20110722 Usvc Portfolio English

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  • 1. An Analysis of US Venture Capital Investment Trends in Cleantech Startups July 22, 2011 ⓒ 2011 insprout Corporation. All rights reserved
  • 2. Table of Contents1. What is Smart Grid?2. Smart Grid Associated Technologies3. US Venture Capitals • Investment Trends • Portfolio Analysis4. Implications for Japanese Cleantech Startups5. Conclusion 2 ⓒ 2011 insprout Corporation. All rights reserved
  • 3. IntroductionPurposeWe analyze each portfolio of the selected US venture capitals. Indoing so, we sort those startups into some categories based ontechnologies such as Renewable Energy and Energy Management.We then evaluate opportunities for Japanese cleantech startups.Conclusion1. VC investment concentrates on “Energy production”, “EgergyManagement Systems (EMS)”, and “Batteries.”2. For Japanese cleantech startups, it seems that “Demand Side” ofSmart Grid presents more business opportunities than Supply sidedue to the following three reasons: direct contact to consumers,technological overlaps, and required capital. 3 ⓒ 2011 insprout Corporation. All rights reserved
  • 4. 1. Smart Grid’s Concept 4 ⓒ 2011 insprout Corporation.Source: Toshiba Home Page All rights reserved
  • 5. 1. A Defenition of Smart Grid A “smart grid” is a set of software and hardware tools that enablegenerators to route power more efficiently, reducing the need forexcess capacity and allowing two-way, real time informationexchange with their customers for real time demand side management(DSM).*SMART 2020: "Enabling the low carbon economy in theinformation age" Global Sustainability Initiative From a business perspective, we need to divide the composition elements of smart grid into some meaningful classifications. 5 ⓒ 2011 insprout Corporation. All rights reserved
  • 6. 2.Technical Domains of Smart Grid Generation Transmission Distribution Consumption 1 2 3 Energy Consumption Energy Production Monitoring&Control of System Power Supply 1) Renewable Energies 4) Wide Area Monitoring System 5)Distribution Automation 6) EMS 2) Alternative Energies 7) EV 4 Effective Operation of System Power Supply 3)Fossil Fuel Efficiency 8) Recycle 10)Superconducting Transmission 9) Energy Saving 11) Power Electronics Applied Equipment 5 Advanced Interface Technologies 12) AMI・Smart Meter 13) Power Conditioner Technologies 6 Energy Storage 14) Energy Storage Technologies 6 ⓒ 2011 insprout Corporation.※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved
  • 7. 2. Six Main Technological Domains of Smart Grid(LEV1) Technological Description Companies Domain Includes renewable energies and bio fuels. It also includes fossil fuel Sharp, Kyocera①Energy Production efficiency. Difference in business structures such as manufacturing solar BrightSource Energy panels and operating a power plant are not taken into account. Altarock Energy②Monitoring&Control Refers to monitoring & control technology used at central load dispatching Toshiba, GE,of System Power Supply center and local transformer substations. SIEMENS Refers to various technologies that control energy consumption of consumers. IBM, EnerNOC、③EnergyConsumption It includes HEMS, FEMS, BEMS, and Demand Response. It also includes Tendrill, Opower, EVs and affiliated technologies such as V2G. Tesla④Effective Operation Refers to technologies that concern effective and flexible operation of system Sumitomo Electric,of System Power power supply. It includes such technologies as superconducting transmission, ABBSupply ultra‐high voltage power transmission, and power electronics. Refers to advanced interface technologies that connect between distributed Siver Spring Networks,⑤Advanced InterfaceTechnologies generation and system power supply. It deals with sending & receiging Itron, Landis+Gyr, information and include such things as smart meters power conditioners. Mitsubishi Electric Panasonic,⑥Energy Storage Refers to energy storage technologies such as batteries. NGK Insulators 7 ⓒ 2011 insprout Corporation.※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved
