john babcock, cleantech/green venture capital, at opportunity green business conference 2009
TRANSCRIPT
Cleantech Venture CapitalOpportunity Green - Los Angeles,
CANovember 7, 2009
Prerequisite Cleantech Slides
• Blue Marble Shot• McKinsey Chart• The CFL• Polar Bear
Cleantech Markets Today
• Environmental issues• Market opportunities• Market challenges• Examples
Rustic Canyon Partners
• Founded in 1999• $800MM under management• Investing out of Rustic Canyon III – closed in Oct
2008• Offices in Santa Monica and Silicon Valley• 49 portfolio companies
Current Investments• Foodlink• Leads360• Pentadyne*• Serious Materials*• Transonic Combustion*
*Cleantech
Prior Investments• SiliconSystems
– Sold to Western Digital
• HomeGain– Sold to Classified Ventures
• Cyrano Sciences– Sold to Smiths PLC
John Babcock
Where Do We Invest?
• Location: – Almost always in California (two-hour rule)
• Amount:– $3 - 10MM first investment– $5 - 25MM over the life of the company
• Engagement:– Always lead or co-lead financing round– Always take a board seat
The Pressing Need
The Tragedy of the Commons
Coal is Really Cheap
U.S. Electricity Production
0
1,000
2,000
3,000
4,000
5,000
1996 1998 2000 2002 2004 2006
Bill
ion
Kw
h
Other
Other Renewables
Hydroelectric
Nuclear
Other Gases
Natural Gas
Petroleum
Coal
Energy Growth > Population Growth
0
1,000
2,000
3,000
4,000
5,000
Bill
ion
Kw
h
Worldwide Electricity Consumption
United States
Europe
China
Japan
South America
Canada
Why Cleantech Now?
Why Cleantech Now?
Cleantech DefinitionCleantech is a term used to describe knowledge-based products or services that improve operational performance, productivity or efficiency while reducing costs, inputs, energy consumption, wasteor pollution. Its origin is the increased consumer, regulatory and industry interest in clean forms of energy generation—perhaps, the rise in awareness of global warming and the impact on the natural environment from the burning of fossil fuels. The term cleantech is often associated with venture capital funds.
Source: Wikipedia.com
Cleantech is Diverse
Source: greentechmedia.com
VC Has Distinct Sectors
• Traditional Software• SaaS• System Hardware• Life Science Devices• Life Science Drugs
Cleantech Doesn’t Fit Old Formula
Gross margins: 60% - 90% 20% - 50%Capital intensive: $5 - $50MM $50 - $250MMMarkets: Creating New Entering
Old
Classic VC
Cleantech VC
Where the Money is Going
$3,300
$904$795$502
$345$166
$148
$2,240
Amount Invested ($MM)
SolarBiofuelsTransportationWindSmart GridAgricultureWaterOther
Where the Money Should Go
TRANSONIC
FULCRUM BIOENERGY
SERIOUS MATERIALS
51%27%27%
U.S. Energy Demand
Built EnvironmentTransport Industry
A supreme union of form and function, there is no other window that saves more heating and cooling dollars. Beautiful for your home, your wallet . . . and the planet.
After 100 years, there’s finally a better alternative to gypsum drywall. Contractors love it. Termites and mold hate it. Made from 80% recycled materials using dramatically less energy and no mercury, EcoRock helps build a cleaner, cooler future, one home at a time.
What if a transformational approach to fuel injection yielded a dramatic improvement in fuel economy and radical reduction in engine emissions? That’s how Transonic Combustion drives change forward.
A bold step forward in “recycle/reuse,” Fulcrum Bioenergy unlocks the energy trapped in trash to create clean-burning ethanol – while reducing solid waste blight and harmful landfill methane emissions.
Market Conditions
• Fuel prices low (used to be high)• Capital is very expensive (used to be cheap)• Political support very strong (used to be strong)
Are We in a Bubble?
Yes.
Just Like the Last Bubble?
Yes.
Venture Capital101
Don’t do it if you can grow organically• Expensive money• Limits early exit and autonomy• Works when growth = 40% year/year and
viable, quick path to $100M in revenue
Questions?