November 03, 2010 Page | 1 India Climate Innovation Center: CIC A Business Plan for the financing and implementation of a CIC in India. Prepared by infoDev for the UK‟s Department for International Development Contributing Authors: Anthony Lambkin Ashok K Das Julian Webb
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India Climate Innovation Center: CIC · IRG, USAID ECO-III Project Delhi Satish Kumar Swiss Agency for Development & Cooperation (SDC) Delhi Veena Joshi Winrock International India
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November 03, 2010 Page | 1
India Climate Innovation Center: CIC
A Business Plan for the financing and implementation of a
CIC in India.
Prepared by infoDev for the UK‟s Department for International Development
4.1 Gaps along the value chain ................................................................................................................................ 19
4.3 Company Gaps ..................................................................................................................................................... 20
6 Implementation Plan ................................................................................................................................... 33
6.1 Implementation Plan (phase 1) ........................................................................................................................... 33
7.0 Financial Plan ............................................................................................................................................. 36
7.1 Budget Year 1-4 ...................................................................................................................................................... 36
7.2 Second round funding: Years 5+ ......................................................................................................................... 36
7.4 Co-investment and leverage .............................................................................................................................. 39
7.5 Funding/Fundraising plan ..................................................................................................................................... 40
7.6 Implementation oversight and governance .................................................................................................... 42
8.0 Outcomes and Impact ............................................................................................................................ 44
1.0 Executive Summary infoDev‟s Climate Technology Program is
developing business plans for the financing and
implementation of Climate Innovation Centers
(CICs). Such centers form a holistic country-driven
approach to accelerating the development,
deployment and transfer of locally relevant
climate technologies. This business plan outlines a
required investment of USD 16 million over 4 years
to establish a CIC in India. This investment includes operations, programs, investments
and implementation. In the first four years, the CIC will create more than 70 sustainable
climate technology ventures, generating 4,800 direct and indirect jobs at a cost of
approximately USD 3,300 per job and over 36,000 jobs within 10 years at an average
cost of less than USD 900 per job1. With investment returns and other potential revenue,
the center aims to be between 70%-100% financially sustainable after 10 years. A
leverage of 1:1 in cash and in-kind contributions from local public and private partners
is anticipated in the first 4 years of operations.
1.1 Context:
India faces numerous development challenges that intersect directly with the global
climate change agenda. This underscores the critical need to stimulate climate
innovation and the growth of new clean technology industries in India:
While per capita CO2 emissions are minimal, India‟s aggregated CO2 emissions from
fossil fuels are the fourth highest in the world (1,293 mmt of CO2 in 2006) 2.
Current power generation capacity of ~150 GW3, primarily from coal, is far below
the 460GW needed to meet demand by 2030. Challenges distributing this power
further exacerbate the energy divide with over 400 million Indians having no
connectivity to a power grid4.
India is the fifth largest petroleum oil consumer globally.5 Energy security is an
increasingly important issue, as 72% of crude and refined products are imported6
and petroleum-based fuel subsidies accounted for 2% of GDP (in 2008) 7.
Energy for cooking and heating is often sought through biomass based fuels such as
wood, leading to in-home pollution, causing over 400,000 deaths8 in India annually,
deforestation, and adding to the regional and global effects of black-carbon.
1 Average investment required to create a job within the CIC will continue to decline over time. 2 Energy Information Agency (2007) 3 Central Electricity Authority, Ministry of Power 4 TERI (2010) 5 IEA/OECD 6 International Energy Agency 7 ADB (2009) Working Paper 150 8 Smith (2000) National Academy of Science
November 03, 2010 Page | 7
Access to water is an immediate concern, as India accounts for 17% of the world‟s
human population but has only 4% of its water resources9.
The agriculture sector, employing 66% of India‟s workforce, is under serious threat
due to a mix of increasingly unpredictable rainfall, hotter temperatures and more
expensive resource inputs such as water and fertilizer.
1.2 Process:
Over the course of an eight-month process, infoDev engaged with Indian stakeholders
from relevant sectors: R&D facilities, universities, incubators, industry, SMEs, investors,
NGOs, and international institutions operating in India. This multidisciplinary group gave
both rich and diverse feedback which fed directly into the results of the business plan.
Firstly, infoDev identified the most critical gaps facing climate innovation across the
following journeys: technology, company, finance, markets and policy. Secondly,
infoDev prioritized six technologies on which the India CIC could focus including water,
energy efficiency, agriculture, solar, transportation and bio-based energy. Finally,
based on these learnings, the mission and core goals of the CIC were designed:
1.3 Model:
The CIC‟s mission and goals, to be delivered through a range of services and programs,
are summarized below:
Finance
Providing risk capital through a flexible fund that offers financing at various levels
including proof of concept ($10 – $50K), pre-seed ($100 – $250K) and seed ($250K -
$750K).
