metcalfe may 29 08 talk version of 5-28-08

8/14/2019 Metcalfe May 29 08 Talk Version of 5-28-08

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Murray R. Metcalfe, Ph.D.Visiting Scholar, Abe Laboratory

Department of International Development Engineering

Tokyo Institute of Technology

[email protected]

How Innovative Technologies and

Entrepreneurial Organizations

Can Generate Change in Developing Countries:

Case Studies in Energy and Related Segments

May 29, 2008


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2MURRAY R. METCALFE, Ph.D.

May 29, 2008

Murray Metcalfe: Personal Background

Visiting Scholar in Professor Naoya Abes lab in the Department of International Development Engineering atTokyo Tech, April through June 2008

Educational background:

Undergrad degree from the University of Toronto in Industrial Engineering

Masters and Ph.D. from Stanford University in Engineering-Economics Systems (now Dept. ofManagement Science & Engineering)

Began professional career as a management consultant at McKinsey & Company, a management consulting firm

20 year career in the financing of technology companies and systems: Managing Director, Private Equity, Lee Munder Capital Group, 2001 to present (currently on leave)

Previous positions in venture capital, and in working with and building start up companies

Focused on investments in information technology and software and more recently in alternative energy;have worked in various other technology-based industries

Active at the University of Toronto, Faculty of Applied Science and Engineering advisory boards; member ofDeans Task Force on Globalization and Engineering; developing a course for the 2008-2009 academic year

Chairman of Transform Capital, a small not-for-profit that supports innovative organizations active ininternational development. Examples include the Asian University for Women, a start up undergrad and graduniversity to be based in Bangladesh.

Introduction


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May 29, 2008

Technology Innovation and Entrepreneurial Organizations - This Model Has

Worked Well in Developed Economies

Technology

Innovation

Entrepreneurial

FinanceThe Entrepreneur

Development and deployment of newtechnologies in selected industries

Improved standard of living for users and

employees

Introduction


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May 29, 2008

The model has now been expanded to include environmental products and

considerations

Technology

Innovation

Entrepreneurial

FinanceEntrepreneurship

Sustainability

and

Environmental

Protection

Sustainability

and

Environmental

Protection

Development and deployment of new

technologies in selected industries

Improved standard of living for users and

employees

Improved environmental footprint

Introduction


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May 29, 2008

Our Central Question: How Can These Approaches Play a Role in International

Development?

Technology

Innovation

Entrepreneurial


Sustainability

and

Environmental

Protection

Sustainability

and

Environmental

Protection

The reduction of poverty and disease

Global development, in a sustainable

manner

Introduction


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May 29, 2008

There is a recognized need for new models and approaches to development, to

compliment existing government and NGO driven approaches

Are current models broken? arguments by William Easterly (formerly of theWorld Bank and now at NYU). Planners versus Searchers.

Millennium Villages Project a joint venture of UNDP, Columbia Universityand the not-for-profit Millennium Promise - seeks to implement MillenniumDevelopment Goals at the village level

Progress by the Bill & Melinda Gates Foundation and others in mobilizingsmall scale projects

The success of microfinance

Success of cell phone penetration; interest in the MIT $100 laptop project

Introduction


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May 29, 2008

Our Central Question: How Can These Approaches Play a Role in International

Development?

Technology

Innovation

Entrepreneurial


Sustainability

and

Environmental

Protection

Sustainability

and

Environmental

Protection



manner

Entrepreneurship


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May 29, 2008

Technology Innovation and the Entrepreneur

Technology

InnovationEntrepreneurship

Technology Area Individual(s) Company

Aviation

Semiconductors

Transistor-based devices

Software

Internet & telecom

Internet search

Biotechnology

Steel

The Rockefeller family

Robert Noyce, Gordon Moore et. al.

