Posts Tagged by venture capital
Investment Opportunities in Renewable Energy and Electric Transportation
| September 24, 2011 | Posted by Craig Shields under Renewables - Business |
Wanted: Solid Cleantech Business Plans
| August 5, 2011 | Posted by Craig Shields under Renewables - Business |
I’d like to re-extend an offer I made a year or so ago: If you’re trying to raise capital for a cleantech business from angel investors, venture capitalists, or private equity, and want objective feedback on your business plan (in any stage of formality), please send it to me. I’ll get right back to you with my honest opinion of your project – along with constructive suggestions for improvement you may want to consider.
Now in truth, I don’t want to see just any business plan. I would prefer that, in addition to its merely pertaining to cleantech, that it meet as many of the following features as possible:
1) Try to make it a game-changer. Is this an idea that has a very large available market? Does it offer a unique and obvious advantage over current solutions?
2) Demonstrate a market position that offers an opportunity for domination – or at least stability. Have you put yourself in a position where you’re likely to be usurped by large, powerful competitors? Perhaps you could own a market niche that is very unlikely to be challenged – at least for the foreseeable future.
3) Showcase the strength/quality of the team. At the end of the day, an investor has to walk away believing that you’re smarter than the other people who may be having similar ideas.
4) Present a solid marketing strategy. A good business plan contains a good marketing plan; “Build it and they will come” is fallacious business thinking. How are you going to identify customer segments, and tell them your story in a clear, compelling way?
5) Understand what to expect from government. Most of the boom and bust cycles we’ve seen in cleantech to date have been driven by the rise and fall of incentives, subsidies, tax equity, loan guarantees, etc. Where is the wind blowing in government? How does that affect your trajectory for success – and your strategy for dealing with the uncertainties that come from each new election cycle? Can you succeed internationally, even if the US continues to drag its heels?
Again, I look forward to reviewing your ideas, and adding any value I feel I can.
2GreenEnergy Video Report – Raising Investment Capital for Clean Energy Companies
| April 9, 2011 | Posted by Craig Shields under Renewables - Business |
In this episode of the 2GreenEnergy Video Report, host George Alger interviews me on my trip to visit Kleiner Perkins, the legendary venture capital firm, and what I learned about the process of raising money for clean energy firms.
Venture Capital, Renewable Energy, and an Amusing Moment in Time
| February 26, 2011 | Posted by Craig Shields under Renewables - Business |
I had an amusing experience the other day that I thought I’d share. I was making a phone call to the administrative assistant of a senior partner in a venture capital firm, trying to squeeze in a moment to make a pitch for a certain client whose clean energy solution I happen to favor. A woman picked up the phone and said, “This is April, may I help you?”
I said, “Yes, April, you may. But first, let me tell you that what you just said was the first sentence I’ve ever heard that used two consecutive months of the year – consecutively in the sentence: April and May.”
“Oh my goodness!” she exclaimed. I’ve been saying that for years and never noticed.”
“All right!” I responded. “Now, if you want to set a record that will probably never be broken, here’s a suggestion. When you hire yourself an assistant, hold out for one named June. Then you can say, ‘This is April, may June, my assistant, or I help you?’ Offhand, I can’t think of a way to get ‘March’ in front of all this, but if I think of one, I promise to let you know.”
We had a good laugh about it.
Steve Blank on Capital Formation for Start-Ups
| November 14, 2010 | Posted by Craig Shields under Renewables - Business |
I thought I’d share this terrific article on how the investor market has changed. It cites the founder of Tesla cars and explains how he got millions in investment, in spite of the current venture capital climate.
You’ll travel a long way to find someone more informed on start-ups. Steve Blank is a serial entrepreneur, an angel investor, and teaches entrepreneurship at Stanford and Berkeley.
Here’s another article by Steve on how to launch a start-up.
Renewable Energy and Job Creation
| September 10, 2010 | Posted by Craig Shields under Renewables - Business |
As I’ve mentioned in previous posts, I’m in the process of studying the size and shape of job creation that will come as a welcome by-product of the migration to renewables.
How this sits in the constellation of benefits to renewables depends on whom you ask. But regardless of the level of importance that job creation has compared with national security, fiscal responsibility, the health and safety of the world’s population, and stemming the long-term ecological damage wrought by extracting and burning fossil fuels, it’s got to be in there someplace.
Yet job creation is a very complicated subject, as it comes with so many moving parts:
- What percent penetration of renewables are we talking about? What type? In what time-frame?
- How are market forces affected by the actions of Congress (e.g., removing/perpetuating subsidies that keep the price of oil artificially low, creating incentives for renewables, state legislatures enacting renewable portfolio standards)?
- What’s happening outside the US, where many countries are taking aggressive action to move to renewables?
