Cleantech venturing performance, players and potential Presentation to Environmental Finance Worksho

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Cleantech venturing - performance, players
and potentialPresentation to Environmental
Finance WorkshopDecember 9th 2004

• Prepared by Nicholas Parker, Chairman

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Presentation Outline

• Venture Capital Cleantech Defined
• Cleantech Venture Network
• Cleantech Trends By the Numbers
• The opportunity in cleantech
• Venture grade returns
• The industry drivers
• The players
• Summary
• Cleantech Venture Network/WBCSD collaboration

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Venture Capital Defined

• Funds made available for startup firms and small
  businesses with exceptional growth potential.
  Managerial and technical expertise are often also
  provided.
• Businesses are typically technology-intensive,
  such as IT, telecom or biotech.
• Capital invested is usually in the form of
  preferred shares
• VC funds are raised from pension funds, insurance
  companies, banks, corporations and wealthy
  families
• VCs are angels, professionals and corporations
• VCs seek to exit deals via IPOs or trade sales
• Silicon Valley in northern CA is the epicentre
  although now a global phenomenon

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Cleantech 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.

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Cleantech the Sustainable Venturing
Opportunity

• 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
  efficient
• Offer greater service utility per unit of
  material input
• Enable virtually zero waste and/or emissions

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Cleantech Industry Segments

• Energy Generation
• Energy Storage
• Energy Infrastructure
• Energy Efficiency
• Transportation Logistics
• Water Purification Management

• Air Quality
• Materials Nanotechnology
• Manufacturing/Industrial
• Agriculture Nutrition
• Enabling Technologies
• Materials Recovery Recycling
• Environmental IT

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Cleantech Thematic Segments
Clean Energy
Cleaner Production
Clean Water
CONVERGENCE CONVERGENCE
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.
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Cleantech is not Envirotech

• Envirotech
• 1970s-80s
• Regulatory driven market
• Compliance-based purchasing
• End-of-pipe tech, e.g. scrubbers on smoke
  stacks
• Chemical science
• Traditional engineering
• Slow growth markets, e.g. waste management
• Save the world mentality
• Low IT use

• Cleantech
• mid 1990s -
• Economic market drivers
• Productivity-based purchasing
• Front-of-pipe tech, e.g. zero emission plants
• Biological materials science
• Systems design engineering
• Rapid growth markets, e.g. solar energy
• Entrepreneurial mentality
• High use of IT

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Cleantech 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

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Our 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
• 5 Full-time employee equivalents hiring 2-3
  additional employees.

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Current 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

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Accomplishments

• Met all key targets in founding business plan.
• 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, VCJ
• Sophisticated website, offering member services
• High-profile venture advisory board
• Currently expanding into Europe with first Forum
  planned for Spring 2005 in Paris

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Accomplishments by Numbers

• 130 full members with gt3.5 billion in assets
  focused on cleantech venturing, as well as over
  400 affiliate members
• Reported on more than 3.0B in cleantech venture
  investments since beginning of 2002
• Identified approximately 480 investors in 450
  deals
• Directly sourced gt 600 deals for our members
• Profiled 103 pre-qualified investment
  opportunities at our Venture Forums
• More than 1000 investor attendees at Forums
• Over 250M raised to date by presenting companies
• Avg. 250,000 hits per month on cleantechventure.co
  m

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Corporate Members

• Ingersoll Rand
• Henkel
• Hydro Quebec Capitech
• Intel Capital
• Lubrizol Corporation
• Mitsubishi International
• Norsk Hydro Ventures
• OPG Ventures
• PwC
• RBC Technology Ventures
• RWE Dynamics
• Southern California Gas
• Trans Pacific Petroleum
• Unilever Ventures
• and others

• ABB New Ventures
• BASF Venture Capital
• Boeing Tech Ventures
• Cinergy Ventures
• CH2M Hill
• Chevron Texaco Ventures
• DTE Energy Ventures
• Eastman Ventures
• EBARA
• Electricite de France
• ENCANA
• EPCOR
• Fuji Research
• GE Energy
• Honda Research

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Investor Members (Partial List)

• Specialist Funds
• Global Environment Fund
• NGEN Partners
• Enertech Capital
• Rockport Capital
• Nth Power
• SAM Private Equity
• Expansion Capital
• Perseus LLC
• Odyssey Venture Partners
• Ventures West
• Braemar Energy Ventures
• Quantum Leap Company

• Mainstream Funds
• Kleiner Perkins Caufield Byers
• VantagePoint Venture Partners
• Draper Fisher Jurvetson
• Technology Partners
• Ventures West
• CDP Capital
• Garage Technology Ventures
• Bessemer Venture Partners
• Arch Venture Partners
• Carlyle Group

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Upcoming Events - 2005

• Cleantech VI March 2005 - San Francisco
• 500 investors expected to attend
• Opportunity for significant LP and MNC
  participation
• Cleantech VII May 2005 - Paris
• Launch of Cleantech Europe
• European Advisory Board
• Cleantech VIII September 2005 - Boston
• Our first visit to Boston
• Cleantech IX December 2005 - Shanghai
• Launch of Cleantech Asia
• Asia Advisory Board

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Cleantech Venture Monitors

• In Each Issue
• Cleantech Investments Monitored
• Cleantech Investments Profiled
• Clean Capital Stories
• Venture Activity
• Clean Bulletin Board

3 billion in deals tracked!
Established reference for media and other
stakeholders on cleantech venture industry
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On-line Investment Opportunities

• Available to Member Investors
• Comprehensive inventory of clean technology
  investment opportunities
• Have sourced over 500 deals to our Members
• Full search capability on-line
• By segment, stage, geography, capital raise,
  posting date, etc.
• Download or view full executive summaries
• Email notification of companies of interest
• Timely and efficient delivery
• Due diligence assistance
• Identify competitors, competing or complementary
  technologies, potential partners, etc.

