Murray Metcalfe: Personal Background

Murray R. Metcalfe, Ph.D.Visiting Scholar, Abe Laboratory

Department of International Development EngineeringTokyo Institute of Technology

[email protected]

How Innovative Technologies and Entrepreneurial Organizations

Can Generate Change in Developing Countries: Case Studies in Energy and Related Segments

May 29, 2008

2MURRAY R. METCALFE, Ph.D.

May 29, 2008

Murray Metcalfe: Personal Background

• Visiting Scholar in Professor Naoya Abe’s lab in the Department of International Development Engineering at Tokyo Tech, April through June 2008

• Educational background:

– Undergrad degree from the University of Toronto in Industrial Engineering

– Masters and Ph.D. from Stanford University in Engineering-Economics Systems (now Dept. of Management Science & Engineering)

• Began professional career as a management consultant at McKinsey & Company, a management consulting firm

• 20 year career in the financing of technology companies and systems:

– Managing Director, Private Equity, Lee Munder Capital Group, 2001 to present (currently on leave)

– Previous positions in venture capital, and in working with and building start up companies

– Focused on investments in information technology and software and more recently in alternative energy; have worked in various other technology-based industries

• Active at the University of Toronto, Faculty of Applied Science and Engineering – advisory boards; member of Dean’s Task Force on Globalization and Engineering; developing a course for the 2008-2009 academic year

• Chairman of Transform Capital, a small not-for-profit that supports innovative organizations active in international development. Examples include the Asian University for Women, a start up undergrad and grad university to be based in Bangladesh.

Introduction


May 29, 2008

Technology Innovation and Entrepreneurial Organizations - This Model Has Worked Well in Developed Economies

TechnologyInnovation

Entrepreneurial FinanceThe Entrepreneur

• Development and deployment of new technologies in selected industries

• Improved standard of living for users and employees

Introduction


May 29, 2008

The model has now been expanded to include environmental products and considerations


Entrepreneurial FinanceEntrepreneurship

Sustainability and

Environmental Protection

Sustainability and


• Development and deployment of new technologies in selected industries

• Improved standard of living for users and employees

• Improved environmental footprint

Introduction


May 29, 2008

Our Central Question: How Can These Approaches Play a Role in International Development?



Sustainability and


Sustainability and


• The reduction of poverty and disease

• Global development, in a sustainable manner

Introduction


May 29, 2008

There is a recognized need for new models and approaches to development, to compliment existing government and NGO driven approaches

• Are current models broken? – arguments by William Easterly (formerly of the World Bank and now at NYU). Planners versus Searchers.

• Millennium Villages Project – a joint venture of UNDP, Columbia University and the not-for-profit Millennium Promise - seeks to implement Millennium Development Goals at the village level

• Progress by the Bill & Melinda Gates Foundation and others in mobilizing small scale projects

• The success of microfinance

• Success of cell phone penetration; interest in the MIT $100 laptop project

Introduction


May 29, 2008

Our Central Question: How Can These Approaches Play a Role in International Development?



Sustainability and


Sustainability and




Entrepreneurship


May 29, 2008

Technology Innovation and the Entrepreneur


Entrepreneurship

Technology Area Individual(s) Company

Aviation

Semiconductors

Transistor-based devices

Software

Internet & telecom

Internet search

Biotechnology

Steel

The Rockefeller family

Robert Noyce, Gordon Moore et. al.

