investor pitch andrew_chung__clean_tech_academy_2012_

Investor Pitch – The Essence of Telling Your Company’s Story

Andrew Chung, Partner, Khosla VenturesCleantech Open Academy 2012, San Jose, California

2 Clean Tech Open Confidential Information

About Lightspeed

• Venture assistance model

• 6 investing partners, $3B under management

• $300M Seed Fund: high-risk, higher-return experiments

• $1.05B Main Fund: 50% Cleantech, 50% Info/MedTech

”“"Our willingness to fail gives us the ability and opportunity to succeed where others may fear to tread.”

-Michael Jordan

3 Clean Tech Open Confidential Information 3

…With Green Technologies!

MATE

RIALS

OIL

Waste Water

Water Desalination

PVC

Plasticizers

Glass

Feedstock Processing

Distributed Solar

DieselGasoline

Other Hydrocarbons

Motors

Appliances

Batteries

Geothermal

AGRICULTURE / OTHER

PLASTICS & CHEMICALS

CELLULOSIC ALCOHOL

ADVANCED HYDROCARBONS BATTERIES / OTHER

MECHANICAL EFFICIENCY

ELECTRICAL EFFICIENCY

OTHER

DISTRIBUTED GENERATION

Utility Scale Solar

Butanol

SyntheticNatural Gas

CellulosicEthanol

Lighting

Engines

Cement

Drivetrains

Feedstocks

Polyurethane

Polyethylene

COAL

EFFIC

IENCY

Storage

Wind

Generators

Agronomy

Nuclear

Storage

Other

Homes

Smart grid

UTILITY SCALE GENERATION

Grid-Scale Storage

ADVANCEDCARBOHYDRATES

BUILDING MATERIALS


Biodiscovery

KiOR

NanoH2O

Coskata

Soladigm

Virdia

LanzaTech

Gevo

LS9

NRG-Dynamix

Seeo Tula Transonic

Great Point Energy

Stion

EchoFirst

CaitinAmyris

Altarock

Mascoma

Soraa

Ecomotors Topanga

Sakti3

Calera

MATE

RIALS

OIL

COAL

EFFIC

IENCY

Danotek

NordicSolum

PSP

TerraPower

Pellion

Liquid MetalBattery

Avogy

Cogenra

Lightsail

Segetis

Varentec

ADVANCEDCARBOHYDRATES

CELLULOSIC ALCOHOL

ADVANCED HYDROCARBONS BATTERIES / OTHER

MECHANICAL EFFICIENCY

ELECTRICAL EFFICIENCY

AGRICULTURE / OTHER

PLASTICS & CHEMICALS

BUILDING MATERIALS OTHER

DISTRIBUTED GENERATION

UTILITY SCALE GENERATION

Izar

EtagenRecapping

Climate Corporation

Reluceo

Quantumscape

Arcanum

Range

Khosla Ventures Green Portfolio

Sunborne

Bidgely

Nu-Tek Salt

Unreal Foods


AC: At a Glance

• My areas of interest– Science: Cleantech & Medtech– IT: Internet, Mobility, Education

• 1 of 6 partners at Khosla, also lead China activities

• Launched Lightspeed Ventures’ cleantech practice

• Bain Capital, TL Ventures, Bain, Trilogy, Wharton, Harvard

• Ex-IT entrepreneur: founded startup, sold to public co.

(NSDQ: SZYM)


What to present to a VC?

Operations Sales pipeline Distribution Policy/regulatory issues

Financials Projections Fundraising needs

4

5

Mission statement

Management team

Market

Technology Overview / value prop Competitive differentiation Economics Development timeline

0

1

3

2

For each section, we’ll discuss:

What I'm looking forCommon issuesSample slides


Some ground rules

General reminders

Know your audience

Be conscious of time

Get to the point

Simple and clear slides

Be ready to jump around a lot

Your delivery

Enjoy the stage

Inspire confidence

Look them in the eye

Don’t overgesticulate

Coordinate team roles before your pitch


A few caveats before we dig in…

• Not all VC's look for the same stuff

• Cleantech is vast, so different sectors require different emphasis

• Sample slides are illustrative and most use dummy data

• Presentation order will depend on you


For Starters…

Highest-efficiency thin-film module in production

Lowest production & capital costs in the industry

Scalable manufacturing with industry-standard equipment

Stion: Silicon Efficiency at Thin-film Cost

Courtesy: Stion’s Web site


Management Team

What I'm looking for

Is there a balanced skillset across team?

