Master Thesis Business Administration, M.S. Van Der Vlist. VU Amsterdam

Master Thesis Business Administration, M.S. van der Vlist. VU Amsterdam 2009

Master Thesis Maarten van der Vlist Vrije Universiteit Amsterdam, July 2009 Master of Business Administration Financial Track

Venture Capital for Clean Technologies

a Case Study on Electric Vehicles

Central Research Question

In which part of the value chain in the market of EVs can VC be most effectively applied?

Thesis Supervisor Denitsa Stefanova Internship at Yellow&Blue Investment Management B.V.


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Abstract The development of young innovative firms is an important stimulant for economic growth. The

role of venture capital is key in nurturing such ventures. This thesis tries to enhance knowledge on

the investment model of venture capital (VC). It does so by relating this model to the rise of a

clean technology: electric vehicles (EVs). Environmental issues are pushing society towards more

sustainable modes of transportation. At the moment, aided by improvements in battery

technology, electric transportation appears to provide a serious alternative. This thesis investigates

what role VC could play in the further development of electric transport. It investigates whether

the market is suitable for VC investment and where in the value chain VC could be most

effectively applied. An extensive market analysis shows that the diffusion of the innovation will

remain low for the coming years, although number of ventures could still profit from the early rise

of EVs. Three possible fields of investment are identified: energy storage, vehicles and

infrastructure. Battery and vehicle development are both interesting fields of investment. There

was a steady rise in VC investment over the last years into these two fields. Batteries are the

primary technological enabler for EVs - technology-based innovations fit the VC model. Good, safe

and affordable batteries will be able to conquer a market share in a growing market. Vehicle

integration and design offers opportunities for small firms to enter the transport industry.

Positioning their EVs as disruptive innovations, start-ups will be able to conquer a foothold through

niche market introduction. Infrastructure companies had little VC investment over the last years.

The risk of investment here is high, since future market developments are hard to predict.


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Tab le of Contents

Introduct ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1. Theoret ica l Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1.1 The Venture Capita l Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.1.1From Lead to Exit ....................................................................................................................... 101.1.2 What Constitutes a Good Investment......................................................................................... 121.1.3 Financial Assessment of Investment Opportunities .................................................................... 16

1.2 The Or ig in and Diffus ion of Innovat ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.2.1 Sources of Innovation .................................................................................................................. 191.2.2 Conditions for Innovation Diffusion ............................................................................................. 201.2.3 Sustaining or Disruptive Innovation............................................................................................. 22

2. Case Study on Electr ic Vehic les . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

2.1 Market Analys is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.1.1 Market Drivers .............................................................................................................................. 252.1.2 From Combustion to Electric: Cost Analysis .............................................................................. 262.1.3 Inside View: Battery Development .............................................................................................. 272.1.4 Solving Issue of Range for FEVs ................................................................................................. 312.1.5 Infrastructure Development ......................................................................................................... 342.1.6 Market Expectations..................................................................................................................... 35

2.2 Investment Opportunit ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.2.1 Top-Down: Investment Monitor ................................................................................................... 412.2.2 Bottom-Up: Dealflow Analysis...................................................................................................... 45

3. Evaluat ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.1 Conclus ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

3.2 Discuss ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Contact ................................................................................................................................................... 56Acknowledgements................................................................................................................................. 56Sources ................................................................................................................................................... 57


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Int roduct ion The development of new innovative firms, or ventures, is commonly recognized as a very

important stimulant for economic growth (Storey, 1994). The role of venture capital (VC) is key in

nurturing such ventures, enabling entrepreneurs to introduce their innovations to the market

(Harrison & Mason, 1999). Fostering economic growth is crucial, especially with the present global

economic recession. It is therefore important to improve knowledge on the how the investment

model of venture capital works.

Another important development today is the rise of sustainable innovations and clean technologies.

One of the clean technology trajectories is the search for a more sustainable mode of

transportation. The race for alternatives has several contestants. Leading options are biofuels,

hydrogen and electricity. At the moment, aided by improvements in battery technology, electric

transportation seems to emerge as the winner (Press: Weekblad M. 2009). One can imagine that

changing the fuel and drivetrain of vehicles will have profound consequences for the players in

affiliated lines of business. The rise of electric vehicles (EVs) could reshape entire industries. Such

a technological development typically provides possibilities for entrepreneurs and young businesses

to come up with new business propositions (Nooteboom, 1993).

What role can VC play in the further development of electric vehicles? Will electric transportation

develop itself as a viable alternative to traditional transport in the coming years? Is it a profitable

field for VC investors, considering the short investment horizon of VC funds? The central research

question concentrates on different investment opportunities in the value chain:

In which part of the value chain of EVs can VC be most effectively applied?

A discussion on the VC model will function as a broad introduction. A set of investment criteria

will be presented as a broad guideline for evaluating investment opportunities. What constitutes a

good investment? Secondly, some of the basic characteristics of innovations are explored. Is there

a sectoral pattern for different kinds of innovations? Where and when do young firms have the

best chance to successfully push innovations into the market? And what conditions should an

innovation meet before it can effectively penetrate society? Lastly, an introduction is presented to

the financial tools a VC fund may use in order to evaluate an investment opportunity.

In the second part of the thesis there will be an extensive analysis of the EV market. This is done

by combining qualitative and quantitative research. Firstly, a qualitative market analysis will map

the current situation and future developments of electric transportation. The market analysis is


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based on academic literature and reports, but also on a number of interviews with experts from

different segments of the market. An extensive discussion on battery technology is presented,

since it is vital to the future success of EVs.

The qualitative market analysis will be supported by quantitative data. The value chain of the

electric vehicle market is classified in three possible fields for investment: energy storage, vehicles

and infrastructure. These three fields will be analysed by combining a top-down and a bottom-up

approach. Top-down, two extensive databases provide an overview of all VC investments in the

field of electric transport for the past 3,5 years. The databases used are owned by the CleanTech

Group and New Energy Finance. The databases are matched with an extensive internet search, in

order to assure a comprehensive analysis. The acquired data will provide insight into what VC

funds around the globe are putting their money on. Bottom-up, a number of actual investment

proposals in the field of electric transportation are evaluated. These investment opportunities are

part of the dealflow of Yellow&Blue Investment Management BV, a VC fund based in Utrecht, the

Netherlands.

In the final section, the aim is to bring together the theoretical considerations and the case study

in a consistent conclusion. The EV market is directly related to the VC model and the specific

characteristics of innovations. Are EVs an innovation which is suitable for VC investment? Is the

current EV market interesting for VC funds? Also, a definitive conclusion on the analysis of

investment opportunities is given, in which the three fields identified earlier are considered,

addressing the research question directly.


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1. Theoret ica l Framework

1.1 The Venture Cap ita l Mode l Venture Capital (VC) is money provided by investors to young firms. Young firms that are believed

to have a potential for high growth in the period to come. Such an investment entails high risk,

but also has the possibility for a high return.

VC is an important source of funding for young firms. Due to their limited operating history, they

have little access to traditional capital markets. Usury laws prohibit banks to charge higher interest

rates. This would be necessary to compensate for the higher risk involved with an investment in a

young firm. This higher risk is mainly due to the lack of hard assets that can be used as a

collateral for a loan. Also, the short operating history of the company makes it difficult to perform

an accurate valuation. Rules that protect the public investor make it impossible for most young

firms to get funding through investment banks or public equity markets. All in all, a young

company cannot turn to traditional capital markets for money. But they do need money. This is

why VC investment has become increasingly successful over the last 50 years. It fills a void in the

financial economic system.

VC is a form of private equity. Owning equity means to own a share in a company. Private equity

is simply equity that is not publically traded. Instead, you meet with the owner of the company

and negotiate a private agreement. In the practice of private equity finance there are several

strategies. All these strategies have the purpose of getting a high return on investment. VC

investment is one of these strategies. The investor provides money for early development and

expansion of a promising start-up business. In return, the investor gets a share in the company. It

is expected that the valuation of the young venture will grow as the company develops, allowing

the equity share to gain in value.

By definition, all capital that is invested in a young and innovative business, a venture, can be

considered as venture capital. Sometimes a venture investment is made by a single individual. Such

a person is referred to as a business angel. Even angel networks exist that are effectively involved

in investing in promising business ideas. However, the main emphasis of this thesis, will be on VC

as it is arranged in independent capital funds. VC is made available by both retail and institutional

investors and subsequently pooled into large investment funds, managed by an independent

management team. The fund makes venture investments with the goal to provide an attractive

return to their investors. The following quote captures a good working definition:


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VC is an investment by specialised organisations in high-growth, high-risk, often high-tech firms

that need capital to finance product development and growth and must, by the nature of their

business obtain this capital largely in the form of equity rather than debt (Black & Gilson, 1998).

A VC fund may be structured as a corporation or as a partnership. The main difference between

these two is liability. In a corporation the owner’s liability is limited to the initial investment. In a

partnership the partners share both profits and losses. The managers of the fund are commonly

paid through what is called the 2-and-20 arrangement. Management is entitled to an annual

management fee that consists of 2% of all the committed capital. Besides this annual fee, they

receive what is referred to as carried interest. Carried interest is simply a share of the profits,

most of the time around 20%.

1.1.1 From Lead to Ex it It begins with one or more entrepreneurs who have a promising business idea. In an early stage,

the entrepreneur will use his own capital or will turn to family and friends for financial help. This

type of funding is referred to as seed capital. Seed money covers early development, but is often

not enough to establish the commercial viability of a business concept (Bygrave and Timmons,

1992). After an entrepreneur has used up his seed capital, the company enters what is called the

equity gap (Clyne, 2005). At this point, most VC funds are not yet interested in the company. In

order to minimize risk, most VC funds will only invest in a proven concept or a finished prototype.

Investing too early makes things too risky. In this stage of development, a business angel may

become a source of capital. Business angels often invest in earlier stages than VC funds do

(Landstrom, 1992).

Following the definitions of the EVCA, a beginning business has 3 stages: a seed stage, a start-up

stage and an expansion stage (EVCA.com, 2009). The first two stages are often referred to as

the early stage. VC plays an important role in the funding of businesses that have already passed

their early stage. When the business is ready for expansion, VC funds move in. They provide a

cash infusion to cover the near term, negative free cash flows a company faces during the

expansion stage. In return they receive a share in the company.

In the expansion stage the firm does not only need equity financing, it also tends to suffer from a

lack of competencies. This is referred to as the competence gap (Barth, 1999). Setting up a

company requires other skills than managing an expanding business (Barth 1999, Klofsten, 1992,

Greiner, 1972). The complexity of management increases quickly. A VC fund will try to fill this

competence gap.


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Most of the time, a VC fund will not only get a share in the company, they also get a say in the

company. This may be through a position in the board or in the advisory board. From this position,

a VC fund will try to add value to their investment, using their network and experience. They will

nurture the business and after some time try to liquidate the investment with the help of an

investment banker. In this way the venture capitalist cashes out the value he added to the firm,

along with an attractive interest for supplying the capital needed for expansion. It could be the

combination of filling this competence gap, together with supplying necessary capital, which makes

the VC model so successful. Actually, supplying these additional services justifies why venture

capitalists demand such high returns on their investment.

Every fund has its own dealflow. This is the amount of new investment opportunities, or leads that

present themselves to the fund. Every lead is evaluated, but little receive an actual investment.

Most leads are already rejected in an early phase (Harrison & Mason, 1999). If a lead seems

promising and it fits the fund’s strategy, the VC fund will invest more time and money gathering

information to support a proper investment decision. This is referred to as performing due

diligence.

The amount of an investment may vary considerably. It can range from under a million to several

millions of dollars (Database: CleanTech Group & New Energy Finance, 2009). Several funds can

form a syndication in a single fundraising round. Data shows rounds as high as 200 million dollars,

with several firms investing in a single round (Database: CleanTech Group, 2009).

