Murray Metcalfe: Personal Background

1. How Innovative Technologies and Entrepreneurial Organizations Can Generate Change in Developing Countries: Case Studies in Energy and Related Segments May 29, 2008 Murray R. Metcalfe, Ph.D.Visiting Scholar, Abe LaboratoryDepartment of International Development EngineeringTokyo Institute of Technologymm@transformcapital.org

2. Introduction 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.

3. Introduction Technology Innovation and Entrepreneurial Organizations - This Model Has Worked Well in Developed Economies Technology Innovation Entrepreneurial Finance The Entrepreneur • Development and deployment of new technologies in selected industries • Improved standard of living for users and employees

4. Introduction The model has now been expanded to include environmental products and considerations Technology Innovation Entrepreneurial Finance Entrepreneurship Sustainability and Environmental Protection • Development and deployment of new technologies in selected industries • Improved standard of living for users and employees • Improved environmental footprint

5. Introduction Our Central Question: How Can These Approaches Play a Role in International Development? Technology Innovation Entrepreneurial Finance Entrepreneurship Sustainability and Environmental Protection • The reduction of poverty and disease • Global development, in a sustainable manner

6. Introduction 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

7. Entrepreneurship Our Central Question: How Can These Approaches Play a Role in International Development? Technology Innovation Entrepreneurial Finance Entrepreneurship Sustainability and Environmental Protection • The reduction of poverty and disease • Global development, in a sustainable manner

8. Entrepreneurship Technology Innovation and the Entrepreneur Technology Innovation Entrepreneurship

9. Entrepreneurship The Model in Commercial Applications - e.g. Google Technology Innovation Entrepreneurial Finance Entrepreneurship 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 Backdrop of technology innovation - in this case Stanford University and Silicon Valley

10. Entrepreneurship The Social Entrepreneur in Development Entrepreneurship

11. Entrepreneurship Funding of a Commercial Venture – Flow of Capital Company Investor $ $ $ Venture Capital Fund Entrepreneur $ $ $ And to other companies

12. Entrepreneurship Funding of an International Development Venture Company/ Project Donor $ $ $ Social Venture Capital Fund Social Entrepreneur $ $ $ And to other companies/projects

13. Entrepreneurship Funding of an International Development Venture – Potential Next Stage Commercial Investor $ Company/ Project Donor $ $ Social Venture Capital Fund Social Entrepreneur $ $ $ And to other companies/projects

14. Entrepreneurship The Model in International Development – e.g. WaterHealth International Technology Innovation Entrepreneurial Finance Entrepreneurship Acumen Fund – New York based social venture capital firm focused on international development; invested and provided loan guarantees For profit; founded in 1996; motivated entrepreneurs with understanding of the technology and the end user Approaches to drinking water filtration at the village level; previous approaches have had a dismal record; WHI’s technology licensed from Lawrence Berkeley Labs

15. Entrepreneurship 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

16. Entrepreneurship 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

17. Entrepreneurship Donor’s Return Expectations Over Time for a Social VC Investment Portfolio Financial Return: Fund versus Grant Social Return Index: Fund ROI (%) * Index 20% 0% 100 - 100% Time (years) Time (years) = Realm of the commercial investor *

18. Entrepreneurship 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

19. Innovative Technologies Can these approaches play a role in international development? Technology Innovation Entrepreneurial Finance Entrepreneurship Sustainability and Environmental Protection • The reduction of poverty and disease • Global development, in a sustainable manner

20. Innovative Technologies 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

21. Innovative Technologies Technology Innovation - Types

22. Sustainability Considerations Can these approaches play a role in international development? Technology Innovation Entrepreneurial Finance Entrepreneurship Sustainability and Environmental Protection • The reduction of poverty and disease • Global development, in a sustainable manner

23. Sustainability Considerations 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

24. Case Studies Returning to our Central Question - Can These Approaches Play a Role in International Development? Technology Innovation Entrepreneurial Finance Entrepreneurship Sustainability and Environmental Protection • The reduction of poverty and disease • Global development, in a sustainable manner

25. Case Studies 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 … • Industry Segment: • Energy • Transportation • Infrastructure • Others over time • Stage of Development: • Advanced countries • Rapidly emerging – e.g. BRIC countries • Less developed countries

26. Case Studies Populating the Framework – Case Studies in Energy, Transportation, Infrastructure (continued ….)

27. Case Studies Populating the Framework – Case Studies in Energy, Transportation, Infrastructure (continued ….)

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

29. Case Studies 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

30. 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 Case Studies Case 1 – D.Light Solar Lighting Technology Innovation Entrepreneurial Finance Entrepreneurship CEO/Co-Founder is a former Peace Corp volunteer who also holds a Stanford MBA. Small, entrepreneurial teams. Local distribution partners. 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.

31. Founded by Phil LaRocco and a small team. Work with local entrepreneurs and business partners. Multiple funds, some invested directly and some managed on behalf of partner organizations. Combination of donor grants and capital investments. “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. Case Studies Case 2 – E + Co Technology Innovation Entrepreneurial Finance Entrepreneurship

32. 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. Case Studies Case 3 – The RETScreen Model Technology Innovation Entrepreneurial Finance Entrepreneurship 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. Developed by Canadian government agency; supported by NASA, UN, World Bank and other NGOs. Question For Discussion: Is this a counterexample?

33. 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. Case Studies Case 4 – Kramer Junction (SEGS III – VII) – Large Scale Solar Generation Technology Innovation Entrepreneurial Finance Entrepreneurship 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 Question For Discussion: Economic and other barriers to building these arrays in other deserts worldwide?

34. Conclusion “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?

35. Conclusion A Few “Mild” Conclusions To Date • These entrepreneurial models may well have some merit • There are many types of technologies that can help in international development settings • We are in very early days • Engineering oriented institutions like Tokyo Tech have a lot to contribute

36. Conclusion 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 • mm@transformcapital.org • 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)