- What are the strategies of the corporate giants like GE and Siemens in this global economy? From here, it looks like they don’t care where the green jobs are; if the US misses the boat, that’s too bad. Is that true?
- What brown jobs will be lost (e.g., coal mining) simultanously to the build-up of green jobs? Do we have the political stomach to deal with any job loss?
- What will be the impact of all the green job training in the community colleges?
I’ve become particularly interested in the issue of subsidies, as they seem to be so critical in forming the climate in which private investors will climb on board the clean energy bandwagon. But because macroeconomics isn’t my strength, I’m going to have to speak with a great number of economists, analysts, and political pundits to get this right.
It appears that the reason this is so complicated is that subsidies take many forms, some of them (deliberately?) hidden:
- Construction bonds at low interest rates or tax-free
- Research-and-development programs at low or no cost
- Assuming the legal risks of exploration and development in a company’s stead
- Below-cost loans with lenient repayment conditions
- Income tax breaks, especially featuring obscure provisions in tax laws designed to receive little congressional oversight when they expire
- Sales tax breaks – taxes on petroleum products are lower than average sales tax rates for other goods
- Giving money to international financial institutions (the U.S. has given tens of billions of dollars to the World Bank and U.S. Export-Import Bank to encourage oil production internationally, according to Friends of the Earth)
- The U.S. Strategic Petroleum Reserve
- Construction and protection of the nation’s highway system
- Relaxing the amount of royalties to be paid – apparently, we get about 40% of revenues from oil on public land vs. 60% – 65% in most other countries
- Not forcing the industry to deal with the “externalities” – healthcare costs, long-term environmental damage, etc. — costs that are becoming increasingly clear and subject to quantification
If anyone has a suggestion for people I should interview in this regard, please let me know.
Hybrid of Public/Private Financing for Renewables
| March 8, 2010 | Posted by Craig Shields under Renewables - Business |
I wrote not too long ago about the huge, long-term role that the National Renewable Energy Laboratory (NREL), as part of the Department of Energy, plays in supporting the development of clean energy technologies. Their work with solar energy leader Solyndra is a perfect example of a case in which this public support made it possible for a private company to raise critically important addition capital, by preventing their initial private investors from getting scared away. At a certain point, new (very large) rounds of cash were required to get the company to its next level. As I recall, NREL supported this effort to the tune of over $700 million — and this robust commitment showed investors that they weren’t alone in their belief that the company was on the right track.
But not every company that asks for money receives any at all — let alone $700 million. So exactly how does this process work? How fair is it? What criteria are most important? What types of companies are favored over others, and why? Are more mature renewables technologies, like photovoltaics (in which Solyndra plays), favored over newer ideas? (Solyndra has a very well proven breakthrough in deployment of CIGS (copper indium gallium (di) selenide), generating a significant leap in PV efficiencies and reduction in costs).
Unfortunately, it’s not clear. I suppose it’s not supposed to be. Take solar thermal/CSP (concentrated solar power) as an example of a new technology. Technologies like PV and wind have a several-decade head-start over CSP. When I interviewed industry leader Ausra‘s founder Dr. David Mills for my book on renewables, he told me that Ausra had gotten to the second round in one of these mega-contests in which the DoE selects its favorites to back, but that they didn’t make the finals. When I asked if he resented their decision, he — perhaps simply out of good sportsmanship and professional courtesy — said that he didn’t, and told me that he’ll simply try again another time.
I can’t count all the people who have asked us for our insights at 2GreenEnergy on this matter — and I regret that all I can turn up are anecdotal incidents like these. I ask readers to share their own experiences with this process so that all my learn. Thanks.
Renewable Energy and Venture Capital
| January 7, 2010 | Posted by Craig Shields under Renewables - Business |
A great number of readers have written in recently asking about raising investment capital. Most are fairly non-specific about this, hoping, I suppose, to find an extremely wealthy angel investor who likes their idea – in terms of both its risk/reward profile and its philanthropic merits – and is willing to roll the dice. This can happen – in fact, is does happen every day.
Yet I want to write a short post on venture capital. By contrast to angel investors, VCs tend to:
1) Use other people’s money rather than their own; they represent large pools of capital that come from pension funds, government entities, endowments, etc., and
2) Be extremely selective about the deals they take on, looking to “swing for the fences,” as I like to say, i.e., embracing deals whose upside potential is enormous, where an occasional success more than compensates them for their many (smaller) failures.