Example: A typical deal may consist of a VC fund investing an amount of several million, in

exchange for 40% of preferred equity. This preference gives him certain advantages in case of

bankruptcy and liquidation – in which case all assets of the company are used to pay back the

investment of the fund. It is a way to assure some downside protection. Additionally, the deal will

include clauses to safeguard the influence of the fund on the daily management of the business.

Say, for instance, they obtain voting rights through which the fund can influence the decision-

making process (Zider, 1998).

Once an investment in a company has been made by the fund, the company is referred to as a

portfolio company. One fund may manage several portfolio companies at once, depending on its

size. Before a liquidity event, there can be several follow-up investments by the VC fund.

Successive funding rounds are called alphabet rounds. The initial investment is called the A-Round,

then follows the B-round and so on. It is not unusual to have several alphabet rounds before the

VC fund exits. With successive financing rounds a VC firm can manage risk. Investments stages

can be designed around business milestones that either qualify or disqualify a company for

additional funding (Higgins, 2009).


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VC is no long term money. As soon as the balance sheet is strengthened, a fund will search for a

possibility to liquidate the investment with a reasonable profit. Liquidating their equity can be done

through an initial public offering, turning the private equity public. Another possibility is through a

merger or acquisition. Most VC funds are scheduled to liquidate in 10 to 12 years. Some stay

operational for a longer period of time, due to one or two portfolio companies that still need

cashing out. For individual investments, a typical guideline would be an investment horizon of

around 5 to 6 years (Higgins, 2009). But in reality the average time to exit may vary from 2 to

12 years (Cumminga & Johan, 2008). Logically, it can be argued that the internal rate of return

will drop after a certain period of dedicated investment, since firm growth probably slows down.

Logically, a proper exit strategy is very important before a venture capitalist takes a share in a

company.

The VC process can be categorized in several ways. Bygrave and Timmons (1992) identified 4

different stages: the investment decision, contracting, control & value adding and exit. Tyebjee and

Bruno (1984) described 5 stages: deal origination, deal screening, deal evaluation, deal structuring,

and post-investment activities. Combining the different literature, it is possible to come up with a

general categorisation of the VC cycle:

1. Establish a Fund Investment Objectives and Raising Capital

2. Screening Dealflow Opportunity Creation and Identification

3. Investment Decision Due Diligence and Deal Structuring

4. Business Development Venture Nurturing and Adding Value

5. Exit Strategy Liquidation Events and Merger or Acquisition

In the organisation of a fund, different people are concerned with different stages of the VC cycle.

Business and financial analysts will screen the dealflow, investment decisions are the responsibility

of an independent investment committee and the business development is done by experienced

venture managers. The emphasis in this study will be on the identification of new investment

opportunities.

1.1.2 What Const itutes a Good Investment A fund is looking for high quality ideas that can generate high returns for the fund’s participants.

The fund should have the people and expertise, apart from the capital, to create enough upside

potential for entrepreneurs. This asset will attract high quality ideas. Assuming some good ideas

enter the dealflow of a VC fund, the question remains which of these ideas are suitable for

investment. What constitutes a good investment for a VC fund and more importantly, how can it

be recognized?


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The first thing a venture capitalist has to accept is that not all of his portfolio companies will turn

out to be big success stories. Actually, VC funds only make real money on 1 or 2 investments out

of 10 (Higgins, 2009). Most of the portfolio companies will not generate a profit and may even

result in total losses. The good thing is, not all investments need to be success stories. Actually

most VC funds build their reputation on a handful of good investments. Only 10% to 20% of the

portfolio have to be real winners in order to generate an acceptable internal rate of return for

both the managers and the fund’s participants (Zider, 1998).

Investment Guide l ines: The VC industry has shown considerable changes over the last

decades. VC funds show an increasing variety in investment strategies. Still, research showed

certain goals and priorities are central to any VC fund. These have neither changed over time nor

across different strategic groups (Robinson, 2002. Berkery, 2007). These goals are:

• 5-to-6 year investment horizon

• Major emphasis on the quality of the management team

• Annualized, after-tax return on investment to the shareholders between 20% and 40%

• Average IRR of the portfolio should be above 30%

VC will often be centred around new technologies, but it does not have to be. VC funds should

look for firms that have a competitive advantage over others. According to the resource based

view, a competitive advantage for small companies is rooted in a valuable resource it has over

others (Bamberger, 1989). This resource does not necessarily have to be technology-based. Many

success stories in the history of VC have been centred around technology. Perfect examples are

venture-backed companies like Google and Microsoft. Indeed, historically the exploitation of

scientific and technological breakdowns has been the principal way of young companies to

distinguish themselves from mature and better financed competitors (Barret & Butler, 2003). But

the misconception has grown that a VC fund only invest in high-tech ideas. This is not the case.

There are examples of great venture-backed winners that were not technology-based, such as

Federal Express (Barret & Butler, 2003). In the end, most important is that the company presents

something new, an innovation. Data collected in Silicon Valley showed that innovator firms are

more likely to obtain VC than imitator firms (Hellman & Puri, 2002).

VC funds invest in good people and good ideas, but also in good industries. More specific, they

look for industries that are growing fast (Zider, 1998). Industry growth centred around a new

technology or innovation tends to follow the shape of an S-curve (Rogers, 1995). VC funds focus

on the steep, middle part of the S-curve, as seen in Figure 1.


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Such an industry S-curve can be divided into three stages. The early stage shows low growth. It is

characterized by invention and experiment. These early developments are not interesting for VC

funds. Funding should come from seed financing and government grants. However, after this initial

period industry growth can suddenly pick up speed. This is a period of explosive growth and rapid

expansion. It can take the same amount of time to reach a 90% market penetration, as it did to

reach a 10% toehold (Rogers, 1995). This is the moment VC funds move in. They invest in a

company that can capture a market share in this fast growing industry (Zider, 1998). After this

stage of explosive expansion growth declines. There is a gradual saturation of the market. The

typical exit strategy of a VC fund is to cash out the investment before the industry enters this

stage, before the winners are separated from the losers (Zider, 1998).

Figure 1: The Typical VC Investment period. Source: Zider, 1998

One of the most important assets of a young company are its people. A saying in the VC

community goes: bet the jockey, not the horse. But what kind of people contribute to the value of

a young company? What qualities are desirable in an entrepreneurial team, according to a VC

investor?


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Masurel has identified three stages in the lifecycle of start-up firms: early stage, growth and

maturity. Empirical evidence showed that each stage in the company requires different skills from

the management team (Masurel, 2009). In the first stage, the entrepreneurial team should mostly

function as professionals, with expert and technological knowledge. Once the firm enters a stage

of growth, the management team should consist of leaders rather than professionals. Once the

company becomes more mature, leadership becomes less important and the team should position

themselves as managers (Masurel, 2009).

Most VC funds want to invest in a company when it enters a stage of growth. Thus, the team

should consist of experts with technological knowledge, who also have the potential to develop

themselves as leaders and managers. Another option is the entrepreneurial team will accept

additional people on the team who can fulfil these roles, because they understand their own

shortcoming (Zider, 1998).

American Research & Development can be considered the first, and for many years the only,

cooperation to invest in illiquid securities of early stage companies. It was the first official VC

fund. CEO of the company, General Georges Doriot, devised some general guidelines for

investment. Not only did these rules make up the primary guidance for the first modern VC fund,

but they also influenced many of the successful venture capitalists that followed him, through the

courses Doriot taught at the Harvard Business School. Investments considered by American

Research & Development involved (Barret & Butler, 2003):

• new technology, new marketing concepts, new product applications

• a significant participation by the investors in the company’s management

• investment in ventures staffed by people of outstanding competence

(the rule referred to as bet the jockey, not the horse)

• products or processes beyond (at least) the early prototype stage (adequately protected by patents, copyrights, or trade-secret agreements)

• situations that show promise to mature in a few years to an IPO or sale

• opportunities where the VC can contribute beyond the dollars invested

(referred to as the value-added strategy)

R isk Management: The risks concerned with a VC investment are numerous. Protection of

competitive advantage by patents and copyrights, as mentioned by Doriot, is actually one of the

few ways to effectively minimize risk. VC is in essence a risky business: high risk, high return.

Logically, VC funds should follow strategies that minimize risk.


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All young firms have one thing in common, they have little to no performance history. This can

exclude the possibility for a proper firm valuation, which creates an information asymmetry.

Recalling contract theory, this is a typical agent-principal problem. The entrepreneur will always

have an information advantage over the investor. The VC fund has simply little tools to accurately

assess the firm’s value. This is a big problem for the VC funds in their contract negotiations and

deal structuring. This information asymmetry can be diminished by demanding companies to

provide a detailed business plan. This business plan should clearly identify the major uncertainties

and include the company’s financials.

In the case of a new technology a few important risks threaten the success of an investment. It

might be that the expectation for the time-to-market is incorrect. Or it might require more capital

to develop the technology. Also, the development of the technology might be ahead of necessary

business counterparts and suppliers. Such risks are minimized by investing in post-prototype

companies. After a proof of manufacturability, the aforementioned risks are no longer of

importance. Investing post-prototype will leave commercial risks, but eliminate much of these

technological risks. Hence, VC funds often avoid prototype development and early-stage financing

(Landstrom, 1992).

Of course, commercial risks are still numerous. Incumbent technologies might threaten the

technology that is being launched. One could think about market shifts or unanticipated

competitors. Market expectations could be overrated, consumers or businesses might simply not

commit to the product. There is of course also political risk. Government incentives might push

sales in different directions. VC funds dislike the political factor, since it is another variable that

enters the equation. If the success of a product is dependent on government incentives, there is

always the risk that policies might change.

Other ways to minimize risks do not specifically relate to individual investments, but rather to how

the overall capital of the fund is allocated. For example, the firm can choose stage-wise funding

(Ruhnka & Young 1987). Also, the fund can diversify its portfolio. A balanced portfolio should

consist of a variety of companies, creating a risk profile that partly offsets itself. Portfolios may

also be diversified among ventures in different stages of development.

1.1.3 F inanc ia l Assessment of Investment Opportun it ies Financial valuation is critical to any good investment. If a VC fund cannot put a price-tag on what

it is buying, it will never recognize a good deal. Therefore, they have to come up with suitable

financial tools to evaluate investment opportunities. The biggest trouble here is that they are

buying into a young company. Companies are at the beginning of their lifecycle and may not even


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have left the start-up phase. The valuation of such companies is more difficult than evaluating

established firms. There is little historical data on the business which can serve as a basis for

analysis. Secondly, young companies can be characterized as being highly dynamic. Especially the

growth rate of the company is very volatile. Expected earnings and cashflows are always subject

to discussion. Thus, data is not only little, it is also unreliable. Thirdly, the value drivers of young

firms are often intangible assets such as customer base, expected market penetration, technology

know-how and human capital. In other words, the little data that is available, does not tell the

entire story. Thus, an accurate valuation of young ventures is very difficult.

Valuation methods can go two ways. Either they are based on earnings, or they can be based on

assets. As a firm moves through its lifecycle, different valuation methods become appropriate. A

valuation of mature firms can be based on the balance sheet. On the other hand, ventures will

probably have little assets on the balance sheet. Most of the value of the company is intangible.

Therefore valuation of young companies is mostly based on future earnings.

Ex it Mult ip les: VC funds may use earnings multiples to calculate an enterprise value. An

earnings multiple gives an estimate of what a company is worth, by multiplying the future earnings

with a fixed number. This number can be determined by looking at multiples of comparable

companies. If the fundamentals of two businesses are the same, the multiplier between the

capitalisation value of the listed company and its earnings should resemble the multiplier of the

young firm. This gives you a proper tool to valuate a young company.

An earnings multiple can also be used to estimate exit proceeds, what the VC fund will earn upon

exit. When an earnings multiple is used in this way, it is referred to as an exit multiple. An exit

multiple establishes a market value upon exit, based on the future earnings of the company. The

earnings of the proposed exit year are multiplied to determine the enterprise value. This makes it

possible to estimate the exit proceeds, taking into account capital structure and the percentage of

ownership in the company.

