IDCEE 2013: Investing in tech startups - Igor Taber (Director for Russia/CIS @ Intel Capital)
Investing in startups in energy, resources and connectivity
Transcript of Investing in startups in energy, resources and connectivity
Aster Capital – Confidential
Investing in startups in energy, resources and connectivity
A finance guys’ perspective
London, Oct 8th 2014 – Alexander Schlaepfer
Aster Capital – Confidential 2
A unique model to bring value to your business
New Energy Mix
Sustainable Cities
Energy Efficiency
ResourcesManagement
venture Funds ($ 200m)
years of experience(created in 2000)
UNIQUE SPONSORSHIPGLOBAL COVERAGE
offices locations
international team members
Unique access to sponsors' markets and technology experts
Aster Capital – Confidential 3
Cleantech asset class performance
• Listed equities all crashed in 2008
• Cleantech initially did relatively wellbut has been lagging since 2011
• Solar stock recovery from the brinkof bankrupcy drove goodperformance in 2013/2014
• While overall VC portfolios showed10% return p.a. between 2010-2012, Cleantech flatlined
• No exits, no stars (Tesla was 2013)
• Cleantech VC is not a popular assetclass for institutional investorstoday
Underperforming in both – listed and private – equity classes
Aster Capital – Confidential 4
How to make money in a difficult asset class ?
• Steady valuation progression to Exit
• Targeted VC multiples/returns -> entry valuation
• Exit valuations
• Dilution
• Capital Efficiency
• Conclusion
The ingredients of investment performance
Aster Capital – Confidential
Example: Fundraising History
• Production of oils and biofuels by fermentation of microalgae
• Created 2003
• IPO on 02.06.2011
• 2010 KPI
• Revenues: $38m
• EBITDA: ($13.7m)
• Net Income: ($16.3m)
• Shareholders:
• Harris & Harris Group
• Roda Group
• Braemar Energy Ventures
• Lightspeed Venture Partners
• VantagePoint Capital Partners
• Chevron Technology ventures
Solazyme - Valuation History
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1Q2005 2Q2007 3Q2009 3Q2010 2Q2011
A B C D IPO
$ m
illio
n
raised
pre-money
Round A B C D IPO
Year 1Q2005 2Q2007 3Q2009 3Q2010 2Q2011
pre-money 12.8 11.7 144.8 355.8 845.1
raised 8.0 5.0 57.6 60.0 227.2
Market Cap SZYM Oct 2014: $615m
Aster Capital – Confidential
Valuation Progression Analysis
• Fast increase in valuationbefore commercial PoC(volume customers) leads toset-backs
• Amyris
• Valuation trend is exponentialrather than linear
• Reflects time component and gradually declining investment risk
• Higher value of customers (commercial traction) vs. technology
• Keeping it attractive for new investors to join
0%
20%
40%
60%
80%
100%
120%
A B C D E IPO
% o
f final I
PO
valu
e
Valuation Progression US Biofuel IPOspre-money valuation
Amyris KiOR Codexis
Solazyme GEVO Average
Round A B C D E IPO
Amyris 4.2% 74.6% 82.8% 46.3% 85.1% 100%
KiOR 0.3% 1.2% 20.9% 29.0% 100%
Codexis 4.6% 14.3% 47.1% 100%
Solazyme 1.5% 1.4% 17.1% 42.1% 100%
GEVO 5.1% 12.8% 26.2% 29.6% 101.8% 100%
Average 2.8% 22.5% 30.3% 32.3% 78.0% 100.0%
Aster Capital – Confidential
Value of customers (‘proof of value’) vs. technology (‘proof of concept’)
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
A B C D E IPO
% o
f fi
na
l IP
O v
alu
e
Financing Rounds
Valuation Progression US Biofuel IPOs
pre-money valuation
Average valuation
CODEXIS
Signed collaboration with industry leaders (Teva, Pfizer, Shell)
Product revenues: $11M
R&D revenues: $8M
GEVO
Won TOTAL as a strategic investor
Signed Licensing agreement with Cargill
SOLAZYME
Proprietary diesel passed D-975 specification the year before
Various awards
$9M revenues
Proof of concept
‘it works’
Proof of Value‘’customers buy it
– a lot…’
*average valuation excludes Amyris
Aster Capital – Confidential 8
Valuation – VC Target IRR of ~30%
Valuation is primarily driven by expected exit valuationand dilution through future capital raises
Seed Round Series A Series B Seriec C … Exit
Valuation $
10x in 8 years
= 33% IRR
6x in 6 years
= 35%IRR
4x in 4 y
= 32% IRR
2x in 3 y
= 25% (undil.)
