"The Immutable Principles of Energy" Jim Halloran
1. Never confuse reserves with production.
2. The biggest, best fields are discovered first.
3. Commodities are priced at the margin – the last 1% dictates the price.
4. E&P companies are serial destroyers of capital. Any appearance to the contrary is a temporary aberration, usually due to hoped-for, unsustainable pricing gains.
5. More than any other sector, time is money with respect to Energy.
6. The more efficient we become in our use of energy, the more we will use (Jevons’ Paradox).
7. The more society expands and demands greater access to energy, the more it will create roadblocks to its delivery.
8. We desire six qualities in our energy sources: 1) Affordability (cheap); 2) Abundance; 3) Reliability; 4) Purity; 5) Universal access; 6) Environmentally friendly. There is no set of circumstances under which all of these can exist simultaneously.
9. There exists at least a “$2 differential” between crude oil and competing sources of energy, regardless of the price of crude oil.
10. In dealing with OPEC, pay attention to what its members do, and give little heed to what they say.
11. Governments look at energy fields as sources of revenue, not as sources of energy:
· Governments have a disincentive to promote efficiency/conservation
· Income streams will be protected as to magnitude
· Long-term energy planning is incompatible with political realities
12. Once a field goes into decline, it will not increase production beyond this peak in the future without capex infusions that will prove to be uneconomic.
13. Crude oil is universal. The price you pay for gasoline is determined more by the small producer in Colombia than by the Wal*Mart on the corner
14. Natural gas is local. The price will continue to be set by continental production even after the lawyers have given up fighting the LNG terminals.
15. The media know nothing about the oil business. The more strident the published predictions of a price extension above (below) extreme levels, the closer the oil market is to a temporary top (bottom)
16. “It’s always something” - Roseanne Roseannadanna
Sunday, December 13, 2009
Wednesday, November 11, 2009
Lightspeed's venture into Cleantech
Taken from http://www.lightspeedvp.com/news/stories/LSVP_20070829.pdf
Outstanding article on Challenges and Potential growth for Cleantech
When emerging sectors or geographies erupt onto the investment scene - such as China, India, or cleantech – generalist VCs like Lightspeed have to determine whither and how to extend their franchise into a new area. Some generalist firms simply grow a practice by hiring partners away from specialist firms, while others observe from the periphery, sending team members to conferences and selectively seeing deals.
At Lightspeed, we have taken a phased approach by initially making a focused effort to divert resources into cleantech, with a goal of expanding presence over time – but what were some of our considerations before taking the plunge? What might have potentially given us further pause? From an initial survey of the space, we quickly
observed a number of structural challenges for generalist VCs to ramp up quickly and get comfortable with cleantech investing.
First, cleantech comprises an umbrella of sectors that draws from a vast range of technologies and sciences. On an average day, one may evaluate solar concentrators using thin-film cells (materials science, physics, optics), enzymes that facilitate biofuel production (synthetic biology, biochemistry), alternative proton exchange membranes for fuel cells (nanotech, chemistry), and ocean-wave-powered generators (fluid dynamics). For generalist VCs who are more used to dealing with bits and bytes as opposed to bandgap absorption wavelengths and alkane-producing algae, properly evaluating such investments can be a nontrivial task.
Second, cleantech startups have to deal with a range of macroeconomic, policy, and regulatory externalities that are often absent in IT investments. The solar and biofuels sectors continue to depend on subsidies and face upstream feedstock supply issues. Smart grid or water purification companies need to sell into utilities or municipalities, whose purchase affinity can change with evolving regulations. At a roader level, any major shifts in electricity and oil price trends could represent a doomsday scenario for multiple sectors.
Third, many cleantech plays require a different style of investing vis-à-vis eneralist IT deals. Many companies that have a technology founded in advanced materials, enzymes, or catalysts can have long development timelines that match more closely with biotech or pharmaceutical investments. Others have capital requirements from capacity expansion that are more characteristic of project finance or private equity type deals. Similarly, opportunities in “hot” areas like solar concentrators, thin-film, and cellulosic ethanol that have reached lofty valuations may look less like venture-backable deals. As such, for many generalist funds with shorter time horizons or smaller fund sizes, cleantech can pose significant structural and financial challenges.
Finally, the increased number of entrepreneurs coming out of the woodwork to dust off their 20-year-old solar concentrator concept or backyard biodiesel refinery has
also served to depress the signal-to-noise ratio, making it harder to find quality deals and solid management teams. Early-stage founders often have less experience in building teams and scaling production, and successful serial cleantech entrepreneurs remain few and far between. In addition, the geographical diversity of the opportunities in this space adds further challenge to deal sourcing and management team recruiting.
While the amalgam of the above challenges can overwhelm at times, Lightspeed continues to be bullish on cleantech. What are some factors that give us
confidence that the space holds promise for outsized returns?
• Massive global energy markets served and strong macroeconomic tailwinds. Overall energy demand has marched upward relentlessly in recent decades, with electricity generation nearly doubling in the U.S. and up eightfold in China since 1980. Solar,
biofuels, wind, storage, grid management, and water purification each already represent multibillion dollar markets, yet alternative energy in sum accounts
for only approximately 5 percent of total energy output today. As such, we believe that many of these sectors have double-digit growth potential, especially with rising oil and natural gas prices and increased concerns over national security.
Further, in sectors like solar, biofuels, clean coal, and clean water, we
have observed that supply-demand imbalances have reduced market and customer risk; if you can produce it at reasonable cost, someone will buy it.
• Improved cost economics. The intersection of technology- and scale-driven cost reductions within cleantech sectors and recent price increases for traditional energy sources has made a range of business models viable. Solar, for example, has
reached grid-parity pricing (with subsidies) in select geographies for the first time in the sector’s history, and as the industry continues to scale rapidly and
go up the learning curve, we believe solar costs will drive closer to today’s power rates. A similar phenomenon can be seen in the biofuels sector, where economies of scale combined with subsidies have closed the cost gap between crop-feedstock based
biofuels and petroleum-based fuels.