VC funds may use an exit multiple of 5. An earnings multiple can be linked to a return on

investment. Simply put, if one is looking for a return on investment of around 10%, one can afford

to pay a multiple of 10 of the future earnings. Similarly, paying 5 times the earnings is related to

an expected return on invested capital of 20%. Since VC funds require a minimal return on

investment of 20%, they stick to a multiple of 5 for both entry and exit in their financial analyses.

Like this, no error enters the assessment through so-called multiple expansion. Merger and

acquisition experts are quoted to pay 4-to-5 times earnings when (Russel, 2008):


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• There are growth prospects and no requirements for additional capital

• Companies have a 15 to 20 percent return on investment

• There are consistent earnings, good management, and market leadership

IRR & Money Mult ip les : A VC fund may also calculate the internal rate of return of an

investment opportunity. Internal rate of return, or IRR, is a measure of the expected profitability of

a project. It is different form the return on investment, which rather is a measure of the actual

performance after the investment has already taken place. IRR is the discount factor at which the

present value of the investment is zero. The higher the IRR will be, the better. This tells the

investor that even at a very high discount rate, he will not lose any money. In evaluating a specific

investment opportunity, a venture capitalist might also apply a discount factor to the company’s

future earnings. This discount factor is different from the IRR. This factor is assumed and it is a

direct measure of perceived risk. The aim of a VC fund is to achieve an average IRR of above 30%

over its portfolio (Berkery, 2007). Knowing that not all portfolio companies will succeed, a venture

capitalist should look for investment opportunities which offer a slightly higher IRR, say above 50%,

to offset this risk.

Another useful measure in the assessment of investment opportunities is the money multiple. The

money multiple is simply the amount of money that was made upon exit, divided by the initial

investment. It is a rough estimate, since it does not take into account any discount factor.

Inflation is not of real importance, since both values are cash. IRR can be directly linked to the

money multiples as shown for some values in the table. The aforementioned aim of an IRR above

50%, corresponds with a money multiple between 5 and 10, depending on the exit year.

IRR Table Money Mult ip le

Investment Per iod 3 5 10

3 years 45% 72% 118%

4 years 32% 50% 78%

5 years 25% 38% 59%

Table 1: Some relations between IRR and Money Multiples


19

1.2 The Or ig in and Dif fus ion of Innovat ions A VC fund will in principal invest in something new, an innovation. Plus, they tend to invest in fast

growing markets. Fast-growing, unsaturated markets are centred around new things, innovations.

But what kind of innovations are most likely to originate in young and small firms? Does innovation

tends to follow certain sectoral patterns? And how will an innovation make its way into the market

space? Are there certain barriers for innovation diffusion which a VC fund should anticipate?

1.2.1 Sources of Innovat ion

In the early ages of his academic career, Schumpeter argued that small, new firms are the main

source for innovation (Schumpeter, 1911). For Schumpeter, innovation was the result of

competition between old and new firms. Through a process of creative destruction, the new and

small players were able to destroy the economic equilibrium and create a new circular flow in the

economy. This view is referred to as Schumpeter’s Mark I theory. The theory was contested by

Schumpeter himself, later in his life. He argued that most innovation originates from large firms

and concentrated markets (Schumpeter, 1942). He considered innovation as the outcome of

research and development. Research and development programmes are facilitated by economies of

scale and access to financial resources. Higher firm dimensions result in more accumulation of

knowledge and finally in more innovation. This perspective is referred to as his Mark II theory.

Nooteboom tried to establish a synthesis between the two contradicting views (1993). He argued

that the strengths and weaknesses of large and small firms define a sectoral pattern of innovation.

The strengths of a large firms lie in its deeper level of specialization, whereas the strength of

smaller firms lies in their flexibility and closeness to market. This suggests that large businesses

are likely to be better in the generation of complex, science-based technologies (Rosegger, 1980).

Smaller firms are likely to be more effective further downstream. They will be superior in

application, the development and introduction to the market. Typically, the basic technology and

associated opportunity arises in the large firms, whereas the product-market opportunities are first

identified by the smaller firms (Nooteboom, 1993).

The sectoral pattern of innovation is also dependent on the lifecycle of the industry. Typically, a

new industry can be best described by the earlier theory of Schumpeter. It is characterized by

high opportunity for small firms, due to lower barriers of entry. In matured industries, the industry

becomes dominated by a few well-established, larger firms. Here the industry is better reflected by

the Mark II theory. The importance of research and development becomes more and more

important, which will result in higher barriers of entry (Freeman, Clarke and Soete, 1982).


20

Finally, the nature of the technology of an innovation influences the sectoral pattern of innovation.

Research showed that mechanical and traditional sectors are better described by the Mark I

Theory, whereas the electrical and chemical sectors conform to Schumpeter’s Mark II theory

(Malerba & Orsenigo, 1996).

1.2.2 Condit ions for Innovat ion Dif fus ion Every innovation has to conquer the market space. This takes time. How fast an innovation will

penetrate the market is of extreme importance to any VC investment. It relates to the future

sales and earnings of a company, which are central to its valuation. Obviously, it is best if an

innovation is adopted by society on a massive scale in a short period of time. In order to critically

assess the diffusion rate of a new service or technology, different barriers for diffusion should be

evaluated. There are for four perspectives one can take in diffusion theory (Brown, 1970). All

perspectives highlight different barriers a product or service must overcome, before it is adopted

by society on a greater scale. Each perspective creates a condition an innovation should meet for

it to become successful.

The communicat ion perspect ive: From this perspective, an innovation should be attractive. It

stresses the social context of innovation diffusion. It takes up 3 assumptions. Firstly, the

introduction of an innovation will destabilize the consumer and create a sense of uncertainty. This

prompts the consumer to search for more information concerning this new product or service.

Secondly, it assumes that the majority of society is risk averse. People are reluctant to try

something new. Lastly, this perspective theorises that it is only through a process of

communication and peer referencing that people overcome their uncertainty and go over to

adoption. Such referencing can lead to a snowball-effect (Millar, 2009).

It was this perspective that was used to assert the categorization of innovators, early adopters,

late adopters and laggards. From this, it was derived that diffusion of innovations tends to follow

the shape of an S-curve (Rogers, 1995). The proportion of individuals adopting an innovation is

normally distributed over time. When this adoption rate is converted to a cumulative percentage

curve, it turns into a characteristic S-curve, as was already discussed earlier.

The economic h istory perspect ive: From this perspective, an innovation should be

competitive. This view describes innovation diffusion as an interactive and continuous process. The

industry requires some time with an innovation. They never get it right the first time. Over time

the performance of an innovation will improve, due to accumulating experience. A decrease in price

and increase in performance will have a continual influence on the rate of diffusion. Modifications

and changes, established through interaction with the market, may further enhance the innovation.


21

It will becomes increasingly competitive with incumbent products and services. Relating to young

companies and entrepreneurship, this view mainly focuses on the ability of an entrepreneur to

solve technical issues. It thereby loses its focus on other possible obstacles in marketing the

innovation. Such problems relate to raising capital, distribution, supply chain management or even

governmental policies (Miller, 2009).

The development perspect ive: From this perspective, an innovation should be affordable. It

emphasises some people do not posses the necessary resources to acquire an innovation. A simple

lacking of funds with consumers can put a stop to innovation diffusion. From this perspective, the

divisibility of a product or service is important. This stresses that if the innovation can be divided

up into smaller quantities, this can make the innovation more affordable for the less privileged.

This barrier in diffusion is particularly relevant in poor and emerging economies. But this

perspective may also still be relevant to innovation diffusion in Western countries.

The market and infrastructure perspect ive: From this perspective, an innovation should

be accessible. It focuses on the availability of a product, the supply side of an innovation. The

market should enable the consumer to use it. Brown identifies what are called agencies of diffusion

(Brown, 1981). These can be commercial players, such as dealerships and distributors, which make

the innovation available to the greater public. The government can also act as an agency of

diffusion. This perspective also takes into account what are referred to as infrastructure-

constrained innovations (Brown, 1981). For such innovations, the required infrastructure is lacking

or inadequate, limiting the diffusion of the innovation When infrastructure is not in place, an

agency of diffusion might consider infrastructure development as a strategy to allow innovation

diffusion.

Figure 2: The Four Conditions for Innovation Diffusion


22

1.2.3 Susta in ing or Disrupt ive Innovat ion As a final note, an additional factor may influence the origin and diffusion of an innovation. An

innovation may be disruptive or sustaining (Christensen, 2007). The difference between the two is

often misunderstood. A disruptive technology does not refer to something really different or better

(Fyke, 2007). The most important thing about a disruptive innovation is that it is not sold into a

market that values the product along the same standards as a sustaining technology or service.

The CD was not disruptive to the audio tape, because its performance was measured along the

same metrics: sound quality, compactness, recording time. This was a sustaining innovation. It

aimed to beat an incumbent product at its own game. Unlike disruptive innovations, a sustaining

innovation will encounter fierce opposition from incumbent players in the market:

A sustaining innovation targets demanding high-end customers with better performance than was

previously available… The established competitors almost always win the battles of sustaining

technology. Because this strategy entails making a better product that they can sell for higher

profit margins to their best customers, the established competitors have powerful motivations to

fight sustaining battles. And they have the resources to win (Christensen & Raynor, 2003).

Alternatively, disruptive innovations conquer the market from an unexpected angle. In fact, most

disruptive technologies, when tried to be sold head-to-head, will lose (Fyke, 2007). However they

can, as they mature, replace incumbent technologies, even though they originally may be

considered inferior. No doubt, this is exactly why disruptive technologies are so dangerous to the

leaders of an existing market. Because incumbent firms do not recognize the value of the inferior

product, they will not effectively compete with disruptive innovations. If a new innovation is

introduced along a different set of value metrics, in a market niche, it will encounter less

opposition from market leaders upon introduction. In this way, a small business which positions its

innovation correctly, will encounter little immediate competitive threats. It will be in the position to

grow as a company, improve their product and prepare to compete with incumbent players before

they see it coming. In short, disruptive innovations allow smaller players to enter the market space

through niche market introduction.

There are two strategies in conquering market share through a disruptive innovation: low-end and

new-market. New-market innovations address a larger market base. It targets consumers who

would otherwise not have used the product or service. From this foothold, the new technology

starts to push the old technology out of the market. Low-end innovations are targeted at the

mainstream consumer for whom price is more important than the quality of the product. But by

slowly improving quality and profit, incumbent players are pushed towards smaller market

segments.


23

Christensen (1997), who first dubbed the term disruptive technology, came up with a list of

typical characteristics of a disruptive innovation.

• It performs worse in one or more areas, but is more convenient than existing technologies.

• Its performance trajectory is steeper than that of existing technologies.

• It is built from off-the-shelf components.

• It is less profitable than existing technologies.

• Leading firms' most profitable customers generally cannot use it and do not want it.

• It is first commercialized in emerging or insignificant markets.

• Large organizations are fundamentally incapable of successfully bringing it to market.

This list can help identify whether an innovation can be considered as a disruptive innovation. If an

innovation conforms to these characteristics, this might well influence the sectoral pattern of

innovation and innovation diffusion.


24

2. Case Study on E lectr ic Veh ic les

2.1 Market Ana lys is The market of interest in this case study is that of electric vehicles (EVs). The focus will be on

road vehicles: passenger cars, light cargo vehicles and scooters. Electric bicycles and boats are not

part of this study. Heavy duty transportation, such as trucks and airplanes, are not particularly

suitable for electrification. At least, they are not at this point in time. Therefore, they are also left

out of the discussion. The main focus within road vehicles will be on passenger cars.

Batter ies vs. Foss i l Fuel : For an internal combustion engine (ICE), the energy carrier is fossil

fuel. The energy carrier of EVs is the battery pack. Fossil fuels are easily transportable. A

traditional car is also easy and safe to refuel. Plus, due to the high energy content of fossil fuels,

a full tank can go a long way. In short, fossil fuel is considered to be a good mobility provider.