Akio Morita and Masura Ibuka

Bill Gates

Masayoshi Son

Larry Page and Sergey Brin

Robert Swanson and Dr. Herbert Boyer

Lakshmi Mittal

Eastern Airlines

Intel

Sony

Microsoft

Softbank

Google

Genentech

Arcelor Mittal Steel

Entrepreneurship


May 29, 2008

The Model in Commercial Applications - e.g. Google



Entrepreneurship

Backdrop of technology innovation - in this case Stanford University and Silicon

Valley

Larry Page and Sergey Brin –

motivated entrepreneurs with

understanding of the technology and the

end user

Kleiner Perkins and Sequoia Capital –

well known venture capital firms that invested $12.5 million each


May 29, 2008

The Social Entrepreneur in Development

Entrepreneurship

Area Individual Organization

Micro Lending

Econ. Development

Rural Health

Building enterprises

AIDS Reduction

Muhammad Yunus

F.H. Abed

Dr. Paul Farmer

Multiple

Ashok Alexander

Grameen Bank

BRAC

Partners in Health

Ashoka, TechnoServe

Gates Foundation - India AIDS Initiative

Entrepreneurship


May 29, 2008

Funding of a Commercial Venture – Flow of Capital

Investor

Venture Capital Fund Entrepreneur

Company

Entrepreneurship

$

$

$$

$

And to other companies

$


May 29, 2008

Funding of an International Development Venture

Donor

Social VentureCapital Fund

Social Entrepreneur

Company/Project

Entrepreneurship

$

$

$$

$

And to other companies/projects

$


May 29, 2008

Funding of an International Development Venture – Potential Next Stage

Donor

Social VentureCapital Fund

Social Entrepreneur

Company/Project

Entrepreneurship

$

$

$$

$

And to other companies/projects

Commercial Investor

$


May 29, 2008

The Model in International Development – e.g. WaterHealth International



Entrepreneurship

Approaches to drinking water

filtration at the village level; previous

approaches have had a dismal record; WHI’s technology licensed

from Lawrence Berkeley Labs

For profit; founded in 1996; motivated

entrepreneurs with understanding of the technology and the

end user

Acumen Fund – New York based social

venture capital firm focused on

international development; invested

and provided loan guarantees


May 29, 2008

Funding International Social Entrepreneurship – Examples of Currently Active Organizations

• Grameen Bank

• The Rockefeller Foundation

• Ashoka

• The Gates Foundation, Google.org, The Skoll Foundation

• The Acumen Fund

• Kiva.org – online microfinance not-for-profit; works though local partners

Entrepreneurship


May 29, 2008

The key strengths of the venture capital model still apply …..

• Work collaboratively with the entrepreneur

• Arrange follow on financings to ensure ongoing growth

• Vigilance versus fraud and corruption

• Experience across multiple portfolio companies over time builds a knowledge base within the firm

• Measure results – including social returns:

• Much more complex return considerations versus in commercial ventures

• Various approaches to devising models:

• Double bottom line, triple bottom line

• Social Return on Investment (SROI); Blended Value models; Best Available Charitable Option (BACO)

• Decide if/when to declare failure

• If the donors (investors) don’t like what you’ve done, your enterprise will not continue long term

Entrepreneurship


May 29, 2008

Donor’s Return Expectations Over Time for a Social VC Investment Portfolio

Entrepreneurship

Time (years) Time (years)

Index

- 100%

0%

100

ROI(%)

20%

Financial Return: Fund versus Grant Social Return Index: Fund

*

= Realm of the commercial investor*


May 29, 2008

Many, many issues remain - small and large ….

• Labor intensive process, conducted by highly trained personnel – is it scalable?

• Can you generate exceptional returns?

• Assessing the benefits – quantitative approaches

• Keep funding if the commercial funding sources are available?

• Combining these models, adding multiple partners - results in complex structures

• Some segments do not have strong return profiles

• Risk capital approaches in areas of life and death - the moral issues

Entrepreneurship


May 29, 2008

Can these approaches play a role in international development?



Sustainability and


Sustainability and




Innovative Technologies


May 29, 2008

Technology Change and Global Development

• “The World Is Flat” and the spread of modern technologies

• Recent challenge by Bill Gates to deploy more highly skilled personnel to work on the problems of the world’s poor

• Approaches to leapfrogging the use of new technologies:.

• Can advanced technologies be applied in development?.

• An iPod may not help – but what about a cell phone? What about RF-ID and a GPS system

• The MIT $100 laptop project

• Many types of technologies. Some can be used from a distance – e.g. modeling tools – which reduces barriers to adoption.

• The broad role of leading technology-oriented universities:

• Educating “The Global Engineer”

• Engineering practice courses on this topic – e.g. MIT, NYU

• Engineers Without Borders – multi-country student-driven organizations



May 29, 2008

Technology Innovation - Types


Type of Solution Example Application in Developing Setting

“Point” or “Local” solutions • Any type of engineered device

• The electric bicycle • Water filtration systems• Pharmaceuticals

Information and communications technologies (ICT)

• Mobile phones, laptops • Cell phone banking

• Laptops in education, crop rotation planning

• Kiva – “PayPal meets Grameen Bank”

Large scale computer modeling

• Prof. Mark Jacobson modeling of wind energy substitution

• RETScreen

Logistics tools • Federal Express deliveries • Harry Potter delivery vs. malaria drug delivery


May 29, 2008

Can these approaches play a role in international development?



Sustainability and


Sustainability and




Sustainability Considerations


May 29, 2008

Sustainable Development – A Few Points

• Can we learn from past mistakes in the developed world?

• Rate of growth is sufficiently rapid in BRIC countries that pollution mitigation has to be applied simultaneously

• The global engineer will factor in sustainability considerations for all types of engineered products and services

• Energy use characteristics in particular will be central

Sustainability Considerations


May 29, 2008

Returning to our Central Question - Can These Approaches Play a Role in International Development?



