Sunday, December 21, 2008


I'm going to have to rename this blog as I am no longer "Down Under". I've had a great two years supporting the entrepreneurial and venture communities in Australia, but now I'm back home in Pasadena, California. I'm going to continue to search for world-changing businesses in the Cleantech sphere, and I'll continue to provide updates here on useful tidbits that I come across. I'll probably take a break over the holidays, but I'll be back in January. Merry Christmas all!

Sunday, October 26, 2008

Short segue

I thought this was a great quote from David Landers, of Allen & Buckeridge (Sydney-based VC):
There’s no shortage of quality management talent in Australia. The problem is that they are working for Australia’s best organisations and corporations. It’s very hard to lure them into the shaky, ‘maybe if’ world of early-stage venture.
It can be very hard to find good management depth in entrepreneurial teams, but I think the quote is spot-on. It's not that Australia has a shortage of talent (at least, on a per-capita basis). What is a problem (and this is similar to what I experienced when I was living in Canada) is that the large companies (particularly resources and finance) are where good, stable careers are forged. The allure of the start-up hasn't got the same cache as in the US. The good news is that this is a classic virtuous cycle, and the Australian tech community and startup successes of late is changing that mentality.

Thursday, October 23, 2008

Solar - Part 1a, Ausra switches on new power plant

Ausra switches on new power plant

From the San Jose Business Journal:

[Ausra] switched on the first solar thermal power plant built in the country in nearly 20 years today at an event in Bakersfield.

This is the first plant Ausra has constructed in the U.S. and is crucial to Ausra’s ability to raise financing beyond the venture capital it already has, its executives said. The demonstration today was important for Ausra to showcase its technology, said CEO Bob Fishman.

“We do this to prove to PG&E and the rest of the world and to customers that we’re for real and that it works and that we’re not just talking about doing solar power, we’re doing it,” Fishman said. “And to get them to accept the technology and purchase it, I think requires a demonstration that can actually do what we say it will do.”

Ausra’s 5 megawatt system is a test facility and produces enough electricity to power about 3,500 average homes. It includes 720 mirrors that are 8 by 50 feet long that direct the sun’s rays to a solar thermal tower. The heat from the sun heats water inside the tower turning it to steam and that steam. The steam runs a turbine that produces electricity. And that electricity will be sold to Pacific Gas & Electric Co.

Ausra’s investors include Kleiner Perkins Caufield and Byers and Khosla Ventures as well as KERN Partners, Generation Investment Management and Starfish Ventures.

Speaking for me personally, I'm really proud of the progress that Ausra has made in commercializing their technology. Many technology founders underestimate the difficulty of scaling up a technology, and when it comes to bending metal and pouring concrete, meeting budget and schedule can be pretty harrowing, and numerous companies have stumbled trying.

I'll return with a detailed discussion of solar next time, but I thought this announcement fit well right here.

Solar Energy - Part I

Let's start this discussion with Solar Energy. Solar is the 800lb gorilla in terms of investments right now. The last six years' of VC investments are shown on the chart below. Solar clearly dominates. I thought it would be worthwhile to use this chart as a means of prioritizing these posts - so solar clearly is first.

I actually took this from PBS here, which credits the Cleantech Group.

There are a few reasons that solar energy has attracted so much funding, but the main ones include the fact that solar is such a broad field, solar has already proven successes, and that solar has a pretty clear path to a pretty big market.

Solar Energy technology pretty much is any technology that extracts energy from the sun. This includes solar PV, concentrating solar PV, solar thermal, and concentrating solar thermal. Within each of these are multiple subsets. Solar PV consists of monocrystalline, polycrystalline, thin film, triple-junction, and dye-based cells. Concentrating solar PV can be low (3x concentration), medium (10~100x concentration) and high (~1000x concentration). Solar thermal for heating can be simple 1x roof-top water heaters. Solar thermal for utility scale power generation can be tower configurations, trough design, linear Fresnel, or dish designs.

And, it doesn't stop there. Companies which lower the amount of silicon used and companies which allow for cheaper silicon to be used have been funded. Companies which improve the production yield, or better improve manufacturing processes have been funded. Companies which lower the cost of installation, or improve the tracking of solar modules have been funded. In short, anything that can lower the cost of electricity, anywhere along the solar value chain is of interest.

