How Innovative Technologies and Entrepreneurial Organizations Can Generate

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 Laboratory Department of International Development Engineering Tokyo Institute of Technology mm@transformcapital. org

MURRAY R. METCALFE, Ph. D. 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 Mc. Kinsey & 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 20082009 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. May 29, 2008 1

MURRAY R. METCALFE, Ph. D. 2 Introduction Technology Innovation and Entrepreneurial Organizations - This Model Has Worked Well in Developed Economies Technology Innovation The Entrepreneur • Development and deployment of new technologies in selected industries • Improved standard of living for users and employees May 29, 2008 Entrepreneurial Finance

MURRAY R. METCALFE, Ph. D. 3 Introduction The model has now been expanded to include environmental products and considerations Technology Innovation Sustainability and Environmental Protection Entrepreneurship Entrepreneurial Finance • Development and deployment of new technologies in selected industries • Improved standard of living for users and employees • Improved environmental footprint May 29, 2008

MURRAY R. METCALFE, Ph. D. 4 Introduction Our Central Question: How Can These Approaches Play a Role in International Development? Technology Innovation Sustainability and Environmental Protection May 29, 2008 Entrepreneurship Entrepreneurial Finance • The reduction of poverty and disease • Global development, in a sustainable manner

MURRAY R. METCALFE, Ph. D. 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 May 29, 2008 5

MURRAY R. METCALFE, Ph. D. 6 Entrepreneurship Our Central Question: How Can These Approaches Play a Role in International Development? Technology Innovation Sustainability and Environmental Protection May 29, 2008 Entrepreneurship Entrepreneurial Finance • The reduction of poverty and disease • Global development, in a sustainable manner

MURRAY R. METCALFE, Ph. D. 7 Entrepreneurship Technology Innovation and the Entrepreneur Technology Innovation Entrepreneurship Technology Area Individual(s) Company Aviation The Rockefeller family Eastern Airlines Semiconductors Robert Noyce, Gordon Moore et. al. Intel Transistor-based devices Akio Morita and Masura Ibuka Sony Software Bill Gates Microsoft Internet & telecom Masayoshi Son Softbank Internet search Larry Page and Sergey Brin Google Biotechnology Robert Swanson and Dr. Herbert Boyer Genentech Steel Lakshmi Mittal Arcelor Mittal Steel May 29, 2008

MURRAY R. METCALFE, Ph. D. 8 Entrepreneurship The Model in Commercial Applications - e. g. Google Technology Innovation Backdrop of technology innovation - in this case Stanford University and Silicon Valley May 29, 2008 Entrepreneurship Larry Page and Sergey Brin – motivated entrepreneurs with understanding of the technology and the end user Entrepreneurial Finance Kleiner Perkins and Sequoia Capital – well known venture capital firms that invested $12. 5 million each

MURRAY R. METCALFE, Ph. D. 9 Entrepreneurship The Social Entrepreneur in Development Entrepreneurship Area Individual Organization Micro Lending Muhammad Yunus Grameen Bank Econ. Development F. H. Abed BRAC Rural Health Dr. Paul Farmer Partners in Health Building enterprises Multiple Ashoka, Techno. Serve AIDS Reduction Ashok Alexander Gates Foundation - India AIDS Initiative May 29, 2008

MURRAY R. METCALFE, Ph. D. 10 Entrepreneurship Funding of a Commercial Venture – Flow of Capital Company Investor $ $ $ Venture Capital Fund $ May 29, 2008 $ $ And to other companies Entrepreneur

MURRAY R. METCALFE, Ph. D. 11 Entrepreneurship Funding of an International Development Venture Company/ Project Donor $ $ $ Social Venture Capital Fund $ May 29, 2008 $ $ And to other companies/projects Social Entrepreneur

MURRAY R. METCALFE, Ph. D. 12 Entrepreneurship Funding of an International Development Venture – Potential Next Stage Commercial Investor $ Company/ Project Donor $ $ Social Venture Capital Fund $ May 29, 2008 $ $ And to other companies/projects Social Entrepreneur

MURRAY R. METCALFE, Ph. D. 13 Entrepreneurship The Model in International Development – e. g. Water. Health International Technology Innovation Approaches to drinking water filtration at the village level; previous approaches have had a dismal record; WHI’s technology licensed from Lawrence Berkeley Labs May 29, 2008 Entrepreneurship For profit; founded in 1996; motivated entrepreneurs with understanding of the technology and the end user Entrepreneurial Finance Acumen Fund – New York based social venture capital firm focused on international development; invested and provided loan guarantees

MURRAY R. METCALFE, Ph. D. 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 May 29, 2008 14