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Pioneering 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 will provide 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

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Cleantech Achieving Competitive Venture
Returns Report

• The most comprehensive investigations of
  cleantech investment performance to date
• Covers over 75 initial public offerings and 650
  MA transactions - with total value of over 94
  billion - across a dozen industries, a score of
  countries and a quarter of a century
•     Provides evidence investors in
  privately-held cleantech companies have been able
  to achieve liquidity.
•     Documents instances in which shareholders
  exited their investments with venture-grade
  returns.
•     Indicates returns to cleantech investors
  over the past decade have matched or exceeded
  average venture returns across all sectors during
  the same period.

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Returns Report in Numbers

• Exits have been available both through public
  offerings and trade sales
• Past 10 years, overall VC returns have been 26,
  in cleantech it is nearly 30
• Cleantech IPOs yielded returns to pre-IPO
  investor of 5.5x, over 8x in Europe
• Over the past 10 years, cleantech stocks have
  outperformed the SP 500 and Russel 2000
• Overall returns on cleantech MA transactions
  were 4.3x on invested equity, based on over 90
  billion in transactions tracked over the past 2
  decades

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Cleantech Venturing 2002 2004 (Q2)

• Nearly 3b invested in cleantech in the past 10
  quarters
• Approximately 450 unique investors in 400 deals
  over 2002-2003
• Energy related companies account for 40 of all
  cleantech deals
• Strong pipeline of early stage deals requiring
  follow-on financing
• Geographic dispersal and average deal size
  broadly tracks overall deal activity
• Cleantech now 6th largest venture investment
  category

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Cleantech Investment vs. Overall VC
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Investment by Industry Seg. (Q1 2002 Q2 2004)
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Investment by Energy Industry Segment
for 2002-2003 (est.)
Energy Efficiency,
Energy Storage,
74,320,431, 7
186,398,900, 18
Energy Generation,
Energy Infrastructure IT related
493,589,900, 46
303,918,900, 29
Source Cleantech Venture Network LLC
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Who is Investing?

• More than 450 investors in 400 deals over
  2002-2003
• Small pool of specialist energytech funds
• Small pool of funds specializing in industrial
  and environmental technologies
• Small pool of mainstream VCs with some cleantech
  exposure although a large number researching the
  cleantech space
• Significant pool of corporate VCs
• Emerging institutional and family office interest
• California Green Wave initiative 500M from
  CalPERS and CalSTRS being allocated to cleantech
  ventures.

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Who is Buying?

• 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

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The Opportunity

• The market for cleantech is rapidly developing
• Industrial restructuring
• Scientific and engineering advances
• Changing socio-political values
• Concern for environmental sustainability
• Some clean technology markets are growing at
  compound annual rates of more than 20
• Prospect of products that cost less, perform
  better, and sustainably satisfy human demand
• The impact of cleantech is ubiquitous there are
  large and highly disruptive market opportunities
  emerging
• 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

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The Trends

• A confluence of major tipping point events such
  as 50 a barrel oil, driving a shift toward
  cleaner energy generation and consumption
  patterns
• Increasing interest by major corporations in
  adopting clean technologies to drive productivity
  and reduce waste
• The rise of serial entrepreneurs in the
  cleantech field,
• A leveling of the playing field with the
  bursting of the dot com bubble.
• The rise of China, in particular, as a major
  consumer of resources and source of pollution.
• Continuing improvements in the performance of
  clean technologies

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The Attraction

• Category is not over-invested opportunity to
  get in early
• Low enterprise valuations good multiples are
  achievable
• Lower capital intensity than other categories
• Strong trade exit potential most MA
• Strong and growing global corporate, consumer
  and government demand
• Evidence of rising public market interest
• Pro forma portfolio IRRs equal or better than
  other sectors
• Investors can play a key role by selecting and
  nurturing the potential winners for high
  financial ROI and societal benefits

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The Challenges

• Fostering serial cleantech entrepreneurs
• Building big-small business partnerships
• Building investment syndicates
• Attracting institutional capital
• Gaining recognition as an investment category
• Developing sell-side analyst coverage
• Bringing cleantech to emerging market economies
• Avoiding a mini bubble
• Building linkages between different capital
  suppliers (eg project finance, venture capital
  and equipment leasing)
• Encouraging appropriate public policies

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Summary

• Cleantech is an emerging asset allocation
  category
• Cleantech venturing can help reduce carbon and
  other sustainability risks while generating an
  attractive financial return and a window on
  emerging business models and markets.
• Environmental financiers should allocate 5-7 of
  equity funds to cleantech ventures.
• Toronto and Canada can be global leaders in the
  cleantech arena.

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Thank You!
We welcome your interest and support! www.cleantec
hventure.com