Investor pitch andrew_chung__clean_tech_academy_2012_

Investor Pitch –
The Essence of Telling Your Company’s Story
Andrew Chung, Partner, Khosla Ventures
Cleantech Open Academy 2012, San Jose, California

• Venture assistance model
• About Lightspeed
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

2
“ where others may fear to tread.”

-Michael Jordan

Clean Tech Open Confidential Information

…With Green Technologies!
UTILITY SCALE
AGRICULTURE /
GENERATION
OTHER
Grid-Scale Storage
Water
PLASTICS & Utility Scale Solar
Desalination DISTRIBUTED
CHEMICALS
Geothermal GENERATION
Plasticizers Waste Water
Synthetic Distributed Solar
Natural Gas
Polyurethane Agronomy
Nuclear
Polyethylene
BUILDING Wind
MATERIALS PVC Smart grid OTHER

LS
Glass

IA
ER
Generators
Cement

AT

CO
Storage

M

AL

Y
Lighting
O

NC
Feedstock Processing IL

E
Motors

CI
FI
ADVANCED Feedstocks ELECTRICAL
Other

EF
CARBOHYDRATES EFFICIENCY
Engines
Cellulosic
Ethanol
Diesel Appliances
Gasoline Batteries
Homes
Butanol

Drivetrains
CELLULOSI MECHANICAL
C ALCOHOL Other Storage EFFICIENCY
Hydrocarbons

ADVANCED
3 HYDROCARBONS Open Confidential Information
Clean Tech BATTERIES / OTHER
3

Khosla Ventures Green Portfolio
UTILITY SCALE
AGRICULTURE /
GENERATION
OTHER
Liquid Metal
Climate Corporation Battery
PLASTICS & Unreal Foods Stion
CHEMICALS Sunborne DISTRIBUTED
Biodiscovery GENERATION
Altarock
Cogenra
Segetis Nu-Tek Salt
Great Point Energy
Izar
NanoH2O
Reluceo TerraPower
EchoFirst
Solum
BUILDING Nordic
MATERIALS Varentec OTHER
Arcanum

LS
IA
ER
Danotek
Soladigm

AT
Calera

CO
PSP Lightsail

M

AL
Soraa

CY
Avogy
O
IL

EN
Virdia Bidgely

CI
FI
ADVANCED ELECTRICAL

EF
CARBOHYDRATES Ecomotors Topanga EFFICIENCY
Range

LS9 Seeo Tula Transonic
LanzaTech
Coskata
Caitin Etagen
Amyris Recapping
Gevo
Mascoma NRG-Dynamix
Pellion
MECHANICAL
CELLULOSI KiOR
Sakti3 EFFICIENCY
C ALCOHOL

Quantumscape
ADVANCED
4 HYDROCARBONS Open Confidential Information
Clean Tech BATTERIES / OTHER

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)

5 Clean Tech Open Confidential Information

What to present to a VC?


0 Mission statement  Operations
4

 Sales pipeline

1 Management team  Distribution
 Policy/regulatory issues

2 Market
 Financials
5

3 Technology  Projections
 Overview / value prop  Fundraising needs
 Competitive differentiation
 Economics For each section, we’ll discuss:
 Development timeline What I'm looking for
Common issues
Sample slides


Some ground rules

General reminders Your delivery

 Know your audience  Enjoy the stage
 Be conscious of time  Inspire confidence
 Get to the point  Look them in the eye
 Simple and clear slides  Don’t overgesticulate
 Be ready to jump around a lot  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…

Stion: Silicon Efficiency at Thin-film Cost

 Highest-efficiency thin-film module in production

 Lowest production & capital costs in the industry

 Scalable manufacturing with industry-standard
equipment

9 Courtesy: Stion’s Web site Clean Tech Open Confidential Information

Management Team

What I'm looking for Common issues

 Is there a balanced skillset  Homogeneity
across team?
 Theory over substance
 Deep technology expertise
 Lack of clarity about recruiting
 Industry execution experience needs and timing (emphasis on
CEO, VP-level hires)
 Entrepreneurial experience


Management Team (Sample)

Management Team

 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


Market


 Does this market support a  Too much time spent explaining
$1B+ company? a familiar market
 Massive end-markets ($1B+)  Lack of clarity on targeted
segments and true addressable
 High-growth markets
market (it’s all about TAM)
 Potential to dominate
 Ability for startups to compete


Market (Sample)

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

$30

$25

$20
$ Billions

$15

$10

$5

$0

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


Market (Sample)

Target Industry: Key Addressable Markets

Billions of units
51 18 16
100%
Product 11 Time-to-market
Product 3 Product 8

80 1-2 years
Product 7 Product 10
3+ years
Product 6
Market Share

Product 2
60

Product 5

40
Product 9

Product 1
20 Product 4

0
Product Category 1 Category 2 Category 3

Category Share

14
Note: Dummy data used Clean Tech Open Confidential Information

Tech: Overview


 What is the product or service  [25 mins into your
that you’re offering? presentation] “What is it you
do again?”
 Concise, but sufficient
background  Not tailoring the technical
depth for your audience and
 Technology that is IP-rich and
stage of meeting
defensible
 Clear value prop to customer