MURRAY R. METCALFE, Ph. D. 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 May 29, 2008 15

MURRAY R. METCALFE, Ph. D. 16 Entrepreneurship Donor’s Return Expectations Over Time for a Social VC Investment Portfolio Financial Return: Fund versus Grant ROI (%) * Social Return Index: Fund Index 20% 0% 100 - 100% Time (years) * May 29, 2008 = Realm of the commercial investor Time (years)

MURRAY R. METCALFE, Ph. D. 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 May 29, 2008 17

MURRAY R. METCALFE, Ph. D. 18 Innovative Technologies Can these approaches play a role in international development? Technology Innovation Sustainability and Environmental Protection May 29, 2008 Entrepreneurship Entrepreneurial Finance • The reduction of poverty and disease • Global development, in a sustainable manner

MURRAY R. METCALFE, Ph. D. 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 i. Pod 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 19

MURRAY R. METCALFE, Ph. D. 20 Innovative Technologies 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 – “Pay. Pal 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

MURRAY R. METCALFE, Ph. D. 21 Sustainability Considerations Can these approaches play a role in international development? Technology Innovation Sustainability and Environmental Protection May 29, 2008 Entrepreneurship Entrepreneurial Finance • The reduction of poverty and disease • Global development, in a sustainable manner

MURRAY R. METCALFE, Ph. D. 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 May 29, 2008 22

MURRAY R. METCALFE, Ph. D. 23 Case Studies Returning to our Central Question - Can These Approaches Play a Role in International Development? Technology Innovation Sustainability and Environmental Protection May 29, 2008 Entrepreneurship Entrepreneurial Finance • The reduction of poverty and disease • Global development, in a sustainable manner

MURRAY R. METCALFE, Ph. D. 24 Case Studies Our Framework/Taxonomy Categorize a number of case studies by: Technology Type: Stage of Development: Industry Segment: • Point • Advanced countries • Energy • ICT • Rapidly emerging – e. g. BRIC countries • Transportation • Infrastructure • Others over time • Systems • Logistics • Less developed countries • Others Ultimately fill out a matrix of case studies … May 29, 2008

MURRAY R. METCALFE, Ph. D. 25 Case Studies 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 ICT, Logistics delivery Advanced Transportation Logistical issues in world health Emerging and Less Developed Transportation ICT, Logistics (continued …. ) May 29, 2008

MURRAY R. METCALFE, Ph. D. 26 Case Studies Populating the Framework – Case Studies in Energy, Transportation, Infrastructure Case A. Techn. Type B. Stage of Dev. C. Industry 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 Water. Health 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 May 29, 2008 (continued …. )

MURRAY R. METCALFE, Ph. D. 27 Case Studies Populating the Framework – Case Studies in Energy, Transportation, Infrastructure Case A. Techn. Type B. Stage of Dev. C. Industry 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 …… ……. …. . …… May 29, 2008

MURRAY R. METCALFE, Ph. D. 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 May 29, 2008 28

MURRAY R. METCALFE, Ph. D. 29 Case Studies Case 1 – D. Light Solar Lighting Technology Innovation 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 Entrepreneurship CEO/Co-Founder is a former Peace Corp volunteer who also holds a Stanford MBA. Small, entrepreneurial teams. Local distribution partners. Entrepreneurial Finance 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.

MURRAY R. METCALFE, Ph. D. 30 Case Studies Case 2 – E + Co Technology Innovation “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 Entrepreneurship Founded by Phil La. Rocco and a small team. Work with local entrepreneurs and business partners. Entrepreneurial Finance Multiple funds, some invested directly and some managed on behalf of partner organizations. Combination of donor grants and capital investments.

MURRAY R. METCALFE, Ph. D. 31 Case Studies Case 3 – The RETScreen Model Technology Innovation 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. May 29, 2008 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. Entrepreneurial Finance Developed by Canadian government agency; supported by NASA, UN, World Bank and other NGOs. Question For Discussion: Is this a counterexample?

MURRAY R. METCALFE, Ph. D. 32 Case Studies Case 4 – Kramer Junction (SEGS III – VII) – Large Scale Solar Generation Technology Innovation 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 Entrepreneurship Evolution from small scale socially conscious “green” entrepreneurs to large scale commercial facilities. Power “offload” contract with So. Cal Edison Entrepreneurial Finance Carlyle Riverstone Renewable Energy Partners – a multibillion dollar investment pool for renewable energy projects – and FPL, a major utility , are coowners

MURRAY R. METCALFE, Ph. D. 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? May 29, 2008 33

MURRAY R. METCALFE, Ph. D. Conclusion 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 May 29, 2008 34

MURRAY R. METCALFE, Ph. D. 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) May 29, 2008 35