Significant technology headroom for innovation. Many of today’s companies utilize decades-old design approaches and manufacturing practices. For example, in solar, crystalline PV upstream processes are based on old techniques from the semiconductor industry, and the most oft-discussed thin-film materials such as copper indium gallium selenide (CIGS) have remained relatively unchanged for decades. Thus, as a new wave of technologists experiment with processes and materials designed to optimize for solar applications, they have an opportunity to create PV cells with quantum leaps in efficiency and cost reductions. Beyond solar, recent advances in synthetic biology have created enzymes and microorganisms that enable the use of noncrop biofuel feedstock and step-function changes in production yields. We have also seen recent breakthroughs in nanotechnology and materials science that have interesting applications for slowmoving sectors like batteries, fuel cells, and water
purification. The increasing number of world-class technologists and non-cleantech serial entrepreneurs now lending their talents to the emerging space should further increase the opportunities for disruptive innovation.
• Opportunities to play to Lightspeed’s strengths.
As we venture deeper into cleantech, we have found that certain aspects of our firm’s experience,network, and investment model actually help overcome the challenges related to this space. With deep roots in early-stage semiconductor investing,we have helped entrepreneurs build successful businesses and top management teams in an industry that relies on fast-cycle-time technical R&D, strong manufacturing execution, and heavy pre-revenue investment in capital equipment
– not too different from the lifecycle of many cleantech operations. Further, we have observed many well-respected, senior-level veterans from the semiconductor, networking infrastructure, and software sectors exploring cleantech ventures of
late, and we believe that the entrepreneurial DNA of emerging companies in this space will increasingly come from industries where Lightspeed has a robust
network. Our global platform, including investment programs in China, India, and Israel, also gives our portfolio companies access to opportunities for new
deals and potential customers in key international markets for cleantech. Indeed, we feel strongly that generalist VCs do have capabilities that can lend well to cleantech investing.
• Government, corporate, and social imperatives.
There has not been a time in recent memory when public and private sentiment aligned so well in supporting clean technologies as it has today. Governments worldwide have instituted tax subsidies and incentives for consumers to use clean energy sources and manufacturers to make “greener” products. In the U.S., an emerging portfolio of compliance laws and regulatory policies has targeted traditional energy providers like coal-fired plants to seek cleaner, lower-emissions alternatives.
Meanwhile, major corporations like Google, Wal-Mart, AMD, and British Petroleum have sponsored initiatives to increase the usage of renewable energy. BP made the headlines earlier this year in partnering with the Lawrence Berkeley National Laboratory to lead a $500 million research effort to develop new sources of energy. We feel that at least in the short-term, such social sentiment will help support the economic value proposition for cleantech, move industry-wide R&D efforts along, and contribute to public and investor interest in the space.
Armed with conviction in the market fundamentals, cost economics, and technology headroom in cleantech, Lightspeed has pursued investments with a concentrated internal effort and external collaboration with many of our specialist and generalist
VC colleagues. After having seen 300-plus deals that span the breadth of sectors, we are well-calibrated and have embarked on the beginning of our focused investment program in cleantech. With a portfolio of four companies to date spanning the energy storage, biofuels, LED lighting, and clean coal sectors, we believe we are off to a strong start and will continue to make an impact in cleantech.
Outstanding article on Challenges and Potential growth for Cleantech
When emerging sectors or geographies erupt onto the investment scene - such as China, India, or cleantech – generalist VCs like Lightspeed have to determine whither and how to extend their franchise into a new area. Some generalist firms simply grow a practice by hiring partners away from specialist firms, while others observe from the periphery, sending team members to conferences and selectively seeing deals.
At Lightspeed, we have taken a phased approach by initially making a focused effort to divert resources into cleantech, with a goal of expanding presence over time – but what were some of our considerations before taking the plunge? What might have potentially given us further pause? From an initial survey of the space, we quickly
observed a number of structural challenges for generalist VCs to ramp up quickly and get comfortable with cleantech investing.
First, cleantech comprises an umbrella of sectors that draws from a vast range of technologies and sciences. On an average day, one may evaluate solar concentrators using thin-film cells (materials science, physics, optics), enzymes that facilitate biofuel production (synthetic biology, biochemistry), alternative proton exchange membranes for fuel cells (nanotech, chemistry), and ocean-wave-powered generators (fluid dynamics). For generalist VCs who are more used to dealing with bits and bytes as opposed to bandgap absorption wavelengths and alkane-producing algae, properly evaluating such investments can be a nontrivial task.
Second, cleantech startups have to deal with a range of macroeconomic, policy, and regulatory externalities that are often absent in IT investments. The solar and biofuels sectors continue to depend on subsidies and face upstream feedstock supply issues. Smart grid or water purification companies need to sell into utilities or municipalities, whose purchase affinity can change with evolving regulations. At a roader level, any major shifts in electricity and oil price trends could represent a doomsday scenario for multiple sectors.
Third, many cleantech plays require a different style of investing vis-à-vis eneralist IT deals. Many companies that have a technology founded in advanced materials, enzymes, or catalysts can have long development timelines that match more closely with biotech or pharmaceutical investments. Others have capital requirements from capacity expansion that are more characteristic of project finance or private equity type deals. Similarly, opportunities in “hot” areas like solar concentrators, thin-film, and cellulosic ethanol that have reached lofty valuations may look less like venture-backable deals. As such, for many generalist funds with shorter time horizons or smaller fund sizes, cleantech can pose significant structural and financial challenges.