Akio Morita and Masura Ibuka

Bill Gates

Masayoshi Son

Larry Page and Sergey Brin

Robert Swanson and Dr. Herbert Boyer

Lakshmi Mittal

Eastern Airlines

Intel

Sony

Microsoft

Softbank

Google

Genentech

Arcelor Mittal Steel

Entrepreneurship


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May 29, 2008

The Model in Commercial Applications - e.g. Google

Technology

Innovation

Entrepreneurial


Entrepreneurship

Backdrop of

technology innovation

- in this case Stanford

University and Silicon

Valley

Larry Page and

Sergey Brin

motivated

entrepreneurs with

understanding of thetechnology and the

end user

Kleiner Perkins and

Sequoia Capital

well known venture

capital firms that

invested $12.5million each


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May 29, 2008

The Social Entrepreneur in Development

Entrepreneurship

Area Individual Organization

Micro Lending

Econ. Development

Rural Health

Building enterprises

AIDS Reduction

Muhammad Yunus

F.H. Abed

Dr. Paul Farmer

Multiple

Ashok Alexander

Grameen Bank

BRAC

Partners in Health

Ashoka, TechnoServe

Gates Foundation - India AIDS

Initiative

Entrepreneurship


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May 29, 2008

Funding of a Commercial Venture Flow of Capital

Investor

Venture CapitalFund Entrepreneur

Company

Entrepreneurship

$

$

$$

$

And to other companies

$


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May 29, 2008

Funding of an International Development Venture

Donor

Social VentureCapital Fund

SocialEntrepreneur

Company/

Project

Entrepreneurship

$

$

$$

$

And to other companies/projects

$


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May 29, 2008

Funding of an International Development Venture Potential Next Stage

Donor

Social VentureCapital Fund

SocialEntrepreneur

Company/

Project

Entrepreneurship

$

$

$$

$

And to other companies/projects

Commercial

Investor$


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May 29, 2008

The Model in International Development e.g. WaterHealth International

Technology

Innovation

Entrepreneurial


Entrepreneurship

Approaches to

drinking water

filtration at the village

level; previous

approaches have had adismal record; WHIs

technology licensed

from Lawrence

Berkeley Labs

For profit; founded in

1996; motivated

entrepreneurs with

understanding of the

technology and theend user

Acumen Fund New

York based social

venture capital firm

focused on

international

development; invested

and provided loan

guarantees


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May 29, 2008

Funding International Social Entrepreneurship Examples of Currently

Active Organizations

Grameen Bank

The Rockefeller Foundation

Ashoka

The Gates Foundation, Google.org, The Skoll Foundation

The Acumen Fund

Kiva.org online microfinance not-for-profit; works though localpartners

Entrepreneurship


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May 29, 2008

The key strengths of the venture capital model still apply ..

Work collaboratively with the entrepreneur Arrange follow on financings to ensure ongoing growth

Vigilance versus fraud and corruption

Experience across multiple portfolio companies over time builds aknowledge base within the firm

Measure results including social returns: Much more complex return considerations versus in commercial

ventures

Various approaches to devising models:

Double bottom line, triple bottom line

Social Return on Investment (SROI); Blended Value models;Best Available Charitable Option (BACO)

Decide if/when to declare failure

If the donors (investors) dont like what youve done, your enterprise willnot continue long term

Entrepreneurship


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May 29, 2008

Donors Return Expectations Over Time for a Social VC Investment Portfolio

Entrepreneurship

Time (years) Time (years)

Index

- 100%

0%

100

ROI

(%)

20%

Financial Return: Fund versus Grant Social Return Index: Fund

*

= Realm of thecommercial investor

*


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May 29, 2008

Many, many issues remain - small and large .

Labor intensive process, conducted by highly trained personnel is itscalable?

Can you generate exceptional returns?

Assessing the benefits quantitative approaches

Keep funding if the commercial funding sources are available?

Combining these models, adding multiple partners - results in complexstructures

Some segments do not have strong return profiles

Risk capital approaches in areas of life and death - the moral issues

Entrepreneurship


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May 29, 2008

Can these approaches play a role in international development?

