KPCB GreenTech Team Investment Strategy

Jay Kathari, Andrew Damen, Andrew Pidhayny, LucasHagness

Agenda
Issues Facts Options Framework Consequences Principles Action Plan Question and Answer
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The Issue
Kleiner Perkins Caufield & Byers (KPCB) Privately held venture capital firm investing in: Greentech iFund, Information Technology, Life Sciences & sFund. Mission: Invest in early-stage and breakthrough ventures that have a promise to create new market opportunities. KPCBs GreenTech portfolio consists of 20 companies with primary focus on fuel cells, recycling and solar power among others. Examining their performances and growth potential with reference to KPCBs mission: Is this the optimal GreenTech portfolio for KPCB? From an economic perspective? Long-term feasibility? Should KPCB add other companies to its portfolio, or subtract existing ones?
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The Facts
Fossil Fuels account for about 84% of the worlds primary energy consumption. Non-renewable and depleting faster than produced. More than 90% of greenhouse gas emissions come from the combustion of fossil fuels. Use of renewable energy and conservation efforts aim to provide price reductions and price stability. Although climate is not a key driver it once was for clean tech, theres still a strong clean & energy movement. Green Initiatives are driven by financial sentiment and government decisions (tariffs, subsidies, stimulus spending). Approximately $100 billion of the stimulus package will go towards clean tech investments and activities.

The Facts
Biofuel, Wind, and Solar sectors expected to see largest revenue growth over the next 10 years.

The Facts
Energy Information Administration (EIA) projects strongest growth in renewable fuels. Overall energy consumption to fall from 84% in 2008 to 78% in 2035.
Figure 1. U.S. primary energy consumption, 1980-2035
quadrillion Btu 120

100 Biofuels 80 Liquids

60 Natural gas 40 Nuclear 20 Coal 0 1980 1995

http://www.eia.doe.gov/oiaf/aeo/demand.html

The Facts - Portfolio

SOLAR
Ausra - developed solar steam
generators reducing customers emissions profile and providing a renewable energy solution.

RECYCLING
*Harvest Developed technologies to
produce renewable energy and highquality compost products.

Lehigh Technologies recycles tire

rubber into engineered rubber powder providing cost and performance advantages.

Kotak Urja - India's leading Solar

Photovoltaic and Solar Thermal Energy Solutions provider.

*MiaSole - low-cost, thin film CIGS

solar company.

*RecycleBank residential incentivebased recycling rewards program.

Sundrop Fuels Inc. - solar

gasification-based renewable energy, using solar and biomass.
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GEOTHERMAL
AltaRock Energy Inc. - develops of
Engineered Geothermal Systems to produce renewable energy.
*2010 Global Cleantech Top 100 List

The Facts - Portfolio

FUEL CELLS
Lilliputian Systems - Develops
miniature fuel cells for portable electronic devices and wireless applications.

BIOFUEL
*Amyris Biotechnologies - Using
Industrial synthetic biology platform to create renewable fuels and chemicals.

Mascoma Corporation - development

of bio and process technology for costeffective production of cellulosic ethanol, inexpensive renewable energy source.

*Bloom Energy - Develops solid

oxide regenerative fuel cells (SORFC). Renewable electrical energy generated from hydrogen and oxygen.

WIND
Upwind Solutions - 3rd party
provider of asset management and operations and maintenance services for the wind industry.
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SMART GRID
*Silver Spring Networks Inc. technology giving customers to the potential to better utilize their scarce power generating capacity, reduce carbon emissions and improve operating efficiency. *2010 Global Cleantech Top 100 List

The Facts - Portfolio

EFFICIENCY
*Hara Software - provides
environmental and energy software management system to optimize energy consumption and GHG emissions.

PATENTS
RPX Corporation - first defensive
patent aggregator.

EXPLORATION
TTI Exploration - technology-driven
exploration company that minimizes environmental impact, risk and cycletime.

Verdiem - SURVEYOR software

provides measurable energy and cost savings through network-level control over PC and monitor power settings.

TRANSPORTATION
*Fiskar Automotive green
American PHEV premium sports car company.
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CLEAN COAL
Great Point Energy - process for
converting coal into clean-burning natural gas.

*2010 Global Cleantech Top 100 List

The Options
A. Diversify the portfolio B. Maintain course of current portfolio C. Wait and See D. Strengthen focus on Green Tech

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Option A
Diversify the Portfolio
Current Portfolio Concentration:
Solar Recycling Fuel Cells

Suggested Addition of Wind, Energy Storage, and Efficiency

Wind is expected to grow from $63.5 billion to a $114.5 billion dollar industry by 2019 Storage will benefit from renewable energy investment Push to reduce energy consumption

Recommendations
MAGENN Power, LLC. Pentadyne Power Corp, LLC. SN Tech Inc.

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Option A
MAGENN Power, LLC.
Already has raised $11.2 million of capital Projected Revenue of $128 Million Innovative High Altitude Wind Turbine
Low cost electricity - under 20 cents per kWh versus 50 cents to 99 cents per kWh for diesel Lower noise Higher operating altitudes - from 500 feet to 1,000 feet above ground level are possible without expensive towers or cranes

Optimal Markets - areas lacking infrastructure

Island Nations Remote rural areas (farms, exploration areas) Cell Towers Disaster areas

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Option A
Pentadyne Power Corp, LLC.
Already has raised $10 million of capital Projected Revenue of $110 Million Flywheel technology stores energy kinetically versus chemically (standard VRLA battery).
Longer lasting (>50,000 hrs. vs. <2,200 hrs.) Environmentally sound Infrequent maintenance Cost-effective