Why is this? Well, basically energy is a commodity. Barring any kind of "feel good" attributes of green-energy, most people don't have any clue what energy turns their lights on. In a hyper-rational, non-subsidized world that has no clue about external factors like global warming, the day that solar is 1 cent/kWh more expensive than the cheapest form of power, nobody wants it. The day that it is 1 cent/kWh less expensive than the cheapest form of power, everyone wants it. And by "everyone", we mean all 6 billion people on the planet. This is the ultimate tipping point.

So, VCs understand that there is a big market, and this market will crack open if solar power can be made cheaply enough. A lot of the cost of solar PV modules has been their silicon content, which has driven investment into anything that will use less silicon. Concentrating solar PV assumes that by replacing the expensive silicon part within a module with cheaper lenses and mirrors, the overall cost of solar energy will drop. Thin-film solar modules attempt to drastically reduce the silicon content (or eliminate it entirely) by using different materials. Solar thermal, in whatever form, expects that, for utility-scale electricity generation, the best approach is to generate steam and spin a turbine - benefiting from a lot of the work done in the past on thermal power plants.

It's an interesting situation, and one that is encouraging. Back in my Ballard days, when fuel cells were going to change the world, Ballard's mantra was that "we'll make the fuel cells, other suppliers will solve all the other problems". Those "other problems" included hydrogen storage, hydrogen infrastructure, and vehicle manufacturing. There was a huge chicken-and-egg problem which Ballard struggled to overcome. Yet, in the solar industry, there seems to be room for many of these innovations and business models, and the single-mindedness of "decrease cost per watt" has focussed the entrepreneurial community in an extremely positive way.

Next time - more specifics on the technology and path to market.

Thursday, October 16, 2008

Ocean Power and the Cleantech Universe

Well, there has been a lot of interest in the Ausra investment. Some samples of press releases are here, here, here, and here, plus others.

It's great to see the interest in solar thermal technology. However, recently I've started an exercise examining the entire spectrum of all that fits within the cleantech universe. Rob Day had an excellent article on ocean power and it got me thinking about posting my thoughts on the other technologies (wind, solar, fuel cells, biofuels, water recycling, demand management software, hybrid vehicles, batteries, large-scale energy storage, etc. etc. etc.)

So, I'll let Rob's post lead off for ocean power, and I'll be following up in subsequent posts on other technologies. Stay tuned!

Wednesday, October 01, 2008

Australian Solar Potential

As I mentioned on Rob Day's blog, Australia has fantastic solar resources, and the political climate has changed dramatically to be more embracing of renewable and low-carbon technology. Australia is racing towards an emission trading scheme by 2010. However, the preponderance of coal-fired power plants provides an additional opportunity for solar thermal technology. By augmenting the power production of coal-fired power plants (of which Australia has many), solar thermal technology can lower the carbon footprint of these plants in an extremely economical way.

One particular solar thermal company which found its origins in Australia has raised a $60m Series C round. It's worth checking out.

Thursday, August 14, 2008

Fundraising Survival Guide

Paul Graham (of Y Combinator fame) has recently posted a great essay on how to survive the difficult task of fundraising.

I particularly like this because it talks about the pressures experienced by the entrepreneur and the behaviour witnessed by both parties - investor and entrepreneur. There are very rational reasons that lead VCs to act the way they do. One of my favourite quotes from him was the following:

Problem number 3: investors are very random. All investors, including us, are by ordinary standards incompetent. We constantly have to make decisions about things we don't understand, and more often than not we're wrong.

We don't like to call ourselves incompetent - but the truth is that being good at being a VC involves learning a lot about something new very quickly. Even with a certain degree of specialization, the entrepreneur will know more about the particular business than the VC. Of our areas of focus (life sciences, IT, and cleantech), I primarily focus on cleantech. However, within cleantech there are still a huge range of subsectors - solar, wind, fuel cells, batteries, smart meters, biofuels, grey water, black water, carbon storage, synfuels, etc. While I've had the privilege of being involved in startups in a number of these areas, if you come to me with a new material that dramatically improves the energy efficiency in some market somewhere, I'll need to understand how much value the market will place on your offering, the technical feasibility of what you've done, the difficulty it will be to ramp up manufacturing, the cost sensitivity of the inputs, the competitive landscape, etc. So, we get good at learning quickly.