Technology

Innovation

Entrepreneurial


Sustainability

and

Environmental

Protection

Sustainability

and

Environmental

Protection



manner

Innovative Technologies


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May 29, 2008

Technology Change and Global Development

The World Is Flat and the spread of modern technologies Recent challenge by Bill Gates to deploy more highly skilled personnel to

work on the problems of the worlds poor

Approaches to leapfrogging the use of new technologies:.

Can advanced technologies be applied in development?.

An iPod may not help but what about a cell phone? What about RF-IDand a GPS system

The MIT $100 laptop project

Many types of technologies. Some can be used from a distance e.g.modeling tools which reduces barriers to adoption.

The broad role of leading technology-oriented universities:

Educating The Global Engineer

Engineering practice courses on this topic e.g. MIT, NYU

Engineers Without Borders multi-country student-driven organizations



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May 29, 2008

Technology Innovation - Types


Type of Solution Example Application in Developing

Setting

Point or Local solutions Any type of engineereddevice

The electric bicycle

Water filtration systems

Pharmaceuticals

Information and

communications technologies(ICT)

Mobile phones, laptops Cell phone banking

Laptops in education, croprotation planning

Kiva PayPal meetsGrameen Bank

Large scale computer modeling Prof. Mark Jacobsonmodeling of wind energy

substitution

RETScreen

Logistics tools Federal Express deliveries Harry Potter delivery vs.malaria drug delivery


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May 29, 2008

Can these approaches play a role in international development?

Technology

Innovation

Entrepreneurial


Sustainability

and

Environmental

Protection

Sustainability

and

Environmental

Protection



manner

Sustainability Considerations


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May 29, 2008

Sustainable Development A Few Points

Can we learn from past mistakes in the developed world?

Rate of growth is sufficiently rapid in BRIC countries that pollutionmitigation has to be applied simultaneously

The global engineer will factor in sustainability considerations for all types of

engineered products and services Energy use characteristics in particular will be central

Sustainability Considerations


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May 29, 2008

Returning to our Central Question - Can These Approaches Play a Role in

International Development?

Technology

Innovation

Entrepreneurial


Sustainability

and

Environmental

Protection

Sustainability

and

Environmental

Protection



manner

Case Studies


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May 29, 2008

Our Framework/Taxonomy

Categorize a number of case studies by:

Technology Type:

Point

ICT

Systems

Logistics

Others

Ultimately fill out a matrix of case studies

Stage of Development:

Advanced countries

Rapidly emerging e.g.BRIC countries

Less developed countries

Industry Segment:

Energy

Transportation

Infrastructure Others over time

Case Studies


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May 29, 2008

Populating the Framework Case Studies in Energy, Transportation, Infrastructure

Case A. Techn. Type B. Stage of Dev. C. Industry

Blackout Systems Advanced Energy

Solar cell leadership in China Point Rapidly emerging Energy

Mark Jacobson models ofwind vs. coal generation

Systems All Energy

MIT D-Lab projects Point Less developed Multiple

Harry Potter publication day

delivery

ICT, Logistics Advanced Transportation

Logistical issues in worldhealth

ICT, Logistics Emerging and LessDeveloped

Transportation

(continued .)

Case Studies


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May 29, 2008



Electricity generation inBrazil

Systems Emerging Energy

Electrical equipmentmanufacturing in Brazil

Point Emerging Energy

The electric bicycle Point Emerging, Less

Developed

Transportation

Cleantech venture capital Point Advanced Energy

Stationary fuel cells in Japan Point Advanced Energy

WaterHealth International andthe Acumen Fund

Point Emerging, LessDeveloped

Infrastructure

The car of the future in Indiaand China

Point, systems Rapidly emerging Energy,Transportation

(continued .)

Case Studies


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May 29, 2008



D. Light Point Less developed Energy

E + Co. Point Less developed Energy

RETScreen modeling system Systems All Energy

Kramer Junction Large scalesolar generation

Systems Advanced Energy

.