Tech: Overview (Sample)

16
Courtesy: GreatPoint Energy’s Web site Clean Tech Open Confidential Information

Tech: Overview (Sample)

Process Advantages

 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

17
Courtesy: GreatPoint Energy’s Web site Clean Tech Open Confidential Information

Tech: Differentiation


 How is your offering different?  Another “me too” technology
 Tech approach  Assuming your approach is
 Product performance unique
 Cost economics
 Stage of development
 Thoughtful understanding of
competition


Tech: Differentiation (Sample)

Energy Storage Competitive Landscape

Alpha Our Company

Gamma
Increasing Energy Density

Beta

Omega
Sigma
Tau
Delta Epsilon

Increasing Power Density

19

Tech: Economics


 Does your product/service  Industry costs are moving
make economic sense? targets
 Production costs  Not understanding sensitivities
 Capex associated with feedstock price
changes, subsidy changes, etc.
 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


Tech: Economics (Sample)

Our costs will be competitive with existing fuels

Production cost

$3/gge $2.8
$2.5

Processing
2 $1.9
Feedstock
$1.5
$1.3 Cost level with
$1.2 current tax
credit
1

0 Wholesale Soy-based Corn-based Today (Lab) Pilot Commercial
@ $50/bbl Biodiesel Ethanol (Q3 '08) (Q4 '10)

Existing fuels Our technology
Note: gge = “gallon gasoline equivalent”

21

Tech: Development Timeline


 What is your future  Long time-to-market (3+ years)
development roadmap?
 Lengthy “design-in” time
 Technical progress made to date requirements
 Key future milestones and risk  Dependence on other emerging
assessment technologies
 Key capital equipment required
and scale-up needs
 IP portfolio development plan


Tech: Development Timeline (Sample)

Development Roadmap

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

Yield
 Sub-10%
 10-25%
 25-50%
 50-95%

Capacity Scale-up
 5L pilot
 20L pilot

Commercialization
 10K L production
 100K L production


Ops: Sales and Distribution


 What is your go-to-market  Sales cycles that are too long
strategy? (esp. for utilities or local
governments)
 Review of sales pipeline and
notable customers  Long payback time / limited ROI
for end-customers
 Potential engagement with
relevant channel partners  Fragmented customer base


Ops: Sales and Distribution (Sample)

Current Sales Pipeline

Target Customer Potential Deal Likelihood In discussion with
Alpha Energy $2,000,000 Med key distribution
Beta Utility $1,000,000 High partners
Gamma Industrial $800,000 Med
Delta Energy $750,000 High
Epsilon Utility $600,000 Low
Pi Industrial $500,000 Med
Theta Energy $300,000 High
Nu Utility $300,000 Low
Rho Industrial $300,000 High
Sigma Energy $200,000 High
Tau Utility $150,000 High

TOTAL POTENTIAL $6,900,000


Ops: Policy/regulatory Issues


 What key government policies  Business models dependent on:
or regulations drive your  Short-term policy windows
business?  Pending legislation
 Subsidies
 It’s all about the stimulus
 Tax credits
package!
 Emissions credits
 Compliance laws
 Understanding of how they will
evolve over time
 Associated risks and
sensitivities

Financials: Projections


 What does your financial plan  Too aggressive
look like?
 Too conservative
 Any recent historical results
 Not knowing how sensitive
 3-5 year forward projections financials are to externalities
 Simple P&L
 Headcount
 Timing for cash flow breakeven
 Any debt assumptions


Financials: Projections (Sample)

Financial Plan

$80M 100%
Revenue Operating Margin Gross Margin %

60 80

40 60

20 40

0 20

2007 2008 2009 2010 2011 2012 2013

-20 0
Headcount 6 10 15 25 45 75 120
Cash Flow ($M) -1.5 -3.5 -5.3 -7.0 1.2 7.7 17.2

28

Financials: Fundraising Needs


 How much do you need to raise  Large initial rounds with limited
and why? proof points
 Funding history  Lack of flexibility in round
structure
 Total target raise
 Amount available for new VC’s
 Use of proceeds and achievable
milestones
 Board seat expectations
 Valuation expectations


Financials: Fundraising Needs (Sample)

Series B Financing

 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


Now it’s your turn…


0 Mission statement  Operations
4

 Sales pipeline

1 Management team  Distribution
 Policy/regulatory issues

2 Market
 Financials
5

3 Technology  Projections
 Overview / value prop  Fundraising needs
 Competitive differentiation
 Economics Parting thoughts:
 Be passionate
Development timeline
Be confident
Be open to new ideas


GOOD LUCK!

Andrew Chung, Partner
ac@khoslaventures.com

Investor pitch andrew_chung__clean_tech_academy_2012_

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