EcoMachines - Venture Capital in Energy and Cleantech: Is the Model Keeping Up? 10/03/2014

“Venture Capital in
Energy and Cleantech:
Is The Model Keeping
Up?
&

UK
Continental
Europe
Rest of the
world
Research
Consulting
Finance
Project mgt
Engineering
Education
Other
Location Function
Oil & Gaz
Utilities
Nuclear
Renewables
Other
Industry
0
500
1000

We invest in
and accelerate the growth
of promising startups in
high-value manufacturing
and advanced engineering
We address the
funding gap faced by
early-stage
companies that are
working in these areas
Investments
are made as part of an
Accelerator which
includes equity finance,
mentorship, and other
services
About EcoMachines Incubator

Power Generation Transport Water
Energy Efficiency Materials Smart City
Sectors of Interest
EcoMachines focuses on innovations in the following areas:
Waste
Industrials

Accelerator Programme
We help entrepreneurs to transform their business from a startup with a
proof-of-concept technology into a high-growth, investable company.
Stage 1
Startup
Stage 3
Follow On
Result
Our 9-month Accelerator programme is specifically designed for hardware &
advanced engineering startups.

Management Team
CEO and Founder
Ilian Iliev
Founder Director
Oleg Evdokimenko
Director
Alexey Krenke
Investment Relations
Oksana Hilinskaya
Analyst
Robert Snellgrove
Peter Feulner
Leader of Technology,
Innovation and Strategy
at Ricardo Germany
Igor Turevsky
Ex-Global Sales and
Busdev Director of
Alstom Network
Management
Laurence John
VC and investor; ex-CEO
of Amadeus Capital’s
Seed Funds
Prof. Nelson Philips
Chair in Strategy and
Organisational Behaviour at the
Imperial College Business School
Advisory Panel

Mentors
Former head of intellectual
property at BP; Founder and
owner of Fairoaks IP
Mike Barlow
Co-founder and President,
Operations at Owlstone
Nanotech
Billy Boyle
Founder and Non-Executive
Director of Brady plc
Robert Brady
Managing Director, Sustainable
Blueprints; Ex-Head of Water
Insight Services, BNEF
Dimitra Christakou
CEO of Puntios, which creates
and finances technology spin-
outs from industry.
Simon Hombersley
Energy Policy Advisor ,
Energy Technologies Institute
(ETI)
Mahdi Kazemzadeh
European Patent Attorney,
Partner at Mathys & Squire
Alan MacDougall
Director at Fidem Partners
Hristo Mitchkovski
Chairman of Cambridge
Cleantech
Hugh Parnell
Business change and growth
leader
Sir Eric Peacock
Founder Director at
Productiv; Chairman at
Oxford BioMedica
Nick Rodgers
Managing Partner and
Co-Founder of White Lake
Strategic Advisory Group
John Rowland

Why are we bullish on the opportunities in
energy & cleantech?
Source: http://www.ritholtz.com/blog/wp-content/uploads/2009/07/cartoon-spin-bull-vs-bear.jpg

VC in energy and cleantech: is the model keeping up?
The VC environment has been broadly
positive in the last few years
...while cleantech investment has
moved in the opposite direction

...yet within sub-sectors investment trends differ
Source: Cleantech Group i3 database

Why are we bullish about hardware in
energy and cleantech?
• The ‘bubble’ in Cleantech has already burst – look
elsewhere for bubble conditions
• Move towards specific, real solutions for mature industrial
sectors – with real bottom-line benefits to specific
users/clients
• Much easier to have investment discussions firmly focused
on real world outcomes – where real cash flows come from
Bubble
inoculation ?
• Improved CAD design & simulation, 3D printing/rapid
prototyping, and more executive experience can lead to
leaner, faster startups
• Impact is lower capex and faster time-to-market
Lean hardware
startups?
• Opportunities for energy/cleantech application areas from
well developed platform technologies in materials science,
robotics, M2M/Connected hardware
• The application of these to industrial problems can lead to
significant value release/capture – and novel business
models
Horizontal
technologies
impact?

