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A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
INTELLIGENT BUILDINGS &
ENTERPRISE
JANUARY 2014
ABOUT THE AUTHOR
NAVITAS CAPITAL IS A VENTURE CAPITAL FIRM AT THE INTERSECTION OF THE IT AND ENERGY SECTORS WITH A UNIQUE FOCUS ON THE INTELLIGENT BUILDINGS & ENTERPRISE SPACE. OUR MISSION IS TO IDENTIFY, INVEST IN, AND HELP BUILD THE NEXT GENERATION OF DEFINING COMPANIES IN OUR SPACE.
WE WOULD LIKE TO THANK THE INCREDIBLE FOUNDERS AND LEADERS FROM OUR PORTFOLIO COMPANIES FOR GIVING US THEIR FEEDBACK ON THIS REPORT AND HELPING US PULL THE CASE STUDIES TOGETHER. SPECIAL THANKS GOES OUT TO ADAM STEIN AND TOM ARNOLD FROM GRIDIUM, RAO MULPURI AND ERIC KLAWUHN FROM VIEW, RYAN SUTTON-GEE AND TRACY YOUNG FROM PLANGRID, MATT FREY AND MARTY HESS FROM OPTIMUM ENERGY AND SIMON LEBLOND FROM SCL ELEMENTS.
THANK YOU.
AUTHORS:
Jim Pettit
Navitas Capital
Travis Putnam
Navitas Capital
William Busch
Navitas Capital
NORTHERN CALIFORNIA
1751 Harbor Bay Parkway, Suite 200
Alameda, CA 94502
SOUTHERN CALIFORNIA
11990 San Vicente Blvd., Suite 350
Los Angeles, CA 90049
www.navitascap.com
© 2014 NAVITAS CAPITAL. ALL RIGHTS RESERVED.
1
CONTENTS
INTRODUCTION _________________________________________________________ 2
NAVITAS INVESTMENT THESIS ______________________________________________ 4
MARKET & GROWTH DRIVERS _______________________________________________ 5
TECHNOLOGY ENABLERS __________________________________________________ 9
CHALLENGES TO DRIVING INVESTMENT RETURNS ________________________________ 13
CONCLUSION __________________________________________________________ 18
APPENDIX A: CASE STUDIES ________________________________________________ 19
GRIDIUM ___________________________________________________________ 19
VIEW ____________________________________________________________ 22
PLANGRID _________________________________________________________ 25
OPTIMUM ENERGY ___________________________________________________ 28
SCL ELEMENTS ______________________________________________________ 31
APPENDIX B: 50 INTELLIGENT BUILDINGS & ENTERPRISE STARTUPS TO WATCH ___________ 34
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
2
INTRODUCTION
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
3
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
4
NAVITAS INVESTMENT THESIS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
5
MARKET & GROWTH DRIVERS
SIZE & IMPACT
o
o
o
o
o
o
o
o
o
o
INTELLIGENT BUILDINGS & ENTERPRISE GROWTH DRIVERS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
6
PROVEN TECHNOLOGIES & AFFORDABLE COST POINTS
IT DRIVING REAL-TIME UNDERSTANDING OF BUILDINGS
BUILDING ENERGY CODES
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
7
GREEN BUILDING MOVEMENT
ENERGY VOLATILITY & RELIABILITY
ENERGY EFFICIENCY FINANCING SOLUTIONS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
8
CORPORATE SUSTAINABILITY INITIATIVES
UTILITY DEMAND SIDE MANAGEMENT PROGRAMS
INCREASED EDUCATION & ENERGY EFFICIENCY AWARENESS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
9
TECHNOLOGY ENABLERS
o CLOUD AND BIG DATA
o INTERNET OF THINGS
o MOBILE
o SOCIAL BUSINESS
o 3D MODELING/IMAGING
CLOUD AND BIG DATA
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
10
INTERNET OF THINGS
MOBILE
SOCIAL BUSINESS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
11
3D MODELING/IMAGING
“Beyond BIM as we know it today, we believe there will be a new generation of exciting 3D imaging and analytical modeling technologies that will make a big difference in the facility’s long-term health and management.”
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
12
THE “SMART BUILDING”
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
13
CHALLENGES TO DRIVING INVESTMENT RETURNS
SCALABILITY
COMPETING VS. PARTNERING WITH LARGE CORPORATE PLAYERS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
14
REAL BUSINESS METRICS VS. “VANITY METRICS”
CAPITAL INTENSITY OF FINANCING REQUIREMENTS
GETTING THE BUSINESS MODEL RIGHT
WHAT WE LOOK FOR & KEYS TO SUCCESS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
15
TABLE 1
WORLD-CLASS TEAMS
SCALABLE GO-TO-MARKET STRATEGY
OPTIMUM ENERGY: ROI & PAYBACK CASE STUDY
OPTIMUM ENERGY CUSTOMER – NEW YORK
PREDICTED ANNUAL SAVINGS:
ACTUAL 1ST YEAR SAVINGS:
> 1,662,000 KWH PER YEAR
> 1,725,000 KWH PER YEAR
> $174,500/YR. > $180,820/YR.
