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  • 1. Investor Pitch –The Essence of Telling Your Company’s Story Andrew Chung, Partner, Khosla VenturesCleantech Open Academy 2012, San Jose, California
  • 2. • Venture assistance model • About Lightspeed 6 investing partners, $3B under management • $300M Seed Fund: high-risk, higher-return experiments • $1.05B Main Fund: 50% Cleantech, 50% Info/MedTech "Our willingness to fail gives us the ability and opportunity to succeed2 “ where others may fear to tread.” -Michael Jordan Clean Tech Open Confidential Information
  • 3. …With Green Technologies! UTILITY SCALE AGRICULTURE / GENERATION OTHER Grid-Scale Storage Water PLASTICS & Utility Scale Solar Desalination DISTRIBUTED CHEMICALS Geothermal GENERATION Plasticizers Waste Water Synthetic Distributed Solar Natural Gas Polyurethane Agronomy Nuclear Polyethylene BUILDING Wind MATERIALS PVC Smart grid OTHER LS Glass IA ER Generators Cement AT CO Storage M AL Y Lighting O NC Feedstock Processing IL E Motors CI FI ADVANCED Feedstocks ELECTRICAL Other EF CARBOHYDRATES EFFICIENCY Engines Cellulosic Ethanol Diesel Appliances Gasoline Batteries Homes Butanol Drivetrains CELLULOSI MECHANICAL C ALCOHOL Other Storage EFFICIENCY Hydrocarbons ADVANCED3 HYDROCARBONS Open Confidential Information Clean Tech BATTERIES / OTHER 3
  • 4. Khosla Ventures Green Portfolio UTILITY SCALE AGRICULTURE / GENERATION OTHER Liquid Metal Climate Corporation Battery PLASTICS & Unreal Foods Stion CHEMICALS Sunborne DISTRIBUTED Biodiscovery GENERATION Altarock Cogenra Segetis Nu-Tek Salt Great Point Energy Izar NanoH2O Reluceo TerraPower EchoFirst Solum BUILDING Nordic MATERIALS Varentec OTHER Arcanum LS IA ER Danotek Soladigm AT Calera CO PSP Lightsail M AL Soraa CY Avogy O IL EN Virdia Bidgely CI FI ADVANCED ELECTRICAL EF CARBOHYDRATES Ecomotors Topanga EFFICIENCY Range LS9 Seeo Tula Transonic LanzaTech Coskata Caitin Etagen Amyris Recapping Gevo Mascoma NRG-Dynamix Pellion MECHANICAL CELLULOSI KiOR Sakti3 EFFICIENCY C ALCOHOL Quantumscape ADVANCED4 HYDROCARBONS Open Confidential Information Clean Tech BATTERIES / OTHER
  • 5. AC: At a Glance • My areas of interest – Science: Cleantech & Medtech – IT: Internet, Mobility, Education • 1 of 6 partners at Khosla, also lead China activities • Launched Lightspeed Ventures’ cleantech practice • Bain Capital, TL Ventures, Bain, Trilogy, Wharton, Harvard • Ex-IT entrepreneur: founded startup, sold to public co. (NSDQ: SZYM)5 Clean Tech Open Confidential Information
  • 6. What to present to a VC?  0 Mission statement  Operations 4  Sales pipeline  1 Management team  Distribution  Policy/regulatory issues  2 Market  Financials 5  3 Technology  Projections  Overview / value prop  Fundraising needs  Competitive differentiation  Economics For each section, we’ll discuss:  Development timeline What Im looking for Common issues Sample slides6 Clean Tech Open Confidential Information
  • 7. Some ground rules General reminders Your delivery  Know your audience  Enjoy the stage  Be conscious of time  Inspire confidence  Get to the point  Look them in the eye  Simple and clear slides  Don’t overgesticulate  Be ready to jump around a lot  Coordinate team roles before your pitch7 Clean Tech Open Confidential Information
  • 8. A few caveats before we dig in… • Not all VCs look for the same stuff • Cleantech is vast, so different sectors require different emphasis • Sample slides are illustrative and most use dummy data • Presentation order will depend on you8 Clean Tech Open Confidential Information
  • 9. For Starters… Stion: Silicon Efficiency at Thin-film Cost  Highest-efficiency thin-film module in production  Lowest production & capital costs in the industry  Scalable manufacturing with industry-standard equipment9 Courtesy: Stion’s Web site Clean Tech Open Confidential Information
  • 10. Management Team What Im looking for Common issues  Is there a balanced skillset  Homogeneity across team?  Theory over substance  Deep technology expertise  Lack of clarity about recruiting  Industry execution experience needs and timing (emphasis on CEO, VP-level hires)  Entrepreneurial experience10 Clean Tech Open Confidential Information