Finally, the increased number of entrepreneurs coming out of the woodwork to dust off their 20-year-old solar concentrator concept or backyard biodiesel refinery has
also served to depress the signal-to-noise ratio, making it harder to find quality deals and solid management teams. Early-stage founders often have less experience in building teams and scaling production, and successful serial cleantech entrepreneurs remain few and far between. In addition, the geographical diversity of the opportunities in this space adds further challenge to deal sourcing and management team recruiting.
While the amalgam of the above challenges can overwhelm at times, Lightspeed continues to be bullish on cleantech. What are some factors that give us
confidence that the space holds promise for outsized returns?
• Massive global energy markets served and strong macroeconomic tailwinds. Overall energy demand has marched upward relentlessly in recent decades, with electricity generation nearly doubling in the U.S. and up eightfold in China since 1980. Solar,
biofuels, wind, storage, grid management, and water purification each already represent multibillion dollar markets, yet alternative energy in sum accounts
for only approximately 5 percent of total energy output today. As such, we believe that many of these sectors have double-digit growth potential, especially with rising oil and natural gas prices and increased concerns over national security.
Further, in sectors like solar, biofuels, clean coal, and clean water, we
have observed that supply-demand imbalances have reduced market and customer risk; if you can produce it at reasonable cost, someone will buy it.
• Improved cost economics. The intersection of technology- and scale-driven cost reductions within cleantech sectors and recent price increases for traditional energy sources has made a range of business models viable. Solar, for example, has
reached grid-parity pricing (with subsidies) in select geographies for the first time in the sector’s history, and as the industry continues to scale rapidly and
go up the learning curve, we believe solar costs will drive closer to today’s power rates. A similar phenomenon can be seen in the biofuels sector, where economies of scale combined with subsidies have closed the cost gap between crop-feedstock based
biofuels and petroleum-based fuels.
Significant technology headroom for innovation. Many of today’s companies utilize decades-old design approaches and manufacturing practices. For example, in solar, crystalline PV upstream processes are based on old techniques from the semiconductor industry, and the most oft-discussed thin-film materials such as copper indium gallium selenide (CIGS) have remained relatively unchanged for decades. Thus, as a new wave of technologists experiment with processes and materials designed to optimize for solar applications, they have an opportunity to create PV cells with quantum leaps in efficiency and cost reductions. Beyond solar, recent advances in synthetic biology have created enzymes and microorganisms that enable the use of noncrop biofuel feedstock and step-function changes in production yields. We have also seen recent breakthroughs in nanotechnology and materials science that have interesting applications for slowmoving sectors like batteries, fuel cells, and water
purification. The increasing number of world-class technologists and non-cleantech serial entrepreneurs now lending their talents to the emerging space should further increase the opportunities for disruptive innovation.
• Opportunities to play to Lightspeed’s strengths.
As we venture deeper into cleantech, we have found that certain aspects of our firm’s experience,network, and investment model actually help overcome the challenges related to this space. With deep roots in early-stage semiconductor investing,we have helped entrepreneurs build successful businesses and top management teams in an industry that relies on fast-cycle-time technical R&D, strong manufacturing execution, and heavy pre-revenue investment in capital equipment
– not too different from the lifecycle of many cleantech operations. Further, we have observed many well-respected, senior-level veterans from the semiconductor, networking infrastructure, and software sectors exploring cleantech ventures of
late, and we believe that the entrepreneurial DNA of emerging companies in this space will increasingly come from industries where Lightspeed has a robust
network. Our global platform, including investment programs in China, India, and Israel, also gives our portfolio companies access to opportunities for new
deals and potential customers in key international markets for cleantech. Indeed, we feel strongly that generalist VCs do have capabilities that can lend well to cleantech investing.
• Government, corporate, and social imperatives.
There has not been a time in recent memory when public and private sentiment aligned so well in supporting clean technologies as it has today. Governments worldwide have instituted tax subsidies and incentives for consumers to use clean energy sources and manufacturers to make “greener” products. In the U.S., an emerging portfolio of compliance laws and regulatory policies has targeted traditional energy providers like coal-fired plants to seek cleaner, lower-emissions alternatives.
Meanwhile, major corporations like Google, Wal-Mart, AMD, and British Petroleum have sponsored initiatives to increase the usage of renewable energy. BP made the headlines earlier this year in partnering with the Lawrence Berkeley National Laboratory to lead a $500 million research effort to develop new sources of energy. We feel that at least in the short-term, such social sentiment will help support the economic value proposition for cleantech, move industry-wide R&D efforts along, and contribute to public and investor interest in the space.
Armed with conviction in the market fundamentals, cost economics, and technology headroom in cleantech, Lightspeed has pursued investments with a concentrated internal effort and external collaboration with many of our specialist and generalist
VC colleagues. After having seen 300-plus deals that span the breadth of sectors, we are well-calibrated and have embarked on the beginning of our focused investment program in cleantech. With a portfolio of four companies to date spanning the energy storage, biofuels, LED lighting, and clean coal sectors, we believe we are off to a strong start and will continue to make an impact in cleantech.
Four Trade Secrets for Clean Tech Entrepreneurs in Small Countries
Very Interesting Article from http://www.huffingtonpost.com/karin-kloosterman/4-trade-secrets-for-clean_b_312046.html
A plucky little country, is how the late Princess Diana once described Israel to Shimon Peres. About the size of New Jersey, Israel has a disproportionate number of clean tech companies and investment in clean technology compared to its size. And now businessman and investor David Anthony from 21Ventures in the US is about to reveal his trade secrets and insider information about clean tech investing in Israel. If you are itching to become a clean tech entrepreneur in Israel, this is must-read information. If you'd like to know more about what makes the industry tick, read on. His advice applies to many other small countries interested in ramping up development and investment in clean tech.