It is unsure if a battery pack can present a competitive case. Battery packs are cheaper to refuel,

but refuelling takes longer, since batteries have long charging times. Also, the energy density of

batteries is much lower. The energy density of fossil fuels equals about 12.200 Wh/kg, whereas

batteries with a high energy density reach 200 Wh/kg. The combination of long charging times

and limited energy storage limits the driving range. It affects the core function of the product,

since the mobility of the consumer is limited. And transport should provide unlimited mobility.

E lectr ic Motor vs. ICE: The electric motor has the upper hand over the traditional engine. An

electric motor opens up the possibility for a more sustainable mode of transportation. The

efficiency of an internal combustion engine is about 20%, whereas the electric drivetrain has an

efficiency of about 85%. It is more efficient to burn fossil fuels in a power plant and drive on the

generated electricity, than it is to burn the same fossil fuel in the car’s engine. The former path

constitutes an efficiency of 27%, whereas the latter is only 17% efficient (Report: Deutsche Bank,

2008). If the electricity used for transportation is generated through renewable sources, the

energy path of transportation will become emission free. The fact that electric transportation does

not rely on fossil fuels has a political advantage. This will make the economy less dependent on

oil-producing countries. Another advantage is maintenance. Traditional engines require regular

maintenance, whereas electric motors need little attention. At last, the electric motor is quiet and

does not cause air pollution. This makes EVs very attractive for city transport. In short, electric

motors provide mobility that is cleaner, more quiet, more efficient and makes countries less

dependent on foreign resources.


25

2.1.1 Market Dr ivers The developments around EVs have several causes. The higher or unstable oil price is a direct

driver for the development of vehicles with alternative propulsion. Fluctuating fuel prices push

society towards alternative modes of transportation. Secondly, the environmental issues that are

being raised, such as air pollution and the greenhouse effect, increase consumer and government

awareness. Not only is electric transport a more efficient mode of transportation, it will also shift

the location of recapturing carbon emissions from millions of individual vehicles to a small number

of central power plants. Moreover, stiff regulation pushes car manufacturers to deliver more

efficient cars. Car companies either fine-tune traditional engines, or opt for increased electrification.

More and more are choosing for the latter option. The future of EV depends primarily on the cost and availability of batteries with high energy

densities, power density, and long life, as all other aspects such as motors, motor controllers, and

chargers are fairly mature and cost competitive with internal combustion engine components

(Report: Deutsche Bank, 2008).

As can be concluded from the quote above, a very important driver for electrification is the

improvement in battery technology. The cost and performance of large-size battery packs are

improving to the point that EVs might be able to compete with traditional combustion engines on

a commercial level. This is especially due to the introduction of lithium-ion batteries. Until EVs

present an actual competitive case, government sponsorship remains a key variable. This is no

problem, around the globe governments are offering incentives that stimulate the roll-out of

electric transportation. Examples are tax cuts for consumers and companies and government grants

for associated research, or owners of EVs not having to pay congestion charges in the bigger

cities. It is however uncertain what policies will look like in the future.

Energy resilience is also an important motivator for governments to stimulate electric transport. Oil

moves to the highest bidder, since it is so easily transportable. Ships can carry it to any place in

the world. Natural gas can also be transported across oceans, albeit with more difficulty. Electricity

can only be exported over land, so it stays in the continent where it was produced - it is sticky.

Equally important is the fact that it can be produced from a multiple of energy sources: coal,

renewable or nuclear. For both reasons, the energy resilience of countries will increase through a

switch from traditional to electric transport. In short, the main drivers for the EV market are:

• Environmental Issues

• Improvements in Battery Technology

• Higher and Unstable Oil Price

• Energy Resilience


26

2.1.2 From Combust ion to E lectr ic : Cost Analys is

All vehicles can be converted to an EV once the combustion engine is replaced with an electric

drivetrain. This is referred to as electrification. There are several steps in electrification. A car can

have a blended fuel mix. Electrification goes from micro hybrids and full hybrids to plug-in hybrid

EVs and full EVs. The table below shows these different steps.

Model E lectr ic Dr iv ing

Micro Hybrid Stop during idle

Mild Hybrid During acceleration

Hybrid (HEV) At low speed

Plug-in Hybrid (PHEV) First Miles

Full Electric Vehicle (FEV) Fully electric

Table 2: Electrification Steps

The focus of this study is mostly on PHEVs and FEVs. These vehicles also require the development

of charging infrastructure. This is one of the reasons why these last steps in electrification

represent a bigger technological breakthrough, a more fundamental change in the market space.

Moving through the steps of electrification, the cost structure of the product becomes increasingly

different. The initial costs get increasingly higher, while the operational costs get increasingly

lower. The initial cost is pushed up because of the battery pack cost. The battery accounts for a

large portion of the incremental cost of turning a vehicle electric. Every step in electrification

requires the installation of a bigger battery pack. Battery pack cost may easily exceed 15.000 €

for a FEV (Report: Deutsche Bank, 2008). Yet after the higher initial investment, the payback

starts. An electric motor has one moving part, compared to 400 moving parts in a combustion

engine (Interview: Geert Kroon, 2009). The result is a decrease in maintenance cost. Of course,

there is also the reduction in fuel cost. The price of electricity is much lower than the price of

fossil fuels.

The Boston Consulting Group has conducted a payback analysis for HEVs, PHEVs and FEVs at a

battery cost of 500 €/kWh (2008). Battery cost can be best defined in terms of €/kWh: the

amount of money it costs to store a certain amount of energy. In the end, energy storage is what

batteries are designed to do. And they should do so at a reasonable price. An assumption of 500


27

€/kWh is below present production prices, which are currently between 550 to 1100 €/kWh

(Hensley & Knupfer, 2009). But it is above the industry’s target price set by USABC (United

States Advanced Battery Consortium) at 400 €/kWh (Web: USCAR.com, 2009). Taking the cost of

the battery at 500 €/kWh may reflect a situation in the near future, but how fast battery cost

will drop remains uncertain. In the analysis of the Boston Consultancy Group, the fossil fuel and

electricity prices are averaged over the period of years. The assumptions of battery size per car

are conservative. The eventual result of the analysis provides more insight into the cost

considerations consumers will face when purchasing an EV.

Costs in € HEV vs. ICE PHEV vs. ICE FEV vs. ICE

Battery cost 600 6000 11000

Other incremental costs 1000 2000 -

Total cost 1600 8000 11000

Annual fuel cost savings 530 1080 1360

Payback period 3 years 7.4 years 8.1 years

Table 3: Payback at 500€/kWh (excl. maintenance savings). Source: BSG (2009)

The table shows an initial investment will pay itself back in under 10 years. About 30% of the

cars in the EU is older than 10 years (ANFAC, 2009). For a battery pack, assuming one complete

charge-discharge per day, lasting 10 years equals about 3000 cycles. It is unclear if the new

generation batteries can last this long. Also important, it is uncertain if consumers will be willing to

make such a high initial investment. It is quite a leap of faith to spend a high amount of money on

a new and unfamiliar product, even considering it will eventually pay itself back.

2 .1.3 Ins ide View: Battery Development The key technical enabler for electric transportation is advanced battery technology. The problem

of electric transport is, as it has always been, energy storage (Anderman, 2007; Mandel, 2007;

Rauch 2008). In order to successfully introduce electric transportation, batteries should score high

in five fields (Axsen, et al. 2008):

• Energy High energy density results in a bigger vehicle range

• Cost Cheaper batteries are necessary to present a competitive case

• Lifetime Battery cycle determines the payback period of a battery pack

• Safety Batteries need to be abuse-tolerant – no thermal-runaway or explosion.

• Power Batteries should be able to deliver an high energy burst for acceleration


28

Battery requirements for PHEVs and EVs are different from batteries for HEVs. In a hybrid vehicle,

the battery provides acceleration assistance and should have the properties of a power battery. It

should be able to deliver a short, energetic burst. EVs and PHEVs need an energy battery. Here

the primary function is storing large amounts of energy in order to provide a sufficient driving

range. And it is competing with a serious competitor, since fossil fuels show very high energy

content.

The earlier cost analysis showed that batteries should have a long lifetime. The problem is that

they degrade over time. Each battery has a limited number of cycles. Battery cycle life is defined

as the number of complete charge-discharge cycles a battery can perform before its nominal

capacity falls below 80% of its initial rated capacity. Today, a cycle life of around 300 to 1200

cycles is typical. The well-known lead-acid battery for example, will most likely last about 300 to

400 cycles (Report: Deutsche Bank, 2008). Logically, the number of cycles differs for different

technologies. The prospects of new lithium-ion batteries are great, some predict above 3000

cycles (Anderson, 2009)

The different battery technologies that are suitable for EV application are lead-acid, nickel

cadmium, nickel metal hydride and lithium-ion batteries. After quickly reviewing the first three,

lithium-ion will be discussed in more detail, as it is the most promising of the four.

Lead-Acid: This technology has existed for some time. The batteries in traditional cars are lead-

acid. They are cheap and the technology is mature. But they are environmentally unfriendly, heavy

and have a limited cycle life. Their energy density is low and they take a long time to charge.

Nicke l Cadmium: This also is an older technology. Its properties make it especially suitable for

portable power tools and other mobile applications. NiCd is a typical power battery, delivering very

high discharge rates. Still, they are environmentally unfriendly, have low energy density and are

expensive. Recently this battery has received heavy competition from the new NiMH batteries.

Nicke l Meta l Hydr ide: This battery is the new power battery technology. Most hybrid vehicles

use NiMH batteries. Their high discharge rates prove useful for assisting in acceleration. They are

relatively safe and not environmentally unfriendly. Yet, they have relatively low energy density,

which makes them unsuitable for EV or PHEV application.

The table below gives the characteristics of the above three battery types, compared to lithium-

ion. These numbers were gathered from multiple sources. Numbers between different sources

varied significantly. In battery technology, comparisons are difficult to make. Batteries perform

differently due to different processes used by different manufacturers. Batteries from the same

manufacturer will perform differently depending on what they are optimized for. The actual

application will dramatically affect a battery's performance and the choice of battery. Still the

below table, gives an indication of the relation between the different battery types.


29

Table 4: Battery Properties for Different Chemistries (Sources: Anderson, 2009. Gaines & Cuenca,

2000. Report: Deutsche Bank, 2008. Interview: Wagemaker, 2009.)

L ith ium- ion: Lithium-ion batteries are a new technology. Unlike other battery types, lithium-ion

refers to a whole family of batteries. Each based on different anode and cathode materials, but in

all types lithium-ions are moving between the cathode and the anode. Each type has its strengths

and weaknesses. Research investigates anode-cathode combinations that result in the best possible

properties. Important here is the difference in chemical potential. The beauty of lithium-ion

chemistries, is that this difference can be optimized.

On first sight, the best option for the anode is simply lithium metal. It has the lowest possible

voltage of storing lithium, creating high chemical potential. The structure is compact and it stores

a maximum amount of lithium. However, lithium metal reacts readily with water and air. It must be

kept dry in an oxygen-free environment, also during production. This adds significantly to the cost

of the metal. The high reactivity also causes unsafe situations. At last, recharging such a battery

chemistry gives way to dendritic formation. After discharge and charge, the lithium-ions do not

rearrange in the same neat structure as before. These dendrites grow and grow, eventually leading

to lower cycle life, short circuiting and thermal runaway (Interview: Wagemaker, 2009)

As an alternative, it has been proposed to use an intercalation compound as anode material (an

intercalation compound is a material providing a host lattice with voids into which guest atoms or

molecules can be inserted). During charge and discharge, the ions are moved between the anode

and cathode hosts. Logically, the amounts of cathode and anode material are directly correlated.

