1. An Analysis of US Venture Capital Investment Trends in
Cleantech Startups
July 22, 2011
ⓒ 2011 insprout Corporation.
All rights reserved

2. Table of Contents
1. What is Smart Grid?
2. Smart Grid Associated Technologies
3. US Venture Capitals
• Investment Trends
• Portfolio Analysis
4. Implications for Japanese Cleantech Startups
5. Conclusion
2 ⓒ 2011 insprout Corporation.
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3. Introduction
Purpose
We analyze each portfolio of the selected US venture capitals. In
doing so, we sort those startups into some categories based on
technologies such as Renewable Energy and Energy Management.
We then evaluate opportunities for Japanese cleantech startups.
Conclusion
１. VC investment concentrates on “Energy production”, “Egergy
Management Systems (EMS)”, and “Batteries.”
2. For Japanese cleantech startups, it seems that “Demand Side” of
Smart Grid presents more business opportunities than Supply side
due to the following three reasons: direct contact to consumers,
technological overlaps, and required capital.
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4. 1. Smart Grid’s Concept
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Source: Toshiba Home Page All rights reserved

5. 1. A Defenition of Smart Grid
A “smart grid” is a set of software and hardware tools that enable
generators to route power more efficiently, reducing the need for
excess capacity and allowing two-way, real time information
exchange with their customers for real time demand side management
(DSM).
*SMART 2020: "Enabling the low carbon economy in theinformation age" Global Sustainability Initiative
From a business perspective, we need to divide the composition
elements of smart grid into some meaningful classifications.
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6. 2．Technical Domains of Smart Grid
Generation Transmission Distribution Consumption
1 2 3 Energy Consumption
Energy Production Monitoring&Control of System Power Supply
1） Renewable Energies 4） Wide Area Monitoring System 5）Distribution Automation 6） EMS
2） Alternative Energies 7） EV
4
Effective Operation of System Power Supply
3）Fossil Fuel Efficiency 8） Recycle
10）Superconducting Transmission
9） Energy Saving
11） Power Electronics Applied Equipment
5
Advanced Interface Technologies
12） AMI・Smart Meter
13） Power Conditioner Technologies
6
Energy Storage
14） Energy Storage Technologies
6 ⓒ 2011 insprout Corporation.
※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved

7. 2. Six Main Technological Domains of Smart Grid（LEV1）
Technological
Description Companies
Domain
Includes renewable energies and bio fuels. It also includes fossil fuel Sharp, Kyocera
①Energy Production efficiency. Difference in business structures such as manufacturing solar BrightSource Energy
panels and operating a power plant are not taken into account. Altarock Energy
②Monitoring&Control Refers to monitoring & control technology used at central load dispatching Toshiba, GE,
of System Power Supply center and local transformer substations. SIEMENS
Refers to various technologies that control energy consumption of consumers. IBM, EnerNOC、
③Energy
Consumption
It includes HEMS, FEMS, BEMS, and Demand Response. It also includes Tendrill, Opower,
EVs and affiliated technologies such as V2G. Tesla
④Effective Operation Refers to technologies that concern effective and flexible operation of system
Sumitomo Electric,
of System Power power supply. It includes such technologies as superconducting transmission, ABB
Supply ultra‐high voltage power transmission, and power electronics.
Refers to advanced interface technologies that connect between distributed Siver Spring Networks,
⑤Advanced Interface
Technologies
generation and system power supply. It deals with sending & receiging Itron, Landis+Gyr,
information and include such things as smart meters power conditioners. Mitsubishi Electric
Panasonic,
⑥Energy Storage Refers to energy storage technologies such as batteries. NGK Insulators
7 ⓒ 2011 insprout Corporation.
※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved

