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

2. 1 MURRAY 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

3. 2 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Introduction

4. 3 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Introduction

5. 4 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Introduction

6. 5 MURRAY R. METCALFE, Ph.D. 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

7. 6 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Entrepreneurship

8. 7 MURRAY R. METCALFE, Ph.D. May 29, 2008 Technology Innovation and the Entrepreneur Technology Innovation Entrepreneurship Technology AreaIndividual(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

9. 8 MURRAY R. METCALFE, Ph.D. May 29, 2008 The Model in Commercial Applications - e.g. Google Technology Innovation Entrepreneurial Finance 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

10. 9 MURRAY R. METCALFE, Ph.D. May 29, 2008 The Social Entrepreneur in Development Entrepreneurship AreaIndividualOrganization 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 Init iative Entrepreneurship

11. 10 MURRAY R. METCALFE, Ph.D. May 29, 2008 Funding of a Commercial Venture – Flow of Capital Investor Venture Capital Fund Entrepreneur Company Entrepreneurship $ $ $ $ $ And to other companies $

12. 11 MURRAY R. METCALFE, Ph.D. May 29, 2008 Funding of an International Development Venture Donor Social Venture Capital Fund Social Entrepreneur Company/ Project Entrepreneurship $ $ $ $ $ And to other companies/projects $

13. 12 MURRAY R. METCALFE, Ph.D. May 29, 2008 Funding of an International Development Venture – Potential Next Stage Donor Social Venture Capital Fund Social Entrepreneur Company/ Project Entrepreneurship $ $ $ $ $ And to other companies/projects Commercial Investor $

14. 13 MURRAY R. METCALFE, Ph.D. May 29, 2008 The Model in International Development – e.g. WaterHealth International Technology Innovation Entrepreneurial Finance 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

15. 14 MURRAY R. METCALFE, Ph.D. 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

16. 15 MURRAY R. METCALFE, Ph.D. 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

17. 16 MURRAY R. METCALFE, Ph.D. May 29, 2008 Donor’s Return Expectations Over Time for a Social VC Investment Portfolio Entrepreneurship Time (years) Index - 100% 0% 100 ROI (%) 20% Financial Return: Fund versus Grant Social Return Index: Fund * = Realm of the commercial investor *

18. 17 MURRAY R. METCALFE, Ph.D. 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

19. 18 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Innovative Technologies

20. 19 MURRAY R. METCALFE, Ph.D. 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 Innovative Technologies

21. 20 MURRAY R. METCALFE, Ph.D. May 29, 2008 Technology Innovation - Types Innovative Technologies Type of SolutionExampleApplication in Developing Setting “Point” or “Local” solutionsAny type of engineered device The electric bicycle Water filtration systems Pharmaceuticals Information and communications technologies (ICT) Mobile phones, laptopsCell 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 toolsFederal Express deliveriesHarry Potter delivery vs. malaria drug delivery

22. 21 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Sustainability Considerations

23. 22 MURRAY R. METCALFE, Ph.D. 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

24. 23 MURRAY R. METCALFE, Ph.D. May 29, 2008 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 Case Studies

25. 24 MURRAY R. METCALFE, Ph.D. 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

26. 25 MURRAY R. METCALFE, Ph.D. May 29, 2008 Populating the Framework – Case Studies in Energy, Transportation, Infrastructure CaseA. Techn. TypeB. Stage of Dev.C. Industry “Blackout”SystemsAdvancedEnergy Solar cell leadership in China PointRapidly emergingEnergy Mark Jacobson models of wind vs. coal generation SystemsAllEnergy MIT D-Lab projectsPointLess developedMultiple Harry Potter publication day delivery ICT, LogisticsAdvancedTransportation Logistical issues in world health ICT, LogisticsEmerging and Less Developed Transportation (continued ….) Case Studies

27. 26 MURRAY R. METCALFE, Ph.D. May 29, 2008 Populating the Framework – Case Studies in Energy, Transportation, Infrastructure CaseA. Techn. TypeB. Stage of Dev.C. Industry Electricity generation in Brazil SystemsEmergingEnergy Electrical equipment manufacturing in Brazil PointEmergingEnergy The electric bicyclePointEmerging, Less Developed Transportation Cleantech venture capitalPointAdvancedEnergy Stationary fuel cells in Japan PointAdvancedEnergy WaterHealth International and the Acumen Fund PointEmerging, Less Developed Infrastructure The car of the future in India and China Point, systemsRapidly emergingEnergy, Transportation (continued ….) Case Studies

28. 27 MURRAY R. METCALFE, Ph.D. May 29, 2008 Populating the Framework – Case Studies in Energy, Transportation, Infrastructure CaseA. Techn. TypeB. Stage of Dev.C. Industry D. LightPointLess developedEnergy E + Co.PointLess developedEnergy RETScreen modeling system SystemsAllEnergy Kramer Junction – Large scale solar generation SystemsAdvancedEnergy …… ……. ….. …… Case Studies

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

30. 29 MURRAY R. METCALFE, Ph.D. May 29, 2008 Case 1 – D.Light Solar Lighting Technology Innovation Entrepreneurial Finance Entrepreneurship 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

31. 30 MURRAY R. METCALFE, Ph.D. May 29, 2008 Case 2 – E + Co Technology Innovation Entrepreneurial Finance Entrepreneurship 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.

32. 31 MURRAY R. METCALFE, Ph.D. May 29, 2008 Case 3 – The RETScreen Model Technology Innovation Entrepreneurial Finance Entrepreneurship 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?

33. 32 MURRAY R. METCALFE, Ph.D. May 29, 2008 Case 4 – Kramer Junction (SEGS III – VII) – Large Scale Solar Generation Technology Innovation Entrepreneurial Finance Entrepreneurship 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?

34. 33 MURRAY R. METCALFE, Ph.D. 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

35. 34 MURRAY R. METCALFE, Ph.D. 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

36. 35 MURRAY R. METCALFE, Ph.D. 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 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) Conclusion