  • 8. 2. Fourteen Sub Technological Domains of Smart Grid(LEV2-1) Technological Domain Description Companies Renewable enegies(photovoltaic generation, solar thermal power, wind power, geothermal Sharp, Kyocera①Energy Production power, etc). Business structures such as manufacturing solar panels and operating a BrightSource Energy1) Renewable Energies power plant are not taken into account. Altarock Energy①Energy Production Amyris Biotechnologies Bio Fuels (ie. Ethanol), and their affiliated businesses2) Alternative Energies Mascoma, Gevo, KiOR①Energy Production Fossil fuel efficiency technologies such as decreasing CO2 emission, and conversion GreatPoint Energy3) Fossil Fuel Efficiency technologies to natural gas. Luca Technologies②Monitoring&Control Monitor & control of system power supply such as PMU (Pharos Measurement Unit)collectsof System Power Supply data of electric current & voltage and thus monitoring the conditions of system power supply. Toshiba, GE, Siemens4) WASA It controls system power supply optimally, and deters & prevents the system’s collapse.②Monitoring&Control Monitos electric current and voltage running through distribution lines and electricof System Power Supply power substations, automatically controls the swich of distribution lines, and therefore Toshiba, GE, Siemens5) Distribution Automation increases the reliability of distribution lines as well as softening maintenance work.③Energy Consumption Process of managing the consumption of energy, generally to optimize available and EnerNOC, Tendrill,6) EMS Techonologies planned generation resources. It includes HEMS, BEMS, FEMS, and Demand Response. Opower③Energy Consumption Tesla, Fisker Automotive Refers to EVs. It also includes affiliated technologis such as V2G and G2V.7) EV Better Place 8 ⓒ 2011 insprout Corporation.※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved
  • 9. 2. Fourteen Sub Technological Domains of Smart Grid(LEV2-2) Tenonological Domain Description Companies ③Energy Consumption Lehigh Technologies, 8) Recycle Various recycling technoclogies, including financial services. RecycleBank Various energy saving devices & services such as LED lighting. ③Energy Consumption Luminus Devices 9) Energy Saving It also includes improving existing automobiles (development of low CO2 SeaMicro, Caitin emission engines). ④Effective Operation Uses direct current for the bulk transmission of electrical power, in contrast of System Power Supply 10) Superconducting with the more common alternating current systems. For long-distance Sumitomo Electric, ABB Transmission transmission, it may be less expensive and suffer lower electrical losses. ④Effective Operation Refers to Electric voltage control by reactive power control and Electric of System Power Supply current control of distribution lines by impedance changes in distribution 11) Power Electronics lines. ⑤Advanced Interface Monitors & measures electricity demand, send the data using IT Siver Spring Networks, Technologies technologies periodically. Sometimes equipped with the capability to Itron, Landis+Gyr 12) AMI control household appliances. ⑤Advanced Interface Conversion technologies from DC to AC. Technologies We expect to see the rise of this technology along with the increase in Sharp, Kyocera 13) Power Conditioner distributed generation. ⑥Energy Storage Used both sides of smart grid: both supply side and demand side need Panasonic, 14) Batteries batteries to even out generation. NGK Insulators 9 ⓒ 2011 insprout Corporation.※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved
  • 10. 3. US Venture Capitals’ Investments (Unit: Million) $4,500 20% $3,987 $4,000 $3,668 18% $3,500 17.67% 16% 13.91% 15.77% 14% $3,000 $2,605 10.95% 12% $2,500 $2,122 10% $2,000 $1,647 8.59% 8% $1,500 6.30% $1,038 6% $1,000 4% $500 2% $- 0% 2006 2007 2008 2009 2010 Q1 2011 Amount Invested (Cleantech) Cleantech % in Overall Invest Between 2006 and 2010, Cleantech Investments increased at CAGR 22% *In Q1 2011, investment equals that of Web companies 10Source: National Venture Capital Association