Ilian Iliev (CEO)
London, United Kingdom (HQ)
(m) +44 77863 73965
(e) ilian.iliev@ecomachinesincubator.com
Oksana Hilinskaya (Investor Relations)
Moscow, Russia
(m) +7 964 566 8105
(e) oksana.hilinskaya@ecomachinesincubator.com
Alexey Krenke (Director)
Prague, Czech Republic & Germany
(m) +420 604 257 524
(e) alexey.krenke@ecomachinesincubator.com
Contact Us
To find out more about EcoMachines Incubator,
please contact us.
ECOMACHINES INCUBATOR LTD.
Rainmaking Loft, International House, 1 St Katharine’s Way, London, E1W 1UN, United Kingdom
www.ecomachinesincubator.com @EcoMachinesUK

Dr. Dominic Emery
VP Long-Term Planning
BP Group
Venture capital in energy
VC and corporate perspectives

Venture capital study:
• Start-ups backed by VC since 1970:
– employ 9% of US private sector
– accounts for 16.6% of US GDP
• Total VC investment 0.2% of GDP
VC and innovation:
• Venture capital investments have 3 times
higher innovation/patent output than R&D
Venturing - historically used by digital and biotech sectors
and increasingly now by energy, too

16
Sector Venture/Start-up Corporate investor
Electric vehicles Reva Mahindra & Mahindra
Concentred solar power Brightsource Alstom
Electric vehicles Tesla Toyota
Advanced biofuels Virent Shell/Cargill
Solar Stion TSMC
Advanced biofuels Amyris Total
Offshore wind A2Sea Siemens
Advanced biofuels Verenium BP
Energy Efficiency SynapseSense GE
Material/Solar Nanosys Samsung
Electric vehicles Bright Automotive GM
Solar Solarfun Hanwha Chemicals
Market trends: Rise of corporates in energy ventures
Selected recent corporate cleantech investments

Some context - BP at a glance
employees
83,200 $23,5 bn
profit proved
reserves
17Bn boe
of oil refined
per day
1.8M bbls
of petchems
produced
in 2012
13.9M tns
sugar
cane
capacity
7.4M tns
2013 annual report
BP is one of the world's leading integrated oil and gas companies

How innovation in technology supports our business
Ensuring safe, reliable operations is our top priority
 Focused at the point of competition in 15 major technology programmes
 Leveraged investment through partnerships
Conversion
• Chemicals
process
technology
• Upgrading
refineries
Consumption
• Lubricants
• Advanced fuels
Low carbon
• Biofuels
18
Resource
extraction
• Subsurface
understanding
• Standardised
engineering
solutions
• Unconventional
hydrocarbons

Sunbury, UK
Bochum,
Germany
Hull, UK
Pangbourne, UK
Naperville, USA
San Diego, USA
Houston, USA
Examples of research partnerships : Academic institutions, strategic alliances,
JVs
Research and development
Seven major BP technology centres
Venturing operates in BP’s innovation ecosystem
M&A
Corporate
venturing
Academic
institutions
Strategic
Alliances
& JVs
CORPORATE
INNOVATION
Internal
R&D

Innovation through venturing
20
What?
■36 investments, c. $200m invested and committed
■First returns realised in 2011
How?
■Investing in early and growth-stage energy ventures
leveraging external resources
■ Incubating high-potential proprietary R&D from leading
universities
■ Using collaborative, complementary and critical business
creation skills
Who?
■7 venture professionals based in UK and US
■Network of world-class technical and energy market
expertise across BP

Our venturing journey to date
■2006
Biosciences and their
application to energy
(especially fuel)
■ By 2009
Investment entity:
Alternative Energy
Ventures created
■By 2011
Sourcing technologies
that complement BP’s
core skills as an oil and
gas company,
re-named BP Ventures

BP Ventures: Supporting Upstream Businesses
22

BP Ventures: Supporting Downstream Businesses
23

To sum up: the role of BP Ventures
 …supporting innovation in science and technology which
is vital to meeting energy demand
 …helping to build BP’s research and technology
interests – supporting business strategy.
 …contributing to BP’s focused, open research
relationships, often multi-party and cross-discipline

©2014 Energy Technologies Institute LLP - Subject to notes on page 1
25
DRAFT
©2014 Energy Technologies Institute LLP
The information in this document is the property of Energy Technologies Institute LLP and may not be copied or communicated to a third party, or used for any purpose other than that for which it is
supplied without the express written consent of Energy Technologies Institute LLP.
This information is given in good faith based upon the latest information available to Energy Technologies Institute LLP, no warranty or representation is given concerning such information, which must
not be taken as establishing any contractual or other commitment binding upon Energy Technologies Institute LLP or any of its subsidiary or associated companies.
ETI – Supporting industry growth by developing and
demonstrating affordable, secure energy technologies
Dr David Clarke FREng

26
ETI - supporting preparation, delivering innovation
Reducing costs
Creating investor confidence
Establishing new business models
ETI Members

27
ETI headlines
24
projects
completed
1st
programme
associate -
Hitachi
2
equity holdings –
supporting
business
developments
£210
m
projects
announced
119
partner
organisations
15
countries -
europe, north
america,
middle east,
asia
9
commercial
product launches
52
projects across
the portfolio
£100m
Potential revenue
from existing
project portfolio

