Branson launches first Virgin buyout fund(2)

Sir Richard Branson’s Virgin Group is making its first ever foray into institutional private equity, raising a $400 million Virgin Green fund to invest in renewable energy opportunities.

Sir Richard Branson, the UK billionaire and head of the Virgin Group of companies, is about to launch his first institutional private equity fund, a $400 million (€289 million) vehicle under the Virgin Green banner, targeting opportunities in renewable energy and energy efficiency.

Sir Richard Branson

It is a notable change in strategy for Branson, who has run his Virgin empire much like a private equity firm but without relying on capital from external investors. The fundraising will effectively double assets under Virgin’s management to invest in businesses that can reduce the impact of global warming.

Branson launched Virgin Fuels in September last year with a commitment of $400 million, of which around $175 million has been invested.

A potential investor in the fund, which will be run by Branson’s existing Virgin Fuels team, said: “Virgin is effectively a consumer brand-focused private equity house. Virgin Fuels – and by extension Virgin Green – invests in non-branded businesses that are about science and innovation, with a focus on expansion and growth capital deals. So it makes sense to do it outside of the Virgin balance sheet.”

He said Virgin Green would draw on Virgin’s skill set in company building, but the business would be independent. In time, some of the investments could potentially become Virgin brands, but it is not a prerequisite for a transaction.

Virgin is understood to be investing $100 million in the fund.

Another potential investor said the fundraising would allow Branson’s team, headed in the UK by Shai Weiss, to draw capital from a wider network of interested parties. These could include investors in renewable energy, traditional energy investors or limited partners such as Calpers or AlpInvest, both of which have recognised the importance of the sector and set aside significant allocations for it.

He said: “There is a real opportunity here. There are plenty of cleantech VCs from established venture firms, and there are infrastructure and energy funds. But nobody is really doing private equity deals in the renewables and energy efficiency space.”

The fund will invest primarily in established companies across sectors in Europe and the US, deploying up to $75 million in equity per transaction. It will also have the ability to co-invest, allowing it to target larger deals alongside other investors. Unlike a venture fund it will use debt where appropriate.

It has a team in San Francisco led by Anup Jacob, who previously worked at TPG Aqua, a Texas Pacific Group water-focused fund. Weiss was one of the executives behind the creation of Virgin Media – the division currently in the sights of a number of big buyout firms. Previously he was a partner at Jerusalem Venture Partners and a banker at Morgan Stanley.

MVision is acting as placement agent for the fund. Both MVision and Virgin Fuels declined to comment.