  • 11. 3. Venture Capitals Active in Cleantech Investment Venture Investor # deals Draper Fisher Partners 16 Chrysalix Energy Venture 16 Capital Kleiner Perkins Caufield & Byers 12 We select these three firms, Carbon Trust Investment Partners 12 plus Nth Power specialized Element Partners 12 in cleantech investment for Emerald Technology Ventures 10 our research. RockPort Capital Partners 10 Good Energies AG 10 Vantage Point Venture Partners 10 Khosla Ventures 8 SET Venture Partners 8 11 ⓒ 2011 insprout Corporation.Source: Cleantech Group All rights reserved
  • 12. 3. Investment Analysis Based on Technological Domains of Smart Grid (LEV1-1) (Unit: Deal) 70 :# of deals 60 60 :# of deals over $100M 50 40 31 30 18 20 13 15 10 4 3 0 2 2 0 0 0 0 0 Others Monitoring&Control Energy Storage Advanced Interface Effective Operation Energy Production Consumption of System Power of System Power Energy Technology Supply Supply Energy Consumption takes up about 50% of VC investment. Almost zero investment in System Power Supply. 12 ⓒ 2011 insprout Corporation.Source: From VCs’ publicly available portfolios. All rights reserved
  • 13. 3. Investment Analysis Based on Technological Domains of Smart Grid (LEV1-2) Number of Investment Number of Investment Over $100M LEV 1 Total LEV1 KPCB Nth DFJ Khosla KPCB Nth DFJ Khosla # Invest # Over $100MEnergy Production 16 11 14 19 8 0 4 6 60 18Energy Consumption 8 7 11 5 2 0 2 0 31 4Energy Storage 3 0 6 4 0 0 0 0 13 0Advanced Interface Technology 2 0 1 0 1 0 1 0 3 2Effective Operation of System Power Supply 1 0 0 1 0 0 0 0 2 0Monitoring&Control of System Power Supply 0 0 0 0 0 0 0 0 0 0Others 0 5 1 9 0 0 0 0 15 0Total 30 23 33 38 11 0 7 6 124 24 No noticeable differences among VCs and their investment trends at LEV 1. Investment deals for energy production tends to be big! About 30% of Energy Production deals are over $100M deals (cumulative amount of capital raised). 13 ⓒ 2011 insprout Corporation.Source: From VCs’ publicly available portfolios. All rights reserved
  • 14. 3. Investment Analysis Based on Technological Domains of Smart Grid (LEV2-1) (Unit:Deal) :# of deals 35 :# of deals over $100M 30 30 25 20 20 16 15 15 13 10 10 8 8 6 4 4 32 5 1 1 22 10 2 0 0 00 0 00 00 0 0 A EV S in g g ies rs y s s s er s ion vin AS ion EM gi e nc er nic gi e he ion cl er et at Sa cie i ss W er Ot er ro cy tt tM dit m En En ct Ba ffi Re sm y to on g le lE ar Au er b le an ive rE rC Sm ue En Tr wa at ion we we il F I/ rn g ne ut AM Po in Po te ss Re ct rib Al Fo du st on Di rc pe Su VCs’ investment concentrates in Energy Production, EMS, Batteries, taking up 72% of the overall investment. 14 ⓒ 2011 insprout Corporation.Source: From VCs’ publicly available portfolios. All rights reserved
  • 15. 3. Investment Analysis Based on Technological Domains of Smart Grid (LEV2-2) Number of Investment Number of Investment Over $100M LEV 1 Total LEV1 LEV2 KPCB Nth DFJ Khosla KPCB Nth DFJ Khosla # Invest # Over $100MEnergy Production Renewable Energies 7 7 8 8 4 0 3 1 30 8 Alternative Energies 5 2 4 9 2 0 0 4 20 6 Fossil Fuel Efficiency 4 2 2 2 2 0 1 1 10 4Energy Consumption EMS 5 6 5 0 1 0 0 0 16 1 Energy Saving 0 1 2 5 0 0 1 0 8 1 Recycling 2 0 2 0 0 0 0 0 4 0 EV 1 0 2 0 1 0 1 0 3 2Energy Storage Batteries 3 0 6 4 0 0 0 0 13 0Advanced Interface Technology AMI/Smart Meters 1 0 1 0 1 0 1 0 2 2 Power Conditioner 1 0 0 0 0 0 0 0 1 0Effective Operation of System Superconducting Transmission 0 0 0 0 0 0 0 0 0 0Power Supply Power Electronics 1 0 0 1 0 0 0 0 2 0Monitoring&Control of System WASA 0 0 0 0 0 0 0 0 0 0Power Supply Distribution Automation 0 0 0 0 0 0 0 0 0 0Others Others 0 5 1 9 0 0 0 0 15 0Total Total 30 23 33 38 11 0 7 6 124 24 Noticeable differences among VCs and their investment areas. →Khosla clearly focuses on energy production while zero investment in the area of EMS. Very few over $100M deals for investments in EMS and batteries. (1 out of 29 deals) 15 ⓒ 2011 insprout Corporation. Source: From VCs’ publicly available portfolios. All rights reserved