8. 2. Fourteen Sub Technological Domains of Smart Grid（LEV2-1)
Technological
Domain
Description Companies
Renewable enegies（photovoltaic generation, solar thermal power, wind power, geothermal Sharp, Kyocera
①Energy Production
power, etc). Business structures such as manufacturing solar panels and operating a BrightSource Energy
1) Renewable Energies
power plant are not taken into account. Altarock Energy
①Energy Production Amyris Biotechnologies
Bio Fuels (ie. Ethanol), and their affiliated businesses
2) Alternative Energies Mascoma, Gevo, KiOR
①Energy Production Fossil fuel efficiency technologies such as decreasing CO2 emission, and conversion GreatPoint Energy
3) Fossil Fuel Efficiency technologies to natural gas. Luca Technologies
②Monitoring&Control Monitor & control of system power supply such as PMU （Pharos Measurement Unit）collects
of System Power Supply data of electric current & voltage and thus monitoring the conditions of system power supply. Toshiba, GE, Siemens
4) WASA It controls system power supply optimally, and deters & prevents the system’s collapse.
②Monitoring&Control Monitos electric current and voltage running through distribution lines and electric
of System Power Supply power substations, automatically controls the swich of distribution lines, and therefore Toshiba, GE, Siemens
5) Distribution Automation increases the reliability of distribution lines as well as softening maintenance work.
③Energy Consumption Process of managing the consumption of energy, generally to optimize available and EnerNOC, Tendrill,
6) EMS Techonologies planned generation resources. It includes HEMS, BEMS, FEMS, and Demand Response. Opower
③Energy Consumption Tesla, Fisker Automotive
Refers to EVs. It also includes affiliated technologis such as V2G and G2V.
7) EV Better Place
8 ⓒ 2011 insprout Corporation.
※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved

9. 2. Fourteen Sub Technological Domains of Smart Grid（LEV2-2)
Tenonological
Domain
Description Companies
③Energy Consumption Lehigh Technologies,
8) Recycle
Various recycling technoclogies, including financial services. RecycleBank
Various energy saving devices & services such as LED lighting.
③Energy Consumption Luminus Devices
9) Energy Saving
It also includes improving existing automobiles (development of low CO2 SeaMicro, Caitin
emission engines).
④Effective Operation Uses direct current for the bulk transmission of electrical power, in contrast
of System Power Supply
10) Superconducting with the more common alternating current systems. For long-distance Sumitomo Electric, ABB
Transmission transmission, it may be less expensive and suffer lower electrical losses.
④Effective Operation Refers to Electric voltage control by reactive power control and Electric
of System Power Supply current control of distribution lines by impedance changes in distribution
11) Power Electronics lines.
⑤Advanced Interface Monitors & measures electricity demand, send the data using IT
Siver Spring Networks,
Technologies technologies periodically. Sometimes equipped with the capability to Itron, Landis+Gyr
12) AMI control household appliances.
⑤Advanced Interface Conversion technologies from DC to AC.
Technologies We expect to see the rise of this technology along with the increase in Sharp, Kyocera
13) Power Conditioner
distributed generation.
⑥Energy Storage Used both sides of smart grid: both supply side and demand side need Panasonic,
14) Batteries batteries to even out generation. NGK Insulators
9 ⓒ 2011 insprout Corporation.
※Classifications are based on Japan’s New Energy and Industrial Technology Development Organization (NEDO) “Renewable Energy Technology White Paper 2010.” All rights reserved

10. 3. US Venture Capitals’ Investments
(Unit:
Million)
$4,500 20%
$3,987
$4,000 $3,668 18%
$3,500 17.67% 16%
13.91% 15.77% 14%
$3,000
$2,605 10.95% 12%
$2,500
$2,122 10%
$2,000 $1,647 8.59% 8%
$1,500 6.30% $1,038 6%
$1,000 4%
$500 2%
$- 0%
2006 2007 2008 2009 2010 Q1 2011
Amount Invested (Cleantech) Cleantech % in Overall Invest
Between 2006 and 2010, Cleantech Investments increased at CAGR 22%
*In Q1 2011, investment equals that of Web companies
10
Source: National Venture Capital Association

11. 3. Venture Capitals Active in Cleantech Investment
Venture Investor # deals
Draper Fisher Partners 16
Chrysalix Energy Venture
16
Capital
Kleiner Perkins Caufield & Byers 12
We select these three firms,
Carbon Trust Investment Partners 12 plus Nth Power specialized
Element Partners 12 in cleantech investment for
Emerald Technology Ventures 10 our research.
RockPort Capital Partners 10
Good Energies AG 10
Vantage Point Venture Partners 10
Khosla Ventures 8
SET Venture Partners 8
11 ⓒ 2011 insprout Corporation.
Source: Cleantech Group All rights reserved