Unlike Silicon Valley and the high-tech industry, the clean tech market today has no center of excellence, Anthony tells Green Prophet. In the last 50 years of venture capital investing there has been a saying: Never fly over your company -- meaning one shouldn't invest in a company that isn't within a 60 mile radius of the office. But without a center for clean technology, explains Anthony, a VC fund now has to dig into new territory to find the golden investment egg. Investors need to cross borders and turn over new stones.
light bulb sprouting green roots photo 21ventures
Compared to any other country in the Middle East, Israel is a clear and defined leader in this market, so we've focused on Israel. Most of Anthony's tips could work in other non-US locales as well.
First a short background on Israel:
According to Anthony, clean technology researchers are not the same scientists that the traditional Israeli technology environment was founded on. Focused primarily on IT and telecom, Israel's high-tech success came about as a result of Israelis joining the army and getting an electrical engineering degree. But this is not the case anymore in clean tech: "What did Israel need to succeed?" Anthony asks. "Telecom was critical. They needed to tap Arafat for 30 years. IT security obviously is critical for Israel so necessity has driven the Israeli technology economy to focus on IT and telecom."
But today, Israel and the world has bigger problems than Arafat, says Anthony:
Global warming and over-population and the combination of global warming and over-population is greatest problem of the 21st century. There are different types of scientists solving these problems like physical chemists and fluid dynamicists.
These are individuals who have not traditionally participated in the technology economy of Israel for the last 20 years. There is a disconnect between the entrepreneurs and the technology refugees because there are little opportunities now in IT and teleco.
Usually management types with electrical engineering backgrounds, this kind of training and background might not be applicable when "scouring scientists of major universities in Israel," says Anthony.
DAVID ANTHONY
david-anthony-21ventures-photo-invest-israel.jpg
How to bridge the divide and disconnect? Anthony, offers his trade secrets:
1. Scour universities. Troll these places before technology refugees get to them. Entrepreneurs are not digging deep enough at Israeli universities -- at the Weizmann Institute, The Technion, Bar Ilan University or Tel Aviv University. Entrepreneurs, he says, need to go out in the field and do their research. They need to meet with tech transfer officers to find out what's interesting.
"One of the great mysteries is why doesn't Israel have a leading solar energy company," Anthony asks. "Luz I was a failure ... Israel is not on the map of the Top 10. Why is Germany a big leader? Germany doesn't have sun."
It's because the entrepreneurs in Israel have not mined the scientists or scoured or searched deep enough, he reasons. Time to get busy:
Read Science Daily, a compendium of scientific released from universities around the world.
Go and visit the tech transfer offices, like Ramot at Tel Aviv University.
Contact scientists directly. Tell them: I would love to sit and talk with you about the potential for commercializing your research.
"What I do isn't brilliant or insightful," says Anthony. "It's like being a basketball scout: but at universities you are dealing with scientists instead of 16-year-old seven footers."
2. Be less practical and forget about getting to the top. According to Anthony Americans are less practical than Israelis might think. Living in 7,000 square foot homes, Israelis who live in 4-room apartments don't see how impractical Americans really are, he says. Even though milestones and pilot projects are developed in Israel through connections and limited funds, "Adopting technology quickly doesn't always win."
Instead of wasting years and money developing a pilot in Israel, one needs referencable customers in the US to attract US investment. The Israeli military mentality doesn't translate well in America, North America or Asia. Nor does aspiring to get to the top quickly, says Anthony.
Let's forget about going to the top. Israelis are good at tinkering and improvising and getting a prototype. ... If I tell someone my security software is defending the Israel Defense Forces, Americans want to know who is your US customer.
The bottom line: don't bank on pilot projects in Israel.
3. Bet your life on your research. Israeli scientists, unlike those in the US, are not as quick to leave the comfort of academia. Being a scientist and having a position at a university commands more respect in Israeli culture than in the US, meaning the Israelis are less likely to leave their tenure.
Anthony asks:
But if I am investor and you're at Bar Ilan University or the Technion, am I supposed to put my money in you if you aren't betting your life? This is something that IT scientists understand, but I don't think it has reached the clean tech researchers yet. I want a CTO full-time.
There is something about betting your life on a business. If you don't, then it's hard for me as an investor, with an investment ranging from $10 to $15 million over a set of milestones.
4. Build a business plan and milestones with teeth. The last tip, Anthony offers is for entrepreneurs to build a solid business plans with milestones mapped out. This demonstrates to him the increasing value of the company.
In today's market, my most difficult job negotiating is not the price, but the teeth of the milestones. That to me is always the weakness in business plans and I see it in presentations: someone will say I need $4 to 10 million. This needs to be broken down into 4 or 5 milestones over 3 or 4 years. Thinking out those milestones, commercial milestones, collaborative milestones ahead of time is the best way to get my attention.
If you have an opportunity and solve a huge problem, then I am interested. If you thought out the milestones well, then I have a compatibility with you.
David Anthony is the founder and manager of 21Ventures, a virtual clean technology incubator focusing on the ideas and innovations that will dominate the 21st century. You can follow him on Twitter at http://twitter.com/DavidAnthony21
Karin Kloosterman is the founder of Green Prophet, a green news site covering green business and environment news from Israel and the Middle East. See www.greenprophet.com.
A plucky little country, is how the late Princess Diana once described Israel to Shimon Peres. About the size of New Jersey, Israel has a disproportionate number of clean tech companies and investment in clean technology compared to its size. And now businessman and investor David Anthony from 21Ventures in the US is about to reveal his trade secrets and insider information about clean tech investing in Israel. If you are itching to become a clean tech entrepreneur in Israel, this is must-read information. If you'd like to know more about what makes the industry tick, read on. His advice applies to many other small countries interested in ramping up development and investment in clean tech.
