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					Presentation to the California Commission for Economic Development “Venture Investing in Cleantech” Andrew G.W. Chung
Principal, Lightspeed Venture Partners September 15, 2008

Our mission: We partner with exceptional entrepreneurs to build high-growth, market-leading companies globally

Lightspeed: At a glance
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$2.1B of committed capital
Currently investing Fund VIII: $800M

Selected Managing Director Investments

22 investment professionals Lead investor orientation Global platform
U.S. China India Israel
Cleantech & Energy-Related Investments

Top-quartile performance across all funds

Global energy needs continue to rise along with dependence on carbon…
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Electricity Generation

CO2 Levels vs. Temperature Change
400ppm 10°C 8 350 6 4 China 300 2 0 250 -2 -4 200 -6 -8 150 -10 400 350 300 250 200 150 100 50 0 1000s Years Ago

4TWh

U.S.

3

2 Japan Russia India Canada 1980 1985 1990 1995 2000 2005

1

0

Source: IOGA, Bureau of Labor Statistics, US National Ocean and Atmospheric Administration (NOAA) / UK Climate Research Institute

3

…and the price of oil has reached levels unseen since early ’80’s
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Monthly Average Oil Price per Barrel

Nominal Prices
Source: IOGA, Bureau of Labor Statistics

Inflation-Adjusted Prices (December 2007 $)
4

Renewables expected to supply only 20% of energy by 2020…
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Global Sources of Energy
1600 1400

Annual Energy Output (1018 Joules)

1200 1000 800 600 400 200 0 2000

Geothermal Other Renewables Solarthermal Solar Electricity Wind Biomass (Modern) Biomass (Traditional) Hydro Nuclear Gas Coal Oil

Renewables

2010

2020

2030

2040

2050

Source: Scientific Advisory Committee, German Government

5

…and the U.S. continues to lag in renewables adoption
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% Share of Hydroelectricity

% Share of Other Renewables

% Share of Biofuel Vehicles

100%

30%

100%

80 20 60

80

60

40 10 20
World average

40

20
World average
U. ex K ic Br o az i I l S w tal y G ed er en m an Sp y F a Ph inl in ili an p d D pin en e m s ar k S.

0
S. Sw S w e N itz de e w er n Ze lan al d a Au nd st C ri Ve an a ne a d zu a I c ela Co ela lo nd m b B r ia N az or il w ay U.

0
U. M

0

U.S.

Brazil

Source: BP Statistical Review of World Energy 2008, Brazilian Automakers Association, U.S. Bureau of Transit Statistics, U.S. Energy Information Administration

6

Cleantech: a portfolio solution that comprises a broad set of sectors…
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Solar
Polysilicon/wafer Cell/modules Balance of systems Financing

Wind
Horizontal-axis turbines Vertical-axis turbines Small form factor Off-coast

Fuels
Petroleum substitutes Coal-to-liquids Gas-to-liquids Ethanol production Biodiesel production

Other Generation
Coal gasi-/purification Solar thermal Transportation tech Oil & gas solutions Hydropower Wave kinetics

Storage
Batteries Ultracapacitors Grid storage services Fuel cells

Energy Efficiency
Demand response Lighting/HVAC control Distributed generation management Automated metering

Water/Air
Water purification Air purification

Other
Building materials Waste management Recycling

7

…each providing a depth of entrepreneurial opportunities
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Example: SOLAR
Traditional

Sample areas of innovation

Polysilicon
Metallurgical-grade

C-Si cells
Back-contact cells Sliver cells

Module packaging Balance of systems
Inverters MPP tracking Systems monitoring

Wafering
Continuous CZ method Ribbon technology

Thin-film
a-Si/CdTe/CIGS/CIS Dye, organics New materials

Solar financing
Residential Commercial

Concentrated PV Solarthermal Combined heat & power (CHP)

Capital equipment
8

Lightspeed’s cleantech/energy investments
Lightspeed Confidential/Trade Secret - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

Solar

Wind

Fuels

Other Generation

Renewable petroleum biofuels

Coal pre-treatment systems

High-efficiency thin-film modules Algae-based biofuels/chemicals

Oil & gas exploration equipment

Storage

Energy Efficiency

Water/Air

Other

Next-generation lithium-ion batteries

Power management for LED lighting

Cleantech media & research

9

Why cleantech now?
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Shift in economics Massive end-markets Technology headroom

Entrepreneurs Businesses Investors

Corporate & social imperatives

Government imperatives
10

Sampling of corporate and social initiatives
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11

Cleantech venture investment up significantly since 2002…
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$4 $3 $ Billions
7.6% 10.1%

13.1%

15% % of Total VC Investment 12% 9%

$2
5.1%

6.9%

5.9% $2.8

$4.1

6% 3% 0%

$1
$1.1 $1.2 $1.2

$1.6

$0 2002 2003 2004 2005 2006 2007

VC Investment in Cleantech
Note: Includes only North American deals; Source: Cleantech Venture Monitor

% of Total VC Investment
12

…with the bulk of capital going into generation during 2007
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100% 80% 60% 40%

278
Other Agriculture Infrastructure Recycling Efficiency Transportation Storage

$4.1B
Other Agriculture Infrastructure Recycling Efficiency Transportation Storage

Generation

20% 0%

Generation

# of Rounds
Note: Includes only North American deals Source: Cleantech Venture Monitor

Total $ Raised
13

Cleantech-specific deal evaluation criteria
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Massive addressable market opportunity Strong technology, process defensibility Convincing fundamental economics Viable distribution, infrastructure compatibility Capital efficiency, milestones tiered for risk reduction Time-to-market consistent with investment horizon Macroeconomic, regulatory, and public policy tailwinds Team with start/scale-up experience and domain expertise
14