28
ETI Delivery Partners

29
When does ETI invest ?
Technology is of strategic importance to a
future low carbon UK energy system
Risk too high to support market investment
Additionality delivered through ETI
partnership (implies market failure)
ETI investment can move technology to the
point where market will provide further
support
• Cost reduction to ensure subsidies are not
a critical part of securing market investment
• Technology risk reduction through focused
development and demonstration
• Market risk reduction through dialogue with
regulators / policy groups
• Project finance, equity, loans as
appropriate
1s 10s 100s
Ideas / Proof
of concept
Technology
development
Technology
demonstration
Commercialisation
£m
ETI invests all along
the innovation chain –
primarily in very high
risk early stages …
… taking out risk to
encourage later stage
commercialisation
investors

30
Fault Current Limiter
In supply from GridON with site test by UK Power Networks
£4m contract from ETI
On test at UK substation (Newhaven) from June 2013
Market and policy
environment
exists
Manufacturing
supply-chain
exists worldwide
Technology now
demonstrated
Requires
 Business
development
capital (sales
and
marketing)

31
‘Very long blade’
Next generation high performance wind turbine blade development
£15.5m contract from ETI with Blade Dynamics
In development for test from 2015
 UK / US based entrepreneurial development team – small business
 Technology and business development support from ETI - project
financing, equity investment
Market and policy environment exists
Requires
 Technology development and demonstration
 Local (small-scale) manufacturing facility investments

32
Electricity storage
Substation scale electricity storage as heat
£15.5m contract from ETI with Isentropic and Western Power Distribution
In development for UK substation test in 2015
 UK based entrepreneurial development team – small business
 Technology and business development support from ETI -
project financing, equity investment
Requires
 Technology
development
 Market / Policy
development
 Business
development
finance

33
Available Now

34
For more information about
the ETI visit www.eti.co.uk
For the latest ETI news and
announcements email
info@eti.co.uk
The ETI can also be
followed on Twitter at
twitter.com/the_ETI
Energy Technologies Institute
Holywell Building
Holywell Park
Loughborough
LE11 3UZ
For all general enquiries
telephone the ETI on 01509
202020.

Setting up a PE Business
focused on Resource Efficiency
Dr Rob Wylie
Co-Founder and Chairman WHEB
March 10 2014

Goldsmith Connection – Money and Environment
38
Sir James
The “financier”
Teddy
The “environmentalist”
Ben
“WHEB”

WHEB PE History
39
1995 until
2002
2002 until 2007 2007 onwards
1995 WHEB
Partnership
founded as an
environmental
corporate finance
and incubation
boutique by Rob
Wylie and Kim
Heyworth (hence
Wylie Heyworth
Environmental
Business = WHEB)
2002 Ben Goldsmith
joins the team and
WHEB Partnership
becomes WHEB
Ventures
Fund 1 (2004
vintage):
WHEB Ventures 1
2007 Shift from
venture to EU
growth capital
investment :
 Focus on
growth capital
 Open German
office
WHEB Ventures
renamed
WHEB Partners
2007: James McNaught-Davis joins as
Managing Partner
2008: Jörg Sperling joins to manage
German activity
2011: Kim Heyworth retires
Growth stage Investing
Fund 2 (2008 vintage):
Green Growth Fund 1
Fund 3 (2014 vintage):
Green Growth Fund 2

WHEB 2014
40
WHEBp
 Sustainability focused multi-asset class investment firm covering Private Equity, Listed Equities and
Infrastructure (acquiring renewable energy assets).
 Total AuM around €480m of which some €250m (£210m) across three VC/PE funds.
WHEB PE Funds
• Fund 1 (2004 vintage) – “WHEB Ventures”: £24 million; invested in 8 companies and closed for new
deals. Investors are nearly all family offices. Focused on venture stage.
 Fund 2 (2008 vintage) – “Green Growth Fund 1”: £105.million; invested in 12 companies to date.
Investors are around 70% family offices and 30% institutions. Focused on growth stage.
 Fund 3 (2014 vintage) – “Green Growth Fund 2”: first closing in Feb 2014 at €95m with eventual
target of €200m. Likely investor base 15% family offices, 85% institutions. Focused on growth
stage.
Location
 2 offices (London, Munich).
Team Size
 20 investment professionals across WHEB Group of which 8 plus 3 special advisors involved in
the PE funds.

