Cleantech venturing - performance, players and potential

Cleantech venturing - performance, players Cleantech venturing - performance, players and potentialand potential

Presentation to Presentation to Workshop on Innovative Options for Financing the Workshop on Innovative Options for Financing the

Development and Transfer of TechnologiesDevelopment and Transfer of Technologies , October 2004 , October 2004

Prepared by Nicholas Parker, Chairman

Cleantech DefinedCleantech Defined

• Embraces products and services that optimize the use of natural resources, while reducing ecological impact and adding economic value by significantly lowering cost and improving profitability.

• Cleantech spans many industries, from alternative forms of energy generation to water purification to materials-efficient production techniques.

• Not classic “environmental” technology – more like “biotech” as an investment theme.

Our Background & MissionOur Background & Mission

• Cleantech Venture Network (“Cleantech”) is a private company founded in 2002 by investors to provide information-based services to an emerging community of clean technology venturers.

• Our mission is to accelerate the growth of investment into venture-grade companies deploying "clean technologies" through the provision of high quality market facilitation activities.

• Our principal office is in Michigan, with a presence in Canada, Europe and on the US West Coast

• We have 120 full members with >$3.4 billion in assets focused on cleantech venturing, as well as over 400 affiliate members

The FoundersThe Founders

Nicholas Parker:

Substantial experience in starting and investing venture capital funds. Currently director of leading cleantech investment group.

Keith Raab:

Significant expertise in creating and managing investment networks. Engineering and business degrees and startup experience.

Current ServicesCurrent Services

• Venture Forums – provide access to high quality deal flow, industry information, and networking opportunities

• Venture Monitors – provide investment tracking and quarterly analysis, along with industry updates, trends and forecasting.

• On-line Investment Opportunities – provides access to cleantech investment opportunities in real time with minimal transactional costs

• Research – provide subscription based reports on investment returns and prospects leveraging proprietary data streams and industry partnerships

AccomplishmentsAccomplishments

• Five highly successful forums in Toronto, San Francisco & New York

• Venture Monitor established as the source on cleantech venturing

• Media coverage in over 80 publications including WSJ, FT, Newsweek, Red Herring, Venture Capital Journal.

• Sophisticated website, offering member services• High-profile venture advisory board• Currently expanding into Europe with first Forum

planned for Spring 2005 in Paris

Cleantech Venture ForumsCleantech Venture Forums

• Cleantech I – Nov 2002, Toronto– 20 presenting companies: 80 investors

• Cleantech II – April 2003, San Francisco– 22 presenting companies: 230 investors

• Cleantech III – October 2003, New York– 20 presenting companies: 200 investors– Pre-event workshops; inaugural Pioneer Awards; significant PR

• Cleantech IV – April 2004, San Francisco– 22 presenting companies: 300 investors– Cleantech 2003 awards; major institutional investor involvement

• Cleantech V – October 2004, Toronto– 21 presenting companies: over 200 investors– Discovery showcase

More than 500 different Forum attendees: over $230M raised to date by presenting companies

Cleantech Venture MonitorsCleantech Venture Monitors

In Each Issue:• Cleantech Investments

Monitored• Cleantech Investments

Profiled• Clean Capital Stories• Venture Activity• Clean Bulletin Board

Established reference for media and other stakeholders on cleantech venture industry

Over $3 billion in deals tracked!

Pioneering ResearchPioneering Research

• Responding to an unmet demand for reliable research on the state, performance and opportunities in the cleantech area.

• Initiated preparation and publication of the first report on cleantech venture returns, exits and prospects.

• Report underwritten by sponsors – EnerTech Capital, Expansion Capital Partners, CDP, Rustic Canyon, Sustainable Asset Management, SDTC.

• First report provided preliminary data suggesting strong historical and projected returns to cleantech venture investors.

• Future reports will cover topics such as State of the Industry, VC Directory as well as more detailed data on investor returns

““Cleantech” – the Sustainable Venturing Cleantech” – the Sustainable Venturing OpportunityOpportunity

Alongside the information revolution is an industrial revolution reshaping the design and manufacture of almost everything that we see around us. The revolutionary products being developed today have dramatic improvements over the old because they: 

Are lighter, smarter and stronger. Are cheaper to manufacture and operate.Are less carbon-intensive and more energy efficientOffer greater service utility per unit of material inputEnable virtually zero waste and/or emissions

Cleantech SegmentsCleantech Segments

Clean Energy

Clean WaterCleaner Production

Advanced Materials & Nanotechnology (e.g. catalysts and membranes)

Information Technology & Internet (e.g. advanced meters and sensors)

Cleantech is a category like biotech, not a sector.

CONVERGENCE CONVERGENCE

Who are the Buyers?Who are the Buyers?