9 TERISCOPE, March-April, 2010
Mission
To create, leverage and aggregate a holistic portfolio of programs, services and financing in India that bridge local market gaps and support the
accelerated growth of innovative climate technology ventures
CIC Core Goals - Fill market gaps by:
1. Providing access to flexible finance at a number of strategic levels;
2. Building capacity of new and existing enterprises and facilitating the interaction of innovative ideas , technologies and enterprises with large industry;
3. Enabling collaboration and supporting an ecosystem that aggregates existing partners;
4. Creating regional clusters of innovation to leverage existing resources and infrastructure.
November 03, 2010 Page | 8
Facilitating other sources of financing through syndicating investors, cataloguing
existing sources of funding and building partnerships with banks to assist in accessing
working capital finance.
Capacity Building
Training and accrediting mentors, providing educational services and toolkits,
providing events and seminars.
Offering hands-on mentoring by packaging advisory services via a network of
accredited services providers.
Providing access to a specialized services fund for high-cost, high-expertise
technical assistance including IPR support.
Ecosystem Development
Coordinating, brokering and funding applied R&D activities including standardizing
commercial terms between industry and domestic R&D institutes and piloting USD
$500K applied R&D competitions.
Forming global technology partnerships through technology sourcing and
international innovation center networking activities.
Providing and facilitating access to a range of analytical and market research
products including the promotion of regulatory good-practice and innovation
policy advocacy.
Innovation Cells
Building regional and technology specific clusters of innovation through accrediting,
leveraging, aggregating and networking existing:
Advisory services: Professional services, incubators and mentors.
Facilities: Labs, testing equipment and universities/incubators.
Industry: Technology partnerships, demonstration projects and manufacturing.
1.4 Impact:
In carrying out this mission the center will measure performance against aggressive
impact and outcome targets over a 4 year period including:
Select, finance, and provide technical assistance & mentoring to over 70 Indian
climate technologists, innovators and new ventures – achieving a 75-85%
survivability rate of enterprises after 3 years of operation.
Generate over 1000 direct jobs and 3800 indirect jobs10 at a cost of less than USD
3,300 per job and over 36,000 jobs over 10 years at cost of less than USD 900 per job.
Achieve a 100% leverage ratio with the private sector for 30% of the investment
funds and achieve an overall 100% leverage of the entire cost of the center via
local cash and in-kind contributions.
10 Spill-over jobs are calculated at 4 times direct jobs. This an average that has been benchmarked from various sources
of data on indirect jobs created in high-tech sectors.
November 03, 2010 Page | 9
Provide increased energy access of up to 1b kWh, contributing to an installed
capacity of over 94MW reaching an additional 1m people11.
Providing over 1b kiloliters of clean water to over 1.5m people.
Improving agricultural efficiency in over 50,000 farms
The CIC will strive towards further financial, social and environmental returns over a 4
year period:
Social: Ensure that the companies and initiatives promoted within the CIC practice
fair treatment to poor and marginalized demographics including creating over 1100
jobs for women and 1200 jobs for youth12.
Financial returns: Achieve 69% sustainability of the total costs and almost 100% of
investment costs of the CIC after the 10th year of operation.
Environmental: Mitigate up to 2.1m tons13 of CO2 by the products/services deployed
by CIC supported ventures.
1.5 Implementation:
The USD 16 million budget for the establishment of the CIC over a 4 year period will
include; 55% for financing, 20% for programs, 15% for staff, 8% for implementation and
2% for facilities. With this initial funding, investors will see concrete economic,
environmental and social returns as outlined above. Furthermore, investors will benefit
from:
1. Exposure to an on-going pipeline of climate technology innovations and new
ventures.
2. Considerable knowledge generated and disseminated through the CIC‟s R&D and
market analysis.
3. Access to the complete network of CIC partners and stakeholders.
4. A primary point of contact for establishing international linkages that can facilitate
technology transfer, as well as business-to-business opportunities and collaborative
R&D.
These are the types of ecosystem impacts that only a well-funded, holistic institution like
the CIC can provide.
11 See impact section of report for further details on assumptions 12 Based on ILO data, infoDev‟s jobs model and Grant Thornton Incubation Report (2009) 13 See impact section of report for assumptions
November 03, 2010 Page | 10
2.0 Climate Innovation Centers Over an eight month period, infoDev has been assessing the feasibility of a locally
owned and operated Climate Innovation Center in India through an intensive
stakeholder engagement process. The process concluded in May 2010 with over 90
stakeholders from varied backgrounds and experiences involved in the
conceptualization, design and development of a CIC in India.
2.1infoDev‟s Goals:
1. Assess the feasibility for establishing a Climate Innovation Center in India and
develop a business model that reflects the Indian market, as well as the national
strategy to address climate change.
2. Based on the outcomes of the feasibility assessment, implement the CIC.
3. Network the Indian CIC regionally and internationally to promote south-south
and north-south learning, business linkages and exploit local and international
synergies for the India climate technology sector.