> 15.4% SAVINGS > 17% SAVINGS
> $506K COST > $506K COST WITH A $100K REBATE
> 2.9 YEAR PAYBACK + 34% IRR
> 2.8 YEAR PAYBACK + 35% IRR
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
16
“CAPITAL LIGHT” APPROACH
FLEXIBLE BUSINESS MODELS
INTELLIGENT IP STRATEGY
HIGH GROSS MARGINS
“Generally speaking (there are always exceptions to the rule), we believe funding startups with limited amounts of capital to demonstrate product-market fit and a compelling growth story is a better venture capital investment strategy, particularly for Navitas Capital, which is not conflicted by large VC politics (e.g. the propensity to over-capitalize a startup in an attempt to “move the return needle” of an investment bet in a big fund.)”
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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TABLE 2
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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CONCLUSION
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
19
APPENDIX A: CASE STUDIES
GRIDIUM, INC.
BUSINESS OVERVIEW
BUSINESS OPPORTUNITY
THEME(S)
BUSINESS MODEL
PRODUCT(S)
GO-TO-MARKET STRATEGY
CUSTOMER TRACTION
CAPITAL RAISED
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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PRODUCTS & SOLUTIONS
CUSTOMER VALUE PROPOSITION
KEYS TO SUCCESS
CAPITAL EFFICIENCY
HIGH GROSS MARGINS
CHANNEL PARTNERSHIPS
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
21
CONCLUSIONS
STRONG FOUNDING
TEAM
O
O
O
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
22
VIEW, INC.
BUSINESS OVERVIEW
BUSINESS OPPORTUNITY
THEME(S)
BUSINESS MODEL
PRODUCT(S)
GO-TO-MARKET STRATEGY
CUSTOMER TRACTION
CAPITAL RAISED
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
23
PRODUCTS & SOLUTIONS
CUSTOMER VALUE PROPOSITION
o
o
o
o
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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KEYS TO SUCCESS
CONCLUSIONS
GO-TO-MARKET
STRATEGY
IP STRATEGY
WORLD-CLASS TEAM
O
O
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
25
PLANGRID
BUSINESS OVERVIEW
tools
.
BUSINESS OPPORTUNITY
THEME(S)
BUSINESS MODEL
PRODUCT(S)
GO-TO-MARKET STRATEGY
CUSTOMER TRACTION
CAPITAL RAISED
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
26
PRODUCTS & SOLUTIONS
CUSTOMER VALUE PROPOSITION
o
o
o
o
KEYS TO SUCCESS
CAPITAL EFFICIENCY
HIGH GROSS MARGINS
STRONG FOUNDING TEAM
GO-TO-MARKET STRATEGY
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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CONCLUSIONS
O
PlanGrid was able to deliver its first product into its customer’s hands on a very thin budget, thus establishing
“product-market-fit” without burning through large amounts of capital. Capital efficiency creates a healthy scenario
for founders and early investors.
O
From a platform standpoint PlanGrid has clearly benefitted initially from the “halo” effect of Apple and its iPad
product, creating a very trusted and highly innovative platform in the construction sector, from which to launch its
workflow management solutions. While early, PlanGrid has had strong success in selling directly to tier-1 general
contractors to gain a critical mass of market acceptance and credibility by all relevant constituents. Clearly, the
scalable, “viral” opportunity is to build a standardized field platform that is trusted in the construction space,
broadly accepted by general contractors, subcontractors, engineers, architects and owners.
O
PlanGrid’s co-founding team is well balanced (industry domain expertise, and technically strong) and thrives
working in an extremely fast-paced environment. This has proven to be a powerful recipe as the team has been
able to deliver product to customers early in the development cycle, get feedback, and continuously update the
software with new features. In addition to the founding team, PlanGrid benefitted from the technical, business, and
investor networks of its early investors and advisors, including the Y Combinator incubation program.
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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OPTIMUM ENERGY, LLC
BUSINESS OVERVIEW
BUSINESS OPPORTUNITY
PRODUCTS & SOLUTIONS
THEME(S)
BUSINESS MODEL
PRODUCT(S)
GO-TO-MARKET STRATEGY
CUSTOMER TRACTION
CAPITAL RAISED
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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CUSTOMER VALUE PROPOSITION
o
o
o
o
KEYS TO SUCCESS
GO-TO-MARKET STRATEGY
BUSINESS MODEL
IP STRATEGY
WORLD-CLASS TEAM
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
30
CONCLUSIONS
O
O
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
31
SCL ELEMENTS INC.
BUSINESS OVERVIEW
BUSINESS OPPORTUNITY
THEME(S)
BUSINESS MODEL
PRODUCT(S)
GO-TO-MARKET STRATEGY
CUSTOMER TRACTION
CAPITAL RAISED
EXIT
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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PRODUCTS & SOLUTIONS
CUSTOMER VALUE PROPOSITION
o
o
o
o
o
o
KEYS TO SUCCESS
“CAPITAL LIGHT” APPROACH
GO-TO-MARKET STRATEGY
STRONG IP STRATEGY
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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CONCLUSIONS
STRONG TEAM
O
O
O
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
34
APPENDIX B: 50 INTELLIGENT BUILDINGS & ENTERPRISE STARTUPS TO WATCH
INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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INTELLIGENT BUILDINGS & ENTERPRISE: A HIGH-GROWTH INVESTMENT STRATEGY AT THE INTERSECTION OF IT AND ENERGY
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