12. 3. Investment Analysis Based on Technological Domains of
Smart Grid (LEV1-1)
(Unit: Deal)
70 ：# of deals
60
60 ：# of deals over $100M
50
40
31
30
18
20 13 15
10 4 3
0 2 2 0 0 0 0
0
Others
Monitoring&Control
Energy Storage
Advanced Interface
Effective Operation
Energy Production
Consumption
of System Power
of System Power
Energy
Technology
Supply
Supply
Energy Consumption takes up about 50% of VC investment.
Almost zero investment in System Power Supply.
12 ⓒ 2011 insprout Corporation.
Source: From VCs’ publicly available portfolios. All rights reserved

13. 3. Investment Analysis Based on Technological Domains of
Smart Grid (LEV1-2)
Number of Investment Number of Investment Over $100M LEV 1 Total
LEV1 KPCB Nth DFJ Khosla KPCB Nth DFJ Khosla # Invest # Over $100M
Energy Production 16 11 14 19 8 0 4 6 60 18
Energy Consumption 8 7 11 5 2 0 2 0 31 4
Energy Storage 3 0 6 4 0 0 0 0 13 0
Advanced Interface Technology 2 0 1 0 1 0 1 0 3 2
Effective Operation of System Power Supply 1 0 0 1 0 0 0 0 2 0
Monitoring&Control of System Power Supply 0 0 0 0 0 0 0 0 0 0
Others 0 5 1 9 0 0 0 0 15 0
Total 30 23 33 38 11 0 7 6 124 24
No noticeable differences among VCs and their investment trends at LEV 1.
Investment deals for energy production tends to be big! About 30% of Energy
Production deals are over $100M deals (cumulative amount of capital raised).
13 ⓒ 2011 insprout Corporation.
Source: From VCs’ publicly available portfolios. All rights reserved

14. 3. Investment Analysis Based on Technological Domains of
Smart Grid (LEV2-1)
(Unit:Deal) ：# of deals
35 ：# of deals over $100M
30
30
25
20
20 16 15
15 13
10
10 8 8
6
4 4 32
5 1 1 22 10 2
0 0 00 0 00 00 0
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VCs’ investment concentrates in Energy Production, EMS, Batteries,
taking up 72% of the overall investment.
14 ⓒ 2011 insprout Corporation.
Source: From VCs’ publicly available portfolios. All rights reserved

15. 3. Investment Analysis Based on Technological Domains of
Smart Grid (LEV2-2)
Number of Investment Number of Investment Over $100M LEV 1 Total
LEV1 LEV2 KPCB Nth DFJ Khosla KPCB Nth DFJ Khosla # Invest # Over $100M
Energy Production Renewable Energies 7 7 8 8 4 0 3 1 30 8
Alternative Energies 5 2 4 9 2 0 0 4 20 6
Fossil Fuel Efficiency 4 2 2 2 2 0 1 1 10 4
Energy Consumption EMS 5 6 5 0 1 0 0 0 16 1
Energy Saving 0 1 2 5 0 0 1 0 8 1
Recycling 2 0 2 0 0 0 0 0 4 0
EV 1 0 2 0 1 0 1 0 3 2
Energy Storage Batteries 3 0 6 4 0 0 0 0 13 0
Advanced Interface Technology AMI/Smart Meters 1 0 1 0 1 0 1 0 2 2
Power Conditioner 1 0 0 0 0 0 0 0 1 0
Effective Operation of System Superconducting Transmission 0 0 0 0 0 0 0 0 0 0
Power Supply Power Electronics 1 0 0 1 0 0 0 0 2 0
Monitoring&Control of System WASA 0 0 0 0 0 0 0 0 0 0
Power Supply Distribution Automation 0 0 0 0 0 0 0 0 0 0
Others Others 0 5 1 9 0 0 0 0 15 0
Total Total 30 23 33 38 11 0 7 6 124 24
Noticeable differences among VCs and their investment areas.
→Khosla clearly focuses on energy production while zero investment in the area of EMS.
Very few over $100M deals for investments in EMS and batteries. (1 out of 29 deals)
15 ⓒ 2011 insprout Corporation.
Source: From VCs’ publicly available portfolios. All rights reserved