2.2 Innovation Centers
infoDev supports the innovation ecosystem in developing countries through facilitating
a global network of „business incubation centers‟. These incubators act as hubs to
aggregate financing and shared services to assist innovators overcome market barriers
that are particularly high in developing countries. Experience has shown that these
centers dramatically increase the survival rate of new enterprises with over 75% being
operational after 3 years of exiting the incubator.
As a policy tool, creating such centers of innovative
activity also is a highly effective form of public
spending, with employment generated at a long-term
cost per job of 10 to 30 times less than infrastructure
projects14. Incubation experience also has shown that
for every USD 1 of government subsidy, a Return on
Investment (ROI) of USD 30 tax revenue can be
generated in the long-term through corporate and
income taxes from the spun-out companies15. With
infoDev‟s business incubator network expanding to
over 300 centers in more than 80 developing
countries, generating 20,000 SMES and 220,000 jobs, it
is clear that centers supporting innovative activity are
important building blocks in developing countries‟
private sector development strategies.
14
Grant Thorton Report on Incubation: Source: EDA 15
NBIA (National Business Incubation Association) data
November 03, 2010 Page | 11
2.4 Climate Innovation Centers
As multilateral, national and local solutions are being structured around the world to
address the issue of climate technologies, infoDev‟s Climate Technology Program is
piloting the concept of Climate Innovation Centers (CICs) as a mechanism to support
innovation by offering a full suite of services to address locally relevant barriers to
climate technology commercialization. In addition to supporting promising new
technologies and ventures, these centers could also provide access to; finance,
equipment and facilities, market information, policy advocacy, and technical
assistance, as well as facilitate national and international collaboration. In this way, a
center acts as a national focal point or „one-stop-shop‟ to aggregate efforts in
promoting the growth of locally relevant, indigenous climate innovations and to
facilitate cross-border technology collaboration.
Leveraging Lessons learned:
The foundation of the CIC‟s assessment and feasibility has been based global
experiences in conceptualizing, designing, developing and implementing similar
initiatives. This experience has included infoDev‟s 10 year track record in the
implementation of technology innovation and entrepreneurship programs in over 50
developing countries. Other lessons learned and experiences that have been
leveraged for the CIC feasibility work include the UK‟s Carbon Trust and infoDev‟s
Global Assessment Report on CICs prepared in collaboration with UNIDO and
Bloomberg NEF (due September 2010). This study showcases an inventory of 70
innovation centers around the world, including 5 detailed case studies on CGIAR, NVI -
India, UNIDO NCPCs, CIETEC - Brazil and the Baoding National New and High-tech
Industrial Development Zone - China.
2.4 Stakeholder engagement process
The Center‟s business model and associated services are
dependent on and tailored to the local market. To identify market
needs, opportunities and challenges from a local perspective,
infoDev conducts a feasibility analysis via an in-country multi-
stakeholder engagement process and sector mapping exercise of
the climate innovation landscape. Stakeholders are then
convened for a series of workshops and interviews to explore the
key barriers to climate technology commercialization and assist in
the development and design of a business plan to establish a CIC.
November 03, 2010 Page | 12
3.0 Climate Technology Market Landscape: India
3.1 Defining Climate Technologies in Indian context
India is characterized by the following challenges, which intersect directly with the
global Climate Change agenda:
Current power generation capacity of ~150 GW is far below what is needed to
meet social development targets. For example, China has five times this
capacity and continues to grow. The distribution of the available power further
widens the energy divide since over 400 million Indians lack any connection
point to a power grid.
India is the fifth largest global petroleum oil consumer.16 Thus, energy security has
become an increasingly important issue, as 72% of crude and refined products
are imported and petroleum-based fuel subsidies accounted for 2% of GDP (in
2008).
Energy for cooking and heating is often sought through biomass based fuels such
as wood, leading to in-home pollution (causing 400,000 deaths in India annually)
and adding to the regional and global effects of black-carbon.
Access to water is an even more immediate concern because economic
development and climate change have placed (are placing?) further strain on
this already depleted resource. India accounts for 17% of the world‟s human
population but only has 4% of the world‟s water resources17.
Food security is under serious threat due to a mix of (climate and environmental
issues, such as increasingly unpredictable rainfall, hotter temperatures and more
expensive resource inputs like water and fertilizer. Over 65% of the agricultural
land is rain-fed and over 60% of the Indian population works within the
Agricultural sector, further underscoring the necessity of addressing this
vulnerability.
However, these challenges are also opportunities. India already has one of the lowest
environmental footprints per capita in the world. For example, it has 1/10th the carbon
footprint of industrialized countries - although the total size of the population adds up to
a large footprint at a country level. By adopting and adapting new technologies, India
can maintain or better its environmental balance, while allowing for significant
development improvements. India could become a global leader in charting a path
for a sustainable future while continuing to industrialize. Some growth in this area has
already begun. Sustainable energy investment attracted close to USD 4 billion in 2008
and HSBC forecasts that India will receive around USD150 billion in investments during
2008-2017. The key will be to fast track and direct this investment.