However, all of this dance of information exchange can seem, to the entrepreneur, to be frustrating. The entrepreneur has been living this vision for the past "x" months/years and can't understand why everyone else doesn't see what they do. We try to recognize the situation from the entrepreneur's point of view. and this is why, if we aren't going to progress an investment, we strive to provide companies with a quick "no" rather than a slow "no", and this is why we try to give feedback where we can - although often it is difficult for us to provide feedback because the reasons for us progressing an investment can often be intertwined with other investments we are considering. Nevertheless, the road to funding can be a long one, and Paul's post I think helps chart the course.

Sunday, August 03, 2008

VC Fund Economics

I wanted to link to this great post by Fred Wilson - Venture Fund Economics.

"When I write about venture fund returns, there are always comments and questions that lead me to believe that the economics of a venture fund are not well understood. And since most of the readers and commenters on this blog are people who work in the startup ecosystem, I think its important that the economics are better understood. So I am planning on some posts on this topic in the coming weeks."

I thought a number of my readers may be interested in the drivers of VC returns. Note that these returns are also the aggregate of the entire fund. Each individual company invested in needs to be able to return a much higher amount to get this overall performance. I delve into that a little bit here.

Historic Oil Prices - Peak Oil Phenomenon

I think this link from Forbes is really interesting. It shows that the oil industry had pretty spectacular prices at the beginning of the industry (1861) that were driven down by efficiency and productivity improvements. This happened remarkably quickly because by 1880, the real price of oil hit the low where it would remain for almost 100 years.

1978 was understandably a pretty shocking time - oil prices shot up to the levels only seen more than 100 years previously, near the start of the oil industry. Fortunately, prices plummeted, and we all convinced ourselves everything was going to be ok. It's clear that that was only a fifteen year reprieve. Oil prices now are once again at spectacular prices. However, this time they are higher than ever seen previously in the history of the industry.

Given the concept of peak oil, which I wholly believe - in part due to what I learned during my stint at Esso (Exxon) as a reservoir engineer, we're going to continue to see price increases until substitutes can be obtained. While oil prices are often discussed, I think this graph really puts an interesting historical perspective on things.

Wednesday, July 23, 2008

Rob Day, Seed Stage Capital, and Government Labs

Rob Day writes one of my favourite cleantech blogs. I think today's post is particularly compelling. In it he describes the harsh reality of why many early stage companies are too "early-stage" for an early-stage VC. This is very, very useful to understand if you are pitching to a VC, or if you are interested in government policy to support innovation. Are you listening Dr. Terry Cutler?

Thursday, July 17, 2008

Chinese Soft Drink

Please do not use the Chinese soft drink argument:

"If I sell only ONE can of soft-drink to everyone in China, I'll have $1billion in revenue!"

or, its cousin:

If we get 0.05% of the marketplace, we'll make billions!

This sounds like you are being conservative, but it obscures the issue. If you are talking about home PCs and the market for operating systems, you could say, "I just need 0.05% of PCs to buy my operating system, and I'll be rich!" Ask Apple how that's working out for them competing with Microsoft. On the other hand, if you are in a field of gold bars and you've only got enough time to grab 0.05% of the field, you'll probably do great (or, at least have one shiny gold bar).

As always, the difference comes down to the actual competitive situation in the market - and THAT'S what matters. If you want to sell a compelling story, don't talk about getting miniscule slivers of the market. Instead, talk about HOW you will get the revenues you are projecting, who you will target, etc. It's much more compelling to say you'll get 80% of a certain addressable market (and list the reasons) than say you'll get .05% of a HUGE market, but not say how.

Sunday, July 06, 2008

Allow time for funding - show how great you are

Back in 2005 Jeff Bussgang of Flybridge wrote a great post on why some companies get funded on his blog here.

I particularly liked item #2:

2. VCs invest in movies, not snapshots

When you see a deal as a VC, you see it at a point in time. If the entrepreneur tells you that you have only three weeks to make a decision, the decision is almost always an easy, "no". No VC nowadays likes to be rushed into a decision, and people prefer to see the company and team evolve over time (like a movie) as opposed to at a discrete point in time (like a photo snapshot). If a team walks into the first meeting and outlines what they plan on achieving in the next two months, and then walks in two months later having achieved each of the milestones plus two others, it's very impressive and gives the VC confidence that the milestones they've laid out for the next two years will be achieved as easily.