Sources Venture Capital
41
Family
Offices/HNWs
EIS/ECT/VCT
“tax driven”
Corporates VC and PE
Endowments Para-State Project funding/
hybrid debt
Public/Institutional
Wide range
Evergreen ?
Typically sub £5m
Short/medium term
OCP
Octopus
Albion Ventures
Oxford Technology
Depends on corp.
Strategic timeframe
Tate & Lyle
Dow
Unilever
Siemens
Google
 BP
Typically up to £20m
5-7 years
Emerald (VC)
Aster Capital (VC)
MTI (VC)
WHEB (PE)
 plus big PE players
Gates Foundation LCIF Silicon Valley Bank IP Group

PE Portfolio
42
Energy
generation
Energy
efficiency
& storage
Clean
industrial
processes
Waste Water
 Industrial and Resource Efficiency
 For PE/VC avoid over hyped, capital intensive, subsidy dependent businesses!
 Focus on those offering short term economic returns to customers with clear market demand

Investment Criteria
43
 growth stage i.e. profitable
 strong and clear market drivers
 legislative demands or replacement of banned products are great but
 need “must have” not just “nice to have” products
 not subsidy dependent for economic viability
 low capital requirements
 how mitigate through business model
 “gorillas” do exist but are rare and multiple funding
rounds are a pain
 strong IP
 not just for protection, key is for exit

Investment Criteria (cont)
44
 clear differentiation
 important for winning partners and sales growth
 important for exit
 clear exit route
 with whom?
 when?
 for how much?
 scalable business model
 licensing technology vs. prime developer/distributor
 engagement with potential partners at early stage

45
Electric Vehicles
 Headquartered in Starnberg near Munich, Germany
 Develops and distributes an integrated drive system involving high torque,
very low weight electric outboard motors for boats
 Has all the advantages and none of the disadvantages of other electric
vehicles
 Very cool product!

Geothermal
46
 Headquartered in Oslo with engineering and technology centre in Iceland
 Delivers small scale, modular, turnkey, “well-head” geothermal power plants.
 Significantly shortens the time to power online in a geothermal project, minimises well
redundancy, highly flexible and low cost per MW.
 5MW well-head pilot plant delivered to first customer in Kenya and delivering at least 14
more plants to Kenya and negotiating first Indonesian contracts.

Cleantech Headlines - Whoops!
47
U.S. solar firm Solyndra
files for bankruptcy
protection
Startup SolFocus Lays Off
Staff, Looks For New
Owner
MiaSole Sold to China’s
Hanergy for $30 Million
Siemens Says Auf
Wiedersehen to Solar
Beleaguered battery
maker A123 Systems
finally files for
bankruptcy
Kleiner Perkins cools to
cleantech investing
“The top five VC firms no
longer admit they invest in
cleantech,” according to
Jigar Shah.

Exit
48
The Company
 friedola TECH supplies tough, lightweight patented plastic components, for
automotive and logistic applications (used by Daimler, VW, others).
 Products made from recycled materials derived at friedolaTECH‘s own
plastic waste recycling facilities.
Investment Thesis
 Acquired 90% of the Company’s equity for an extremely low EBITDA
multiple.
 Significant growth potential in new market segments, applications and
regions.
Extracting Value Through Pursuit of Growth
 Revenues doubled and EBITDA tripled from 2009 to 2012.
 WHEB brought in KPCB as co-investor and accelerated expansion in the USA by hiring US
staff and starting US production facility. WHEB also introduced the company to several blue
chip OEMs to grow the customer base.
 Majority shareholding sold to US based PE fund SilverLake in 2012 letting WHEB return
roughly 2x cost to LPs plus retain minority shareholding.

Fund raising - LP Investor Trends
49
 Institutional LPs averse to venture and focus on growth/buy out funds
 LPs sceptical of cleantech theme after being burnt in renewable energy mania
 Early stage investment being met by corporates, family offices/HNWs and tax
driven vehicles
 Growth/buyout deals available at good valuations as bank debt funding is
scarce.
 Secondary buyout by larger PE firms is a good alternative to corporate M&A as
an exit route

www.whebgroup.com
Contact
CONFIDENTIAL 50
London
2 Fitzhardinge Street
London W1H 6EE
United Kingdom
+44 (0)203 219 3441
info@whebgroup.com
Munich
Maximilianstraße 36
80539 München
Deutschland
+49 (89)122 2808 20

Contact
EcoMachines Incubator is an
investment fund for advanced
engineering and high-value
manufacturing companies, with a
particular emphasis on cleantech. It
makes seed investments through its
Accelerator programme, and also
invests in later-stage companies raising
larger rounds.
info@ecomachinesincubator.com
www.ecomachinesincubator.com
@EcoMachinesUK
The Cambridge Alumni Energy
Society’s mission is to connect alumni
with an active interest in the energy
sector, enhance networking and help
with sharing ideas, publications, and
events. To join, please send an email
with your current position,
matriculation year, college, and
degree title to
antoine.huard@cantab.net

EcoMachines - Venture Capital in Energy and Cleantech: Is the Model Keeping Up? 10/03/2014

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EcoMachines - Venture Capital in Energy and Cleantech: Is the Model Keeping Up? 10/03/2014