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Cleantech venturing


									Cleantech venturing - performance, players
              and potential

                    Presentation to
    Workshop on Innovative Options for Financing the
 Development and Transfer of Technologies , October 2004

         Prepared by Nicholas Parker, Chairman
          Cleantech Defined

• Embraces products and services that optimize the
use of natural resources, while reducing ecological
impact and adding economic value by significantly
lowering cost and improving profitability.

• Cleantech spans many industries, from alternative
forms of energy generation to water purification to
materials-efficient production techniques.

• Not classic “environmental” technology – more like
“biotech” as an investment theme.
           Our Background & Mission

• Cleantech Venture Network (“Cleantech”) is a private company
  founded in 2002 by investors to provide information-based services
  to an emerging community of clean technology venturers.

• Our mission is to accelerate the growth of investment into venture-
  grade companies deploying "clean technologies" through the
  provision of high quality market facilitation activities.

• Our principal office is in Michigan, with a presence in Canada,
  Europe and on the US West Coast

• We have 120 full members with >$3.4 billion in assets focused on
  cleantech venturing, as well as over 400 affiliate members
                     The Founders

Nicholas Parker:
Substantial experience in starting and
investing venture capital funds. Currently
director of leading cleantech investment

Keith Raab:
Significant expertise in creating and
managing investment networks.
Engineering and business degrees and
startup experience.
               Current Services
• Venture Forums – provide access to high quality
  deal flow, industry information, and networking
• Venture Monitors – provide investment tracking
  and quarterly analysis, along with industry updates,
  trends and forecasting.
• On-line Investment Opportunities – provides
  access to cleantech investment opportunities in real
  time with minimal transactional costs
• Research – provide subscription based reports on
  investment returns and prospects leveraging
  proprietary data streams and industry partnerships
• Five highly successful forums in Toronto, San
  Francisco & New York
• Venture Monitor established as the source on
  cleantech venturing
• Media coverage in over 80 publications including
  WSJ, FT, Newsweek, Red Herring, Venture Capital
• Sophisticated website, offering member services
• High-profile venture advisory board
• Currently expanding into Europe with first Forum
  planned for Spring 2005 in Paris
        Cleantech Venture Forums
• Cleantech I – Nov 2002, Toronto
   – 20 presenting companies: 80 investors
• Cleantech II – April 2003, San Francisco
   – 22 presenting companies: 230 investors
• Cleantech III – October 2003, New York
   – 20 presenting companies: 200 investors
   – Pre-event workshops; inaugural Pioneer Awards; significant PR
• Cleantech IV – April 2004, San Francisco
   – 22 presenting companies: 300 investors
   – Cleantech 2003 awards; major institutional investor involvement
• Cleantech V – October 2004, Toronto
   – 21 presenting companies: over 200 investors
   – Discovery showcase

More than 500 different Forum attendees: over $230M raised to
date by presenting companies
         Cleantech Venture Monitors

In Each Issue:
• Cleantech Investments
• Cleantech Investments
• Clean Capital Stories
• Venture Activity
• Clean Bulletin Board

   Over $3 billion in deals tracked!

Established reference for media and other stakeholders
on cleantech venture industry
               Pioneering Research
• Responding to an unmet demand for reliable research on the
  state, performance and opportunities in the cleantech area.
• Initiated preparation and publication of the first report on
  cleantech venture returns, exits and prospects.
• Report underwritten by sponsors – EnerTech Capital,
  Expansion Capital Partners, CDP, Rustic Canyon,
  Sustainable Asset Management, SDTC.
• First report provided preliminary data suggesting strong
  historical and projected returns to cleantech venture investors.
• Future reports will cover topics such as State of the Industry,
  VC Directory as well as more detailed data on investor returns
   “Cleantech” – the Sustainable Venturing

Alongside the information revolution is an industrial revolution
reshaping the design and manufacture of almost everything
that we see around us. The revolutionary products being
developed today have dramatic improvements over the old
because they:

     Are lighter, smarter and stronger.
     Are cheaper to manufacture and operate.
     Are less carbon-intensive and more energy efficient
     Offer greater service utility per unit of material input
     Enable virtually zero waste and/or emissions
          Cleantech Segments

Clean Energy
                                                       Clean Water

                     CONVERGENCE           CONVERGENCE

Advanced Materials & Nanotechnology (e.g. catalysts and membranes)

 Information Technology & Internet (e.g. advanced meters and sensors)

         Cleantech is a category like biotech, not a sector.
             Who are the Buyers?
• Pharmaceutical, Semiconductor and Thermoelectric
  companies who use large quantities of ultra pure water
• Automobile and Aircraft Manufacturers needing higher
  fuel efficiency from lighter materials
• Utilities and Large Energy Users demanding reliable,
  affordable and low carbon power supplies
• Consumer Electronics companies needing to reuse
  valuable components and materials
• Agricultural producers requiring safer and more precise
  inputs and products
• Logistics organizations seeking more efficient use of
  fleets and containers
         Cleantech is not Envirotech