16 And one of the fastest growing at 5% p.a. growth expected during 2007-2012 vs. 1.6% population growth (energy
consumption in the OECD countries generally tracks population growth) 17 TERISCOPE, March-April, 2010.
November 03, 2010 Page | 13
3.2 Technology Prioritization
While the CIC will maintain an inclusive strategy in its initial phases, offering its services to
most climate related sectors, the Indian stakeholders voiced a strong recommendation
for prioritizing certain sectors that (1) have a high-potential but are currently under-
developed in India, (2) are well-suited for the targeted capabilities of a CIC and (3) will
have the greatest climate and development impacts for India.
The process of prioritization involved three key steps:
1. The infoDev team evaluated all the technology sectors using criteria to measure
market opportunity, business viability, and potential impact. See the table below
for the detailed evaluation and Annex 2 for full analysis18.
2. Stakeholders ranked the climate technologies most suitable for the CIC.
3. Technologies were benchmarked against leading government policies to ensure
that the CIC‟s focus would align with the Government of India‟s priorities and the
National Action Plan for Climate Change (NAPCC).
The weighted average of these three steps resulted in the selection of six key
technology areas: water, energy efficiency, sustainable agriculture, solar, transportation
and bio-fuels. It should be noted that the CIC does not intend to neglect other sectors;
however, it will develop specializations in specific sectors and focus on creating expert
and tailored services to ensure that one or more of the previously mentioned categories
will be fostered and scaled up over time.
18 Adapted by infoDev: Nortech
November 03, 2010 Page | 14
TR Technology Readiness Potential of the technologies to enter the market in the
DST, DBT, SBI, SIDBI, NABARD, IREDA, YES Bank, Applied Ventures, Siemens, New Energy India, IREDA, KPCB,
Sherpalo
For more detailed information on the ongoing activities and initatives of the above
stakeholders, please see Annex 3.
Solar EE Water Biofuel/Biomass Agriculture Transport
Government of India‟s Commitment to Climate Innovation Centers:
In 2009 at the Delhi Technology Development and Transfer Conference, the Prime
Minister of India, Manmohan Singh, expressed India‟s commitment to Climate
Innovation Centers; “India has proposed the setting up of an international network of
Climate Innovation Centers (CICs) which should act as vehicles for enhancing
technology innovation and capacity building in developing countries. Each such
center could focus on a key technological product that addresses climate change.
The CICs in different countries may also cross-fertilize each other by sharing of
„learning-by-doing‟ experience.”
November 03, 2010 Page | 18
3.4 Stakeholder mapping matrix19
Graphic illustrates ongoing activities of various stakeholders mapped to the innovation value chain. Gaps highlight areas
of CIC focus. Overlap is indicative of potential partnerships and collaboration.
19 Adapted by infoDev: Nortech
November 03, 2010 Page | 19
4.0 Climate Innovation Analysis: India
4.1 Gaps along the value chain
Over an eight-month period, which included two formal workshops, infoDev engaged
with its climate technology stakeholders to identify the specific gaps and needs of
climate technology innovation in India. The major gaps arise in five core areas20:
technology, company, finance, market, and policy.
Technology: Supporting local and adapted technology innovation.
Company: Building a pipeline of workforce capacity and sustainable ventures.
Finance: Ensuring access to flexible risk capital.
Market: Creating new and expanding existing local and global markets.
Policy: Informing, linking and transforming innovative policy mechanisms.
These gaps were then mapped to corresponding needs which were then translated
into the activities, programs and services of the center i.e. the model.
20 Adapted by infoDev: Carbon Trust
Gaps Needs Solutions
November 03, 2010 Page | 20
4.2 Technology Gaps
According to stakeholder feedback, the greatest technology gaps exist in the areas of
creating effective R&D, adapting technologies to local needs and linking the lab to the
market.
Gaps Needs
R&D conducted in isolation without
market inputs
Reduce fragmentation and lack of
knowledge of R&D opportunities
Many technologies stuck in labs and
never see the market
Standardize contractual agreements and
commercial terms with industry
R&D diluted and not focused on a
few high impact solutions
Systematic facilitation of collaborative R&D
with focus on technologies that create high
impact solutions
Adaptation of available technologies
to local needs
A knowledge database with assessment of
potential for localization of worldwide
technologies
Limited resources for prototyping and
testing in clean tech space
Access to prototyping and testing facilities to
innovators and entrepreneurs in their
commercialization journey
Standardize contractual agreements and
commercial terms with facility providers
Lack of information sharing and
collaboration amongst R&D centers,
institutes, and industry
A support system for global collaboration on
R&D, technology transfer and knowledge
sharing
4.3 Company Gaps
The company journey starts with the individual and continues through the start-up and
growth phases of new ventures. According to stakeholder feedback, entrepreneurial
capacity, which encompasses human, financial, and operational activities, is lacking.