Looking back on my 25-year career as a marketing consultant to high-tech companies, I remember the good old days fondly. Most of our clients were Fortune-sized: Sony, Pioneer, Oracle, Microsoft, National Semiconductor, IBM, 3M, Philips, 3Com, ITT, Fedex, Xerox, Hewlett-Packard, as so forth — but many were venture-capitalized start-ups. As one of several examples, I worked for years for a nascent company called etNetworks – a joint venture with IBM that was focused on using satellite technology to deliver IBM courseware to computer resellers worldwide. Representatives of the venture team were in most of our meetings, and I got to know the type of expectations they have and the way they like to interact with the management teams (and consultants) within their portfolio companies.
The upside potential of etNetworks, as I demonstrated in my numerous research presentations, was most definitely there. The numbers penciled out beautifully in terms of the size of the reseller market-base, their disdain for travelling to receive training, and their willingness to pay for training and educational services. Initially, a venture capital giant took a huge position in the company.
And, to a lesser extent, so did I; in exchange for a substantial reduction in billings, I received over $1 million in etNetworks’ stock. I remember my seven-year-old son was so excited when, in an effort to get him to grasp the concept of equity ownership, I explained this all to him. “How many Lamborghinis can we buy if etNetworks goes public at $5 a share?” he’d ask, his eyes as wide as tennis balls. “A whole parking lot full of ‘em,” I replied, hugging him close.
Its current value? Zero. It wasn’t the homerun it looked like a few years earlier — more like a ground-out to the shortstop – a disappointment for everyone – including my son and me. Essentially, the advent of a reliable, ubiquitous, high-bandwidth Internet did the same thing to etNetworks that it’s in the process of doing to the video rental industry.
Of course, new venture deals happen every day — and many create huge rewards for all concerned. In the process of discussing renewable energy business consulting with 2GreenEnergy readers, I’ve provided my experiences with this process, and offered whatever advice I’m able to.
To add to that, I just came across this truly excellent article on the realities of pitching VCs on an idea; the author explains this process far better than I can from my perspective. Enjoy, and good luck.
Solyndra – Renewable Energy Cinderella Story
| September 16, 2009 | Posted by Craig Shields under Photo-voltaics |
Dr. Kelly Truman was good enough to update me on what I have to call a textbook success of the business he started with his partner CEO Chris Gronot. Solyndra, a venture-capitalized photo-voltaics company, is based in Fremont, CA — and seems to have done essentially everything right. And that starts with the company’s proprietary PV technology, using cylindrically shaped elements coated with the semiconductor copper indium gallium (di)selenide (or CIGS), which is perfect for large, low-slope roofs, and is targeted mainly to commercial buildings.
There are several features of this technology and its implementation that have come together to form a highly differentiated product that is making a real name for itself around the world in a period of time that is, relative to other similar ventures, unbelievably short. First, because wind blowing through the elements tends to hold the installation on the roof (rather than blow it way) the system can be put in place very easily, quickly, and inexpensively with no penetration of the rooftop itself. Also, CIGS deployed in cylindrical elements results in 25% to 100% more power than conventional thin-film technology installed onto equivalent roofs.
As a business consultant, I’ve lived through dozens of stories of venture-capitalized start-ups, and I have to say that Kelly’s narration of the company’s history makes it sound – to me at least — like one of the smoothest in VC history. The company received its initial venture funding in 2005 and went about the business of building prototypes, working with the National Renewable Energy Laboratory (NREL) which provided the equipment and technology for deposition. Soon the technology was demonstrated, the technical milestones were reached, beta customer feedback was positive – and actually serendipitously helpful; customers would often provide constructive input that none of the principles had thought of — e.g., “Do you realize that this could be used for — (some new application)?”
But the good news goes on: Solyndra took over a facility that Seagate (the hard disk-drive manufacturer) had abandoned when they took their operations overseas, and smoothly completed its third-party testing, validating not only the energy efficiency of its products, but also their seismic and wind readiness. By mid-2008 the first volume customer shipments were coming off the loading docks, and the company has grown in revenue in every subsequent quarter.
Looking for some plot twist or at least some conflict to make this story more interesting, I asked if investors getting antsy for a liquidity event, like an IPO on an acquisition by a publicly traded company. “No,” Kelly says, “They’re wonderfully patient. They know we’re in this to make a real difference against the reality of global warming, and that will require some time for growth. To give you an idea of their patience, we received a nine-figure from the DoE which required us to put up 27%. Even in this financial climate, our investors made sure this happened.”
Kelly Truman and I don’t know one another outside of this one-time encounter, and so I didn’t feel it was my place to ask anything else. When the interview was over, I politely thanked him and hung up. But I have to admit that I was wondering: Do his kids have naturally straight teeth? Are they headed for Ivy League colleges on full academic scholarships? I somehow feel that I want to hang out with Kelly, as he’s obviously doing a great number of things right.
I’m kidding here, of course. What I really mean is this: congratulations.