This is very relevant because some entrepreneurs don't understand the relationship-building aspect of raising capital. Raising funding is not an issue of showing up, applying for money, and getting a cheque 30 days later. We hate being rushed into a decision, because each deal is very different and we want to feel confident that we've truly seen all the issues and can feel comfortable that the company and team is one that we can place one of our very limited bets on.

Do not underestimate how long it can take to raise money. The answer is months. If you leave time to build a relationship with a VC, time to show your successes, time to let the VC fall in love with your business, then you are far more likely to raise money. If you rush the process, or make the investor feel rushed, then it is much less likely that he/she will get to that "happy comfort point" where they want to pursue a deal.

I would love it if someone came to me and said, "Here's where we are - here's what we are planning on accomplishing in the next two months. We don't need money now, but we will on this date. We'd like to introduce ourselves and start talking, and then we'll come back when we've made some more progress to show you we're serious. We can continue to talk at that time about our funding plans." Hands down, this would be more impressive than a lot of the "We need money in 3 weeks; why do you need to do due diligence? - Australian investors have no risk tolerance!" refrains that we can occasionally have the privilege to see.

A VC investment is a marriage - be sure to give time to let the relationship develop. The advantage to you (the entrepreneur) is strong as well. Over time, you get a much better look at the VC and will then be better able to decide whether you want them to be on your board for the next five years.

Thursday, July 03, 2008

Happy Fourth of July

To all my readers - Happy Fourth of July!

While it is a bit weird to be celebrating a typically summer holiday in the dead of the Australian winter, it's a nice reminder of home all the same.

Monday, June 30, 2008

Happy Canada Day

To all my readers - Happy Canada Day!

While it is a bit weird to be celebrating a typically summer holiday in the dead of the Australian winter, it's a nice reminder of home all the same.

Friday, June 27, 2008

Australia's Per Capita Excellence - #2 on Internet Spend!

I don't know why, but Australia has an amazing amount of "per-capita" excellence. Now, part of scoring high on any "per-capita" ranking is to have very few people (the Vatican always seems to do well), but with 21m people Australia is big enough that some very real factors come into play. An example of both of this is the fact that, on a per-capita basis, Australia came in 3rd in the 2004 Olympics (with 49 medals - the US was 34th with 103 medals); however, it was behind the Bahamas (with 2 medals) and Norway (with 6).

However, in another very real way Australia has shown itself to dominate the world stage, and this is on internet spend per capita. A really interesting post on Techcrunch discusses potential valuations of social networking sites (the few comments on DCF are especially entertaining). But the part that I found particularly interesting was the following bit, showing the average internet spend per person for a given country:

The U.S. (at $132 per person), by the way, is only the 4th most valuable market per Internet user, trailing The UK ($213), Australia ($148) and Denmark ($144).

So, Australia has the second highest per-capita internet spend in the world. This is interesting. The time that I've spent here has given me some insights to why this may be. First off, the power of the internet is as the great market leveler. The more inefficient a market, the more likely the impact of the internet can be. Due to Australia's size and distance from major markets, it has been my experience that price competition in Australia between retailers is, shall we say, far from fierce (the car I purchased in Australia cost almost 2x what it would have in the US, for example). Being savvy people, this turns many Australians, where they can, to purchase products off the internet in larger numbers than would be the case when retailers would be more price competitive. That's at least my current theory. There may be other factors, but it's certainly interesting to discover that this country, which is a huge adopter of other types of technologies (internet penetration, mobile phone use, etc) is #2 on per-capita Internet spend.

Sunday, June 22, 2008

Hatch That!

Hey! My friend Ross Hill's online entrepreneurship magazine, HatchThat, published a discussion with me recently. I'm impressed with the breadth of people that Ross has spoken with, especially in such a short period of time. Check it out!

Non-Disclosure Agreements

Bill Snow has a great summary of why venture capital firms do not sign NDAs (non-disclosure agreements).