        Envirotech                      Cleantech
        1970s-80s                       mid 1990s -
• Regulatory driven market      • Economic market drivers
• Compliance-based purchasing   • Productivity-based purchasing
• “End-of-pipe” tech, eg        • “Front-of-pipe” tech, eg zero
  scrubbers on smoke stacks       emission plants
• Chemical science              • Biological & materials science
• Traditional engineering       • Systems design & engineering
• Slow growth markets, eg       • Rapid growth markets, eg
  waste management                solar energy
• “Save the world” mentality    • “Entrepreneurial” mentality
• Low IT use                    • High use of IT
        Cleantech - “Leapfrog” Opportunity

The market for cleantech is rapidly developing due to a industrial restructuring
and modernization; scientific and engineering advances in microelectronics,
biology, chemistry and physics; changing socio-political values; and,
deepening concern for environmental sustainability.

Some clean technology markets are growing at compound annual rates of
more than 20%, for instance those for solar energy and natural pesticides, as
costs come down, products improve and consumer demand strengthens.

Emerging fields such as nanotechnology offer the prospect of products that
cost less, perform better, and sustainably satisfy human demand in ways that
could not be done or imagined previously.

The impact of cleantech is ubiquitous: there are large and highly disruptive
market opportunities emerging in the multi-billion dollar agricultural,
manufacturing and transportation sectors, as well as in the fundamental
enabling areas of energy and water.
       Example: Cleantech and Nanotech
     TIME (in years)

                       Tools for V isualization, Measurement, Manipulation, Process Control

                                                                                                                   Enabling technologies
                                                                                                                   for most of these
                                            Self-Assembling Structures                                             applications include
                                                                                                                     • nano tubes
                                                                                                                     • nano crystals
                                                                                                                     • nano cones
                                                                                                                     • nano horn
                                                                                                                     • nano rods
                                        Embedded Ttechnology in Materials


           Recyclable Polymers      Fuel/Energy Storage           Ultra Clean Diesel      Nano pourous Materials
           Biosensors               Conductive Polymers           Coal Liquefication      Recyclable Polymers
           Catalysts                Catalysts                     Catalytic Converters    Biosensors
           Coatings                 Coatings                      Miniturized Networks    Membrane Filter

              Resource                   Alternative             Conventional                 Water & W aste
             Productivity                  Energy                  Energy                      Treatment

                                         ILLUSTRA TIVE APPLICA TIONS
                         Cleantech Examples

•   Agriculture - bio-based materials, farm efficiency technologies, micro-irrigation
    systems and natural pesticides

•   Energy - distributed and renewable energy generation and conversion
    (including fuel cells, geothermal, wind and photovoltaics); energy management
    systems; superconducting transmission; energy storage and power quality; key
    enabling technologies; and related Internet and information technology-based

•   Manufacturing - advanced packaging; high value materials recovery; natural
    chemistry; sensors; smart construction materials; and precision manufacturing

•   Transportation - hybrid vehicles, lighter materials, smart logistics software and

•   Water - water recycling and ultra-filtration systems (UV and membrane based
    systems), sensors and automation systems and desalination equipment

                      CleanTech             % of Total VC
400             376                                                             10.0%
350                      321                321      320      313
300                        7.1%               7.2%     7.5%     7.4%
250               6.3%            219                                           6.0%
200    169                                                               5.0%
150                                                                             4.0%
100      2.6%
  0                                                                             0.0%
      Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '04
           Cleantech Venture Activity
•   $1.1B invested in North America during 2002, $1.2B in 2003, for about
    6% market share, up from about 2% in the late 90s. Momentum

•   Approximately 450 investors in 400 deals over 2002-2003 – from
    specialists to corporations to mainstream VC investors

•   Energy related companies account for 40% of all cleantech deals,
    followed by advanced materials/nanotech, water purification and
    management, materials recovery & recycling and sustainable
    agriculture and precision farming

•   Strong pipeline of early stage deals requiring follow-on financing,
    especially in the US North East and Canada

•   Geographic dispersal and average deal size broadly tracks overall deal
    activity although the US West Coast is less dominant and the North
    East has the highest number of start-ups

                                Water Purification and       Agriculture and Nutrition,
                                   Management,                  $114,160,000, 5%
                                 $115,276,900, 5%
 Materials Recovery and
Recycling, $208,658,538,
           8%                                                                      Air Quality, $131,557,500,

  Transportation and
Logistics, $69,522,420,
           3%                                                                               Enabling Technologies,
                                                                                              $229,253,400, 9%

       Materials and
     $406,312,000, 16%

        Manufacturing/Industrial,                                                 Energy Related ,
          $145,052,900, 6%                                                      $1,058,228,131, 43%

                                    Environmental IT,
                                    $2,640,000, 0%
Investment by Energy Industry Segment
                                        for 2002-2003 (est.)

