the art of investing in cleantech start-ups · the art of investing in cleantech start-ups ....

March 2012 Bart Markus, General Partner Wellington Partners

The Art of Investing in Cleantech Start-ups

Wellington Partners Technology Fund London / Munich / Zurich / Palo Alto

„The art“ of what we really do seems quite simple

3.  We get someone to believe all this is true and sell them

1.  We pick companies and invest in them

2.  We wave our magic wand and make them successful


But in practice is hard to make work

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

1990 1992 1994 1996 1998

Median Net to LPs (%) Upper Quartile Net to LPs(%) Lower Quartile Net to LPs (%)

Source Cambridge Associates


Why is this so hard - especially for Cleantech

Urban Myths:

§  Europe has no real entrepreneurs – especially in Cleantech

§  Cleantech is way too capital intensive

§  It takes far too long for a company in Cleantech to develop


Digital Media Cleantech

Well, actually there have been GREAT European entrepreneurs – also in cleantech!


And this is increasingly the case

Digital Media

Music Advertising Online Payment

Cleantech

Solar BOS LED Biomass


Capital intensity can be dealt with properly

2

Funding to Milestonesa.k.a “Old-Fashioned Venture Capital”

Capital & timeRisk (ß)

Valuation

Idea isFeasible

TechnologyWorks

A CustomerBuys

SeedFunding

R&DCapital

Go-to-MarketCaptial

ExpansionCaptial


But don´t get yourself in the Solyndra conundrum

3

The “Fully Funded” FollyA Customer

Buys

FullyFund

IPO(……….pray……………….)

Capital & timeRisk (ß)

Valuation

Idea isFeasible

TechnologyWorks


§  The average period between first money in and exit for all historic US Venture exits above $100M is 6.5 years

§  For IPOs that number is 9 years § 

ü  Yes, that includes Google, Netscape, Juniper Networks, eBay and Linked-in

And yes, Venture takes forever – ALL Venture does


So how DO we make it work?





What we are looking for in a company

§  Disruptive change in big markets

§  Top entrepreneurial and management talent

§  Customer-centric thinking

§  Sustainable competitive advantage


Solar PV Market Size in $ billions

Wind Market Size in $ billions

LED Market in $ billions

Grid Storage Market in $ billions

35.6 49.1 58.7

73.0 91.2

114.0 142.5

178.1

07 08 09 10 11 12 13 14

4.8 5.2 4.9 7.4

12.4 15.2

18.3 20.1

07 08 09 10 11 12 13 14

0.50 0.55 0.60 0.64

0.90 1.05

1.15 1.23

07 08 09 10 11 12 13 14

16.6 39.2 36.0

63.5 82.5

107.2

139.4

181.2

07 08 09 10 11 12 13 14

Source: World wind association, Bloomberg New Energy Finance, European PV Association, Strategies Unlimited, Lux Research

Cleantech markets provide rapidly growing new opportunities


•  So you can mobilize significant resources and still have a great return •  Large market enables large exit

Nanowire LED Technology •  September 2010 Investment •  We were tracking the company since they pitched for their series A in 2008 •  LED is $12Bn market, growing at 35% CAGR – and that is without mainstream adoption in general lighting

The result: •  Company raised $60M to date – should get them to first product samples •  Will need another $50M to volume production – but then there is a $ multi-Bn market to grab

A large market to address

Case example: GLO


Top Entrepreneurial and management talent

Case example: Enecsys Microinverter company •  May 2009 Investment •  CEO and VP Mkt ex Intel, Cadence •  VP Ops ex Cisco, went through 0-200M ramp 2 times •  VP Sales EU and NA from sector (Xantrex, Solyndra) •  VP Engineering ex Flex

The result: •  One of 2 DC/AC Microinverter companies with significant product traction in market •  US launch big success on the back of deep integration with Facebook

§  Previous experience (serial entrepreneur) is a big + §  Willingness to sacrifice for the sake of the company §  Willingness to learn from and bring in people with relevant experience


Customer centric thinking

Case example: Enocean Wireless, Batteryless sensor networks •  Feb 2002 Investment •  Replacing sensor systems with wireless technology, eliminating cabling needs, without adding the need to change batteries through energy harvesting

The result: •  Market leader in energy harvesting sensor networks •  Central positioning in upcoming smart home market

•  A true customer problem (keeping the customer awake at night) •  A solution, not a technology, which solves the entirety of this problem •  Some evidence of the above


Sustainable competitive advantage

•  First in the market advantage •  IP •  Competition?

Case example: Heliatek Organic PV without the lifetime and efficiency issues of other solutions •  August 2007 Investment •  We actively sourced the deal through research in the space •  17 patents granted, 20 applications in process

The result: •  More than unlikely that someone else will come up with the same solution •  High IP (=trade sale) value embedded

Wellington Partners Technology Fund London / Munich / Zurich / Palo Alto 1

8

Ceterim censeo – The 4-Genome DNA of a hypergrowth start-up

§  At any given point in time, have the dream-team on all key positions in the company (and keep challenging this)

§  Have the right Clock-frequency (days, not months) §  Have a long-term (3-4Y) Strategy, broken down into manageable short-term (1-2Q) targets

§  Have a „Bang for the Buck“ culture; money is a finite resource, and the moving variable is in where it is spent


Incorporations of successful startups constant over time

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Incorporations of companies with subsequent $100 m + Exits __ INCORPORATIONS


Exits, however, are highly volatile ...

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... as they are closely correlated to the stock markets

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__ EXITS

__ NASDAQ


The good news – it is happening again

Thank you

London / Munich / Zurich / Palo Alto

the art of investing in cleantech start-ups · the art of investing in cleantech start-ups ....

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