Here's his introductory paragraph:
Let’s take a look at one of the most common miscalculations made by early stage entrepreneurs: Asking potential investors to sign a non-disclosure agreement (NDA). In the pantheon of entrepreneurial mistakes, the NDA is right up there with the infamous line, “these projections are conservative.” Simply put, if you hope to raise money from VCs, you increase your chances of success by eschewing the NDA request. Most (if not all) VCs will not sign the darn things. There are bound to be some exceptions to this rule, but not many.

The rest of the article goes into why that is the case. However, the gist of the reasoning is that venture capitalists see a vast number of deals, and it is simply not feasible to enter into non-disclosure agreements with each of them. The liability and the potential conflicts are enormous.

It is the policy of most VCs not to sign NDAs for the business plans that they are sent. A simple poll of angel investors and VCs in Australia shows that many firms have similar policies. Yet, a large number of entrepreneurs approach me, and are adamant about having an NDA signed. Why is this?

I believe that this is due to cultural factors, bad advice, and ignorance of how the industry works. The cultural factors stem from, what I have perceived is an Australian bias that assumes that "people" (banks, investors, business partners, the government, etc.) have it in for the company. Rather than looking at what a business partner, such as a venture investor, can bring to a business (ie, maximizing the upside), an entrepreneur may be more likely to be suspicious on how the business partner can hurt the business (ie, minimizing the downside).

The second factor is bad advice. Entrepreneurs look to their advisors, such as their lawyers, or investment advisor (intermediaries) for guidance. I have been impressed by far too few of these professionals that I have seen. Most do not seem to understand the position that the venture/angel industry takes because they are ignorant to the industry's requirements. The entrepreneur then approaches the investor demanding an NDA, "because my lawyer said I needed one", and this can prevent things from moving forward.

The third factor is ignorance of the industry. This is, in part, what this blog hopes to correct. However, similar to point #2, there are few sources for Australian entrepreneurs to learn what the industry requirements are. When told that an investment firm will not sign an NDA, the entrepreneur does not have the background to understand why. However, I am optimistic that this is changing because a) entrepreneurs are becoming more sophisticated all of the time, and b) the number of sources of information for entrepreneurs is growing all of the time.

So, why the AVCAL NDA then? This comes from a difference between venture capital and later stage private equity. Although our friends in private equity have their own issues, discussed here and here.

So, to close I'd like to loop back to Bill Snow's article above. While asking for an NDA is not the kiss of death, starting an early stage raise with that discussion is not the way to lure in an investor. You control the information you release - keep the super proprietary details to yourself and only worry about disclosures once the deal has progressed sufficiently. I can pitch Google's value as an investment without disclosing their algorithm, and you should be able to do the same for you business as well.

Sunday, June 15, 2008

The Hive networking event

Earlier this week I spoke at a networking event for entrepreneurs called The Hive . I was extremely impressed by the organization of the event, and I think it's a great opportunity for Melbourne based entreprenuers.

I have been looking for events like this to meet new entrepreneurs and to talk about my investment interests and there haven't been many well targeted events. There are various conferences about Cleantech and business financing, and there are various lunchtime seminars put on by government organizations (which can be quite good - especially Innovic's), however, my experiences at MIT have taught me that the most exciting startup activity happens when a bunch of really smart, really motivated people get together over a beer. This is what The Hive offers.

About 100 people were on hand to listen to me give some of my thoughts on the industry (I'll boil these down to a few blog posts in the future), but more importantly, I felt that this gave a really good cross section of those interested in starting their own companies. There was a lot of passion in the room, and that's something that I think fills me with the most optimism about the future of the Australian startup scene. If you are based in Melbourne be sure to check out future events!

Wednesday, April 30, 2008

I Cut The Wrong Deal With An Advisor - Ask the VC

This is a great post from Brad and Jason over at "Ask the VC" (one of the blogs I like). Advisors can be a useful member of the team if they can help you structure your business plan and help prepare your company to be attractive to investors. However, remember, we are investing in YOU, not your advisor. So, outsourcing your fund-raising to an advisor is a non-starter strategy. Advisors should be just that, your advisor, the person next to you willing to give you support.

Advisors do have a role - some companies would never have received funding without the advisor's help. However, an advisor can also poison a deal by demanding unattractive terms. They need to find the sweet spot in the middle to reach the most success.

