How Dem Moneyman Nat Simons Profits from Political Giving

Simons’ venture capital firms boasts seven taxpayer-backed green energy companies

Nathaniel Simons' boat 'Elan' / Lachlan Markay
November 4, 2014

A high-dollar Democratic donor whose foundation spends tens of millions of dollars each year promoting green energy policies also runs a venture capital firm that invests in green energy companies that have benefited from those policies.

Nathaniel Simons may take a 54-foot yacht to work every day, but his bona fides as an environmentalist donor are unimpeachable. Through contributions to Democratic candidates, interest groups, and environmental nonprofits, he helps advance liberal climate and energy policy.

Simons is a hedge fund manager, but he also provides venture capital for early-stage green energy companies through Elan Management and an offshoot VC firm, Prelude Ventures.

As Simons’ firm has invested in cleantech firms, he has promoted increased federal involvement in the energy sector. Policies advanced by Simons and the Sea Change Foundation, which he runs with his wife Laura, would benefit green energy companies such as those backed by Prelude.

The firm’s website lists 12 companies in its portfolio. Seven of them have received federal grants, loans, contracts, or other government assistance since 2009, when Prelude was founded.

Prelude-backed solar cell manufacturing firm Suniva was awarded a $141 million stimulus-funded Department of Energy loan guarantee in 2010.

The company passed on the award, saying it was "uncomfortable" with its terms. But it has since received additional federal support: a $5 million DOE grant last year, a $2 million loan guarantee from the U.S. Export-Import Bank, and more than $750,000 in Justice Department contracts to build solar panels for federal prisons.

Another Prelude-backed company, Solarbridge Technologies, has received about $3.5 million in DOE grants, the latest of which came in March. Another, Acquion Energy, got a $5.1 million DOE grant in 2010 and a $550,000 taxpayer-backed loan in 2012 from the Department of Agriculture.

Additional federal assistance for the firm’s portfolio has come by way of grants from the National Science Foundation and contracts from the Defense Department.

Synergy between Simons’ political and business activities is emblematic of a sector of the economy that has come to rely on government handouts and other incentives for the adoption of otherwise uncompetitive technology, according to William Yeatman, a senior fellow with the Competitive Enterprise Institute.

"Environmentally-minded venture capitalists like Simons must pursue a political strategy," Yeatman wrote in an email. "To this end, they invest in politicians who can give them favors, and also in special interests, which can promote policies that benefit their bottom lines."

Since Prelude is focused on cleantech, most of its companies’ federal awards have come by way of DOE, in many cases from federal programs aimed at promoting energy efficiency.

Simons was a major supporter of both of Barack Obama’s presidential campaigns, personally maxing out to both in addition to five-figure contributions to organs of the Democratic Party.

Obama subsequently featured energy efficiency incentives prominently in his "Climate Action Plan." Those were exactly the types of projects that Prelude focused on, according to founder and managing director Gabriel Kra.

"Where we are investing right now pretty actively … are energy efficiency projects," Kra said at a panel discussion on renewable energy in 2010.

The panel touched on ways in which the government can facilitate green energy investment. "Maybe you have a goose from a government policy, maybe you’ve got a little help getting off the ground, but fundamentally it has to make sense as a stand alone business," Kra said of his investment strategy.

However, he endorsed a significant and controversial role for federal government in promoting cleantech.

"What is the role for government? Send intelligent market signals," he said. "I think the easiest market signal to send is a price on carbon."

Putting a "price on carbon" generally entails one of two policies: a cap and trade regime or a direct carbon tax. Both are designed to make fossil fuel energy more expensive and cleantech alternatives more economically viable

"Why is coal cheap? Why is oil cheap? Because the effect isn’t factored into the price," Kra said. "If you force people to factor that in, you’ve done a good job."

Tim Woodward, another managing director at Prelude, made it clear in a 2013 interview that raising the price of carbon-based fuels would improve the firm’s business prospects given its heavy investments in energy efficiency technology.

"We are also looking for opportunities to bring ‘energy efficiency’ in the marketplace but do it in a way that the customer will engage and care," Woodward said. "Unfortunately, energy is still a very inexpensive resource in North America, and that can make it difficult for many customers to pay much attention."

Simons has worked through political channels to raise the price of American energy. He was heavily active in promoting a cap and trade scheme when it was under consideration in Congress in 2009.

Simons’ Sea Change Foundation was one of five left-wing foundations that "invested substantially in pursuing a cap-and-trade policy," according to a report on environmental advocacy commissioned by the liberal Rockefeller Family Fund.

Simons and his wife even personally hired a lobbyist to push for the measure.

The lobbyist, Nossaman’s Brent Herberlee, is a former aide to Senate Majority Leader Harry Reid (D., Nev.) who "maintains a strong working relationship" with Reid, according to his company bio. Nevertheless, the measure died in the upper chamber.

Since then, Simons has poured money into the coffers of environmentalist groups that continue to support "putting a price on carbon" in some form.

A host of Sea Change grantees have explicitly called for such a policy. They include the Center for American Progress, the League of Conservation Voters, the Sierra Club, the Energy Foundation, the National Wildlife Federation, the World Wildlife Fund, the Natural Resource Defense Council, the Environmental Defense Fund, the Union of Concerned Scientists, Environment America, Ceres, Climate Solutions, and the U.S. Climate Action Network.

Sea Change has contributed more than $173 million to these and other environmental groups from 2007 through 2012, according to Foundation Search, a service that tracks foundation and charitable giving.

Many Sea Change grant recipients pass those funds along to other like-minded groups. The Energy Foundation and the Tides Foundation, another recipient of Sea Change cash, have their own large portfolios of environmentalist grantees, making it difficult to know the full reach of Sea Change’s financial network.

The sources of those funds are also at times unclear. Sea Change has received $23 million from a Bermuda-based company called Klein Ltd. It is not clear what the company does or from where it derives its revenue, but its contributions made up more than 40% of all donations to Sea Change in 2010 and 2011.

A recent report from Republicans on the Senate Environment and Public Works Committee called Klein’s contributions to Sea Change "a deceitful way to hide the source of millions of dollars that are active in our system, attempting to effect political change."

Simons did not respond to a request for comment.