Deep technology expertise

Industry execution experience

Entrepreneurial experience

Common issues

Homogeneity

Theory over substance

Lack of clarity about recruiting needs and timing (emphasis on CEO, VP-level hires)


Management Team (Sample)

Tom Cruise – President & CEO 30 years of executive management and startup experience C- or VP-level at 5 startups, 3 successful exits (AAA, BBB, CCC) - cumulative value of $300M MBA, Wharton School; B.S., Materials Science, UC Berkeley

Jack Nicholson, Ph.D. – Founder & CTO 20 years at Sandia National Labs: Photovoltaics Team Lead Professor, Materials Engineering, Stanford University Ph.D., Materials Science, M.I.T.; B.S.E., Electrical Engineering, University of Washington

Demi Moore, Ph.D. – VP of Engineering Applied Films: Head of Engineering, led commercialization of 5 thin-film production lines Unisolar: Production Manager, Employee #25 Ph.D., Electrical Engineering, University of Toledo; B.S.E., Electrical Engineering, Northwestern

Kevin Bacon – VP of Business Development Complete Phase II of development MBA, Duke University; B.S. Electrical Engineering, Stanford

Technical Team: First Solar, Miasole, SunPower, Stanford, Harvard, MIT, Berkeley

Key Hires Needed: COO, CFO, materials engineers

Management Team


Market


Does this market support a$1B+ company?

Massive end-markets ($1B+)

High-growth markets

Potential to dominate

Ability for startups to compete

Common issues

Too much time spent explaining a familiar market

Lack of clarity on targeted segments and true addressable market (it’s all about TAM)


Market (Sample)

$0

$5

$10

$15

$20

$25

$30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009E 2010E

$ Bi

llion

s

The solar market has grown at 40%+ CAGR since 2000


Market (Sample)

Target Industry: Key Addressable Markets

0

20

40

60

80

100%

Product Category 1

Product 3

Product 2

Product 1

51

Category 2

Product 8

Product 7

Product 6

Product 5

Product 4

18

Category 3

Product 11

Product 10

Product 9

16Billions of units

1-2 years

3+ years

Time-to-market

Note: Dummy data used

Category Share

Mar

ket S

hare


Tech: Overview


What is the product or service that you’re offering?

Concise, but sufficient background

Technology that is IP-rich and defensible

Clear value prop to customer

Common issues

[25 mins into your presentation] “What is it you do again?”

Not tailoring the technical depth for your audience and stage of meeting


Tech: Overview (Sample)

Courtesy: GreatPoint Energy’s Web site


Tech: Overview (Sample)

Courtesy: GreatPoint Energy’s Web site

Produces methane in a single step and in a single reactor Pipeline grade product No need for external water gas shift reactor No need for external methanation reactor Produces CO2 as a valuable sequestration-ready byproduct

Significantly reduces operating temperature Lower cost reactor components Lower maintenance costs and higher reliability Eliminates costly high termperature cooling

Utilizes steam methanation Eliminates costly air separation plant

High efficiency 65% overall efficiency Thermally neutral reaction process No need for integrated power plant

Process Advantages


Tech: Differentiation


How is your offering different? Tech approach Product performance Cost economics Stage of development

Thoughtful understanding of competition

Common issues

Another “me too” technology

Assuming your approach is unique


Tech: Differentiation (Sample)

Energy Storage Competitive Landscape

Delta EpsilonTau

Beta

Sigma

Alpha

Omega

Gamma

Increasing Power Density

Incr

easin

g En

ergy

Den

sity


Our Company


Tech: Economics

What I'm looking for Common issues

Does your product/service make economic sense? Production costs

Capex

For “incremental” tech (e.g., ethanol), ability to compete with existing alternatives

For “displacement” tech (e.g., thin film), ability to achieve significant cost improvement

Industry costs are moving targets

Not understanding sensitivities associated with feedstock price changes, subsidy changes, etc.