Unfortunately, the advisor in the post below isn't in the sweet spot:

Saturday, April 12, 2008

How to make your company investor ready

Part of what I like to speak about are interesting technology trends - particularily Cleantech trends. However, other topics of interest for me include suggestions that I can make to potential entrepreneurs. This post is the latter.

We see a lot of variety in the deals we review here in Australia. There are the straightforward deals - smart founder, team of three or four, raised $200k of angel funding, prototype developed and some market traction with introductory customers. We put in money to unlock the full potential of the company and things can really take off. However, just as often we see the "non-straightforward" deals. These might be companies which have been operating on a shoe-string budget for ten years or more, often earning consulting revenue on the side while they try to develop their product. They may have fair amounts of debt, most of it from friends/family who didn't understand that VCs are much more comfortable with angels that hold an equity position, than debt. The company may have a smattering of different products that they have tried over the years, with varying degrees of success. There could be an attractive way forward with a new market opportunity that makes the company attractive for a VC, but given the company's history, there is a lot of baggage to get through.

So, here are my suggestions for making your company as clean as possible before approaching investors (or, at least, before entering final due diligence when the lawyer's bills are running!)

Convert Debt to Equity

One of the things investors have constantly worry about is fraud. Money that immediately leaves the company to repay debt (or to pay advisors, for that matter, if they have excessively high fees - which I would classify, in some cases, to be much more than 4~5%) makes investors very uncomfortable. The reason that the company is valued for what it is by investors is partly due to what the company has accomplished, and partly due to what the company is expected to accomplish. If the company is fully debt financed, especially by the founding members, it says that the founders don't have as strong a vested interest in the company as they would with equity, and are keen to get as much money back as soon as possible, and then participate in the gains of the company. Therefore, expect to have debts paid to founders convert to equity. Debts owed to related parties or third parties may be paid, but in this case, be sure to have clear documentation of the debts prepared to be able to justify these payments. However, if you want to make your company as attractive to investors as possible, raise equity funding from your early stage backers, not debt financing.

Have Accounting Records Clearly Prepared

If your company matches the "straightforward" description that I mentioned above there is likely to be little trading history for the company, and what is there should be simple and easy to understand. However, if you have a longer history of trading (which, arguably is a good thing), then be sure to be able to present clear accounting records documenting the company's history. If it is difficult to verify the company's trading history, if it is difficult to verify the inventory the company claims as an asset, if it is difficult to verify that the company revenues have been what is being claimed, or if it is difficult to understand the company's historic cost structure (and margins) then investors are going to be very uncomfortable. If you have an attractive story, but little documentation to back it up, investors may be interested in supporting your story, but uninterested in supporting a fantasy. Without clear records, some investors won't be interested in taking a risk, based solely on your say-so. Other investors may take the risk on your company, but they will simply discount away anything they are uncomfortable about in the valuation. To have the deal be as attractive as possible to both parties, be sure to keep good records.

Clean Up Complicated Contracts

Have a special agreement with your CTO where the company pays for her car payments? Have an contract with your suppliers where they provide better payment terms in exchange free use of your testing facility? Have you agreed with a distributer to an exclusive licence of your technology over a key geographic region? If you have bizarre agreements or contracts, either within the company, or with external parties, this just further compalicates the deal - either find ways to simplify these agreement, or, again, be able to clearly demonstrate the boundaries of the agreement to the investor - and justify why the agreement was initiated in the first place. This will help calm fears which might come when the investor reviews these agreements in the due diligence, and it will build trust that you are being upfront on the state the business and how it got there.

Remove Conflicts of Interest
Don't try to operate two businesses at once - a consulting business and a high-growth product development business, and argue that you can split your time between two businesses. When investors put their money in, they are backing the founders - and for this they want to be sure that the founders will be focussed on the success of the business. If the investors are worried about your other businesses/committments, they can be uncomfortable about proceeding. If you do have multiple businesses, or subsidaries that are unrelated to the investment that can be conflicted, or even merely distracting, then plan on disengaging yourself from these businesses before proceeding. Structure your responsibilities so that 100% of you commitment is on the new venture, and you will find investors much more interested in backing you.

A key message through all of these points is clarity, transparancy, and accountability. In all cases, show clear documentation, and be able to justify past decisions the company has made, so that the investor feels comfortable that they understand what company they are purchasing, and that they understand what the company needs to do going forward. Without this clarity you may find that the investor feels too concerned about the complicated nature of a deal, and the deal cannot proceed.