Technology
Supporting local and adapted technology innovation
Case Study: Technology Gap (See Annex 4)
Sunair Power - Bangalore, IIMA-CIIE Incubated: Founded 2006
Sunair's 'Micro-Hyrbrid Generator' which captures both wind and solar energy and charges a storedbattery, is still being developed to meet market requirements. The period of development has takenseveral years with the product just now taking commercial form. Accelerating the productdevelopment process would help decrease time to market.
November 03, 2010 Page | 21
Gaps Needs
Lack of seasoned entrepreneurs Build a pool of seasoned and trusted mentors
available to entrepreneurs
Enable trusted match-making
Ensure international mentors have an
understanding of doing business in India
Provide an avenue to recognize and reward
„heroes‟ in the cleantech sector
Incubators do not have capacity to
build successful climate technology
companies
Network and train incubators
A pool of inexpensive but high quality service
providers
Reduce fragmentation of existing incubators,
experts, mentors and services
Unstructured handover of ideas from
innovators to entrepreneurs
A platform to connect innovators to
entrepreneurs - link technologies and
innovations to aspiring entrepreneurs, &SMEs
Lack of experienced clean tech
mentors & lack of willingness for
mentoring amongst entrepreneurs
Prepare seasoned entrepreneurs and
professionals to provide effective mentoring
Bridge gap in expectations between
entrepreneurs and mentors
Quality of services is assured through an
accreditation
Lack of end-to-end support Local proximity to handhold entrepreneurs
through company journey
Contracts between service providers and
service users can be standardized
Financing paired with credible services
providers to ensure symbiotic use of funding
and advisory services
Financial inability of entrepreneurs to
access expensive advisory services
A pool of inexpensive but trusted service
providers available to all entrepreneurs
Services made available, even to
entrepreneurs who can‟t afford them
Industries not supportive of
entrepreneurs and innovators
Improve credibility and accessibility of
entrepreneurs and companies that leverage
the CIC‟s brand name
Company
Building workforce capacity and a pipeline of sustainable enterprises
Case Study: Company Gap (See Annex 4)
Husk Power - Bihar, Uttar Pradesh: Founded 2007
The company is at a critical stage of growth to expand from 30 to 2,000 systems sold within 4-5 years.The company must reach this level of scale to achieve attractive financial returns. The entrepreneursare young and require additional business support to form an effective franchising strategy. In orderfor the company to successfully scale and achieve a tangible impact on rural electrification, theyrequire mentoring and business advisory support, which is often inaccessible to start-up companies inIndia, especially cleantech companies.
November 03, 2010 Page | 22
4.4 Finance Gaps
The financial journey often begins with concessionary funds (from a government or a
charity) and continues with venture capital and commercial debt to reach public
equity. According the stakeholder feedback, the main gaps are found in establishing
flexible, early-stage risk capital.
Gaps Needs
Lack of Valley-of-Death financing Bridge „valley of death‟ funding gaps with
earlier stage financing options
Fragmentation of existing financing
sources in market
“Crowd-in” multiple private sector
investment
Reduce fragmentation and lack of
knowledge of funding options available
Perception of high-risk in climate
technologies sectors for private
funding alone
Reduce risk and incentivize private sector
investment
Lack of debt finance from banks Standardize contractual agreements and
commercial terms with banks
Most technologies still looking for
market and hard to fund
Link market opportunities to technologies to
attract funding – make entrepreneurs
investment ready
Far and few technology innovations
based businesses
Business model innovation to adapting
technologies to local needs in India.
Scarce deal flow of climate related
companies
Lack of critical mass of pipeline for
financial institutions
Make funding simple, transparent and easy
to apply for
Improve credibility and accessibility of
entrepreneurs and companies that leverage
the CIC‟s brand name
Limited internal capacity of financial
institutions to conduct due diligence
Lack of exit options
Increase market education on potential of
sector
Research and tracking of market demands
and trends
Link market opportunities to technologies to
attract funding
Finance
Ensuring access to flexible risk capital
Case Study: Finance Gap (See Annex 4)
Sustaintech/ TIDE - Tamil Nadu: Spun-out 2009
The company’s stage of development and capital requirement places this company in the “valley-of-death” where there is a great scarcity of investors with the risk appetite to support these enterprises.Sustaintech has been seeking investments for more than 18 months with no success, despite receivingaccolades such as the Ashden Awards, the Sankalp Social Enterprise Business Plan Competition and theNewVentures India coaching.
November 03, 2010 Page | 23
4.5 Market Gaps
Ensuring accurate market information and accurately evaluating technologies are two
areas, according to stakeholder feedback, that require further attention.
