Renewable Energy 101

I’m going to post a powerpoint deck here, and I want to explain why.  I’ve attended several state-of-the-union-type presentations on the energy industry recently, and they’ve all been given by long-time industry insiders.  I and others were very dissatisfied by the pessimism and lack of creativity that was shown in these presentations and frustrated that many of the participants, not seeing any opportunities to change the situation, might become disengaged rather than engaged. 

We realized that there needs to be an ability to communicate the potential of the renewable energy industry to a non-technical audience very succinctly.  This should take a variety of forms.  There need to be public figures that take up the standard, in the same way that Al Gore did for climate change.  There needs to be a grass-roots organization responsible for educating high-schoolers and college students that are in the process of choosing a career.  Individuals need to be given the opportunity to engage with a problem rather than be told that it is far too complicated for them to affect. 

I am not and would not want to be an organizer, but I do know how to make powerpoint decks.  This one was developed and presented as part of a KFBS salon entitled “Renewable Energy 101”.  I’m hereby releasing it with a Creative Commons Share-Alike license in hopes that it may form the basis of someone else’s similar presentation.  I’m certainly not claiming this deck to be as good as it could be…it was built under time constraints as is everything else in an MBA program.  If you see ways that it could be improved and would like to do so, send me an email and I’ll re-post your edits on this site.

Renewable Energy 101 Deck

VCIC

I’ve been looking forward to UNC’s Venture Capital Investment Competition for almost a year now.  And, after the heat of battle has left me, I’m pretty happy with the results.  My team came in 2nd place out of 12, and we were the #1 first-year team.  We also nabbed Entrepreneur’s Choice.  Our betters were a team of second years, and I wish them all the best in regionals and beyond.

There, that’s out.  Sometimes blogging about something can actually make it true.

The event really was great, and it reinforced my commitment to VC as a long-term goal.  Time pressure, high stakes decisions, and bleeding-edge innovation mix one intoxicating cocktail.  And I can’t help but love the people: all the VCs that I have met during my time at KFBS have been blunt, piercingly smart, and all-around interesting.

The three entrepreneurs at this year’s VCIC were Collexpo, Belief Networks, and Songvest.  I enjoyed meeting each of the entrepreneurs, especially Lisa Maki from Belief.  Lisa’s easily projected confidence was one of the main reasons that our team decided to “invest” in her company.

To sum up: the obligatory three-item list.

What I learned

• Pre-money valuations are all about comparables, gut feeling, and negotiation.  Don’t even try to justify a pre-money valuation based on financials within a plan.  We were taught that a 50% haircut on revenue projections was “reasonable” as a basis for applying multiples but it turns out that this is really just a split-the-difference rule.  Don’t look for numerical justifications that don’t exist.
• You can include almost anything in a term sheet.  Want to make sure that your portfolio company’s CEO doesn’t have a heart attack?  Write a term that forces him to forfeit 5% of his options every time he eats red meat.  Worried about that husband-and-wife founder team?  Don’t worry, just write it in—they’ll be more than happy to get divorced given the right valuation.
• Ask questions during due diligence that will give you leverage during negotiations.  We should’ve come right out and asked Lisa what she felt was a reasonable pre-money valuation.  It’s a standard technique (“How much were you looking to pay?” asks the car salesman) and definitely could’ve helped us avoid valuing Belief at 2x the judges’ assessment.

A final note: we’ll be competing again next year.  Watch for us to go all the way.

Cleantech Forecasts

I generally shy away from tumblog-style reposts, but this article really doesn’t need any elaboration. 

Three Cleantech Forecasts

Net Impact 2008: Cleantech VC Wrap-up

Friday’s second session at the Net Impact North America conference was Cleantech Venture Capital Investing. After having interviewed two of the three panelists prior to the conference (posts are here and here), the panel itself was an opportunity to think more deeply about the lessons offered by some of the most experienced players in the cleantech sector. The panelists were three managing directors at Philadelphia-based VC firms: from left to right, Joyce Ferris, David Lincoln, and Tucker Twitmyer.  The moderator, Clint Wilder, is at the far right.