Solar: Cost economics
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Total Installed Cost per Peak Watt

$8 $7 $6 $5 $4 $3 $2 $1 $0

Crystalline Silicon

Thin Film (Projected Costs)

ESTIMATES

Systems and Installation Module

Mono
Target Efficiency
Source: Lightspeed analysis

Multi
14%

CIGS
13%

CdTe
10%

a-Si
8%

New Tech
15%++
15

18%

Biofuels: Cost economics
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$8 Production Cost Per Gallon (Gasoline Equivalent) $6

$25+ ESTIMATES
Infrastructure compatibility issues

Feedstock-constrained

Synthetic biology Metabolic engineering
Tax Credit

$4 $2 $0 $50/Barrel Oil Wholesale Soy-based Biodiesel Corn-based Ethanol Cellulosic Ethanol New Tech

Coal liquefaction Photosynthetic (algae)

Tax Credit Tax Credit

Algae-based Biocrude

Source: USDA, DOE, ILSA, Lightspeed analysis

16

Storage: Battery technologies
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Safer

Ni-Cd New Tech

Safety

Lead-acid Ni-MH

Li-Ion

0

50

100 Energy Density (Wh/Kg)

150

200

Smaller/Lighter
17

Source: Merriman, Curhan, Ford; IEA; Lightspeed analysis

Coal: primary source of SO2 emissions
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Growth in Global Energy Sources

US Electricity vs. SO2
Renewables

% change in global coal use (2001-04)

30% 25% 20% 15% 10% 5% 0% Coal NG Hydro Oil Nuclear 9% 8% 25%

100% 80% 60% 40%

Hydro Nuclear Gas

Other

Coal Coal

6%

4%

20% 0%

Electricity Generation

SO2 emission

Source: National Coal Council, Deutsche Bank, US Department of Energy

18

High-efficiency coal carries significant market premium
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Price Spread for Low-BTU vs. High-BTU Coal

~5-10X

Source: US Department of Energy

19

Government & public policy support has had strong “greening” impact
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Per Capita Electricity Sales
Per Capita Electricity Sales (not including self-generation) (kWh/person) (2006 to 2008 are forecast data)

U.S. Refrigerator Energy Use
New United States Refrigerator Use v. Time and Retail Prices
2,000 1,800 25

14,000

12,000

10,000

2005 Differences = 5,300kWh/yr = $165/capita

Average Energy Use or Price

United States

1,400 1,200 1,000 800 600 400

8,000

Refrigerator Size (cubic ft)

$ 1,270
15

6,000

California

10

4,000

Energy Use per Unit (kWh/Year) Refrigerator Price in 1983 $

$ 462 5

2,000
US GDP/capita Cal GSP/capita

Per Capita Income in Constant 2000 $ 1975 2005 % change 16,241 18,760 31,442 33,536 94% 79%

200 0
2008

0 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982

0

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Key regulatory changes
Source: Art Rosenfield, California Energy Commission

2006

1947

1952

1957

1962

1967

1972

1977

1982

1987

1992

1997

2002

Key regulatory changes
20

Refrigerator volume (cubic feet)

1,600

20

How can policy support contribute to cleantech innovation today?
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Support Initiatives
Providing funding aid for cleantech startups and R&D efforts (grant monies, loan guarantees, tax breaks) Support creation of cleantech clusters and facilitate ecosystem communication Connecting startups to key export markets Setting example in adopting clean, energy efficient products for government use Reduce uncertainty by making multiyear commitments to environmental policy Expanding consumer and commercial incentives for cleantech adoption

Sample Policy Mechanisms
Solar: investment tax credit, residential/ commercial/utility-based PPA incentives Biofuel: blending/production credit, fuel distribution and performance requirements Wind: production tax credit Energy efficiency: demand response, HVAC, lighting, heating & green building incentives Smart grid: grid storage, net metering Transportation: incentives for fleet emissions/GHG reduction, ZEV credits Carbon reduction: cap & trade, carbon capture/sequestration, coal retrofitting
21

Greenhouse gas abatement necessitates a portfolio approach
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Source: McKinsey

22

Cleantech companies could have strong impact on the economy
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Average Employment for Energy Facilities
12 Jobs/MW operating capacity 10 8 6 4 2 0 Solar Biomass Wind Coal Gas 2.8 2.8 1.0 1.0

REPP: each MW of installed solar generates 35.5 new jobs CVN: 2007-10 cleantech VC-backed companies ~$14-19B investment 400-500K new jobs $70-100B new revenue Stern Review: cost of not addressing climate change: 5-20% of global GDP/yr
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10.6

Source: UC Berkeley, Cleantech Venture Network, Renewable Energy Policy Project

Cleantech: A multitude of opportunities
Lightspeed Confidential/Trade Secret - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

Solar

Wind

Fuels

Other Generation

Renewable petroleum biofuels

Coal pre-treatment systems

High-efficiency thin-film modules Algae-based biofuels/chemicals

Oil & gas exploration equipment

Storage

Energy Efficiency

Water/Air

Other

Next-generation lithium-ion batteries

Power management for LED lighting

Cleantech media & research

24

Questions?
Andrew G.W. Chung
Principal, Lightspeed Venture Partners andrew@lightspeedvp.com (650) 234-8300

Our mission: We partner with exceptional entrepreneurs to build high-growth, market-leading companies globally


				
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