Unlike Silicon Valley and the high-tech industry, the clean tech market today has no center of excellence, Anthony tells Green Prophet. In the last 50 years of venture capital investing there has been a saying: Never fly over your company -- meaning one shouldn't invest in a company that isn't within a 60 mile radius of the office. But without a center for clean technology, explains Anthony, a VC fund now has to dig into new territory to find the golden investment egg. Investors need to cross borders and turn over new stones.
light bulb sprouting green roots photo 21ventures
Compared to any other country in the Middle East, Israel is a clear and defined leader in this market, so we've focused on Israel. Most of Anthony's tips could work in other non-US locales as well.
First a short background on Israel:
According to Anthony, clean technology researchers are not the same scientists that the traditional Israeli technology environment was founded on. Focused primarily on IT and telecom, Israel's high-tech success came about as a result of Israelis joining the army and getting an electrical engineering degree. But this is not the case anymore in clean tech: "What did Israel need to succeed?" Anthony asks. "Telecom was critical. They needed to tap Arafat for 30 years. IT security obviously is critical for Israel so necessity has driven the Israeli technology economy to focus on IT and telecom."
But today, Israel and the world has bigger problems than Arafat, says Anthony:
Global warming and over-population and the combination of global warming and over-population is greatest problem of the 21st century. There are different types of scientists solving these problems like physical chemists and fluid dynamicists.
These are individuals who have not traditionally participated in the technology economy of Israel for the last 20 years. There is a disconnect between the entrepreneurs and the technology refugees because there are little opportunities now in IT and teleco.
Usually management types with electrical engineering backgrounds, this kind of training and background might not be applicable when "scouring scientists of major universities in Israel," says Anthony.
DAVID ANTHONY
david-anthony-21ventures-photo-invest-israel.jpg
How to bridge the divide and disconnect? Anthony, offers his trade secrets:
1. Scour universities. Troll these places before technology refugees get to them. Entrepreneurs are not digging deep enough at Israeli universities -- at the Weizmann Institute, The Technion, Bar Ilan University or Tel Aviv University. Entrepreneurs, he says, need to go out in the field and do their research. They need to meet with tech transfer officers to find out what's interesting.
"One of the great mysteries is why doesn't Israel have a leading solar energy company," Anthony asks. "Luz I was a failure ... Israel is not on the map of the Top 10. Why is Germany a big leader? Germany doesn't have sun."
It's because the entrepreneurs in Israel have not mined the scientists or scoured or searched deep enough, he reasons. Time to get busy:
Read Science Daily, a compendium of scientific released from universities around the world.
Go and visit the tech transfer offices, like Ramot at Tel Aviv University.
Contact scientists directly. Tell them: I would love to sit and talk with you about the potential for commercializing your research.
"What I do isn't brilliant or insightful," says Anthony. "It's like being a basketball scout: but at universities you are dealing with scientists instead of 16-year-old seven footers."
2. Be less practical and forget about getting to the top. According to Anthony Americans are less practical than Israelis might think. Living in 7,000 square foot homes, Israelis who live in 4-room apartments don't see how impractical Americans really are, he says. Even though milestones and pilot projects are developed in Israel through connections and limited funds, "Adopting technology quickly doesn't always win."
Instead of wasting years and money developing a pilot in Israel, one needs referencable customers in the US to attract US investment. The Israeli military mentality doesn't translate well in America, North America or Asia. Nor does aspiring to get to the top quickly, says Anthony.
Let's forget about going to the top. Israelis are good at tinkering and improvising and getting a prototype. ... If I tell someone my security software is defending the Israel Defense Forces, Americans want to know who is your US customer.
The bottom line: don't bank on pilot projects in Israel.
3. Bet your life on your research. Israeli scientists, unlike those in the US, are not as quick to leave the comfort of academia. Being a scientist and having a position at a university commands more respect in Israeli culture than in the US, meaning the Israelis are less likely to leave their tenure.
Anthony asks:
But if I am investor and you're at Bar Ilan University or the Technion, am I supposed to put my money in you if you aren't betting your life? This is something that IT scientists understand, but I don't think it has reached the clean tech researchers yet. I want a CTO full-time.
There is something about betting your life on a business. If you don't, then it's hard for me as an investor, with an investment ranging from $10 to $15 million over a set of milestones.
4. Build a business plan and milestones with teeth. The last tip, Anthony offers is for entrepreneurs to build a solid business plans with milestones mapped out. This demonstrates to him the increasing value of the company.
In today's market, my most difficult job negotiating is not the price, but the teeth of the milestones. That to me is always the weakness in business plans and I see it in presentations: someone will say I need $4 to 10 million. This needs to be broken down into 4 or 5 milestones over 3 or 4 years. Thinking out those milestones, commercial milestones, collaborative milestones ahead of time is the best way to get my attention.
If you have an opportunity and solve a huge problem, then I am interested. If you thought out the milestones well, then I have a compatibility with you.
David Anthony is the founder and manager of 21Ventures, a virtual clean technology incubator focusing on the ideas and innovations that will dominate the 21st century. You can follow him on Twitter at http://twitter.com/DavidAnthony21
Karin Kloosterman is the founder of Green Prophet, a green news site covering green business and environment news from Israel and the Middle East. See www.greenprophet.com.
Thursday, October 29, 2009
Very interesting post - 3 challenges of Cleantech
According to Deborah Fleischer, one of the coaches at Cleantechopen semifinalists, here 3 challenges of Cleantech
1. Lifecycle assessment (LCA): LCA is an approach that considers the cradle-to-grave lifecycle chain involved in producing, using and disposing of a product or service. It forces you to consider materials use, energy consumption and related greenhouse-gas emissions of your product, packaging and transportation decisions.
While larger corporations might have the resources to tackle LCA head on, across the board, the start-ups were struggling with easily accessing good data to help them estimate the key impacts associated with their entire value chain.
As a post on SustainableMinds says, “Paper or plastic? Diesel or hybrid? Extrude or blow-mold? Some of the most difficult problems in designing sustainable products involve making the right choices in materials, processes and transportation methods. However, choosing the options that will actually have a lower environmental impact is much more complex that one would think.”