The two intercalation compounds have a different chemical potential for storing the lithium, which

creates the voltage of the battery. The basics of battery research is very simple: search for two

insertion compounds, both which can accommodate as much lithium as possible and which have an

optimal chemical potential difference. The energy density of the battery will be the product of

these two factors. However, the intercalation compounds should also provide a rigid storage

Lead-Acid NiCd NiMH Li- ion

Specific Energy Wh/kg 30-40 40-60 60-90 110-190

Battery Cycle Life >300 >400 >500 >1000

Working Temperature 0C -20 – 40 -20 – 50 -20 – 50 -20 – 60

Environmental Bad Bad OK OK

Fast Charge Times (h) 8-16 1 2-4 >1

Current Production Cost €/kWh 150 450 600 1000

10 yrs Projected Cost €/kWh 150 450 250 500


30

structure for the lithium, avoiding dendritic formation. This is important for safety and cycle life,

because it stops the aforementioned dendtritic formation (Interview: Wagemaker, 2009)

L iCoO2 L iMn2O4 L i(NiCoMn)O2 L iFePO4

Energy Density Wh/kg 190 110 170 130

Cycle life (cycles) >500 >500 >500 >2000

Safety Unsafe Unsafe Acceptable Safe

Table 5: Different Lithium-Ion Chemistries (Anderson, 2009. Report: Deutsche Bank, 2009)

The best composition for the cathode at this moment seems to be lithium-iron phosphate

(LiFePO4), also referred to as LFP batteries. This compound provides a rigid structure: charging and

discharging does not result in dendritic formation. This results in very high safety and cycle life.

However, a downside of this material is that it is relatively inconducive to the electrons. This

results in a need for nanocoating, which can be thought of as a kind of wiring, to provide

conductivity. The process of this nanocoating increases production. Another negative aspect of the

LFP battery is the energy density, which is relatively low (Interview: Wagemaker, 2009).

Most uncertain for future generation batteries is their production cost. Future development of

energy- and power density, safety and lifetime depends on the choice of intercalation compounds.

The cost of batteries is subject to a wider range of variables. Today, yield adjustment is the

highest cost factor (Anderson, 2009). This tells us that a high percentage of production does not

meet quality standards. Ramping up production could result in cost savings, due to economies of

scale. The use of cheaper cathode materials could also reduce cost (Anderson, 2009).

Chart 1: Breakdown of Production Cost of Lithium-Ion Batteries (Source: Anderson, 2009)

37%�

27%�

13%�

8%�

8%�4%� 3%�

Yield Adjustment�

Cathode Materials�

Lithium Salt�

Anode Materials�

Enclosure & Connections�

Control & Safety�

Other�


31

Fact remains that lithium-ion batteries are still too expensive. The USABC has set impressive

targets, but it remains uncertain if the industry will meet its ambitions. With large sums of money

going into battery research, a lot is possible. But money cannot solve all problems.

2 .1.4 So lv ing Issue of Range for FEVs

The issue of range is a direct result of the limitations of batteries as an energy carrier. The energy

content is lower than fossil fuels, limiting the distance one can drive. Once depleted, the batteries

take some time to charge. The range of FEVs varies between 50km and 400km (Web: Olino.org,

2009). Logically, vehicles with a bigger range also have a more expensive battery pack. Even a

range of 400km is a limitation to mobility. An increase in the range of FEVs would drastically

increase the number of potential consumers (Report: Frost & Sullivan, 2008). Geographically less

dispersed areas might prove suitable for FEV adoption. City commuters have short daily trips. The

car would have enough time to recharge, either at work or at home during the night.

Range expectations vary across populations. Survey showed that for 50% of all motorists in the

United States a trip is less than 40km, 80% less than 50km. The average daily vehicle drive is

about 50km (Report: Deutsche Bank, 2008). European countries show a lower geographic

dispersion. In Europe, the average daily drive is approximately 27 km. In the UK, 93% of all trips

last less than 40km (Report: Deutsche Bank, 2008). Looking at these numbers, most trips do not

present a issues for EVs. Still, some trips will surely exceed the range provided by batteries.

Incremental innovations can increase the range of EVs. Increasing the energy density of batteries is

the best possible solution. Another option is to make vehicles lighter. Increasing the efficiency of

electric motors is not a real saver, since it is already in the range of 80%-90%. There are also

solutions which address the issue more rigorously, which will be discussed here.

Fuel Cel l Hydrogen Vehic les: The issue of range is a result of the limiting properties of

batteries. A change in energy carrier could solve this problem.Unlike charging batteries, refuelling an EV with hydrogen fuel takes little time. The energy density of hydrogen is also higher. Still, the

efficiency of these vehicles on a well-to-wheel basis is too low, due to the chemical process of

producing hydrogen. Infrastructure is not in place and the production cost of current fuel cell cars

are very high. Safety issues are also an important objection. Multiple OEMs (Original Equipment

Manufacturers) have terminated fuel cell development programs. In May 2009, US Government

announced to cut off funds for the fuel cell hydrogen vehicles, as it was not considered a viable

alternative for the coming decades (Web: AutoBlogGreen.com, 2009).


32

Fast Charg ing: If charging can be done faster, a smaller vehicle range is no longer a real issue.

This solution needs extensive infrastructure development. The present grid does not support fast

charging. Charging points should be able to deliver a high voltage, in combination with intelligent

sensoring and battery management. The cost of such charging points could be as much as 10.000

€ (Interview: van der Sluijs, 2009).

Still, a limited number of fast charging points is needed. Charging infrastructure defines a

distinction between end-points and through-points. End-points would be located at home or at

work, any place where a vehicle is parked for a longer period of time. Through-points are used en

route, located near highways. Fast charging technology is only necessary in through-point

infrastructure. Currently there are only 4100 gasoline stations in the Netherlands, which is not an

extremely high number (Web: BOVAG.nl, 2009). The number of fast charging points would not

significantly exceed this amount, considering a limited number of fast charging points per station.

Moreover, companies like Royal Dutch Shell actually make the highest margin on the products they

sell in their gasoline station shops, so it seems plausible they will invest in additional fast charging

infrastructure to keep customers coming (Interview: van der Sluijs, 2009).

From a battery perspective, fast charging times are limited. Beginning this year, MIT Researcher

Gerbrand Ceder and his graduate assistant Byoungwoo Kang claimed nanocoatings could speed up

the movement of ions in lithium-ion batteries, functioning as a sort of a beltway for the ions

moving into the electrodes. It was proposed this could lead to charging times of mere seconds

when considering smaller appliances like phones (Press: MIT News Office, 2009). A car battery,

being substantially larger, would be able to charge in a matter of minutes. Ceder stated that this

technology could make it to the market in 2 to 3 years (Press: MIT News Office, 2009). The

research results were applauded, but unfortunately it seems conclusions were too optimistic.

According to Marnix Wagemaker, a researcher at the TU Delft (who actually worked at Gerbrand

Ceder’s group at MIT in the past) Ceder has recently received heavy criticism and will have to

correct his findings (Interview: Wagemaker, 2009).

In the end, charging a battery comes down to moving molecules. Ions are passing through rigid

structures. It is the mere friction in this process and the subsequent heat development that limits

fast charging on a fundamental level. Even nanocoatings, acting as beltways and smooth wirings,

cannot change this. Marnix Wagemaker proposed fast charging times for car-sized batteries will

remain limited to a time of about 20 to 30 minutes. Otherwise one would need extensive cooling

mechanisms, further driving up cost. He also mentioned that fast charging can highly damage the

battery’s cycle life (Interview: Wagemaker, 2009).


33

Battery Swapping: Battery Swapping is a straightforward solution. If the battery is depleted,

just replace it. One thing is inherently connected to this proposition: no one will own their own

battery. Battery swapping is advocated by a company called Better Place. Their technology can

switch a battery in under 80 seconds (Web: Betterplace.com, 2009). They received major funding

to implement underlying infrastructure. Better Place wants to position itself as a mobility provider.

Kind of like a telecom provider sells minutes, Better Place will sell kilometres.

It is an innovative business model that could increase the adoption rates for FEVs. The purchase

price of FEVs is reduced, since the battery pack cost is excluded. Better Place owns the battery

pack. The customer pays a fixed fee per month to use the mobility network. Also, customers can

follow the steep technology curve of battery technology. Today, chances are that money invested

in an expensive battery pack will depreciate at a high rate. Still, all packs should be similar in order

to make swapping possible. In a FEV, the properties of the battery pack are the key determinant

of driving characteristics. It is highly unlikely all OEMs will agree on a single battery system. Also,

this model implies that companies like Better Place will have to acquire a multiple of batteries per

vehicle, which is an enormous investment.

Range extender : A range extender makes the difference between a PHEV (Plugged-in Hybrid

Electric Vehicle) and a FEV (Fully Electric Vehicle). PHEVs can either switch to a normal

combustion engine once the battery pack is depleted, or they can use a range extender. A range

extender is a small on-board electricity generator, running on fossil fuel. This generator recharges

the battery while driving. Considering most people will mostly use their vehicles for short trips, the

range extender will only be used sporadically. Still, range extender takes away range anxiety, the

fear of stranding somewhere without fuel. Especially in the near future, with little charging

infrastructure in place, it will assure mobility even in rural areas.

Figure 3: Visual Representation of the function of the Range Extender

With the addition of a range extender, the composition of a drivetrain can be customized. In this

way, a range extender allows a reduction in the size of the battery pack. Commuting to work

30km away, one would only need a battery pack with a 30km-range. This assures the daily vehicle

drive is electrical, but limits the cost of the battery pack. For the few trips that exceed this

distance, the driver can switch to fossil fuels to get him there. If your work is 40km away, one


34

may go with a slightly bigger battery pack in your car. It is a modular way of assembling a

drivetrain system (Interview: Hermans, 2009). Still, installing a range extender will also result in

extra costs, because in the end it involves adding an extra component to the drivetrain.

2.1.5 Infrastructure Development Infrastructure is an essential enabler for electric transportation. Without an acceptable amount of

charging points, a successful introduction of PHEVs and FEVs is impossible. Where battery

technology is primarily a technical enabler, the implementation of charging points does not pose

direct technical challenges. The already existing electricity grid is suitable for charging. With the

installation of charging point technology, it can be made applicable for electric transportation. This

is not considering the aforementioned fast charging, which would require higher voltage. Here we

focus on end-point charging. Although implementation seems rather straightforward from a

technical point of view, a lot of uncertainties remain.

The grid company Alliander has made an assessment of how many end-points would be needed per

car. The number of parking spaces per car in the Netherlands equals around 1.2 to 1.3. They

assume the number of charging points per vehicle will somewhat equal this number. A charging

spot at home and some additional spots at supermarkets, work and tourist places (Interview: van

der Sluijs, 2009). There might be a need for a higher number of points per car at the introduction

of the first EVs (Report: Frost & Sullivan, 2008). Following this line of reasoning, the number of

end-points will be very high. As a result, the assembly of these points should remain basic and

simple: a cable with a standard plug, keycard access for customer identification and a meter to

determine electricity use.

Figure 4: Future Intelligent Infrastructure (Source: EPRI, 2009)


35

An increase in the number of EVs will result in fundamental changes for both electricity and grid

companies. All users of the grid are now fixed clients. They use the grid and electricity from a

fixed point. With the introduction of EVs, these customers turn mobile. The question becomes how

these customers are billed for their use of the electricity grid. It remains unclear whether utility

and grid companies will be directly linked to these mobile customers. Maybe they will allow an

intermediary in the value chain, functioning as a fixed host towards these mobile clients (Interview:

Knigge, 2009). In terms of load management and peak shaving, the grid companies require

charging to be allocated to more convenient hours. Logically, most people will plug in their car

when returning home after work, which is already a time of peak demand. This could possibly

result in an overload of the grid. Therefore, grid companies prefer charging occurs at night.

The storage capability of all the vehicle batteries, connected to the grid for a longer period of

time, opens up additional possibilities. It can be used to build a stronger case for renewables such

as solar power and wind energy. The weakest point of these technologies is that their energy

supply cannot be regulated - they need buffering. If vehicle batteries could store excess energy,

the economic value of renewables will increase. One could even consider a bidirectional flow of

electricity, with vehicles supplying electricity back to the grid. This concept is referred to as

Vehicle 2 Grid, or V2G (Web: AutoBlogGreen.com, 2009). Also the recyclability of lithium-ion

battery packs by utility companies for the purpose of buffering, could further enhance the

proposition of the EV.