                                                               Energy and Efficiency,
                                                                 $74,320,431, 7%
                Energy Storage,
               $186,398,900, 18%

                                                                                 Energy Generation,
  Energy Infrastructure – IT related                                             $493,589,900, 46%

          $303,918,900, 29%

            Source: Cleantech Venture Network LLC
             Investors in Cleantech Funds
Chrysalix Energy Management   EnerTech Capital Partners       SAM Private Equity LP                  Nth Power
Ballard Power Systems         AES Corporation                 CDP Capital Technology Ventures        ABB
BASF Venture Capital          Avista Energy                   EDF Ventures (Electricité de France)   Alliant Energy
The BOC Group                 Ballentine Capital Fund         Gerling                                Avistar
The Boeing Company            Bank of America                 Hydro Quebec Capitech                  Ballentine Capital
Duke Energy                   Battelle Memorial Institute     Mitsui & Co. Ltd.                      Banc of America
The Mitsubishi Corporation                                    Norsk Hydro Technology Ventures
                              ChevronTexaco Technology Ventures                                      CDP Capital
Shell Hydrogen                CIBC                            Ontario Power Generation               CH Energy
                              Crow Holdings                   Suncor Inc.                            CIBC Capital Corp
                              DTE                             Swiss Re                               Cinergy Ventures
                              Dyson-Kissner-Moran                                                    Dominion
                              Electricite de France - France                                         Electricite de France
                              Endesa - Spain                                                         Emerson Ventures
                              Exelon                                                                 EnergyEast
                              First Energy                                                           EPCOR
                              Fortum - Finland                                                       FirstEnergy
                              Gas Technical Institute                                                Hydro-Quebec Capitech
                              Harbourvest Partners                                                   Itochu International
                              Hunt Power                                                             Lehman Brothers
                              Hydro-Quebec - Canada                                                  Meridian Energy
                              Integrated Electrical Services                                         NiSource
                              Mellon Ventures                                                        Norsk Hydro Venture
                              Orion Group - New Zealand                                              OPG Ventures
                              Partners Group                                                         PacifiCorp
                              People's Energy                                                        Pantheon Ventures
                              Pepco                                                                  Sierra Pacific Power
                              Permal Capital                                                         Swedish Pension Fund
                              Safeguard Scientifics                                                  Williams, Jones & Associates
                              Stephens, Inc.
                              TotalFinaElf - France
                Some Success Stories
•   Ballard(CAN) – fuel cells; MC ~C$1.5Billion
•   Xantrex(CAN) – power conversion equipment; MC ~C500Million
•   American Power (US) – power conditioning; MC ~US$3.0Billion
•   Vestas/NEG Micon(DEN) – wind turbines; MC ~EUR1.6Billion
•   Zond (US) – wind turbines, 7x return to investors when sold
•   Trojan Tech (CAN) – ultraviolet technologies, MC ~C$200Million
•   Zenon (CAN) – membrane technologies; MC ~C$600Million
•   USFilter (US) – water technologies; sold in ’99 for ~US$8.2Billion
•   Pall Corp.(US) – filtration/separation tech; MC ~US$3.6Billion
•   Nanogram (US) – battery materials, 90% IRR to investors when sold
•   Silicon Energy (US) – energy IT, high multiple to investors when

More success stories and more stable returns than commonly understood
       Attractive Financials & Fundamentals

• Category not over invested
• Low enterprise valuations
• Lower capital intensity than other categories
• Strong trade exit potential – most M&A
• Global corporate, consumer and government demand
• Evidence of rising public market interest
• Pro forma portfolio IRRs equal or better than other
• Strong leverage on public sector incentives
           Opportunities & Challenges
• Clean technologies reflect long-term trends – decarbonization,
  lighter materials, greater social transparency etc – accelerated by
  technology and the eco-footprint of 6.1 bn people. Trends +
  acceleration = new sustainable market opportunities

• Investors can play a key role by picking out and nurturing the
  potential winners for high financial ROI and societal benefits

• Challenges include:
   • Fostering “serial” cleantech entrepreneurs
   • Building big-small partnerships
   • Building investment syndicates
   • Attracting patient and smart capital
   • Gaining recognition as an investment category
   • Earning sell-side analyst coverage

Cleantech can help reduce sustainability risks while
providing opportunities to leapfrog into new markets with
high margin revenue streams
Cleantech emerging as a new asset category with
increasing evidence of venture grade ROI potential
SRI oriented investors need to allocate 5-7% of assets to
cleantech private equity, either through established or
emerging managers
Cleantech Venture Network is positioned to assist
investors and entrepreneurs to succeed in this next and
necessary wave of venture-backed innovation
            Thank You!

We welcome your interest and support

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