• Pharmaceutical, Semiconductor and Thermoelectric companies who use large quantities of ultra pure water

• Automobile and Aircraft Manufacturers needing higher fuel efficiency from lighter materials

• Utilities and Large Energy Users demanding reliable, affordable and low carbon power supplies

• Consumer Electronics companies needing to reuse valuable components and materials

• Agricultural producers requiring safer and more precise inputs and products

• Logistics organizations seeking more efficient use of fleets and containers

Cleantech is not EnvirotechCleantech is not Envirotech

Envirotech1970s-80s

• Regulatory driven market• Compliance-based purchasing• “End-of-pipe” tech, eg

scrubbers on smoke stacks• Chemical science• Traditional engineering• Slow growth markets, eg

waste management• “Save the world” mentality• Low IT use

Cleantechmid 1990s -

• Economic market drivers• Productivity-based purchasing• “Front-of-pipe” tech, eg zero

emission plants• Biological & materials science• Systems design & engineering• Rapid growth markets, eg

solar energy• “Entrepreneurial” mentality• High use of IT

Cleantech - “Leapfrog” OpportunityCleantech - “Leapfrog” Opportunity

The market for cleantech is rapidly developing due to a industrial restructuring and modernization; scientific and engineering advances in microelectronics, biology, chemistry and physics; changing socio-political values; and, deepening concern for environmental sustainability.

Some clean technology markets are growing at compound annual rates of more than 20%, for instance those for solar energy and natural pesticides, as costs come down, products improve and consumer demand strengthens.

Emerging fields such as nanotechnology offer the prospect of products that cost less, perform better, and sustainably satisfy human demand in ways that could not be done or imagined previously.

The impact of cleantech is ubiquitous: there are large and highly disruptive market opportunities emerging in the multi-billion dollar agricultural, manufacturing and transportation sectors, as well as in the fundamental enabling areas of energy and water.

Example: Cleantech and NanotechExample: Cleantech and Nanotech

Recyclable PolymersBiosensorsCatalystsCoatings

Fuel/Energy StorageConductive PolymersCatalystsCoatings

Ultra Clean DieselCoal LiqueficationCatalytic ConvertersMiniturized Networks

Nano pourous MaterialsRecyclable PolymersBiosensorsMembrane Filter

ResourceProductivity

AlternativeEnergy

ConventionalEnergy

Water & W asteTreatment

10

20

Embedded Ttechnology in Materials

Self-Assembling Structures

Tools for V isualization, Measurement, Manipulation, Process Control

TIME (in years)

ILLUSTRATIVE APPLICA TIONS

Enabling technologiesfor most of theseapplications include

• nano tubes• nano crystals• nano cones• nano horn• nano rods

Cleantech ExamplesCleantech Examples

• Agriculture - bio-based materials, farm efficiency technologies, micro-irrigation systems and natural pesticides

• Energy - distributed and renewable energy generation and conversion (including fuel cells, geothermal, wind and photovoltaics); energy management systems; superconducting transmission; energy storage and power quality; key enabling technologies; and related Internet and information technology-based services

• Manufacturing - advanced packaging; high value materials recovery; natural chemistry; sensors; smart construction materials; and precision manufacturing instruments.

• Transportation - hybrid vehicles, lighter materials, smart logistics software and telecommuting

• Water - water recycling and ultra-filtration systems (UV and membrane based systems), sensors and automation systems and desalination equipment

CLEANTECH vs OVERALL VCCLEANTECH vs OVERALL VC

169

376

321

219

321 320 313

245

2.6%

6.3%7.1%

5.3%

7.2% 7.5% 7.4%

5.0%

0

50

100

150

200

250

300

350

400

Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '04

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

CleanTech % of Total VC

Cleantech Venture ActivityCleantech Venture Activity

• $1.1B invested in North America during 2002, $1.2B in 2003, for about 6% market share, up from about 2% in the late 90s. Momentum building.

• Approximately 450 investors in 400 deals over 2002-2003 – from deals over 2002-2003 – from specialists to corporations to mainstream VC investorsspecialists to corporations to mainstream VC investors

• Energy related companies account for 40% of all cleantech deals, followed by advanced materials/nanotech, water purification and management, materials recovery & recycling and sustainable agriculture and precision farming

• Strong pipeline of early stage deals requiring follow-on financing, especially in the US North East and Canada

• Geographic dispersal and average deal size broadly tracks overall deal activity although the US West Coast is less dominant and the North East has the highest number of start-ups

INVESTMENT BY SEGMENTINVESTMENT BY SEGMENT2002-2003

Materials and Nanotechnology,

$406,312,000, 16%

Manufacturing/Industrial, $145,052,900, 6%

Water Purification and Management,

$115,276,900, 5%Materials Recovery and

Recycling, $208,658,538, 8%

Transportation and Logistics, $69,522,420,

3%

Environmental IT, $2,640,000, 0%

Energy Related , $1,058,228,131, 43%

Agriculture and Nutrition, $114,160,000, 5%

Enabling Technologies, $229,253,400, 9%

Air Quality, $131,557,500, 5%

Investment by Energy Industry Segment for 2002-2003 (est.)