A few LCA resources for start-ups to consider include Sustainable Minds, Earthster and EIO-LCA.
In a recent post, Joel Makower had this to say about Earthster, “…an open-source consortium that is inviting professionals to upload LCA data and methodologies in order to simplify and “democratize” LCA, while improving the quality by pooling nonproprietary information about products and processes. Earthster is garnering buzz within the LCA crowd as a potential game-changing technology.”
My advice–be strategic and focus on the largest pieces of your footprint. Avoid petroleum-based products. Think about the end of life and how the product can be recycled or reused. And don’t forget to consider packaging and transportation choices.
2. Packaging: Many of these clean tech products require packaging and pushing for recycled content and avoiding plastic is a challenge for a CEO with twenty other competing priorities. I argue that companies can maximize market share by making a commitment to greener packaging. Key customers and stakeholders are making demands for sustainable packaging.
The Sustainable Packaging Coalition is a great resource on this issue.
They define sustainable packaging as:
1. Beneficial, safe & healthy for individuals and communities throughout its life cycle;
2. Meeting market criteria for performance and cost;
3. Sourced, manufactured, transported, and recycled using renewable energy;
4. Maximizing the use of renewable or recycled source materials;
5. Manufactured using clean production technologies and best practices;
6. Made from materials healthy in all probable end of life scenarios;
7. Physically designed to optimize materials and energy;
8. Effectively recovered and utilized in biological and/or industrial cradle to cradle cycles.
The Coalition’s new tool, COMPASS , is a free resource to help companies assess their packaging choices.
However, again, I would stress simplicity. Avoid petroleum-based plastics and consider bio-based plastic. Maximize the use of post-consumer recycled content. And reduce the size of your packaging to the maximum extent possible.
3. End of life: Thinking about what happens to these new “clean” products at end of life is challenging. How do you create incentives to get consumers to recycle or return a product? One of the start-ups was considering a rebate program and another planning on using a mailer to make it easy to return the product at the end of its life.
"
This seems more in line with making green products. I would add that cleantech is especially challenging if you agree to all these 3 challenges, and at the same time attempt to be cost competitive with existing offerings. To me, cleantech companies should have the mentality that customers are not willing to pay more for the existing offering, eg. more cents per kWh of electricity.
On another post, a very interesting comment by a VC says that cleantech companies seems to make losses first and profits later, which is the opposite of internet companies, which made big winners for VCs but loses later. That's a very interesting comment of looking at cleantech and the challenge is probably looking for the particular approach in cleantech that can be the next wave of disruptive changes.
This seems to go hand-in-hand with what a VC compared cleantech and internet companies with
1. Lifecycle assessment (LCA): LCA is an approach that considers the cradle-to-grave lifecycle chain involved in producing, using and disposing of a product or service. It forces you to consider materials use, energy consumption and related greenhouse-gas emissions of your product, packaging and transportation decisions.
While larger corporations might have the resources to tackle LCA head on, across the board, the start-ups were struggling with easily accessing good data to help them estimate the key impacts associated with their entire value chain.
As a post on SustainableMinds says, “Paper or plastic? Diesel or hybrid? Extrude or blow-mold? Some of the most difficult problems in designing sustainable products involve making the right choices in materials, processes and transportation methods. However, choosing the options that will actually have a lower environmental impact is much more complex that one would think.”
A few LCA resources for start-ups to consider include Sustainable Minds, Earthster and EIO-LCA.
In a recent post, Joel Makower had this to say about Earthster, “…an open-source consortium that is inviting professionals to upload LCA data and methodologies in order to simplify and “democratize” LCA, while improving the quality by pooling nonproprietary information about products and processes. Earthster is garnering buzz within the LCA crowd as a potential game-changing technology.”
My advice–be strategic and focus on the largest pieces of your footprint. Avoid petroleum-based products. Think about the end of life and how the product can be recycled or reused. And don’t forget to consider packaging and transportation choices.
2. Packaging: Many of these clean tech products require packaging and pushing for recycled content and avoiding plastic is a challenge for a CEO with twenty other competing priorities. I argue that companies can maximize market share by making a commitment to greener packaging. Key customers and stakeholders are making demands for sustainable packaging.
The Sustainable Packaging Coalition is a great resource on this issue.
They define sustainable packaging as:
1. Beneficial, safe & healthy for individuals and communities throughout its life cycle;
2. Meeting market criteria for performance and cost;
3. Sourced, manufactured, transported, and recycled using renewable energy;
4. Maximizing the use of renewable or recycled source materials;
5. Manufactured using clean production technologies and best practices;
6. Made from materials healthy in all probable end of life scenarios;
7. Physically designed to optimize materials and energy;
8. Effectively recovered and utilized in biological and/or industrial cradle to cradle cycles.
The Coalition’s new tool, COMPASS , is a free resource to help companies assess their packaging choices.
However, again, I would stress simplicity. Avoid petroleum-based plastics and consider bio-based plastic. Maximize the use of post-consumer recycled content. And reduce the size of your packaging to the maximum extent possible.
3. End of life: Thinking about what happens to these new “clean” products at end of life is challenging. How do you create incentives to get consumers to recycle or return a product? One of the start-ups was considering a rebate program and another planning on using a mailer to make it easy to return the product at the end of its life.
"
This seems more in line with making green products. I would add that cleantech is especially challenging if you agree to all these 3 challenges, and at the same time attempt to be cost competitive with existing offerings. To me, cleantech companies should have the mentality that customers are not willing to pay more for the existing offering, eg. more cents per kWh of electricity.
On another post, a very interesting comment by a VC says that cleantech companies seems to make losses first and profits later, which is the opposite of internet companies, which made big winners for VCs but loses later. That's a very interesting comment of looking at cleantech and the challenge is probably looking for the particular approach in cleantech that can be the next wave of disruptive changes.