2.1.6 Market Expectat ions

The investment horizon of most VC funds lies around 6 years. Therefore, market expectations are

evaluated up to the year 2015. The focus is on the European market. There are about 250 million

vehicles on the European roads, of which 87% are passenger cars (Web: ANFAC.com, 2009). The

average annual new vehicle registrations is about 18 million over the last years (ACEA, 2009).

FEVs: Today the market for FEVs is restricted to pioneer consumers. People that are

environmentally aware and willing to try something new. It is not yet a mainstream alternative for

traditionally powered vehicles. But the number of FEVs is expected to grow in the coming years

(Report: Frost & Sullivan, 2008). The total sales of FEVs in the EU, as it was presented in a Frost

& Sullivan report, is depicted in Charts 2 and 3. The first chart shows sales in the past, the other

shows the projected growth of unit sold up to the year 2015. Expectations are that there will be

over 250.000 FEVs on the road in Europe by that time. This number is not an overly ambitious

estimate, it is realistic. 250.000 may seem like a large number, but considering the total European

car market, it equals a market share of 0.1%. This does not come across as an immediate threat

to incumbent technologies.


36

Chart 2, 3: Unit of Shipments Sold in the EU for FEVs. In the past (above) and the future.

Source: Report: Frost & Sullivan, 2008.

FEVs may only remain suitable for certain niche markets. But these markets could show higher

market penetration by 2015. A first example are business fleets, in combination with leasing.

Successful pilot projects in this field are already running (Press: Leaseplan, 2009). Actually, it is

expected that by 2015, 75% of FEVs will be sold through leasing (Report: Frost & Sullivan, 2008).

A second niche market is light cargo vehicles, such as airport fleets. These fleets cover a small

perimeter, which reduces charging infrastructure cost and makes the limiting factors of range

become less important. Still, the market is relatively small. The ACEA reports new registrations of

Light Commercial Vehicles in the last years to be around 2.2 million in Europe (ACEA, 2009).

A third interesting market for FEVs is scooters. Today, the market for full electric scooters is

dominated by three brands: EVT, Novox and QWIC. In the Netherlands alone there were a 1000

sold in 2007. Last year, this number has doubled. The expectation for 2009 is that sales will rise

to around 4000. Most models still use lead-acid batteries with a range up to 100km. But driving

behaviour, such as driving too fast, can reduce range to 25km. This is the reason why some

models have built-in speed limitation. The introduction of lithium-ion batteries could solve such

problems and even push future sales higher (Interview: Van den Berg, 2009).

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37

PHEVs: Other data provides insight in the market penetration of the preceding electrification

steps, such as the HEV and the PHEV. Earlier in 2008, Frost & Sullivan predicted the number of

PHEV sold worldwide to reach a number of 130.000 by 2015 (Web: AutoBlogGreen, 2008).

However, not everybody agrees on this number. Some think the coming years will be mostly

dominated by the introduction of PHEVs (Interview: van den Brink, 2009). A number of OEMs is

actually planning to introduce PHEV models in 2010 and 2011 (AutoBlogGreen.com, 2008). If the

cost of battery packs remains high, this intermediate step in electrification might turn out to be

an attractive alternative.

The chair of the Dutch Platform for Sustainable Mobility predicts the future vehicle will have a

more modular design, which fits the PHEV. It will be possible to customize a drivetrain design for

instance, like in a PHEV. Modular car design requires a new approach. A car would become more

like a generic platform, on which every customer can build his own customized mobility concept

(Interview: Hermans, 2009).

The pie-charts below show an increasing division in drivetrain composition across the transport

industry from 2015 to 2020. Different electrification steps each conquer a market share in the

transportation sector. This gives us a peek at what the future might look like. Energy density of

batteries will probably continue to render FEVs unsuitable for heavy duty transport. On the other

hand the world is running out of oil, which makes the rise of some form of electric transport

inevitable. The future is neither electric nor fossil. Instead, it is both and everything in between.

The result is a mix of drivetrain systems.

Figure 6: Drivetrain composition in 2015 (left) and 2020. (Source: Report: Deutsche Bank, 2008)

Future Scenar ios: The Shell Research Centre in Amsterdam has worked on several future

scenarios, with security energy supply as an essential variable. Most scenarios predicted a small

market penetration of EVs by 2015. However, adoption of electric transport could speed up in

case of a stacking of events (Interview: Hermans, 2009).


38

A first scenario showed accelerated development due to shocks in the oil market. A slow down in

economic activity due to the current crisis, would result in lower investment in renewables energy

sources. However, ongoing increase in economic activity in Asia, combined with a quick recovery of

the Western economies could lead to shocks in the oil market. This would push up oil prices,

compared to coal. As the electricity market is mostly based around coal, these developments

would trigger a faster adoption rate of electric transport (Interview: Hermans, 2009).

A second scenario shows accelerated development due to psychological and political factors. Russia

could cut off gas supplies in the near future, as it did before. This would raise awareness on

energy resilience issues. Security of supply would become a dominant motivator for the public to

switch to electric transport. Also the OEMs, who realise they should not manufacture vehicles for a

market starved from fuel, would turn increasingly to the production of electric powered vehicles

(Interview: Hermans, 2009).


39

2.2 Investment Opportun it ies In this section the different investment opportunities for VC funds are analysed. It will be

necessary to map the different opportunities according to some classification. The categories used

here will follow the report by McKinsey and seems to capture the most important value steps in

the value chain (Report: McKinsey, 2009). Additionally, this classification provided the best fit for

the entries in the databases of the CleanTech Group and New Energy Finance. It is a three-way

split consisting of the component level, the level of vehicle integration and design, and the level of

infrastructure and utilities. Notably, the component level is reduced to companies specialized in

energy storage, since other component technology is relatively mature. Thus, the three fields for

possible investment in the value chain of EVs as identified in this thesis are:

• Energy Storage • Vehicles

• Infrastructure

After some introductory remarks, each of the three fields will be evaluated both top-down and

bottom-up. The top-down approach consists of the analysis of two databases: the CleanTech Group

database and the New Energy Finance database. Using the two databases, most of the VC

investments into the three fields can be identified. An additional web search was conducted in

order to achieve a comprehensive analysis. Monitoring all VC investments will provide insight on

what VC funds are investing in. Actual investment opportunities from the dealflow of Yellow&Blue

Investment Management B.V will function as a basis for the bottom-up analysis.

Energy Storage: Initially this field will include firms that present innovative battery cell design,

but might later also consist of companies focussing on battery management and control. Often

value will reside with the real technology owners. Since battery development is the decisive

technological enabler, most value will be with the battery producers. Winners will present a battery

cell design which shows a high energy and power density, but is still safe, long-lasting and cheap.

Over time such battery technology will probably become a commodity, once the technology

matures. Value will probably shift from the battery cell to development of the battery management

systems, which will determine the actual performance of the car battery (Report: McKinsey, 2009).

Currently, almost all vehicle manufacturers who are developing EVs are outsourcing the

development of components of the electric drivetrain. They establish the final integration into the

vehicle, but almost 90% of the system assembly is outsourced to suppliers (Report: Frost &

Sullivan, 2008). An important observation here is that almost none of these suppliers is specialized

in all required fields of energy storage, thus ranging from charging management to power


40

electronics (Report: Frost & Sullivan, 2008). This leaves possibilities for an additional layer in the

value chain. Several of the largest traditional Tier 1 suppliers are currently involved in developing

overall control systems that integrate electric drivetrains (Report: Deutsche Bank, 2008).

Integration and battery management will become an increasingly important step in the value chain

over time. Interestingly, battery producers could capture this value shift and push Tier 1 suppliers

out of the value chain.

Most reports indicate lithium-ion batteries as the dominant technology in the future EV industry

(Report: Deutsche Bank 2008, McKinsey 2009, Frost & Sullivan 2008). The large-format lithium-ion

battery market today equals about €5bn. This could double towards 2015 and quadruple by the

year 2020 (Report: Deutsche Bank, 2008). The raw materials for lithium-ion battery development

constitute close to 50% of the total cost (Cuenca & Gaines, 2000). Many battery makers are

considering vertical integration into the supply chain of such key materials (Report: McKinsey,

2009). Considering the future development of lithium production and the market projections for

battery development, lithium production could face supply constraints by 2020 (Report: Deutsche

Bank, 2009).

Vehic les: The level of vehicle integration and vehicle design also provides investment

opportunities. The Structural Designer of the NUNA Solar Team 2009 stressed the fact that the

introduction of EVs will provide new design possibilities. Existing designs are limited by the

drivetrain system. In an EV, the motor is small and the battery can be placed everywhere

(Interview: Kroon, 2009). Also, EVs open up new product dimensions for transportation. Mobility

can become quiet, clean and more efficient. The high torque at low speed of electric motors might

attract consumers of sportscars. Electric motors might be very suitable for niche markets, for

example light cargo vehicles. Also, EV manufacturers may focus on modular car design and the

possibilities of customized drivetrains, with the introduction of the range extender.

Considering the automotive industry, EVs pose an enormous threat to existing vehicle

manufacturers. OEMs outsource most of their manufacturing, apart from the transmission and

internal combustion engines. Clearly, a change in drivetrain would force them to reinvent their

business (Report: McKinsey, 2009). On the other hand, one can imagine that being an established

player in the market will provide important advantages. New entrants encounter severe entry

barriers. Think about manufacturing scale, brand equity and channel relationships (such as with car

dealerships) (Report: McKinsey, 2009).

Moreover, the entire business model of OEMs may change with the rise of the EV. Today, a car will

be sold relatively cheap. Additional money is made on additional parts sold afterwards. However,

electric motors need little maintenance. Consequently, there will be a severe cut down on repairs


41

and car mechanics. Little money will be made after the initial sale (Interview: Kroon, 2009). Plus, a

car probably will not have any scrap value. At least, the scrap will be worth next to nothing

compared to new battery costs. People will prefer a new car, instead of installing a brand-new,

expensive battery in an old car. Note: Batteries on the other hand do have scrap value, since they

might well have a second life in energy storage appliance for utility companies (Interview: Hermans,

2009).

Infrastructure: Significant changes arise for utility companies, due to the introduction of EVs

(Report: Deutsche Bank, 2008). Logically, electricity companies will be able to sell more electricity.

This is important in a time where they are forced to turn to expensive renewable sources for their

electricity generation. Notably, the combination of electric transport with these renewables offers

inspirational concepts. The buffering through car batteries connected to the grid could increase the

value proposition of renewables.

For grid companies, it is important that charging occurs at night. However, most people will

probably plug in their car when returning home at night. Because this is already a time of peak

demand, this could cause an overload of the grid (Report: McKinsey, 2009). There is a need for

intelligence that monitors charging and can postpone it to more convenient hours. Additionally,

monitoring a mobile electricity customer requires intelligence. All this opens up commercial

opportunities for IT-players and smartgrid companies to penetrate the value chain.

It is unclear who will own recharging infrastructure and the real estate it occupies: electricity

companies, grid companies, gas stations, car companies, or other third parties. It is also uncertain

whether associated recharging intelligence will be installed in the vehicle or in the recharging

infrastructure. Such decisions are also closely intermingled with the political field. For instance,

governments in the EU have already decided on a standard plug (Web: AutoBlogGreen.com, 2009).

One can expect governments to actively take part in the development of charging infrastructure,

positioning themselves as agencies of diffusion for the environmental friendly EVs. Political factors

make it harder to predict how the market will develop. In short, the field of infrastructure shows

many opportunities, but also many insecurities.

2.2.1 Top-Down: Investment Monitor EVs are referred to as a clean technology. Clean technologies are environmental friendly, but offer

competitive returns for investors (Report: CleanTech Group, 2009). The cleantech sector consists

of around 3000 companies, across very different industries. In the last years, the clean technology

market has matured as a sector for investment. Investors from all asset classes are entering the

market: VC, private equity, public equity and project finance. The sector saw a steady increase in


42

VC investment, peaking in the third quarter of 2008, but showed a sharp decline towards the end

of last year (Report: CleanTech Group, 2008). The economy has entered a severe recession

worldwide and the supply in capital that was plenty across all asset classes, is now scarce.