  • 11. Management Team (Sample) Management Team  Tom Cruise – President & CEO  30 years of executive management and startup experience  C- or VP-level at 5 startups, 3 successful exits (AAA, BBB, CCC) - cumulative value of $300M  MBA, Wharton School; B.S., Materials Science, UC Berkeley  Jack Nicholson, Ph.D. – Founder & CTO  20 years at Sandia National Labs: Photovoltaics Team Lead  Professor, Materials Engineering, Stanford University  Ph.D., Materials Science, M.I.T.; B.S.E., Electrical Engineering, University of Washington  Demi Moore, Ph.D. – VP of Engineering  Applied Films: Head of Engineering, led commercialization of 5 thin-film production lines  Unisolar: Production Manager, Employee #25  Ph.D., Electrical Engineering, University of Toledo; B.S.E., Electrical Engineering, Northwestern  Kevin Bacon – VP of Business Development  Complete Phase II of development  MBA, Duke University; B.S. Electrical Engineering, Stanford  Technical Team: First Solar, Miasole, SunPower, Stanford, Harvard, MIT, Berkeley  Key Hires Needed: COO, CFO, materials engineers11 Clean Tech Open Confidential Information
  • 12. Market What Im looking for Common issues  Does this market support a  Too much time spent explaining $1B+ company? a familiar market  Massive end-markets ($1B+)  Lack of clarity on targeted segments and true addressable  High-growth markets market (it’s all about TAM)  Potential to dominate  Ability for startups to compete12 Clean Tech Open Confidential Information
  • 13. Market (Sample) The solar market has grown at 40%+ CAGR since 2000 $30 $25 $20 $ Billions $15 $10 $5 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E13 Clean Tech Open Confidential Information
  • 14. Market (Sample) Target Industry: Key Addressable Markets Billions of units 51 18 16 100% Product 11 Time-to-market Product 3 Product 8 80 1-2 years Product 7 Product 10 3+ years Product 6 Market Share Product 2 60 Product 5 40 Product 9 Product 1 20 Product 4 0 Product Category 1 Category 2 Category 3 Category Share14 Note: Dummy data used Clean Tech Open Confidential Information
  • 15. Tech: Overview What Im looking for Common issues  What is the product or service  [25 mins into your that you’re offering? presentation] “What is it you do again?”  Concise, but sufficient background  Not tailoring the technical depth for your audience and  Technology that is IP-rich and stage of meeting defensible  Clear value prop to customer15 Clean Tech Open Confidential Information
  • 16. Tech: Overview (Sample)16 Courtesy: GreatPoint Energy’s Web site Clean Tech Open Confidential Information
  • 17. Tech: Overview (Sample) Process Advantages  Produces methane in a single step and in a single reactor  Pipeline grade product  No need for external water gas shift reactor  No need for external methanation reactor  Produces CO2 as a valuable sequestration-ready byproduct  Significantly reduces operating temperature  Lower cost reactor components  Lower maintenance costs and higher reliability  Eliminates costly high termperature cooling  Utilizes steam methanation  Eliminates costly air separation plant  High efficiency  65% overall efficiency  Thermally neutral reaction process  No need for integrated power plant17 Courtesy: GreatPoint Energy’s Web site Clean Tech Open Confidential Information
  • 18. Tech: Differentiation What Im looking for Common issues  How is your offering different?  Another “me too” technology  Tech approach  Assuming your approach is  Product performance unique  Cost economics  Stage of development  Thoughtful understanding of competition18 Clean Tech Open Confidential Information
  • 19. Tech: Differentiation (Sample) Energy Storage Competitive Landscape Alpha Our Company Gamma Increasing Energy Density Beta Omega Sigma Tau Delta Epsilon Increasing Power Density19 Note: Dummy data used Clean Tech Open Confidential Information
  • 20. Tech: Economics What Im looking for Common issues  Does your product/service  Industry costs are moving make economic sense? targets  Production costs  Not understanding sensitivities  Capex associated with feedstock price changes, subsidy changes, etc.  For “incremental” tech (e.g., ethanol), ability to compete with existing alternatives  For “displacement” tech (e.g., thin film), ability to achieve significant cost improvement20 Clean Tech Open Confidential Information
  • 21. Tech: Economics (Sample) Our costs will be competitive with existing fuels Production cost $3/gge $2.8 $2.5 Processing 2 $1.9 Feedstock $1.5 $1.3 Cost level with $1.2 current tax credit 1 0 Wholesale Soy-based Corn-based Today (Lab) Pilot Commercial @ $50/bbl Biodiesel Ethanol (Q3 08) (Q4 10) Existing fuels Our technology Note: gge = “gallon gasoline equivalent”21 Note: Dummy data used Clean Tech Open Confidential Information