Gaps Needs
Technology entrepreneurs and
innovators often lack market
information to create viable business
Research and tracking of market demands
and trends
Identify market needs, and match them to
available technologies
Entrepreneurs too tech-focused with
no consideration to market needs
A platform to connect innovators to
entrepreneurs - links technologies and
innovations to aspiring entrepreneurs, &SMEs
Instill business and finance knowledge to the
entrepreneurs who are typically technology
experts
Teach soft skills to tech-savvy one-dimensional
entrepreneurs
Consumers don‟t understand
technology and/or too price sensitive
Increase market education on potential of
sector
Research and tracking of market demands
and trends
Work with policy makers and government to
raise awareness
4.6 Policy Gaps
Policy formation results from general requirements that are revised to meet specific
needs over time. Often the first step to creating a policy is introducing a general
umbrella regulation and, as the policy is implemented, more technology specific
policies emerge until there is a comprehensive framework in place. The stakeholder
feedback reveals that policies are viewed as a critical driver of clean technology
markets, but too often policies are nonexistent or lacking input from enterprise and
industry.
Market
Creating new and expanding existing local and global markets
Case Study: Market Gap (See Annex 4)
Samki Tech Resources - Hyderabad: Founded 1998
In the ealier stages of development, the company's product was not widely known and accepted inthe market due to the unproven nature of the technology. Particularly policy is not supportive ofwaste management which would help create a viable market. Therefore, Samki had a very difficulttime raising funds for the prototype and first demo plant. An intervention at this stage would help toassist in proving the concept and producing a viable business proposition to both consumers andinvestors.
November 03, 2010 Page | 24
Gaps Needs
Lack of policies to create viable
clean technologies markets
Provide market and technology inputs from
industry and experts in the SME sectors to
policy makers
Work with policy makers and government to
raise awareness
Clean tech market is created and
driven by policy - entrepreneurs‟
inputs missing in policy making
Provide entrepreneurs a platform for unified
voice in the policy making
Policy
Informing, linking and transforming innovative policy mechanisms
Case Study: Policy Gap (See Annex 4)
DWP/DURON - Gujurat Uttar Pradesh, Karnataka: Founded 2007
The government spends up to $3 billion each year in kerosene subsidies to households andcustomers. These subsidies impede the adoption of clean, safe technologies for low-incomehouseholds. By reducing the price of kerosene, the government can reduce the incentive forrural consumers to purchase alternative sources of lighting. If these subsidies were repurposed toincentivize the adoption of solar lighting, the product could be scaled and deployed more rapidlyto rural communities.
November 03, 2010 Page | 25
5.0 Indian Climate Innovation Center Model
CIC model addresses local Indian market gaps
Stakeholders have designed this CIC model to respond to the myriad of gaps illustrated
in Section 4. The model will address the majority of the needs of each priority sector
through the following initiatives:
1. Giving access to flexible finance at a number of strategic levels.
2. Building capacity of new and existing enterprises and facilitating the interaction
of innovative enterprises with large industry.
3. Enabling collaboration and supporting an ecosystem that aggregates existing
partners.
4. Creating regional clusters of innovation to leverage existing resources and
infrastructure.
5. Providing a hub for building international partnerships that can facilitate
technology transfer and collaborative R&D, as well as business to business
linkages.
The first three initiatives above form the vertical pillars of the CIC‟s model (finance,
capacity building and collaborative ecosystem). Each supports a number of functions
that are outlined in the diagram below. Over time, the CIC will develop a horizontal
pillar of Innovation Cells (initiative 4 above), strategically located in cities across India.
Each of these Cells will most likely specialize in a technology, so that relevant research
and expertise can be geographically concentrated for optimal collaboration.
See ‘Why this not that’ section in Annex 7 for more details on why specific program,
services and activities were selected for India based on a portfolio of different
programmatic options that were considered.
November 03, 2010 Page | 26
CIC Model: India
November 03, 2010 Page | 27
Pillar 1: Finance
5.1 Vertical Pillars
The following section dives into each of the three vertical pillars, outlining the specific
activities and needs identified in section 4. The scope of each activity is explained in
greater detail in Annex 5.
Risk Capital
Fund
Investment
Facilitation
Activities:
Proof of concept (up to US$ 50K)
Pre-seed investments (US$100-
US$250K)
Seed investments (US$250K-
$US750k)
Facilitate funding sources by leveraging
center‟s brand and relationships:
Syndicate to leverage other grant,
loan and equity investments
Database of financial support
available from public and private
sources
Facilitate working capital financing
from banks
Needs
Addressed:
Bridge „valley of death‟ funding
gaps with earlier stage financing
options
Reduce risk and incentivize
private sector investment
“Crowd-in” multiple private
sector investment
Make funding simple, transparent
and easy to apply for
Reduce fragmentation and lack of
knowledge of funding options
available
Improve credibility and accessibility of
entrepreneurs and companies that
leverage the CIC‟s brand name
Link market opportunities to
technologies to attract funding
Standardize contractual agreements
and commercial terms with banks
Finance
Details:
Investment criteria: Will be developed by the investment team hired by the
CIC. The broad metrics upon which the CIC will invest:
Level of Innovation
Potential business viability
Climate & social impact
Funneling strategy: The CIC will aim to have each stage of investment feed into
the next, ideally, with a projected ratio of:
10 POC 5 Pre-seed 2 Seed
Why this not that? Finance
See annex 7 for details on stakeholder rationale for deciding on the types of financing instruments the India CIC would provide
The CIC proposes to invest in a broad range of technology sophistication, from
technology that is adapted for the low cost mass market (often simplified and
deconstructed) to technology that has the potential for significant export market
revenues. While highly sophisticated technology companies can play a significant
role in climate mitigation at an international level, more basic innovations have the
power to be transformative on a mass scale too. It is important that the CIC works
across the full spectrum of innovation. In the financial modelling of the center, the
pipeline of technology companies has been differentiated based on an innovation
scale of 1-10 (1 - Adaption of low-cost product or service for local conditions versus
10 - products and services with international markets and global scalability).