Sustainability and


Sustainability and




Case Studies


May 29, 2008

Our Framework/Taxonomy

Categorize a number of case studies by:

Technology Type:

• Point

• ICT

• Systems

• Logistics

• Others

Ultimately fill out a matrix of case studies …

Stage of Development:

• Advanced countries

• Rapidly emerging – e.g. BRIC countries

• Less developed countries

Industry Segment:

• Energy

• Transportation

• Infrastructure

• Others over time

Case Studies


May 29, 2008

Populating the Framework – Case Studies in Energy, Transportation, Infrastructure

Case A. Techn. Type B. Stage of Dev. C. Industry

“Blackout” Systems Advanced Energy

Solar cell leadership in China

Point Rapidly emerging Energy

Mark Jacobson models of wind vs. coal generation

Systems All Energy

MIT D-Lab projects Point Less developed Multiple

Harry Potter publication day delivery

ICT, Logistics Advanced Transportation

Logistical issues in world health

ICT, Logistics Emerging and Less Developed

Transportation

(continued ….)

Case Studies


May 29, 2008



Electricity generation in Brazil

Systems Emerging Energy

Electrical equipment manufacturing in Brazil

Point Emerging Energy

The electric bicycle Point Emerging, Less Developed

Transportation

Cleantech venture capital Point Advanced Energy

Stationary fuel cells in Japan

Point Advanced Energy

WaterHealth International and the Acumen Fund

Point Emerging, Less Developed

Infrastructure

The car of the future in India and China

Point, systems Rapidly emerging Energy, Transportation

(continued ….)

Case Studies


May 29, 2008



D. Light Point Less developed Energy

E + Co. Point Less developed Energy

RETScreen modeling system

Systems All Energy

Kramer Junction – Large scale solar generation

Systems Advanced Energy

……

…….

…..

……

Case Studies


May 29, 2008

Assessing the Prospects and Likely Impact of the Approach

:

• Economic impact

• Social development impact

• Environment and sustainability impact

• Policy issues raised

• Viability of the approach and impediments to wider use

Case Studies


May 29, 2008

Case 1 – D.Light Solar Lighting



Case Studies

Financing from several for profit Silicon

Valley venture funds. Additionally funding

from social VC funds. Partnership to solicit donations to purchase individual lamps for

deployment.

CEO/Co-Founder is a former Peace Corp volunteer who also

holds a Stanford MBA. Small,

entrepreneurial teams. Local distribution

partners.

Simple LED lamp to displace use of

kerosene lanterns, initially in India.

Includes solar panel and battery. CTO is a

solid state optical engineer, with start up experience in Silicon

Valley


May 29, 2008

Case 2 – E + Co



Case Studies

Multiple funds, some invested

directly and some managed on behalf

of partner organizations. Combination of donor grants and

capital investments.

Founded by Phil LaRocco and a

small team. Work with local

entrepreneurs and business

partners.

“Technology neutral” - virtually every type of

renewable energy source and device,

from cook stoves and energy efficiency products, to wind,

biogas, geothermal, hydro & solar generation.


May 29, 2008

Case 3 – The RETScreen Model



Case Studies

Developed by Canadian

government agency; supported by

NASA, UN, World Bank and other

NGOs.

The “entrepreneur” in this case is a group of

10 scientists and support staff

employed by the Canadian government.

Software development began as a Master’s thesis by one team member.

Open source software tool for evaluating renewable energy systems. Used

worldwide. Available in 26 languages.

Substantial fraction of downloads are from

China and other Asian countries.

Question For Discussion:Is this a counterexample?


May 29, 2008

Case 4 – Kramer Junction (SEGS III – VII) – Large Scale Solar Generation



Case Studies

Carlyle Riverstone Renewable Energy Partners – a multi-

billion dollar investment pool for renewable energy

projects – and FPL, a major utility , are co-

owners

Evolution from small scale socially

conscious “green” entrepreneurs to large

scale commercial facilities. Power

“offload” contract with SoCal Edison

Combination of proven and more innovative

solar thermal technologies, plus grid

management techniques, to address high growth in

demand in Southern California. Located in the Mojave Desert. 150 MW capacity.

Question For Discussion: Economic and other barriers to building these arrays in other deserts worldwide?


May 29, 2008

“Big Planet” Issues – Some Questions to Ponder

• Building local skills in less developed areas – historical precedents

• Risk capital approaches in areas of life and death - the moral issues

• What are the characteristics of the most replicable technologies for use in global development?

• The commercial investment world has seen a proliferation of private equity funds and their penetration of every investment type, industry niche and (developed and to some extent rapidly developing) locale. Could we see a future proliferation of social venture funds aimed at international development?

Conclusion


May 29, 2008

A Few “Mild” Conclusions To Date

A. These entrepreneurial models may well have some merit

B. There are many types of technologies that can help in international development settings

C. We are in very early days

D. Engineering oriented institutions like Tokyo Tech have a lot to contribute

Conclusion


May 29, 2008

Contact Information

Your comments are most welcome! …..

… as are interesting cases - in Japan or other countries - that you are familiar with and/or that we might examine together.

Murray Metcalfe

[email protected]

Building I-4, Room 103, Tokyo Tech

090-6094-9238 (Japan mobile, until 6/15/08)1-617-633-0041 (US mobile, after 6/15/08)

Conclusion

Documents

Murray Metcalfe: Personal Background