The Ideal “Green” Business Plan:

A Venture Capitalist’s Perspective

Presentation at the BYOBSpring 2011

Po Chi Wu, Ph.D.Adjunct ProfessorHKUSTSpring 2011

What is business planning?

On-going process

Why write a business plan?

Who will read it?

Why will they read it?

After reading it, what will they do?

After feedback, how will your plan change?

“Green” Businesses

How are “green businesses” different?

More stakeholders

More complicated - multi-disciplinary

Longer-term

More costly

Different investor mentality

Higher uncertainty (of ROI), higher risk

What is “Ideal”?

Powerful, inspiring Vision & Mission

Experienced, committed TEAM

Outstanding “partnerships”

Proprietary tech/business model

Strong government support/alignment

Patient investors

Solid Resources, Processes, Values

Top Sectors in 2010

Solar accounted for 24% ($1.83 billion) of total

Transportation (17%, $1.35 billion)

Energy Efficiency (14%, $1.05 billion). Measured by number of deals, was most popular sector (21% share, 151 deals) followed by Solar (16% share, 117 deals).

N. America accounted for 68 percent of total invested, 21% for Europe & Israel, 10% for Asia

US VC Investment in Cleantech

2010 US VC investment reflected a turning point in the industry due to improving credit and capital markets, the deployment of stimulus spending and increasing corporate cleantech adoption

Increased by 8% to $3.98B in 2010 from $3.7B in 2009 and deal total increased by 7% to 278

Investments by Segment

Energy/Electricity Generation segment - $1.32B in 2010

Solar increased by 77% to $1.58B

In Q4 2010 solar investments reached $279.17M

Largest - Abound Solar, Fort Collins, CO, provider of photovoltaic modules, raised $111.18M

SoloPower Inc. of San Jose, CA, a solar cell developer, raised $51.57M

Industry Products and Services - 79% year on year increase, raised $1.24B through a total of 80 deals in 2010

Investments in 2010

In 4Q - $355.84M, including $100M in Elevance Renewable Sciences Inc., of Bolingbrook, IL, a provider of specialty chemicals derived from natural oils, and $80M in SAGE Electrochromics Inc. of Fairbault, MN, a provider of electrochromic smart window products

Electric vehicles (EV) and charging stations - $695.17M, e.g., $350M in Better Place, Fisker Automotive, and Coda Automotive, Inc.

EV coalescing ecosystem: utilities, big box retailers, rental car and battery storage,”e.g., Panasonic invested $30 M in Telsa Motors.

Investments in 2010

Energy Efficiency segment dropped 9% from 2009 to 2010, to $688.99 million through 68 deals

In Q4, OPOWER, Inc., of Arlington, VA, an energy consumption technology provider raised $50M

Seed stage – $477M in 18 deals, averaging $26.5M each (8 in 2009)

Second rounds accounted for $1B

Exits in 2010

Globally, cleantech IPOs raised $16.3B for 93 companies

China accounted for 68% (63) of the IPOs completed and 61% ($10.0 billion) of the total amount raised

China Goldwind, the Xinjiang-based wind turbine manufacturer raised $917M on the Shenzhen Stock Exchange

3 IPOs in US: Amyris, Tesla  Motors and Codexis, Inc.

M&A totaled an estimated 716 transactions in 2010, of which totals were disclosed for 203 transactions totaling $36.0 billion

Issues to Watch Out for…

Over-optimistic, idealistic (wishful) thinking

Timing

Alignment

People (cross-industry culture)

Financing model (payer/beneficiary)

“Resistance”

Accelerating rate of change – driven by China

How to Proceed?

Comprehensive preparation to understand complexity

Extensive networking – cultivate relationships

“Problem-solving” => “innovation” in all domains

PASSION & CURIOSITY MUST GROW

Hot Trends for 2011

1.  Sustained worldwide VC investment

2.  Venture capital will continue to cede importance to corporate and non-institutional capital

3.  A return to early stage venture investments

4.  Energy efficiency emerges as the clear rock star of cleantech

5.  Biofuel investment could reach former highs

Hot Trends for 2011

6.  Nuclear surprises, but not in U.S.

7.  Recycling and mining will attract more investment

8.  Natural gas emerges to threaten solar and wind for utility renewable power generation

9.  China becomes the most important market for cleantech: if you're not selling in China, you won't matter

Source:  http://www.globe-net.com/articles/2010/december/3/predictions-for-cleantech-in-2011.aspx