  • 22. Tech: Development Timeline What Im looking for Common issues  What is your future  Long time-to-market (3+ years) development roadmap?  Lengthy “design-in” time  Technical progress made to date requirements  Key future milestones and risk  Dependence on other emerging assessment technologies  Key capital equipment required and scale-up needs  IP portfolio development plan22 Clean Tech Open Confidential Information
  • 23. Tech: Development Timeline (Sample) Development Roadmap 2012 2013 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Yield  Sub-10%  10-25%  25-50%  50-95% Capacity Scale-up  5L pilot  20L pilot Commercialization  10K L production  100K L production23 Clean Tech Open Confidential Information
  • 24. Ops: Sales and Distribution What Im looking for Common issues  What is your go-to-market  Sales cycles that are too long strategy? (esp. for utilities or local governments)  Review of sales pipeline and notable customers  Long payback time / limited ROI for end-customers  Potential engagement with relevant channel partners  Fragmented customer base24 Clean Tech Open Confidential Information
  • 25. Ops: Sales and Distribution (Sample) Current Sales Pipeline Target Customer Potential Deal Likelihood In discussion with Alpha Energy $2,000,000 Med key distribution Beta Utility $1,000,000 High partners Gamma Industrial $800,000 Med Delta Energy $750,000 High Epsilon Utility $600,000 Low Pi Industrial $500,000 Med Theta Energy $300,000 High Nu Utility $300,000 Low Rho Industrial $300,000 High Sigma Energy $200,000 High Tau Utility $150,000 High TOTAL POTENTIAL $6,900,00025 Clean Tech Open Confidential Information
  • 26. Ops: Policy/regulatory Issues What Im looking for Common issues  What key government policies  Business models dependent on: or regulations drive your  Short-term policy windows business?  Pending legislation  Subsidies  It’s all about the stimulus  Tax credits package!  Emissions credits  Compliance laws  Understanding of how they will evolve over time  Associated risks and sensitivities26 Clean Tech Open Confidential Information
  • 27. Financials: Projections What Im looking for Common issues  What does your financial plan  Too aggressive look like?  Too conservative  Any recent historical results  Not knowing how sensitive  3-5 year forward projections financials are to externalities  Simple P&L  Headcount  Timing for cash flow breakeven  Any debt assumptions27 Clean Tech Open Confidential Information
  • 28. Financials: Projections (Sample) Financial Plan $80M 100% Revenue Operating Margin Gross Margin % 60 80 40 60 20 40 0 20 2007 2008 2009 2010 2011 2012 2013 -20 0 Headcount 6 10 15 25 45 75 120 Cash Flow ($M) -1.5 -3.5 -5.3 -7.0 1.2 7.7 17.228 Note: Dummy data used Clean Tech Open Confidential Information
  • 29. Financials: Fundraising Needs What Im looking for Common issues  How much do you need to raise  Large initial rounds with limited and why? proof points  Funding history  Lack of flexibility in round structure  Total target raise  Amount available for new VC’s  Use of proceeds and achievable milestones  Board seat expectations  Valuation expectations29 Clean Tech Open Confidential Information
  • 30. Financials: Fundraising Needs (Sample) Series B Financing  Funding history  Seed (6/07): $500K – angel investors  Series A (6/08): $2.5M – Alpha Capital, Beta Ventures  Series B financing: $12-15M target equity, $2-5M add’l debt  Insiders to take $2-5M  Expect 2 investors (1 financial, 1 strategic), each with board seat  Targeted milestones  Complete Phase II of development  2 MW pilot line completed  Secure initial distribution partners  Recruit top-tier CEO  Carry company through end of 201030 Clean Tech Open Confidential Information
  • 31. Now it’s your turn…  0 Mission statement  Operations 4  Sales pipeline  1 Management team  Distribution  Policy/regulatory issues  2 Market  Financials 5  3 Technology  Projections  Overview / value prop  Fundraising needs  Competitive differentiation  Economics Parting thoughts:  Be passionate Development timeline Be confident Be open to new ideas31 Clean Tech Open Confidential Information
  • 32. GOOD LUCK!Andrew Chung, Partner ac@khoslaventures.com