Assumptions around expected deal flow take into consideration this methodology.
See Annex 11.
Lev
el o
f In
no
va
tio
n
10
5
1
Cost of developmentRequired level of sophistication of supporting innovation ecosystem
Products or services with international/export market potential
Products or services with regional market potential
Adaptation of low-cost product to local ‘mass market’
Levels of Innovation
E.g. Drip irrigation
E.g. UV sterilization
E.g. Nano-desal
November 03, 2010 Page | 29
Pillar 2:
Capacity
Building
Mentor
Training
Education and
Events
Advisory
Services
Activities:
Train the Trainer Program:
Provide informational
training
Define guidelines for
mentors / mentees
Create tools for easy
access to mentors,
interaction with
mentees and tracking
progress of mentoring
Enhance mentoring
capacity of incubators
Train mentors abroad
Courses of strategic
value to entrepreneurs
Toolkits such as the IFC
SME toolkit
Seminars and other
events organized
monthly.
Training program for
general client –
potential revenue
source
Specialized Services
Fund to finance
specialized advisory
services such as
product design,
engineering and IPR
support
Packaged services
provided on a case-
by-case basis
Accredited service
providers within
innovation cells to
build critical mass of
quality service
providers
Needs
Addressed:
Build a pool of
seasoned and trusted
mentors available to
entrepreneurs
Prepare seasoned
entrepreneurs and
professionals to provide
effective mentoring
Enable trusted match-
making
Bridge gap in
expectations between
entrepreneurs and
mentors
Ensure international
mentors have
understanding of doing
business in India
Build entrepreneurial &
talent capacity
Instill business and
finance knowledge to
the entrepreneurs,
who are typically
technology experts
Work with policy
makers and
government to raise
awareness
Teach soft skills to
tech-savvy one-
dimensional
entrepreneurs
Provide an avenue to
recognize and reward
„heroes‟ in the
CleanTech sector
Financing paired with
credible services
providers to ensure
symbiotic use of
funding and advisory
services
Services made
available even to
entrepreneurs who
can‟t afford them
Quality of services is
assured through an
accreditation
Why this not that? Capacity Building
See annex 7 for details on stakeholder rationale for deciding on the types of capacity and human capital building programs including more details how the center will handle IPR issues.
November 03, 2010 Page | 30
Pillar 3:
Ecosystem
Development
R&D
Coordination*
Markets
& Policy
Activities:
R&D Brokering: Facilitates and brokers
joint R&D proposals and sponsored
research both nationally and
internationally by standardizing
contractual and commercial terms.
Technology sourcing: Links with
international patent databases; builds
and updates a platform/wiki to connect
to int‟l technology partners; establishes
best known solutions for spectrum of
innovations for local needs.
R&D Competitions: Pilots applied R&D
grants (up to USD 500k) through an
international RFP process. This
competition would finance international
joint projects for highly specific technical
barriers to priority Indian technologies.
International CIC network: Develops
global partnerships with other centers
and institutions to exploit opportunities in
technology transfer, joint R&D and B2B
linkages
Analytical products: Quarterly
market reports, annual
specialized reports, annual
policy assessment reports on
sector trends, market demands
and global best practice.
Market and Product
Information: Consumer reports,
performance data on types of
technologies; product quality
reviews etc.
Policy Advocacy: Fellows work
with policy makers to provide
advice, reports and round-
tables on climate innovation
policy best practice. The CIC
will act as advocate/lobbyist
for climate innovation in India,
working to reverse perverse
subsidies and reform regulation
that supports the growth of
new industry and the roll-out of
new technologies.