Aster Capital – Confidential 9
Growth is the key valuation driver in M&A and IPO’s
Valuation drivers – MIT study on 786 MedTech transactions, 1996 - 2008
Aster Capital – Confidential 10
Cleantech: all segments
Revenue Multiple vs. Sales Growth
• Recurring revenues and their visibility are theprimary value driver
• Second is scalability -> the cost/CAPEX foradding another user (or $ of revenue)
• At >20% growth, valuation of 4x revenues isalmost guaranteed
Software: SaaS business models
Source: Sand Hill Source: Aster, with data from Baird Energy Technology Monthly, June 2014
• Few ‘subscriber’ business models
• Capital intensive business models
• Average sector growth is lower (19% vs. 26%)
• With >20% growth, valuation can still be <1x revenues. Hardly any multiples >4x
Aster Capital – Confidential 11
Revenue Multiples vs. Sales GrowthCapital intensive Cleantech segments show poor correlation
Solar PV manufacturing
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0 0.5 1 1.5 2 2.5 3
Revenue to Marketcap Multiple H1/2014
An
nu
al R
even
ue G
row
th
(fw
d)
PV Project Developers & EPC
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0 2 4 6 8 10 12 14
Revenue to Marketcap Multiple H1/2014
An
nu
al R
even
ue G
row
th
(fw
d)
Energy Storage
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0 1 2 3 4 5 6
Revenue to Market Cap Multiple H1/2014
An
nu
al R
even
ue G
row
th
(fw
d)
Turbine Equipment (Wind, Heat, Gas)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0 0.5 1 1.5 2 2.5
Revenue to Marketcap Multiple H1/2014
An
nu
al R
even
ue G
row
th
(fw
d)
Source: Aster, with data from Baird Energy Technology Monthly, June 2014
Aster Capital – Confidential 12
Dilution to A- and B-round investors
• What looked like a great multiple initially, turns out modest
• Here, dilution wacks-off 2000 bps from A- and B-round investorsoriginal IRR
• Capital intensive business modelsrequire larger rounds and createhigher dilution -> hence higherpressure on pre-money valuation
• €45m investment to create a €100m exit is not unusual in theCleantech industry
A typical financing path ?
Round A B C D Exit
Pre-money 5 16 45 70 100Capital raised 3 7 15 20
Post-money 8 23 60 90Dilution Factor 0.63 0.70 0.75 0.78
Multiples (after dilution) IRRA Rounders, 6y 12.5x 8.7x 6.5x 5.1x 31%
B Rounders, 4y 4.3x 3.3x 2.5x 26%
C Rounders, 2y 1.7x 1.3x 14%
D Rounders, 1y 1.1x 11%
Founders, € at Exit 25
Aster Capital – Confidential 13
Capital Efficiency
vs. the Cleantech world:
• €10m CAPEX for non-commercial pilotplant (technical PoC) ?
• €10m CAPEX in a commercialproduction plant that could produce for€10m p.a. in revenues ?
• Finding other people to make thatinvestment
• Grants, suppliers, customers
Turning one VC-€ into €10 (or €200)
or
Aster Capital – Confidential 14
Conclusions
• New Solar PV installations are at 52GW this year – even IEA now acknowledgesthat renewables are the future
• Utility business model is being re-invented -> distributed energy resoures
• Manufacturing industry is now seriouslydriving energy efficiency projects
• The ‘sharing economy’ is transformingthe transportation industry
But we need to be more intelligent
• Innovate where there is a real customer demand
• Watch valuation: customers andsales are the main value driver
• Watch capital efficiency -> is themoney we raise really creatingvalue ?
Cleantech is not ‘over’
Aster Capital – Confidential
Breakthrough liquid cooling technology for data centers.
Aster’s last investments
Leading modeling platform for complex systems.
15
Thank you!Aster Capital 7, bd Malesherbes 75008 Paris +33 1 45 61 30 95 www.aster.com