Energy Infrastructure – IT related

$303,918,900, 29%

Energy Storage, $186,398,900, 18%

Energy and Efficiency, $74,320,431, 7%

Energy Generation, $493,589,900, 46%

Source: Cleantech Venture Network LLC

Investors in Cleantech FundsInvestors in Cleantech Funds

Chrysalix Energy Management EnerTech Capital Partners SAM Private Equity LP Nth PowerBallard Power SystemsBASF Venture CapitalThe BOC GroupThe Boeing CompanyDuke EnergyThe Mitsubishi CorporationShell Hydrogen

AES Corporation Avista Energy Ballentine Capital Fund Bank of America Battelle Memorial Institute ChevronTexaco Technology Ventures CIBC Crow Holdings DTE Dyson-Kissner-Moran Electricite de France - France Endesa - Spain Exelon First Energy Fortum - Finland Gas Technical Institute Harbourvest Partners Hunt Power Hydro-Quebec - Canada Integrated Electrical Services Mellon Ventures Orion Group - New Zealand Partners Group People's Energy Pepco Permal Capital Safeguard Scientifics Stephens, Inc. TotalFinaElf - France

CDP Capital Technology VenturesEDF Ventures (Electricité de France)GerlingHydro Quebec Capitech Mitsui & Co. Ltd.Norsk Hydro Technology VenturesOntario Power GenerationSuncor Inc.Swiss Re

ABBAlliant EnergyAvistarBallentine CapitalBanc of AmericaCDP CapitalCH EnergyCIBC Capital CorpCinergy VenturesDominionElectricite de FranceEmerson VenturesEnergyEastEPCORFirstEnergyHydro-Quebec CapitechItochu InternationalLehman BrothersMeridian EnergyNiSourceNorsk Hydro VentureOPG VenturesPacifiCorpPantheon VenturesSierra Pacific PowerSwedish Pension FundWilliams, Jones & Associates

Some Success StoriesSome Success Stories

• Ballard(CAN) – fuel cells; MC ~C$1.5Billion• Xantrex(CAN) – power conversion equipment; MC ~C500Million• American Power (US) – power conditioning; MC ~US$3.0Billion• Vestas/NEG Micon(DEN) – wind turbines; MC ~EUR1.6Billion • Zond (US) – wind turbines, 7x return to investors when sold• Trojan Tech (CAN) – ultraviolet technologies, MC ~C$200Million• Zenon (CAN) – membrane technologies; MC ~C$600Million • USFilter (US) – water technologies; sold in ’99 for ~US$8.2Billion• Pall Corp.(US) – filtration/separation tech; MC ~US$3.6Billion• Nanogram (US) – battery materials, 90% IRR to investors when sold• Silicon Energy (US) – energy IT, high multiple to investors when

sold

More success stories and more stable returns than commonly understood

Attractive Financials & FundamentalsAttractive Financials & Fundamentals

• Category not over invested• Low enterprise valuations• Lower capital intensity than other categories• Strong trade exit potential – most M&A• Global corporate, consumer and government demand• Evidence of rising public market interest• Pro forma portfolio IRRs equal or better than other

sectors• Strong leverage on public sector incentives

Opportunities & ChallengesOpportunities & Challenges

• Clean technologies reflect long-term trends – decarbonization, lighter materials, greater social transparency etc – accelerated by technology and the eco-footprint of 6.1 bn people. Trends + acceleration = new sustainable market opportunities

• Investors can play a key role by picking out and nurturing the potential winners for high financial ROI and societal benefits

• Challenges include:• Fostering “serial” cleantech entrepreneurs• Building big-small partnerships• Building investment syndicates• Attracting patient and smart capital• Gaining recognition as an investment category• Earning sell-side analyst coverage

SummarySummary

Cleantech can help reduce sustainability risks while providing opportunities to leapfrog into new markets with high margin revenue streams

Cleantech emerging as a new asset category with increasing evidence of venture grade ROI potential

SRI oriented investors need to allocate 5-7% of assets to cleantech private equity, either through established or emerging managers

Cleantech Venture Network is positioned to assist investors and entrepreneurs to succeed in this next and necessary wave of venture-backed innovation

Thank You!Thank You!

We welcome your interest and support