This seems to go hand-in-hand with what a VC compared cleantech and internet companies with
Thursday, October 15, 2009
FYP Update
The past few month have been quite hectic for me. Amidst all heavy coursework of being a final year material science and engineering student, I'm also juggling my final year project, thinking about my career, trying to hone my investing skills and developing a business.
That said, I find myself incredibly lucky to be in such a situation. Knowing myself to be a person that would rather handle multiple projects simultaneously, I feel motivated and full of energy for each task.
Of special interest is my Final Year Project. Building on what previous MIT scientist have done, we're following up to provide a deeper understanding on why and how their breakthrough happened the way it did. Potentially, it could be a ground-breaking revelation which could really help direct research in this area for years to come. Especially now when everyone's talking about batteries etc...
That said, I find myself incredibly lucky to be in such a situation. Knowing myself to be a person that would rather handle multiple projects simultaneously, I feel motivated and full of energy for each task.
Of special interest is my Final Year Project. Building on what previous MIT scientist have done, we're following up to provide a deeper understanding on why and how their breakthrough happened the way it did. Potentially, it could be a ground-breaking revelation which could really help direct research in this area for years to come. Especially now when everyone's talking about batteries etc...
Friday, August 7, 2009
3 Characteristics of the Next Generation of Cleantech Entrepreneurs
During the 2 week study mission around Silicon Valley, several different parties have independently come to the conclusion that Cleantech will provide the next biggest source of growth. Raj Alturu of DFJ gave a very convincing presentation on how cleantech will provide the greatest venture returns in the coming years. He's not alone. Mark Heesen, chairman of the NVCA (National Venture Capital Association) predicts that cleantech will become most invested sector by venture capitalist the next 5 years.
We’ve also managed to visit two successful companies in the Cleantech field – Tesla Motors and Nanosolar. Both companies are well-funded and have a strong management team with robust track records and proven operational/exceptional abilities. Microsoft is also going into the Cleantech area by focusing on energy efficient data centers as the next growth strategy. Companies such as GETIT, a consultancy company integrating green practices into IT, are also becoming more commonplace. Even the lawyers are on the bandwagon. Fred Greguras of K&L gates gave a very interesting account of the various types of cleantech projects to finance and displayed his interest in the angel investing of such projects in times to come.
All these come as little surprise to me. as I have already been working in this industry for the past 1 year. As an investment banking analyst at ReEx Capital Asia, one of the first few investment banks focusing in the Asian Clean Energy sector, I had the opportunity witness first-hand the growing interest in cleantech by both investors, entrepreneurs, consultants and lawyers, which is exactly what is happening now in Silicon Valley. What is different, however, is that this two weeks study mission exposed me other sectors that these players were involved in, namely the Information and Communication Technologies (ICT) and biotech. This exposure allowed me to crystallize my thoughts and to identify the challenges and opportunities that are unique to cleantech companies.
Firstly, cleantech is a resource play. There is no or little product differentiation – at the end of the day you’re going to have to come up with a solution that generates electricity in kWh that is cheaper and/or cleaner. In other words, all cleantech companies produces the same output and will be assessed by the same measuring system. It’s of little use if you can come up with a cleantech solution that sounds and looks sexy but doesn’t make economical sense to your consumers (unless you’re trying to selling to the pure environmentalists). Therefore, marketing still plays a part (see Tesla Motors and premium sports cars), but is less important as compared to ICT or biotech companies.
Second, cleantech companies will more likely result in incremental innovation rather than disruptive innovation. There are several reasons for this, but the most important factor is that in cleantech, as opposed to ICT and biotech, cleantech consumers already know what they want, and that is cheaper/cleaner electricity, water and/or air (see point 1). In contrast, consumers of ICT services often don’t know what they want until the trend actually takes place, allowing small start-ups to quickly become dominant players in the market (see Facebook, Twitter).
Another reason why cleantech companies will more likely result in incremental innovation is due to the higher barriers of entry for innovation in the cleantech space. Whereas a company such as Facebook/Twitter of any other ICT company can be started out by 4 computer engineers dropouts in an underground basement, the entrepreneurs of cleantech companies would require sound engineering and technical understanding in energy, research backgrounds and laboratories, and who has a track record of successfully deploying and operating current energy generation assets. Think PhDs with MBAs who have worked in big companies such as IDEA, IBM etc… and who has a track record of at least 10 years in the field.
Although I believe that most cleantech companies will result in incremental innovation, it is still possible for a cleantech company to result in a disruptive innovation that will revolutionize the world. This company will be spearheaded by the next-generation cleantech entrepreneur. The next generation of cleantech entrepreneur will require the creativity and vision to break through the old-fashioned thinking of incumbent energy generation technologies, and perhaps come up with radically new ways to harvest, store and distribute energy. Thus, he/she would need to have an engineering background together with contempt for the status quo and the ability to challenge long standing engineering principles and practices on a technical level.
Another requirement of the next generation cleantech entrepreneur is also the strong understanding of culture and social science. As compared to previous generations, energy generation and usage is increasing becoming less and less centralized and more and more localized/distributed. Entrepreneurs of cleantech would be required to understand how their technology/product will work in the local context and culture more so then in the past.
However, one thing that has not changed is that the next generation cleantech entrepreneur would also require a strong management team with strong execution/operational ability from day 1 – to test the engineering assumptions and to build and develop the product. Such a management team would also provide strong networks to potential suppliers and customers, which is of paramount importance. This brings us back to point number 1 – which is that cleantech, in the end, is still a resource play.
In conclusion, the next generation cleantech entrepreneurs that will create a radically disruptive cleantech start-up would have an engineering degree with strong creativity, a strong understanding of culture and social science, and has the ability to attract strong management team with years of execution and operational ability.