Needs
Addressed:
Systematic facilitation of collaborative
R&D with focus on technologies that
create high impact solutions
Reduce fragmentation and lack of
knowledge of R&D opportunities
Standardize contractual agreements and
commercial terms with industry
A support system for global collaboration
on R&D, technology transfer and
knowledge sharing
A platform to connect innovators to
entrepreneurs - links technologies and
innovations to aspiring entrepreneurs, &
SMEs
Research and tracking of
market demands and trends
Identify market needs, and
match them to available
technologies
Provide market and
technology inputs from
industry and experts in the SME
sectors to policy makers
Provide entrepreneurs a
platform for unified voice in
the policy making
Increase market education on
potential of sector
* The four activities within „R&D Coordination‟ are specifically designed to facilitate cross-border technology
cooperation and collaboration and promote south-south and north-south technology transfer
Why this not that? Ecosystem Development
See annex 7 for details on stakeholder rationale for deciding on the types of activities the India CIC would provide to help develop an innovation ecosystem
November 03, 2010 Page | 31
Pillar 4:
Cell Network
5.2 Horizontal pillar
The Horizontal Pillar in the CIC model will build regional Innovation Cells in various cities
in India with the central facilities (vertical pillar activities) based in New Delhi. These
clustered Cells will be launched in year 2 and beyond, once the CIC has established a
strong base of operations. Conceptually, these Cells along with the central facility form
a hub-and-spoke model, as shown in the model below. It was concluded that while
Cells that group technology specialized expertise would lead to greater impact in the
long term, Cells would initially need a geographic focus to build critical mass of such
expertise. The primary role of these Cells would be to provide local support to the
technologists, entrepreneurs and new ventures through their journey to market. These
cells would be staffed with decentralized „Partnership Development Managers‟ to
coordinate the activities of the center locally, including mentor networks, local
capacity building, access to industries, and interfacing with other local centers of
excellence, institutes, and facilities. The partnership development staff would also be on
the „front line‟ to source deals and work with partners to identify potential deal-flow for
the Delhi investment team.
Interaction with existing infrastructure: The Center and Cells are designed to
complement the existing activities and infrastructure in India. Their role is to bridge gaps
between these players and „connect the dots‟ with the CIC beneficiaries.
Access to Advisory Services
Access to Facilities
Access to Industry
Activities:
The CIC accredited
service providers can
enter a regional
„Innovation Cell‟.
Verifies and ensures
quality of service providers
and links them to each-
other
Builds a critical mass of
expertise in areas where
service providers are
fragmented
Incubators: Office
space and facilities
Laboratories: Access to
key laboratories at
universities, research
institutes and
government
organizations
Testing and
Demonstration facilities:
Access to testing and
demonstration centers
Technology
Partnerships: Enables
joint development of
technologies and
products with industry
Demonstration: Access
to industry for product
demonstration
Manufacturing: Links up
with industry that could
help manufacture the
product for SMEs
Example: CIIE (Center for Innovation Incubation and Entrepreneurship) at IIMA has
established a strong clean tech network which includes mentoring and Entrepreneur-in-
Residence programs for clean energy entrepreneurs. It is also establishing a clean energy
fund for seed and early stage start-ups. Through partnering with CIEE, the CIC would
leverage CIEE‟s expertise and network. This would include using CIEE‟s existing mentor
network, EIR program, seed fund, and business plan competitions to create potential
pipeline. Their physical location in Ahmedabad could also be used to incubate some of the
CIC ventures. CIIE in return would have access to the CIC‟s capacity building programs, TA
fund and investment funds. (For more examples of how the Cells function, see Annex 6.
November 03, 2010 Page | 32
Needs Addressed:
Reduce fragmentation of
existing incubators,
experts, mentors and
services
Local proximity to
handhold entrepreneurs
through company journey
Contracts between
service providers and
service users can be
standardized
Build a pool of seasoned
and trusted mentors
available to entrepreneurs
Enable trusted match-
making
Access to prototyping
and testing facilities to
innovators and
entrepreneurs in their
commercialization
journey
Improve credibility and
accessibility of
entrepreneurs and
companies that
leverage the CIC‟s
brand name
Standardize
contractual
agreements and
commercial terms with
facility providers
Access to prototyping
and testing facilities to
innovators and
entrepreneurs in their
commercialization
journey
Improve credibility and
accessibility of
entrepreneurs and
companies that
leverage the CIC‟s
brand name
Standardize contractual
agreements and
commercial terms with
facility providers
Innovation Cell Model:
Why this not that? Innovation Cells
See annex 7 for details on stakeholder rationale for deciding why to establish regional clusters for innovation
November 03, 2010 Page | 33
6 Implementation Plan
6.1 Implementation Plan (phase 1)
The diagram below shows the staged roll-out plan for the India CIC based on infoDev‟s
experience with implementing similar programs and centers. Year 1 will be a critical
time for securing the requisite funding, establishing the infrastructure and making key
hires. The majority of the CIC programs will be launched by Year 2, while Years 3 and 4
will be focused on the scaling of financial investments.
6.2 Management Plan
Governance
Board of Directors: Based on international good practice, the board of directors will
include nine members, including two representatives from the public sector, one to two
donors and five to six representatives from the private sector. The directors from the
private sector ideally would be leaders with sector specific expertise. Directors would
rotate every three to four years. A number of board seats may also be made available
for private sector/industry participants that sponsor the CIC center through charitable
donations. The Board, once established, will setup an advisory body that over time may
be split into specialties based on specific technology areas.
Investment Committee: The CIC will establish an Investment Committee of private
sector investment experts to screen and approve all CIC-POC pre-seed and seed