  • 16. 3. Summary of US VCs’ Investment Trends Investment concentrates in Energy Production, EMS, and Batteries. Energy Production:Various policies and governmental aids enacted to create demands for such energies. EMS: US smart grid was envisioned to avoid huge investment required to replace old distribution lines, emphasizing demand control. Batteries: Batteries are used all phases of smart grid: Generation-Transmission-Consumption. On the other hand, almost zero investment was made into such technological domains asMonitoring&Control of System Power Supply or Superconducting Transmission. Dominated by large companies such as GE, Siemens and Toshiba with long history of joint development with electric companies. While investments deals in energy production tend to require huge capital (over$100M), this is not the case for those of EMS and batteries. 30% of investment deals in energy production are over $100M deals. Only 1 deal out 29 is an over $100M deals in EMS and batteries. 16 ⓒ 2011 insprout Corporation.¹State of California mandates that 33% of electricity must be produced by renewable energies by 2020. All rights reserved
  • 17. 4. Implications for Japanese Cleantech Startups ( Supply Side(Generation- ( Demand Side(Consumption)) ) Transmission-Distribution) Technological Domains Technological DomainsRenewable EnergiesAlternative Energies EMSFossil Fuels EfficiencyWAMSDistribution AutomationSuperconducting Transmission < AMI・Smart Meters EV Recycle Energy SavingBatteries BatteriesPower ElectronicsPower ConditionersHypothesis: Demand side of smart grid (especially red-fonted domains) may present more business opportunities for startups than supply side of smart grid. 17 ⓒ 2011 insprout Corporation. All rights reserved
  • 18. 4. Analysis of Hypothese ~1~Smart Grid = Internet of Power NetworkEspecially technological & service domains of EMS are thosedirectly contact with consumers. Power shift from supply side to demand side would occur, once every consumer in would produce and consume energy, becoming so-called prosumers of energy. Nega-watt (savings from energy saving) and Posi-watt (generation from renewable such as PV) would connect to EMS, enabling electricity trade. This new environment, so-called “You Energy (everyone can produce & consume energy)” would create a new paradigm that would foster innovation, growth and employment, incentivizing businesses¹. 18 ⓒ 2011 insprout Corporation.¹Source: Toshiharu Kato, “Smart Grid Revolutuon.” All rights reserved
  • 19. 4. Analysis of Hypothese ~2~Engineering skill sets needed in the Demand Side overlap with those in IT industry.Most IT companies can enter the Demand side with marketing strategies tailored forthe energy industry.Backgrounds of Executives in Smart Necessary skill sets of Grid Companies Smart Grid Engineers Others 12% 、 Renewable Energies (PV, wind power、Geothermal power) ) IT Hardware Additional Telecom skills 30% 8% Electrical Engineering (circuit, etc) ) Finance 6% Network Technology (WAN, LAN, etc ) Skill sets that Control & Communication Technology of Smart Appliance IT engineers Energy 19% already have IT Software WEB Application Technology 25% (e-commerce, power consumption management software) Majority have IT industry backgrounds Similar technological skill sets Source:Greentech Grid “Smart Grid2.0: the Soft Grid” Source:http://engineer.typemag.jp/slive/2011/05/-se5.php http://www.greentechmedia.com/articles/read/smart-grid-2.0- the-soft-grid1/ 19 ⓒ 2011 insprout Corporation. All rights reserved
  • 20. 4. Analysis of Hypothese ~2~ Supply side businesses such as Energy Production tend to requirelarge amount of capital. Average investment size of Japanese VCs is between $1M and $3M, raising the financial bar for Japanese startups to enter the supply side of smart grid. 20 ⓒ 2011 insprout Corporation. All rights reserved
  • 21. 5. Conclusion US VCs’ investment concentrates in the three technologicaldomains: Energy Production (renewable & alternative energies,fossil fuel efficiency), EMS, Batteries. On the other hand, somedomains receive no investment, a great split. About 30% of Energy Production are over $100M deals,requiring huge amount of money to run business. This is not thecase in the other two domains, EMS and Batteries. Demand side of smart grid seem to present more businessopportunities than supply side due to the following three reasons:“direct connections to consumers,” “technological affinity with ITtechnology,” and “required capital. 21 ⓒ 2011 insprout Corporation. All rights reserved
  • 22. TO BE CONTINUEDWe will analyze in detail various EMS technologies and companies in those domains 22 ⓒ 2011 insprout Corporation. All rights reserved