The Startup Ecosystem

AdamdeSolaPoolApril14th2016

HarvardEnergyJournalClub

Warning!

•  Allgeneraliza+onssoontobemadecanbeproved“wrong”duetoexcep+onalcases– StartupdatahasaverybroaddistribuBon

•  Large“tails”atbothendsofthespectrum(winnersandlosers)

– Hugesurvivorshipbias– PressreportsfocusontheexcepBonalcasesnottheaverageornormalones

TheBadNewsFirst….StaBsBcallyYouWillFail•  AngelCapitalFoundaBonsays“ItisextremelyimportanttoidenBfytherisksofa

venturebecauseeveninopBmalcondiBons,manyelementsarerequiredforsuccess.Takethefollowingscenario:

•ManagementiscapableandmoBvated90%•Marketdemandisasexpected90%•ProducBonisscaledupasplanned90%•CompeBBonisheldatbayandIPisdefendable90%•LiabilityandliBgaBonisavoided90%•Companyhassufficientcapital90%•ExisBngcustomersareableandwillingtopay90%

=SuccessProbability48%•  Intheeventthatevenoneoftheserisksisnotassessedcorrectly,andthe

chanceofsuccessisactually50percent,theoverallprobabilitysuccessisreducedto27percent.”

•  SomaybethatjobinabigslowmovingbureaucraBccompanylooksabitbeber?

Source:Pitchbook

Source:Pitchbook

CONFIDENTIAL PRESENTATION | PAGE 6

Venture Capital: Regional Comparison

California: $85B

New York: $20B

Massachusetts: $20B

VC Capital Under Management - 2014

Source: NVCA 2015 Yearbook 80% of total VC $ in these 3 regions

Courtesy of Jeff Bussgang General Partner, Flybridge Capital Partners

CONFIDENTIAL PRESENTATION | PAGE 7

Venture Capital Per Capita

California: $3.7k/person

New York: $1.0k/person

Massachusetts: $4.3k/person

VC Capital Under Management Per Capita - 2014

Source: NVCA 2015 Yearbook, US Census, CA is counted as four MSAs (LA, SF, San Jose, San Diego)

Courtesy of Jeff Bussgang General Partner, Flybridge Capital Partners

Boston is second only to Silicon Value in Ecosystem Value with $46 billion and ranked #5 in Startup Output with 3,700 to 4,500 active tech startups.

Boston’s startup ecosystem is a worldwide leader in science and technology-based enterprises in areas like pharma, life sciences, biotech, and robotics. Entrepreneurs in Boston generally benefit from a rich network of mentors and supportive organizations such as Bolt, Techstars Boston, Harvard Innovation Lab, and MassChallenge—the latter claiming to be the largest startup accelerator in the world. Boston ranks third in Funding with $4.4 billion in VC investments.

QuotaBonsFromTheGlobalStartupEcosystemRanking2015By:Compass.co

Portfolio Models VC Model:

Go Big or Go Home Angel Model: Base Hits and Runs

StrikeOuts

StrikeOuts

Basehits

Doubles

Triples&HomeRunsTriples&HomeRuns

Doubles

Ineithercase,mostinvestmentsfail.Minorityofinvestmentsprovidesmajorityofreturn.UnlikeVCs,Angelstrytopreservecapitalandgetonbasebybeingcarefulaboutcapitalintensive

all-or-nothingbets.

10

Types of Angel Groups

FundsIndividualMembersWithSidecarFund

IndividualMembersInvesBngviaLLCVehicle

IndividualMembers

•  LaunchpadVentureGroup

•  WalnutVentureAssociates

•  BostonHarborAngels

•  CommonAngels

•  GoldenSeeds

•  TechCoastAngels

•  BeaconAngels

•  VirginiaAcBveAngels

•  HubAngels

ListofallangelgroupsinUS,byGeography:hbp://www.angelcapitalassociaBon.org/directory/

AngelsFundMajorityofStartupsinUSA

Sources: Center for Venture Research/ UNH; NVCA 2014 Yearbook; PwC MoneyTree

• $24.8billion• 71,000deals• 32,000seed• 29,000earlystage• 9,200expansion• >298,000individuals

AngelInvestors(2013)• $29.6billion• 4,050deals• 120seed• 1,375earlystage• 2,550later/expansion• 548acBvefirms

VentureCapital(2013)AngelsProvide~90%ofOutsideEquityforStartups

FundingStaBsBcsSource(HaloReportandAngelcapitalAssociaBon)

BostonArea(13%ofdealsintotalUSA)•  $0.6mm=mediansizeofAngelfundingroundfrom2010–2015(2015=$1mm)•  AddinVC’sandmediansizejumpsto$1.5mm(2015=$2.9mm)

SeedRound2014Pre-MoneyValuaBonsbyQuarBle

5to10mm 4to5mm2.5to4mm 0.3to2.5mm

Median2010–2015=$3mmMostacBveangelgroupsinBostonArea:Launchpadis#1CherrystoneAngelsinRIMaineAngels

