportunity.
“Yes, in some cases we have chosen not to use the word impact. And that’s because we’re trying to normalise this type of investing for people.” Ben says.
“It’s just so inherently important to be taking all of these things into account when you’re investing. So we’ve tried to come out the other side and say, look, it doesn’t matter whether you’re an impact investor or not, this is a product for you.”
And impact outcomes are front and centre, they measure their impact, and they hold themselves accountable.
“We’ve got a lot of strong impact assessments and metrics, and we’ve got impact hurdles as well, if we don’t hit our targets, we don’t get our financial returns or carry. We really aim to put our impact where our mouth is.” Ben says.
When it comes to the core of the investment approach, Kilara is focused on growth stage companies. The approach will likely lean into the private equity category, but for Ben, the focus is on companies that are making money, and poised for growth.
“The important differentiator for us is that we invest at a later stage than typical VC funds. We aim for those companies which are EBITDA positive, or if not, within 12 months maximum of being EBITDA positive. It’s a later-stage approach, trying to hone in on the growth piece.” Ben says.
“There’s a real need for growth capital in the small-cap part of the market particularly for companies which can deliver large impact returns. When you get to profitability, you can really start to scale your impact and vice versa. It becomes a flywheel. There’s been somewhat of a vacuum at play, there’s a bit of a barbell. Meaning there’s a lot of early stage VC and a lot of big PE, but not so much in between. A lot of these businesses that will be classified as part of the decarbonisation shift or businesses that have focused on net zero targets, I think they’ll start to become buyout targets in the next three to four years.”
They’re currently in the midst of a capital raise for their Growth Equity Fund. They reached first close and are now targeting second close of $30 million. Ultimately they’re aiming for a final close of $50 million. They’re currently open to interest from investors.
“We’ve already got three deals in the fund, three operating companies, and we’re getting close to doing a deal on our fourth company. For investors, it means we’ve got somewhat of a track-record already.” Ben says.
Both Investing & Operating
Beyond the private equity offering, Kilara also has another two divisions that manage operational businesses. They operate in the same sphere of impact, and they drive change through innovative service offerings, all leveraging the insights from their financial markets pedigree.
The Kilara Energy arm originates and builds renewable energy projects. It’s run by Andrew Thomson, who was on the board of the Clean Energy Council, and he was previously Managing Director of Acciona Energy.
The other operating arm offers infrastructure services, they call it ‘Cooling-as-a-Service’, and it’s targeting the huge opportunity to make the world’s cooling systems far more efficient.
“The amount of emissions that comes from refrigeration and the cooling economy globally is enormous, In fact it was number one in Paul Hawken’s Drawdown book.” Ben says.
“The amount of energy that’s required to refrigerate and cool the planet is enormous. And so there’s big problems there with the aging infrastructure set in Australia. There’s lots of new technology around, and for us, it’s about bolting together multiple pieces of kit.”
It’s an eco-system all united by Ben and the team’s focus on using market-based instruments to bring better products to market, and to fund the next generation of Australian entrepreneurs.
“Essentially we aim to be a group that provides product, as well as very strong and very safe pair of hands offering investment and funds management.” Ben says.
“But ultimately, what we want to do is put multiple products in front of investors that have these inherently deep green outcomes from a PE, and an operating company point of view, and a development infrastructure point of view.”
Growing a Team Amid a Pandemic
The pandemic forced the world to rethink the products and services that are truly ‘essential’. In the process, it pushed impact investors to the forefront, as social services, healthcare, and climate change solutions were suddenly in high demand. And in Kilara’s case, the team grew.
“We’re very excited about the team that we’ve got now. It’s growing, we’ve hired a CFO recently, Paul Byrnes, he’s fantastic. We’ve hired a new investment director, Emma Jenkin, she’s amazing. And fortunately, we’ve found people have been attracted to us, they seem excited by our brand and our vision.” Ben says.
“We haven’t really had any trouble recruiting. It’s just been unusual having to do it via zoom, as we’ve done with fund-raising. So that’s the other thing I’m looking forward to now is to spend a lot more time with people. We’re still raising capital for our fund one, which we want to do in the next six months. And hopefully, we can do it in front of people rather than over zoom. So yeah, we’re really looking forward to the next six to 12 months.”