Arcapita leads $35m venture round in insulation company

The Shariah-compliant venture firm has invested in Aspen Aerogels along with Lehman Brothers Venture Partners, Reservoir Capital Group and Rockport Capital Partners.

Arcapita Ventures, formerly Crescent Capital Partners, has led a $35 million (€22.6 million) Series B-1 funding round for Marlborough, Massachusetts-based insulation manufacturer Aspen Aerogels.

Arcapita Ventures, which is the Atlanta, Georgia-headquartered venture arm of Bahrain-based Arcapita Bank, was joined by existing investors Lehman Brothers Venture Partners, Reservoir Capital Group and Rockport Capital Partners, which led Aspen’s first $4 million financing round in May 2001.

“The interesting thing about the company is its core technology and the superior insulating capabilities of their insulation,” Arcapita Ventures director Ramsay Battin told PEO. Aspen’s aerogel-based insulation is two to eight times more effective than its competitors and the company’s intellectual property is well-protected by patents and licenses, he said.

The global insulation market is approximately $30 billion in size. “In the grand scheme of venture deals that is an absolutely massive market,” said Battin.

The company’s products are used in global industries including oil and gas, building and construction, transportation, appliances and outdoor gear and apparel. Customers include Exxon Mobil, Samsung and Boeing.

“The sales cycles are really long for industrial customers in the space and Aspen’s done the hard work over the last three years to get some of these big customers to start buying the product,” said Battin. “We’re at or close to a tipping point in a number of these industrial markets for the use of this new type of insulation.”

Aspen’s products will gain traction in the residential, building and construction markets over the next couple of years where they have traditionally been less competitive, said Battin. Higher energy prices combined with declining costs resulting from manufacturing efficiencies will allow Aspen to gain market share.

This will be either the last or penultimate round of financing for Aspen, said Battin.

Arcapita Ventures is a $200 million venture fund, launched in October 2005, which focusses on growth and expansion stage companies in the healthcare, information technology and industrial technology sectors. The fund makes Islamically approved investments, primarily in the US, on behalf of Gulf Cooperation Council investors.

Arcapita Ventures is the venture arm of Bahrain-based investment bank Arcapita Bank, previously called First Islamic Bank.