Obviously, it is a difficult time for start-up companies. Due to a lack of exit possibilities, the VC

market will be reluctant to invest (Press: NY Times, 2009). On the other hand, some might

consider it a good time to go bargain-shopping. These developments should be kept in mind when

analysing the number of VC investments made in the EV sector over the last years.

The analysis spanned 3,5 years, from January 2006 till May 2009. The databases that were used

are owned by the CleanTech Group LLC (Website: CleanTech.com) and New Energy Finance

(Website: NewEnergyFinance.com). Notably, these two databases used dollars as a currency. The

analysis will therefore be in dollars. The information gathered from the internet and the databases

resulted in a dataset with the following variables:

• Company Name

• Primary Sector (Investment Field)

• Secondary Sector (Specific Technology, only for some)

• Company Location

• Investor’s Company Names

• Deal Size ($ dollars) • Deal Period (Per Year Quarter)

• Investment Round Type (First Round or Follow-On)

Although a combination of these two databases already gives a comprehensive view of the sector,

extra time was spent searching the web for additional information. The final result of the analysis

was a total of 110 VC deals for EVs. The key results are shown in tables and charts below.

($ in Mi l l ions) Energy Storage Vehic les Infrastructure Tota l

Number of Companies 50 19 6 75

Number of Deals 71 32 7 110

Percentage of Total Deals 65% 29% 6% 100%

Invested $ (Total) 991 590 327 1,908

Percentage of Total Money 52% 31% 17% 100%

Average Deal Size $ 14 18 47 17

Number of First Rounds 27 11 4 42

Table 6: Key Figures extracted from Investment Monitoring, by Investment Field


43

The investments covered a total of 75 companies, which indicates that a considerable amount of

companies received multiple rounds of investment. The data showed most VC money was invested

in energy storage, more than half of the total amount of money. This sector also showed the

biggest number of first round investments. The least amount of money was invested in

infrastructure and utilities. Only 7 VC deals occurred in the field of infrastructure over the last 3,5

years.

($ in Mi l l ions) Asia Europe N. Amer ica Middle East

Number of Companies 6 14 56 1

Number of Deals 6 23 79 2

Percentage of Total Deals 6% 21% 72% 2%

Invested $ (Total) 58 225 1,599 25

Percentage of Total Money 3% 12% 83% 1%

Average Deal Size 10 10 20 13

Table 7: Key Figures extracted from Investment Monitoring, by Region

Looking at the dataset by region showed that by far the highest percentage of all deals occurred

in North America, with even a higher percentage of the total money invested. This implies that

also the average deal size was highest in this region.

Chart 4: Result of Investment Monitoring 2006 – 2009 (May)

VC Investment for vehicle manufacturers and battery producers has increased reasonably steady

over the last years. It was possible to determine an average trend over the first 3 years for these

two sectors. In a linear extrapolation, the amount of investment up till May 2009 was averaged

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with this trend, in order to come up with an estimate over the total year of 2009. It was not

possible to determine a trend for the investment into utilities and infrastructure, which may be due

to the little number of deals in this area. The amount of investment was fluctuating over time.

Company Name Invested Industry Deal Per iod Technology

Better Place 200mln $ Infrastructure 4th Qtr 2007 Battery Swapping

GridPoint 120mln $ Infrastructure 3rd Qtr 2008 SmartGrid

A123 Systems 102mln $ Batteries 2nd Qtr 2008 Lithium-ion (LFP)

Fisker Automotive 85mln $ Vehicles 2nd Qtr 2009 E-Sportscars

A123 Systems 69mln $ Batteries 2nd Qtr 2009 Lithium-ion (LFP)

Table 8: Top Five Rounds 2006 – 2009 (May)

The infrastructure sector witnessed a very small number of rounds, but looking at the five largest

rounds in our dataset, the top two investments are in this area. Actually, these two deals make up

98% of all VC money invested in infrastructure. These two deals push the average deal size up to

over 40 million $ per round. It is good to note that a multiple of funds is involved in such large

rounds. Although battery producers received the majority of VC funding, the average deal size in

this sector was smaller than for vehicle and infrastructure companies. Still, the battery company

A123Systems, specialized in lithium-ion iron phosphate batteries, received a multiple of very large

rounds (as can be seen in Table 8).

Chart 5: Percentage of VC Investment in Battery Producers for Different Technologies

It is predicted that lithium-ion will become the dominant battery technology (Report: Deutsche

Bank, 2008). Indeed, If we look more closely at all VC deals made in the field of energy storage,

most VC money focussed on the development of such lithium-ion chemistries, 71%.

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45

2.2.2 Bottom-Up: Dea l f low Analys is Next, a number of actual investment opportunities are evaluated. These are deal proposals taken

from the dealflow of Yellow&Blue Investment Management BV. The dealflow showed a multiple of

investment opportunities in the field of electric transport. Ideally, an equal amount of investment

opportunities had presented itself in each of the three fields. This was not the case. There were

two companies in the field infrastructure, two companies in the field of vehicle design, but only

one investment opportunity in the field of energy storage. Each of these companies presented the

fund with a business plan, including the financials of the company. Due to confidentiality

agreements, it is not possible to discuss the specifics of the companies in detail. Company names

will not be disclosed (companies will be referred to as Infrastructure Company A and B). The

discussion is restricted to basic information and financial numbers (which cannot be explicitly

shown in the calculations).

The propositions were evaluated using a financial model. All the calculations in the model are

relatively straightforward. The model utilized the financial tools that were discussed earlier in the

theoretical framework. It calculated the IRR and a Money Multiple, using the future expected

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of the different

companies. Not all companies had a clear outlook on their future cash flows, so it was not possible

to perform a discounted cashflow calculation to determine the net present value of the investment

opportunity. The fundamental model was developed by Drs. Hans Haanappel, a Senior Lecturer at

Nyenrode Business University for the Centre of Finance. Slight modifications were made to make

the model applicable for the analysis.

The input data of the model consisted of the investment criteria and the financials of the

company. The investment criteria are the investment need and the proposed stake in the

company. When no explicit equity stake was proposed, the investment divided by the post-money

valuation provided a percentage for the equity share acquired (assuming no other investor parties

participated in the investment round). The financial information of the company included the

expected EBITDA, its capital structure and a pre-money valuation. A pre-money valuation is the

valuation of the company, before the proposed capital injection by the VC fund. This valuation is

an estimation made by the company itself. The accuracy of such a valuation can be questioned.

Logically, the post-money valuation is the sum of the pre-money valuation and the company’s

capital need.

Other parameters in the model are the proposed exit year and an exit multiple. The exit multiple

was fixed at 5 for all companies. The proposed exit year is dependent on the situation of the

company, but varied between 2013 and 2014.


46

The input was used to calculate the exit proceeds, a money multiple and the IRR. Using the

earnings exit multiple, it is possible to calculate the exit enterprise and equity value. Taking the

equity stake gives a result for the exit proceeds over the different years. This is used to derive

the internal rate of return (IRR) and the money multiple. Apart from deriving the money multiple

and the IRR, there is an additional sensitivity analysis for the expected EBITDA. This shows how a

lower EBITDA reflects on the IRR of the investment.

Figure 5: A Schematic Representation of the Financial Model

From earlier discussion, remember a VC fund is aiming for an IRR of above 50% in an individual

investment. This corresponds to a money multiple between 5 and 10, depending on the exit year.

Of course, not all companies which show a satisfactory IRR and money multiple will automatically

qualify for an investment. Many other reasons can block an investment in a particular company. In

order to provide more insight into why a particular investment can be rejected, an additional note

is added per company which shows the most compelling reason why Yellow&Blue Investment

Management BV decided to reject the investment proposal. Notably, all five proposals did not

receive any funding. The tables 9,10,11 show the results.

The proposal from Battery Producer A showed a relatively high capital need of 18 million €. In the

investment monitor, the average dealsize over the 71 deals in this area was slightly lower, 14

million $. The company shows a low IRR and was rejected due to the high cost of delisting. These


47

costs will probably lower the IRR even further. Still, the fact that a VC fund is considering to delist

a public company, proves an interest of VC funds in the possibilities for energy storage.

Company Name Battery Producer A

Capita l Need €18.000,000,-

Pre-money Valuat ion €80.000,000,-

Equity stake acquired 18.4%

Proposed ex it year 2014

IRR 28%

IRR (70% EBITDA) 14%

IRR (40% EBITDA) 2%

Money Mult ip le 3.5

Reason for Reject ion Costs of delisting (the company is listed)

Table 9: Key Results of Financial Assessment of Investment Opportunities

The two proposals of the Vehicle Manufacturers show very different capital need, however resulting

in an equity share which is relatively similar, due to the difference in valuation. Both these

companies presented a vehicle design which focussed on a specific niche market within the

transport sector, a small market segment which exploits the specific qualities of EVs. Still, there is

the danger that the expected market size becomes too small, as can be seen as a reason for

rejection for Vehicle Manufacturer A. Maybe the company should try and expand its business model

to new market segments. The IRR of Vehicle Manufacturer B shows excellent results, but

unfortunately the company is still in a too early stage. No prototype has been developed yet,

increasing technological risk and making financial projections less reliable.

Company Name Vehic le Manufacturer A Vehic le Manufacturer B

Capita l Need €7.500,000,- €600,000,-

Pre-money Valuat ion €9.000,000,- €1.100,000,-

Equity stake acquired 45.5% 30%

Proposed ex it year 2013 2013

IRR 80% 120%

IRR (70% EBITDA) 56% 90%

IRR (40% EBITDA) 36% 66%

Money Mult ip le 10.6 23.5

Reason for Reject ion Market too small Pre-prototype stage



48

The two infrastructure companies do not require the large rounds that were observed in the top-

down analysis. Investment results in two very different equity shares, although capital need is

almost equal. The company in which a lower equity stake is acquired, Infrastructure Company B,

delivers a higher IRR. The two companies focussed on the same market, but Infrastructure

Company B had much larger aspirations, resulting in more impressive EBITDA projections. Logically,

it remains uncertain whether such ambitions are met. The reason for rejection are very different

for these two. Company A had no intellectual property and a management team without any

specialized knowledge. The proposal of Company B was rejected due to the reputation of investors

that already owned a stake in the company.

Company Name Infrastructure Comp. A Infrastructure Comp. B

Capita l Need €1.800,000,- €1.500,000,-

Pre-money Valuat ion €5.000,000,- €16.000,000,-

Equity stake acquired 26.5% 8.6%

Proposed ex it year 2014 2014

IRR 15% 55%

IRR (70% EBITDA) -13% 38%

IRR (40% EBITDA) -24% 24%

Money Mult ip le 2.1 9.0

Reason for Reject ion No IP and weak management Reputation of co-investors


Overall, it will be hard to come to a clear conclusion after analysing the dealflow of Yellow&Blue

Investment Management BV. The results do not point in a single direction. The vehicles sector

showed the best prospects. One of the proposals in the area of infrastructure showed the worst

results. What the analysis also showed, was the variety of reasons why a specific investment

proposal can be rejected. A positive result in the financial analysis will not exclude the possibility

of rejection. Also, proposed equity stakes can range from 8,6%, to 45,5% and investment from

0.6 million €, to 18 million €.


49

3. Eva luat ion A discussion on the venture capital (VC) model and the particulars of innovation have provided a

solid framework for the case study on electric vehicles (EVs). In this concluding section, the aim is

to bring together the different sections in a consistent conclusion, link the EV market directly to

the VC model and the theory on innovation. Are innovations in the EV industry suitable for VC

investment? What aspects of the current EV market are interesting for VC funds? Finally, the

research question will be addressed directly:

In which part of the value chain in the market of EVs can VC be most effectively applied?

3.1 Conc lus ions

Market development will be slow the coming years, limiting expansion possibilities for new ventures.