We’ve also managed to visit two successful companies in the Cleantech field – Tesla Motors and Nanosolar. Both companies are well-funded and have a strong management team with robust track records and proven operational/exceptional abilities. Microsoft is also going into the Cleantech area by focusing on energy efficient data centers as the next growth strategy. Companies such as GETIT, a consultancy company integrating green practices into IT, are also becoming more commonplace. Even the lawyers are on the bandwagon. Fred Greguras of K&L gates gave a very interesting account of the various types of cleantech projects to finance and displayed his interest in the angel investing of such projects in times to come.
All these come as little surprise to me. as I have already been working in this industry for the past 1 year. As an investment banking analyst at ReEx Capital Asia, one of the first few investment banks focusing in the Asian Clean Energy sector, I had the opportunity witness first-hand the growing interest in cleantech by both investors, entrepreneurs, consultants and lawyers, which is exactly what is happening now in Silicon Valley. What is different, however, is that this two weeks study mission exposed me other sectors that these players were involved in, namely the Information and Communication Technologies (ICT) and biotech. This exposure allowed me to crystallize my thoughts and to identify the challenges and opportunities that are unique to cleantech companies.
Firstly, cleantech is a resource play. There is no or little product differentiation – at the end of the day you’re going to have to come up with a solution that generates electricity in kWh that is cheaper and/or cleaner. In other words, all cleantech companies produces the same output and will be assessed by the same measuring system. It’s of little use if you can come up with a cleantech solution that sounds and looks sexy but doesn’t make economical sense to your consumers (unless you’re trying to selling to the pure environmentalists). Therefore, marketing still plays a part (see Tesla Motors and premium sports cars), but is less important as compared to ICT or biotech companies.
Second, cleantech companies will more likely result in incremental innovation rather than disruptive innovation. There are several reasons for this, but the most important factor is that in cleantech, as opposed to ICT and biotech, cleantech consumers already know what they want, and that is cheaper/cleaner electricity, water and/or air (see point 1). In contrast, consumers of ICT services often don’t know what they want until the trend actually takes place, allowing small start-ups to quickly become dominant players in the market (see Facebook, Twitter).
Another reason why cleantech companies will more likely result in incremental innovation is due to the higher barriers of entry for innovation in the cleantech space. Whereas a company such as Facebook/Twitter of any other ICT company can be started out by 4 computer engineers dropouts in an underground basement, the entrepreneurs of cleantech companies would require sound engineering and technical understanding in energy, research backgrounds and laboratories, and who has a track record of successfully deploying and operating current energy generation assets. Think PhDs with MBAs who have worked in big companies such as IDEA, IBM etc… and who has a track record of at least 10 years in the field.
Although I believe that most cleantech companies will result in incremental innovation, it is still possible for a cleantech company to result in a disruptive innovation that will revolutionize the world. This company will be spearheaded by the next-generation cleantech entrepreneur. The next generation of cleantech entrepreneur will require the creativity and vision to break through the old-fashioned thinking of incumbent energy generation technologies, and perhaps come up with radically new ways to harvest, store and distribute energy. Thus, he/she would need to have an engineering background together with contempt for the status quo and the ability to challenge long standing engineering principles and practices on a technical level.
Another requirement of the next generation cleantech entrepreneur is also the strong understanding of culture and social science. As compared to previous generations, energy generation and usage is increasing becoming less and less centralized and more and more localized/distributed. Entrepreneurs of cleantech would be required to understand how their technology/product will work in the local context and culture more so then in the past.
However, one thing that has not changed is that the next generation cleantech entrepreneur would also require a strong management team with strong execution/operational ability from day 1 – to test the engineering assumptions and to build and develop the product. Such a management team would also provide strong networks to potential suppliers and customers, which is of paramount importance. This brings us back to point number 1 – which is that cleantech, in the end, is still a resource play.
In conclusion, the next generation cleantech entrepreneurs that will create a radically disruptive cleantech start-up would have an engineering degree with strong creativity, a strong understanding of culture and social science, and has the ability to attract strong management team with years of execution and operational ability.
Thursday, July 23, 2009
An Alternative View to Stanford and Cleantech
The visit to Stanford University was very worth it today. Weeks before, I had heard from my backpacking friend very interesting stuff about Stanford’s particle accelerator, golf courses and outstanding (and cocky) students. At today’s trip, even though I got to see beautiful buildings, nice open spaces and rich history, what impressed me most was the spirit of giving.
Stanford, as the heart of Silicon Valley, has had a number of sucess stories of stanford graduates (and dropouts) creating high value companies that eventually went IPO or were sold. The founders, who include Bill Gates, Jerry Young and the HP duo, contributed significantly back to Stanford by donating to and having buildings erected in their name. This actions really demonstrated how strong the spirit of sharing and giving is at the valley. Singapore is certainly lacking in this department and have much room for improvement.
On another note, speaking with Anna and Laina from Getit was very interesting. They’re currently consultants to the Clean Tech Open, THE clean tech business plan competition here in America. They bring with them a wealth of experience from working in start-ups and large corporations. I got to know them and where they are coming from, a little bit better from a meeting after their talk, but it was a pity that I missed the bulk of the last presentation by Ooshma.
Stanford, as the heart of Silicon Valley, has had a number of sucess stories of stanford graduates (and dropouts) creating high value companies that eventually went IPO or were sold. The founders, who include Bill Gates, Jerry Young and the HP duo, contributed significantly back to Stanford by donating to and having buildings erected in their name. This actions really demonstrated how strong the spirit of sharing and giving is at the valley. Singapore is certainly lacking in this department and have much room for improvement.
On another note, speaking with Anna and Laina from Getit was very interesting. They’re currently consultants to the Clean Tech Open, THE clean tech business plan competition here in America. They bring with them a wealth of experience from working in start-ups and large corporations. I got to know them and where they are coming from, a little bit better from a meeting after their talk, but it was a pity that I missed the bulk of the last presentation by Ooshma.
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