16. 3. Summary of US VCs’ Investment Trends
Investment concentrates in Energy Production, EMS, and Batteries.
Energy Production：Various policies and governmental aids enacted to create demands for such energies.
EMS： US smart grid was envisioned to avoid huge investment required to replace old
distribution lines, emphasizing demand control.
Batteries： Batteries are used all phases of smart grid: Generation-Transmission-Consumption.
On the other hand, almost zero investment was made into such technological domains as
Monitoring&Control of System Power Supply or Superconducting Transmission.
Dominated by large companies such as GE, Siemens and Toshiba with long history of joint development
with electric companies.
While investments deals in energy production tend to require huge capital (over
$100M), this is not the case for those of EMS and batteries.
30% of investment deals in energy production are over $100M deals.
Only 1 deal out 29 is an over $100M deals in EMS and batteries.
16 ⓒ 2011 insprout Corporation.
¹State of California mandates that 33% of electricity must be produced by renewable energies by 2020. All rights reserved

17. 4. Implications for Japanese Cleantech Startups
（
Supply Side（Generation-
（
Demand Side（Consumption））
）
Transmission-Distribution）
Technological Domains
Technological Domains
Renewable Energies
Alternative Energies
EMS
Fossil Fuels Efficiency
WAMS
Distribution Automation
Superconducting Transmission
< AMI・Smart Meters
EV
Recycle
Energy Saving
Batteries
Batteries
Power Electronics
Power Conditioners
Hypothesis： Demand side of smart grid (especially red-fonted
domains) may present more business opportunities for
startups than supply side of smart grid.
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18. 4. Analysis of Hypothese ～1～
Smart Grid = Internet of Power Network
Especially technological & service domains of EMS are those
directly contact with consumers.
Power shift from supply side to demand side would occur, once every consumer in
would produce and consume energy, becoming so-called prosumers of energy.
Nega-watt (savings from energy saving) and Posi-watt (generation from renewable
such as PV) would connect to EMS, enabling electricity trade. This new
environment, so-called “You Energy (everyone can produce & consume energy)”
would create a new paradigm that would foster innovation, growth and
employment, incentivizing businesses¹.
18 ⓒ 2011 insprout Corporation.
¹Source: Toshiharu Kato, “Smart Grid Revolutuon.” All rights reserved

19. 4. Analysis of Hypothese ～2～
Engineering skill sets needed in the Demand Side overlap with those in IT industry.
Most IT companies can enter the Demand side with marketing strategies tailored for
the energy industry.
Backgrounds of Executives in Smart Necessary skill sets of
Grid Companies Smart Grid Engineers
Others
12% 、
Renewable Energies （PV, wind power、Geothermal power）
）
IT Hardware Additional
Telecom skills
30%
8% Electrical Engineering （circuit, etc）
）
Finance
6% Network Technology （WAN, LAN, etc ）
Skill sets that
Control & Communication Technology of Smart Appliance
IT engineers
Energy
19% already have
IT Software WEB Application Technology
25% （e-commerce, power consumption management software)
Majority have IT industry backgrounds Similar technological skill sets
Source：Greentech Grid “Smart Grid2.0: the Soft Grid” Source：http://engineer.typemag.jp/slive/2011/05/-se5.php
http://www.greentechmedia.com/articles/read/smart-grid-2.0-
the-soft-grid1/
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20. 4. Analysis of Hypothese ～2～
Supply side businesses such as Energy Production tend to require
large amount of capital.
Average investment size of Japanese VCs is between $1M and $3M, raising the
financial bar for Japanese startups to enter the supply side of smart grid.
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21. 5. Conclusion
US VCs’ investment concentrates in the three technological
domains: Energy Production (renewable & alternative energies,
fossil fuel efficiency), EMS, Batteries. On the other hand, some
domains receive no investment, a great split.
About 30% of Energy Production are over $100M deals,
requiring huge amount of money to run business. This is not the
case in the other two domains, EMS and Batteries.
Demand side of smart grid seem to present more business
opportunities than supply side due to the following three reasons:
“direct connections to consumers,” “technological affinity with IT
technology,” and “required capital.
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22. TO BE CONTINUED
We will analyze in detail various EMS technologies and
companies in those domains
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