Optimal Markets: Uninterruptable Power Supply (UPS) Systems

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Energy/Utility Government & Military Data Centers Gaming

Option A
SN Tech Inc.
No Capital Raised Projected Revenue of $108 Million Electronically Commutated Motor (ECM) technology thats far more efficient than AC motors
Reducing Operating Costs by 82% Less Power Consumption by 80% Intelligent Design/minimal parts Internal Control Programmability Longer expected life

Optimal Markets:
HVAC System A/C Systems Agricultural Equipment
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Option B
Maintain course of current investments
Current Portfolio Concentration: Solar, Recycling, FuelCells KPCB could add additional solar investments
Solar investments have support in this political environment. Solar is expected to grow from $36.1 billion to a $116.5 billion dollar industry by 2019

Recomendations
Quadra Solar Corporation

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Option B
Quadra Solar Corporation
Already has raised $1 million of capital Projected Revenue of $150 Million iPyramidTM - Concentrated Photovoltaic and Thermal (CPVT) system
Dual Energy System: PV and Thermal Efficiencies reaching 35% Triple Usage System: Power, Heating, Cooling 2-3x the overall efficiency of PV and CPV systems

Optimal Markets
Flat rooftop construction

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Option C
Wait and See
Let market mature and identify winners Watch for Policy Change Preserve Capital for better investment options in the future Recommendation No action

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Option D
Strengthen focus on Green Tech
Remove investments are not Green Tech focused or may have minimal impact Recommendation Remove RPX corporation
Patent Aggregator Does not meet GreenTech mission

Remove Fisker Automotive

$100,000 Electric Sports Cars Narrow market focus

Remove TTI Exploration

Still consumes fossil fuels, not exactly Green Tech

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Options & Consequences

Ability to Get Maximum Return to KPCB & Institutional Investors Diversify Portfolio +/-

Current Impacts on the Companies We The Government Environment Invest In ++ ++ + +/+ ++ ? ++ ++ +? +++

The General Public

Principles

+/+/+/++

+/+/+/++

Stick with Current + Investment Strategy Wait and See +/-

Focus on Greentech -

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Consequences - Option A
Diversify into Wind, Efficiency, and Energy Storage
+ Reduces Risk of Portfolio
Reduces risk to legal/ political factors Wind could eventually be more profitable per long-term growth estimates and subsidies Efficiency and Storage further diversifies portfolio

- Could reduce returns to portfolio

Solar could be more profitable due to political environment Investment profitability subject to key raw material market fluctuations

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Consequences - Option B
Maintain course of current investments
+ Could produce nice returns to the portfolio
Solar could be more profitable due to political environment

- Not Very Diversified

Heavily invested in solar Could be a risk if the business environment changes

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Consequences - Option C
Wait and See
+ New Technologies might revolutionize Green Tech
These new investments may be more profitable and better for society Limited amount of capital to invest

- Could miss current opportunities

Difficulty in accurately predicting the future

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Consequences - Option D
Focus on GreenTech - divest of RPX, Fisker, and TTI
+ Invest on Principles, more capital to further green technology
Option divests a patent aggregator, sports car company, and Fossil Fuel Do these investments truly advance greentech and help the environment

- Profitability may suffer

These investments may be profitable if not completely helping the environment.

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Environmental Impact
Actively invest in GreenTech Innnovation and Entrepreneurs:
Fulfill increased demand of clean water, clean power and clean transportation created due to rapid urbanization by creating sustainable solutions that minimize carbon footprint Reduce dependence on oil and fossil fuels Renewable Energy Generation and Distribution Energy Efficiency and Demand Destruction Carbon Markets and Climate-Related Financial Services Solutions for the Biomass Economy

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Social Impact/Restrictions
Wind Clean, non-polluting electricity Avoids external or societal costs of conventional energy resources Provides more dollars per job than any other energy technology Efficiency Increasing the resilience level of society through support and adoption Restrictions Public support and government subsidies Noise pollution Impact on wildlife

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Investment Principles
Invest in early-stage breakthrough ventures with potential of creating new market opportunities:
Greentech potentially the largest economic opportunity of 21st century Maximize return on investment for KPCB investors Invest in companies with strong leadership and differentiated approaches

Overall Principle:
Maximize financial return by strategically managing performance in a sustainable economic, environmental, social and ethical context.

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Action Plan - A
Choose Option A + Option D
Option A: Diversify into Wind, Efficiency, and Storage
TOTAL Projected Revenue = $336M RETURN = $16.8M/year (assumption ROR = 5%) Reduces risk and diversifies the portfolio Most fitting KPCBs principles of Investing in future and early-stage breakthrough ventures that could create new market opportunities Opportunity to create synergies by combining multiple alternative energy technologies with complementary benefits to create a seamless GreenTech solution. Hedge Strategy Efficiency & Storage have strong synergies with firm expertise related to hi-tech and semi-conductors Contd..
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Action Plan - A
Choose Option A + Option D
Risks Scalability of wind balloons Public adoption Wind viability due to lack of grids for distribution

Option D: Focus on GreenTech - divest of RPX, Fisker, and TTI

Invest on principles by using more capital to further green technology and divesting in companies that are not truly GreenTech. Potential to move current investment into firms complementary portfolios Risks: Complete divestiture of investments could result in low or no return for investors
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Action Plan - B
Choose Option B + Option D
Option B: Keep with current investment pattern
Profitable and good long term growth prospects Current political environment favoring solar investment Could be a risk if business environment changes in favor of any other alternative energy technology. Increases risk of portfolio concentration

Option D: Focus on GreenTech - divest of RPX, Fisker, and TTI

Invest on principles by using more capital to further green technology and divesting in companies that are not truly GreenTech.

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Questions?

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