The panel started off with the standard “What is cleantech?” question, which the audience and panelists all clearly dreaded. Joyce stepped up to the plate, however, with a very succinct answer that seemed to surprise everyone present: “Cleantech is any technology that reduces natural resource consumption.” I’ll take that over Wikipedia’s definition any day.

With the definitional issues out of the way, the conversation quickly turned into a debate about clean coal and nuclear. The three panelists were of the opinion that any technology that improves upon existing technology is worth putting resources into and should not be left off the table. As Tucker said, “No one investing in the industry believes that clean coal is clean, it’s just cleaner.” That seemed fair to my ears, although not everyone in the audience agreed.

The moderator, Clint Wilder, took a very strong stance against clean coal and nuclear in his recent book but decided to stay out of the debate. On page 24 of the paperback edition there is an entire section entitled “What’s not clean tech: Nuclear and Coal”. The book points out that nuclear has massive capital and scale problems and carbon sequestration techniques needed to make coal truly clean are nonexistant. The concluding paragraph of the section reads as follows:

The best way to “clean up” coal is to replace as much coal-fired power as possible with electricity from wind, solar, biomass, geothermal, tidal, and other renewable clean-tech sources and to make both clean and non-clean power generation as efficient as possible.

Great sentiment, and especially interesting in the current context. Three heavy-hitting investors on one side of the issue and students and an author on the other. This dichotomy of outlook speaks to the significant opportunity for leadership, either political or otherwise, to establish a common vision in the industry.

The other very interesting conversation centered around the difference in perspective between east coast and west coast VCs. Joyce, Tucker, and David are all from firms that have a conservative outlook on cleantech: they are not looking for a silver bullet but rather significant, incremental change. Silicon Valley firms such as Kleiner Perkins often live much further out on the edge.

Tucker used the example of Catch the Wind, one of his portfolio companies. Catch the Wind makes a device that attaches to existing wind turbines and allows them to follow the wind more effectively, thereby improving generation efficiency. Tucker pointed out that companies like this are perfect targets for VC funding as they are small enough to be able to make meaningful use of $3-5M. Comparing this with $500M raised to-date on Nanosolar by Silicon Valley firms is very instructive in terms of the difference in outlook.

Overall this was the best panel I saw during the entire conference. Both the audience and panel built from a deep foundation of practicality towards a bigger cleantech vision.

Net Impact 2008: Irrational Exuberance in Electric Vehicles

The room was packed on Friday for a panel entitled “Bringing Electric Cars to the Mass Market”. The moderator, Bill Moore, editor of EV World, set the stage with a historical perspective—did you know that Henry Ford’s wife drove an electric car?—and then launched straight into the thick of things.

Before being critical, let me just say that I really enjoyed the panel. The panelists had some excellent things to say on the topics of battery rental, lithium availability, and V2G technology. The audience was very knowledgeable and engaged and the room was filled to capacity.

Unfortunately, the real theme of the day was irrational exuberance.  I use the phrase in the same way that Greenspan did: the panelists repeatedly and unequivocally stated that the EV revolution was upon us in much the same was as tech entrepreneurs spoke of the ascendancy of the Internet during the late 1990’s.  Having followed the trajectory of the tech boom and bust very closely, I couldn’t help but cringe: the EV industry isn’t doing itself any favors by preemptively declaring victory.

Some the panel members’ most choice statements include:

Charles Gassenheimer, CEO of Ener1:

• “You are for the first time witnessing the remaking of the car industry.”
• “Today we don’t have carbon caps in the US but under the Obama administration we will.”
• “Detroit is already done. What’s happening now is the effect, not the cause.”

Michael Granoff, Head of Oil Independence Policies at Better Place:

• “Electrification of the car is the path we’re on; it’s inevitable.”
• “Electricity has made oil obsolete before and it will do so again.” (He was referring to the obsolescence of kerosene lamps via the incandesent bulb.)

Vicki Northrup, head of operations for Th!nk North America:

• “We know that people will eventually move towards full battery-electric vehicles.”

Is EV deployment truly inevitable? Of course not. Are there ways that we could still fall off the track? Of course there are. The industry and its leaders need to be worried about history even when things seem ripe for change; 100 years of inertia is a force to be reckoned with. 

If there is one lesson to take away from the tech boom, it is that long-lasting innovation requires sober engineers, sober executives, and sober investors.