This is obviously something both parties want to avoid, so do what you can to make your company as attractive as possible, and you will be in a better position to attract investment!

Wednesday, March 12, 2008

4th AustralAsian Cleantech Forum

I just returned from the two day cleantech conference in Melbourne entitled the "4th AustralAsian Cleantech Forum" (

My co-worker Ivor and I had the opportunity to check in with a number of people we hadn't spoken with in a while. The conference is showing tremendous growth over last year, and last year's event was pretty decent. It was good to run into a number of familiar faces - this is giving me confidence that I'm seeing more and more of the players in Australia's cleantech community. As well, 14 companies pitched to the group - 7 either in Seed or Series A stage, and 7 in Series B stage (or later, as some of the companies had already gone public).

The companies showcased an interesting mix of technology. There were two ocean power companies, a high-performance diesel engine, biodegradable plastics, some water recycling companies, a couple of concentrating solar technologies, and some clean coal companies. All in all, a pretty diverse mix, and hopefully an impressive preview of the further improving dealflow happening in Australia.

In addition to the company showcase, there were several presentations and panel discussions. Premier John Brumby opened the conference. It was good to see him there as he is a big supporter of the cleantech opportunity and the benefits it can provide to the state of Victoria. Several US LPs were there, including representatives of CalPERS and Pacific Corporate Group Asset Management. There is growing interested by US investors in the Asian cleantech space, and I think many of them are realizing (as is our thesis) that Australia, as an English-speaking country with a British-based legal system is a great launching point to Asia.

Also of interest is the greater role that India is playing within this forum. Jeffrey and Peter Castellas, the founders of Cleantech AustralAsia have put together a good team to link opportunities, both for investment, and for companies entering the Indian market, between India and Australia. This is a great move. Every VC understands that tapping into the Indian and Chinese market is incredibly valuable for a growing company, and yet both markets can be very challenging. By leveraging the connections between Australia and India, this market entry can be made easier.

All in all it was a great event.

Friday, January 25, 2008

Rooftop Wind Gets Traction

Welcome back! It's been a wonderful Christmas break, but it's time to get back to work. The new year has started quickly at Starfish, with my time being split between tying up loose ends left from before Christmas, to getting a jump on a bunch of new opportunities.

However, there is a business concept I've seen a couple of times now that I think is interesting. It is a concept that I had the privilege to hear about when I was at AeroVironment (AV's Architectural Wind product is shown below, and another company, Marquiss Wind Power's product is shown to the right), and this is rooftop wind. Similar to rooftop solar, in that this allows the power generation to be close to the source (and therefore compete economically with the retail price of electricity, not the wholesale price). In addition the units, if designed well, allow the building to function as a wind funnel, channelling (and accelerating) the wind over the top of the building. The turbines can be located in a zone of far greater wind-speed than the typical mean windspeed at ground level. This gives the turbines decent performance.

The final benefit is that the turbines can improve the visual aesthetics of a building. This is something that AV has done in spades with the ravenclaw look to their product. What's brilliant about this is that the initial reaction to having a bunch of turbines on a roof of a building is concern about noise and the building visuals. With an attractive design, the concerns over aesthetics are addressed, and the turbines allow a building's "green cache" to be much more easily seen and promoted.

In the last year in Australia I have seen not one but two companies with a similar concept. Both had different product designs, one using a vertical axis. These products had some cost and reasonable payback difficulties. However, I thought, at the time, that it was interesting to see more work done on the concept.

Well today it was announced that Marquiss Wind Power raised $1.3m from Velocity Venture Capital and Strategis Early Ventures. They have a ducted fan design (shown above and to the right). They are in their early design phases and their product looks a lot like the earlier iterations of AVs product, but there is room for improvement. Like many other cleantech products widespread adoption will be determined by the economics, so lifetime reliability, and $/W will be key.

However, I'm interested that four different firms (at least) are pursuing this concept. I imagine that will actually be good news for these companies. When trying to prove a new concept to skeptical customers, a number of competitors in an early growing market can be a good thing as competitors are far more likely to validate the concept than compete for a specific sales dollar. So, it will be interesting to see if more companies jump in this space, and to see whether or not the economics can succeed.