..

Case Studies


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May 29, 2008

Assessing the Prospects and Likely Impact of the Approach

:

Economic impact

Social development impact

Environment and sustainability impact

Policy issues raised

Viability of the approach and impediments to wider use

Case Studies


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May 29, 2008

Case 1 D.Light Solar Lighting

Technology

InnovationEntrepreneurial


Case Studies

Financing from several

for profit Silicon

Valley venture funds.

Additionally funding

from social VC funds.

Partnership to solicit

donations to purchaseindividual lamps for

deployment.

CEO/Co-Founder is a

former Peace Corp

volunteer who also

holds a Stanford

MBA. Small,

entrepreneurial teams.

Local distributionpartners.

Simple LED lamp to

displace use of

kerosene lanterns,

initially in India.

Includes solar panel

and battery. CTO is a

solid state opticalengineer, with start up

experience in Silicon

Valley

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May 29, 2008

Case 2 E + Co

Technology



Case Studies

Multiple funds,

some invested

directly and some

managed on behalf

of partner

organizations.

Combination ofdonor grants and

capital investments.

Founded by Phil

LaRocco and a

small team.

Work with local

entrepreneurs

and business

partners.

Technology neutral -

virtually every type of

renewable energy

source and device,

from cook stoves and

energy efficiency

products, to wind,

biogas, geothermal,

hydro & solar

generation.

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May 29, 2008

Case 3 The RETScreen Model

Technology



Case Studies

Developed by

Canadian

government agency;

supported by

NASA, UN, World

Bank and other

NGOs.

The entrepreneur inthis case is a group of

10 scientists and

support staff

employed by the

Canadian government.

Softwaredevelopment began as

a Masters thesis by

one team member.

Open source software

tool for evaluating

renewable energy

systems. Used

worldwide. Available

in 26 languages.

Substantial fraction ofdownloads are from

China and other Asian

countries.

Question For Discussion:

Is this a counterexample?

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May 29, 2008

Case 4 Kramer Junction (SEGS III VII) Large Scale Solar Generation

Technology



Case Studies

Carlyle Riverstone

Renewable Energy

Partners a multi-

billion dollar

investment pool for

renewable energy

projects and FPL, a

major utility , are co-owners

Evolution from small

scale socially

conscious green

entrepreneurs to large

scale commercial

facilities. Power

offload contract with

SoCal Edison

Combination of proven

and more innovative

solar thermal

technologies, plus grid

management techniques,

to address high growth in

demand in Southern

California. Located inthe Mojave Desert.

150 MW capacity.

Question For Discussion: Economic

and other barriers to building these

arrays in other deserts worldwide?

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May 29, 2008

Big Planet Issues Some Questions to Ponder

Building local skills in less developed areas historical precedents

Risk capital approaches in areas of life and death - the moral issues

What are the characteristics of the most replicable technologies for use inglobal development?

The commercial investment world has seen a proliferation of privateequity funds and their penetration of every investment type, industryniche and (developed and to some extent rapidly developing) locale.Could we see a future proliferation of social venture funds aimed atinternational development?

Conclusion

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May 29, 2008

A Few Mild Conclusions To Date

A. These entrepreneurial models may well have some merit

B. There are many types of technologies that can help in internationaldevelopment settings

C. We are in very early days

D. Engineering oriented institutions like Tokyo Tech have a lot to contribute

Conclusion

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May 29 2008

Contact Information

Your comments are most welcome! ..

as are interesting cases - in Japan or other countries - that youare familiar with and/or that we might examine together.

Murray Metcalfe

[email protected]

Building I-4, Room 103, Tokyo Tech

090-6094-9238 (Japan mobile, until 6/15/08)1-617-633-0041 (US mobile, after 6/15/08)

Conclusion

metcalfe may 29 08 talk version of 5-28-08

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