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Venture Capital in Energy

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					Venture Capital in Energy
     Abdulla Al-Subyani, President
     Gulf Venture Capital Association
           November 20, 2006




                                        1
Objectives

   Introduce Venture Capital
   Highlight the Strategic Benefits of Venture Capital to
    the Saudi Energy Industry




                                                             2
Outline

   Gulf Venture Capital Association
   Introduction to Venture Capital (VC)
   Venture Capital in Energy
   Recommendation




                                           3
Gulf Venture Capital Association




                                   4
Gulf Venture Capital Association




                                   5
 Venture Capital (VC)
 Venture Capital is the catalyst for creating, nurturing, and
  growing new ventures for financial gain to its shareholders,
  i.e., its investors

 New Venture = Entrepreneurs + Venture Capital

 Venture Capitalists contribute
     Funding & experience
     Strategy & insight
     Powerful networks including access to key customers
     Professional and management foresight



                                                                 6
Life Cycle of a New Venture
                                                                                         EXIT
                                 5 - 7 years
   Risk                                                                                          Price
                                                                                     Trade
                                                                                     Sale
                                                                   Market            IPO

                                                  First          Established
                             First                Sales
                Patent      Product
      Idea,
                Prototype
     Concept
      R&D

     Pre-seed      Seed     Start-up        Early stage           Expansion      Buy-outs,
                                                                                 buy-ins
                             Venture Capital
                                                                               M&A


                                 Private Equity
                                                          Source: PolyTechnos Venture Partners


                                                                                                     7
Typical Fund Structure
            2-3% Mgt Fee
                               Money


       Investors                   VC Firm        Portfolio Companies

    Limited Partners       General Partners          Entrepreneurs
                           Fund Managers
   Pension ≈ 40%
   Institutions ≈ 20%
   Endowment ≈ 13%
   Insurance ≈ 12%
   Corporations≈10%
   Individuals ≈ 5%

          ≈ 80% of Capital Gains      ≈ 20% Capital Gains

   Provide Capital           Source Deals              Use Capital
                           Monitor/Add value
                             Raise Money
                                                                     8
Private Equity (PE) Investment To GDP - 2005
          0.80%   0.74

          0.70%
                                                     Saudi Arabia
          0.60%                                      PE Equivalent ≈ $340 MM/Yr
          0.50%
  % GDP




                         0.41
          0.40%

          0.30%                 0.25   0.23
          0.20%
                                              0.12                            World AVG = 0.11%
                                                     0.10
          0.10%                                             0.07 0.06   0.06 0.05
                                                                                      0.02
                                                                                             0.007
          0.00%




                                                                        Source: IMF/Thomson Financial




                                                                                                        9
PE/VC Investment To GDP-2004
           0.8   0.74

           0.7
           0.6          0.51        0.5
           0.5
   % GDP




                                               0.42
           0.4
                                                      0.28    0.14
           0.3
                                                                        0.16
           0.2                                                                     0.12      0.08
           0.1
            0
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                           Source: World Bank/Pricewaterhouse/Venture Economics/NVCA Money tree




                                                                                                    10
PE/VC Investment - 2004


               60    59.2


               50

               40
   $ Billion




               30

               20        15.9

                                  7.2
               10                          5
                                                    2.8
                                                             0.86    0.54   0.52    0.15
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                                   Source: Pricewaterhouse/Venture Economics/NVCA Money tree




                                                                                               11
PE/VC Investment in Asia - 2004

               8        7.2

               7
               6
               5
   $ Billion




               4
                                     2.9             2.8
               3
                                                                    1.7
               2
                                                                                   0.86   0.65
               1                                                                                  0.54

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                                            Source: Pricewaterhouse/Venture Economics/NVCA Money tree




                                                                                                         12
    Venture Capital Drives Economic Growth

    Economic Benefits
      New markets and technologies

      Increased GDP and job creation

      Economic growth and diversification



    US Economic Benefits (1978-2004)
      27.5 million jobs

      Three times more export than established companies

      Key sources of technological and business innovation
Global Raised Venture Capital Funds in Energy

              20.0                                                   17.7
              18.0
              16.0
              14.0
 $ Billions




              12.0
              10.0
               8.0                                    5.3    5.3
                                               5.1
               6.0
               4.0      2.4        2.3
               2.0
               0.0
                      2001        2002        2003   2004   2005   2006 YTD
                 Source: Thompsom Financial




                                                                              14
Key Players in Energy Investing
Venture Capital                   Private Equity
Altira                            First Reserve
Arch Venture Partners             SCF Partners
Braemar Energy Ventures           Limerock
NGP Energy Technology Partners    Natural Gas Partners
Nth Power
Chevron Technology Venture
Shell Technology Ventures
Siemens Venture Capital
Top Venture Capital Firms are Targeting Clean Energy

   Kleiner Perkins
   Highland Capital Partners
   Davidow Ventures
   VantagePoint Venture Partners
   General Catalyst
   Polaris
   PolyTechnos
    Venture Capital-Backed Energy Companies

    Capstone (micro-turbine)
    Weatherford
    Maverick Tube
    National Oil Well
    Superior Energy Services
    Spinnaker Exploration
    Geomechanical International
    Chart Industries
Potential Benefits to the Saudi Energy Industry

   Access and ownership to key technologies and new markets
   Achieve growth by acquiring significant products,
    technologies, people, and companies
   Stimulate entrepreneurial behavior
   Influence pace and direction of markets and technologies
    (e.g., clean energy)
   Achieve above average financial return
    Recommendations

   Private sector should engage in Energy PE/VC
   Create an energy innovation ecosystem in Saudi Arabia
   Corporations should consider getting into venture capital
   Organize a biannual workshop/seminar on VC in Energy
    coupled with exhibition for startup companies




                                                                19
Gulf Venture Capital Association




                                   20

				
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posted:10/3/2011
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