Tech: Economics (Sample)

0

1

2

$3/gge

Wholesale@ $50/bbl

$1.2

Soy-basedBiodiesel

$2.5

Corn-basedEthanol

$1.5

Today (Lab)

$2.8

Pilot(Q3 '08)

$1.9

Commercial(Q4 '10)

$1.3

Production cost

Our costs will be competitive with existing fuels

Feedstock

Processing


Our technology

Cost level with current tax credit

Note: gge = “gallon gasoline equivalent”

Existing fuels


Tech: Development Timeline


What is your future development roadmap?

Technical progress made to date

Key future milestones and risk assessment

Key capital equipment required and scale-up needs

IP portfolio development plan

Common issues

Long time-to-market (3+ years)

Lengthy “design-in” time requirements

Dependence on other emerging technologies


Tech: Development Timeline (Sample)

2012 2013 2014Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Development Roadmap

Sub-10% 10-25% 25-50% 50-95%

Yield

Capacity Scale-up 5L pilot 20L pilot

Commercialization 10K L production 100K L production


Ops: Sales and Distribution


What is your go-to-market strategy?

Review of sales pipeline and notable customers

Potential engagement with relevant channel partners

Common issues

Sales cycles that are too long (esp. for utilities or local governments)

Long payback time / limited ROI for end-customers

Fragmented customer base


Ops: Sales and Distribution (Sample)

Current Sales Pipeline

Alpha Energy $2,000,000 MedBeta Utility $1,000,000 HighGamma Industrial $800,000 MedDelta Energy $750,000 HighEpsilon Utility $600,000 LowPi Industrial $500,000 MedTheta Energy $300,000 HighNu Utility $300,000 LowRho Industrial $300,000 HighSigma Energy $200,000 HighTau Utility $150,000 High

TOTAL POTENTIAL $6,900,000

In discussion withkey distributionpartners

Target Customer Potential Deal Likelihood

http://www.pge.com/


Ops: Policy/regulatory Issues


What key government policies or regulations drive your business? Subsidies Tax credits Emissions credits Compliance laws

Understanding of how they will evolve over time

Associated risks and sensitivities

Common issues

Business models dependent on: Short-term policy windows Pending legislation

It’s all about the stimulus package!


Financials: Projections


What does your financial plan look like?

Any recent historical results

3-5 year forward projections Simple P&L Headcount Timing for cash flow breakeven

Any debt assumptions

Common issues

Too aggressive

Too conservative

Not knowing how sensitive financials are to externalities


Financials: Projections (Sample)

Operating MarginRevenue Gross Margin %

-20

0

20

40

60

$80M

0

20

40

60

80

100%

2007 2008 2009 2010 2011 2012 2013

Financial Plan

6 10 15 25 45 75 120-1.5 -3.5 -5.3 -7.0 1.2 7.7 17.2

HeadcountCash Flow ($M)



Financials: Fundraising Needs


How much do you need to raise and why?

Funding history

Total target raise

Amount available for new VC’s

Use of proceeds and achievable milestones

Board seat expectations

Valuation expectations

Common issues

Large initial rounds with limited proof points

Lack of flexibility in round structure


Financials: Fundraising Needs (Sample)

Funding history Seed (6/07): $500K – angel investors Series A (6/08): $2.5M – Alpha Capital, Beta Ventures

Series B financing: $12-15M target equity, $2-5M add’l debt Insiders to take $2-5M Expect 2 investors (1 financial, 1 strategic), each with board seat

Targeted milestones Complete Phase II of development 2 MW pilot line completed Secure initial distribution partners Recruit top-tier CEO Carry company through end of 2010

Series B Financing


Now it’s your turn…

Operations Sales pipeline Distribution Policy/regulatory issues

Financials Projections Fundraising needs

4

5

Mission statement

Management team

Market

Technology Overview / value prop Competitive differentiation Economics Development timeline

0

1

3

2

Parting thoughts:Be passionateBe confidentBe open to new ideas

Andrew Chung, [email protected]

GOOD LUCK!

investor pitch andrew_chung__clean_tech_academy_2012_

Technology

development

materials

common issues

dummy data

electrical

prop fundraising

university

sales