Many Accelerators / Incubators

• GreentownLabs(energy&Cleantech)• MassChallenge(Largestinworld)• BOLT(hardware)•  TechStars• ArBstsAsylum(art)• CIC• MITVMS+others

Clean energy companies that have recently received >$10M in financing (Source: Crunchbase)

CompanyEnbalaPowerNetworksCoolPlanetEnergySystemsSolexelIBnerisJouleUnlimitedEosEnergyStorageSenBentEnergyStemNextStepLivingSolarUniverseOutSmartPowerSystemsSolantroSemiconductorViZnEnergySystemsGreenRoadTechnologiesBostonPowerSolariaBloomEnergy

KeySectorSmartGridRenewableEnergySolarPVSmartGridRenewableEnergyEnergyStorageSmartGridEnergyEfficiencyEnergyEfficiencySolarPVEnergyEfficiencySolarPVEnergyStorageAutomoBve/EnergyEfficiencyEnergyStorageSolarPVRenewableEnergy

DateofLastRoundSep-15Sep-15Aug-15May-15May-15May-15Apr-15Apr-15Apr-15Apr-15Apr-15Apr-15Apr-15Mar-15Feb-15Feb-15Jan-15

AmountRaised$29,580,000$146,770,000$223,920,000$20,900,000$190,000,000$401,000,000$22,500,000$67,100,000$87,800,000$11,000,000$10,700,000$33,800,000$15,440,000$98,900,000$370,600,000$116,200,000

$1,100,000,000

Clean Energy Venture Group

•  11+investmentsfor$1.3+mmwithapprox.30%IRR(mostlyunrealized)

PikaEnergy

Key Items in a Startup

• Pathtorevenue•  Solvingacommercialproblem

•  Oxygen,Aspirin,Jewelry•  Team•  Shorttermfunding

•  SBIR/DOEetc.•  TalktoCustomers• Preparetopivot• Preparetochange/befired

•  FoundersAgreement•  IPprotecBon• Mentors• Opinionleadersnearyou•  LocaBon,locaBon,locaBon!• CommercialskillsnotjustscienBficskills

•  6pitchbooks(2/10/30Pages)•  Problem,Marketsize,YoursoluBon,IP•  Team,FinancialProjecBons,$Needed,Exit

Energy Startups

•  Infrastructure•  CapitalIntensive•  MoreSecure?

•  GeographicMonopoly•  ShorterTimeFrames?•  PolicyDependent•  Local“Culture”

•  Technology•  TechnologyIntensive

•  SocheckyourIPworldwide•  LessSecure?•  LongLeadTimestoAdopBon•  Possibletobea“Unicorn”•  MoreFun?•  SBIR/DOE(policy)Dependent

Development

• 2–10xreturns• 50%+failurerate• 0.5to3+yearsBme• Rampedcashouxlows

• Capitallight(lessthan$100K/MW)

• Salespricecirca$100to200K/MW

ConstrucBon

• 20+%IRR’s• Lessthan10%failurerate• 1year+• Capitalintensive(usually$10’sto$100’sofmillions)

• Lumpycashouxlowsweightedtobeginning

OperaBon

• 8-14%IRRs• Rarelyfailsexceptforweather(insurance)

• 15+yearcashflows• CashouxlowsmostlyatBmeofacquisiBon(andmajoroverhauls)

Useful Links

• HowtoCreateyourBusinessPlan• BillAulet’s24steps

•  hbp://disciplinedentrepreneurship.com/

• BusinessModelCanvass•  hbp://www.businessmodelgeneraBon.com/canvas/bmc

•  ForPresentaBonTechniques•  ChuckGoldstone

•  hbp://newventureinsBtute.org/about.html

•  LindaPlano•  hbps://www.planoandsimple.com/about-linda/

•  Legalfeesarenotabarrier:onlinesources+“deals”frombigfirms

More links for more informaCon

•  www.angelcapitalassociaBon.org•  hbp://techscene.at/boston•  hbp://bostontechguide.com/•  hbp://bostonvcblog.typepad.com/vc/2015/09/what-makes-the-boston-startup-scene-special.html

•  hbps://www.f6s.com/techstarsapp

•  hbp://masschallenge.org/accelerator/model•  hbp://masstech.org/innovaBon-ecosystem/innovaBon-economy-resources/incubators-and-accelerators-0

•  hbp://blog.startupcompass.co/the-2015-global-startup-ecosystem-ranking-is-live•  hbp://www.maps-inc.org/our-community/portuguese-speaking-community-in-massachusebs/

Thank you

• AdamdeSolaPool•  Telephone+16175475717or+16467854946• pool@eip.com.pl•  Skypenameisadampool•  105IrvingStreet,CambridgeMA02138USA