The investment criteria of VC funds show an investment horizon of 5 to 6 years. Therefore,

market analysis focussed on developments up to the year 2015. The adoption rate of EVs up to

this year will be relatively low: FEV showed a market penetration of only 0.1%. Theory on

innovation diffusion can also provide an explanation why.

Different perspectives show diffusion is high for innovations which are attractive, competitive,

affordable and accessible. An EV is not considered attractive by the general public and even

considered an annoyance by some: people think they should buy an EV because it is good for the

environment or for future generations, not because EVs are good. This is because they are not

competitive. They do not provide the mobility traditional vehicles do. Batteries cannot store

enough energy and once depleted, they take too long to recharge. This results in an issue of

range. Plus, the initial investment required to purchase an EV is quite large. EVs show an increase

in purchase price and a decrease in running costs, typical for green innovations. The high initial

purchase price makes them not very affordable. Even though the investment may eventually pay

itself back, the majority of sales will have to take place through leasing and lending. Finally, the

innovation of EVs is not very accessible, simply because the required infrastructure is lacking.

Without a sufficient number of charging points, a successful introduction of EVs is impossible. All

this will have a negative effect on the future adoption rate of EVs and explains the conservative

market estimates for the coming period. It can be concluded that the industry for EVs is still in an

early stage and it will not see explosive growth for the coming 5 to 6 years.

This makes the industry less attractive for VC investment. Remember, VC funds tend to focus on

industries which are in a period of steep growth. The number of companies with opportunities for


50

quick expansion in the coming investment horizon is limited due to the slow market development.

This does not exclude the possibility that some start-ups can still profit from the early rise of EVs.

Thus, the sector may still attract VC investment, as was seen in our analysis.

The value chain of EVs shows three investment fields: energy storage, vehicles and infrastructure.

On a component level, the only technological enabler for EV development is battery technology, as

all other technology has matured and become relatively straightforward. This was resembled by the

two databases: on a component level, there were little to no deals outside of the field of battery

technology. Battery producers saw a large number of investment rounds, increasing over the last

years. Technologies included a number of different battery types, but by far most money went to

the development of lithium-ion technologies. In the dealflow analysis, only one investment

opportunity could be analysed, which showed disappointing returns.

Moving up in the value chain, there was also great number of deals in the field of vehicle

integration and design. More and more VC money was invested in this part of the value chain over

the last years. Products included a variety of vehicles such as dirtbikes, sportscars and light cargo

vehicles. The dealflow of Yellow&Blue Investment Management BV showed two opportunities in this

field, both with a good IRR.

One additional field of investment can be identified, which could be best described as the area of

infrastructure (all that has to do with the charging infrastructure and electric utilities). The

introduction of EVs opens up commercial opportunities for IT-players and smartgrid companies to

penetrate the value chain of electricity supply to the EV owner. Still, the amount of VC

investments into this field has been low over the past years. It saw little investment deals, but did

profit from a few very large rounds. Dealflow analysis showed two investment opportunities. One

showed acceptable IRR, while the other investment showed poor results.

Improvements in battery technology will remain the decisive factor for the future success of EVs.

Of course, the rise of EVs is aided by the current excitement around all which is green and

sustainable. Indeed, environmental issues have become an important driver for economic

development. Government incentives and consumer awareness create an opportunity for electric

transport. But in the end, the development of good battery technology will be the most important

enabler. The difference in energy density between batteries and fossil fuels is still impressive: the

latter shows an energy density that is 61 times as high. Even a more efficient electric engine

cannot bridge this difference. Companies today are presenting innovative ideas and promising

technologies that aim to overcome the range issues presented by batteries. But without better

batteries even such solutions will not suffice.


51

PHEVs and range extenders appear to provide the most sensible solution to the issue of range.

The issue of range arises from low energy density in batteries in combination with slow charging

times. From the different solutions addressed in this thesis, the range extender seems to be the

most sensible solution. Fast charging and battery swapping face a multiple of barriers, whereas an

introduction of range extenders appears quite simple.

The future of the transport sector will show a mix of drivetrains. Not all transport will become

electric, but not all transport can remain dependent on fossil fuels either. Electricity can be

produced from multiple energy sources, which makes the electric motor a very dynamic drivetrain.

Vehicle manufacturers can exploit this dynamic potential by having a mix of energy carriers

powering their electric drivetrain. A more modular car design, with customized drivetrain

composition (adjustable battery size, including a range extender), could benefit from a future

where both gas stations and electric charging points exist side by side. The development of

compact and efficient range extenders might prove vital for a successful market introduction of

PHEVs. This could be an additional interesting field for VC investment. During market research, only

one company was encountered that focussed on the development of new technology in the field

of range extenders. Unfortunately, technology was still in a pre-prototype stage. Nevertheless, VC

funds should keep a close watch on the developments in technology that supports the further

exploitation of range extenders and PHEVs.

EVs are a disruptive innovation, leaving opportunities for ventures to enter the transport industry.

EVs underperform as a mobility provider, but they are able to provide mobility which is cleaner,

more quiet and more efficient when compared to traditional transport. Traditional transport never

aimed to be clean or efficient. OEMs packed more power under the hood of cars than could be

legally used. Logically, EVs should be introduced in specific markets segments that exploit these

advantages and at the same time consider the limitations of EVs. Introducing an inferior product

along different value metrics is typical for a disruptive innovation. Disruptive innovations are

dangerous to industry leaders, since they conquer the market from unexpected angles. Often

leading players are fundamentally incapable of bringing such a disruptive innovation to market,

since the quality of their product is measured along different product dimensions. In this way,

disruptive innovations offer opportunities for smaller firms in an otherwise uneven battle against

larger industry leaders.

Sustaining innovations would meet instant and fierce competition with existing players. Disruptive

innovations on the other hand do not directly target the primary market of incumbent technology.

Consequently, smaller players can smoothly enter the market space and gain foothold in niche

markets. Subsequently, these companies can expand business towards bigger market segments. In


52

this way, EVs provide opportunities for smaller, young companies. These ventures should present

innovative mobility concepts that exploit the specific qualities of EVs. This is a probably an

important reason for the increasing amount of VC investment in the field of vehicle integration and

design, where start-ups are presenting innovative ideas for taxi’s, small city cars and light cargo

vehicles.

VC funds can consider the sectoral patterns of innovation that influence investment opportunities.

Typically, new industries like the EV sector are characterised by higher opportunity for small firms

when compared to matured industries. This suggests a higher success rate for young start-ups,

which will stimulate VC investment. Still, basic technology will mostly arise in larger firms, due to

the necessity of large research and development expenditures. Relating this to the EV sector, the

basic technology underlying EVs are the lithium-ion batteries. Theory suggests that smaller firms

might have a hard time developing breakthrough technology in this field, since it will require high

investment and larger company dimensions to foster such an innovation successfully. Additionally,

research showed that electrical and chemical sectors are more likely to conform to Schumpeter’s

Mark II theory. On the other hand, successful product-market opportunities are first identified by

smaller firms. This can be related to the field of vehicle manufacturers, who can search for new

mobility concepts that successfully fit the qualities of batteries and electric motors. Also, research

showed that mechanical and traditional sectors are better described by the Mark I Theory.

Concluding, the sectoral patterns of innovation mainly point towards vehicle integration and design

as an interesting field for investment.

The field of infrastructure shows many insecurities, limiting investment opportunity for now.

Analysis showed a limited number of VC deals in this field. Indeed, basic charging equipment will

consist of mature technology, which does not fit with the VC model. Still, commercial opportunities

exist for smaller IT-players and smartgrid companies to penetrate the value chain with innovative

concepts for intelligent charging infrastructure. It should be said though, for these possibilities to

open up, charging infrastructure should first be in place. Concepts like Vehicle 2 Grid, it is all still

in the future. Actually, it is still uncertain whether charging intelligence will be installed in the

vehicle or in the recharging infrastructure. Companies that focus on fast charging and battery

swapping might be considered for investment, but range extenders appear to provide a more

sensible solution to range issues.

Also, it is unclear who will own basic charging equipment and the real estate it occupies. Such

basic decisions are also closely intermingled with the political field. For instance, governments have

already decided on a standard plug. One can expect governments to actively take part in the

development of charging infrastructure, positioning themselves as agencies of diffusion for the


53

environmental friendly EVs. Government decisions might push markets in unexpected directions. VC

funds should be aware of the involvement of such a political factor.

In short, the field of infrastructure does show opportunities, but it is hard to predict where things

might go. This increases risk, limiting the value of investment opportunities. Still, the future will

surely present interesting opportunities for VC investment in the further development of charging

infrastructure.

Both energy storage and vehicle design are interesting areas for VC funds to invest in today.

These two fields saw a large number of deals, increasing over the last 3,5 years. Batteries are a

solid investment, since it appears quite clear what will be the key to success in this market.

Lithium-ion technology will become dominant and the market for large-size batteries will grow fast

in the coming years. Batteries should be cheap, have high power and energy density, but also be

long-lasting and safe. A company that can come up with a battery like that, is almost destined to

make money. Battery companies are the real technology owners in the value chain of EVs.

Exploitation of scientific and technological knowledge is an effective way to create competitive

advantage. It is also a way for young companies to distinguish themselves from mature and better

financed competitors. It therefore fits the VC model, since it provides some assurance of success.

The only question remains whether smaller companies are able foster such a complex technology-

based innovation.

Electric transport opens up new vehicle design possibilities and qualifies for specific niche markets.

VC is often centred around technology, but it does not have to be. As long as a young firm can

establish a competitive advantage through an innovative product or service, it qualifies for

investment. Positioning their vehicle as a disruptive innovation, the field of vehicle integration and

design provides ample opportunity for young companies to distinguish themselves. Start-ups who

are able to present mobility concepts that introduce the EV along different value metrics, making

it superior to its traditional competitors, might well hold the key to success.


54

3.2 Discuss ion Researching the VC market is difficult. It is an industry characterised by discretion and

confidentiality. Working as an intern at Yellow&Blue Investment Management BV made it somewhat

easier. It increased my understanding on the dynamics of VC funds and made academic literature

on the subject matter easier to understand. Additionally, I was able to access confidential

information which proved very helpful. Companies seeking capital provided the fund with detailed

information on their business, their technology and their financials, always under a non-disclosure

agreement. Still, in the end most of this dealflow information could not be disclosed in this thesis.

This made it harder to present a comprehensive analysis on the dealflow of Yellow&Blue

Investment Management BV. This may be the cause why, in the end, the dealflow analysis failed to

provide clear conclusions that would have helped to answer the research question. Still, it did

increase the understanding on the variety of reasons why a specific investment proposal may be

rejected.

Access to the proprietary databases, the CleanTech Group database and the New Energy Finance

database, was of great help. It allowed for an accurate evaluation of VC investment into the EV

sector. Notably, the databases also included information on liquidity events, such as IPO’s and

acquisitions. Ideally, I would have liked to match initial VC investment to subsequent liquidity

events. This would have made it possible to effectively analyse the return on investment.

Unfortunately, both databases grew to a comprehensive size only in the last few years, limiting the

entries in the database that show an overlap between initial investment and subsequent exit. Also,

data did not show the equity stake that was acquired in a specific investment round, which

makes it impossible to accurately assess the proceeds made through an IPO or sale. In the end, it

seemed wiser to exclude such an approach from the methodology. Apart from this disappointment,

the databases helped to validate the classification of the value chain of EVs into the three possible

investment fields. Indeed, most entries in the databases could be categorised under these three

fields, further assuring that this classification provided an acceptable framework for analysis.

Moreover, after the databases were divided into these three fields, it revealed clear results.

The qualitative market analysis took up a lot of time, as it included reading a bulk of reports and

meeting up with market experts for extensive interviews and talks. It certainly helped to create a

solid overview of the market developments. Some discussion entered into quite a bit of detail,

such as the part on battery development. But in the end such knowledge is a prerequisite for a

proper evaluation of the subject matter. It helped to effectively assess the probability of the

future success of electric transportation. Uncertainty still remains, since it is hard to predict what

the future prices of battery packs will be. Nevertheless, the discussion in this thesis tried to

provide insight into the chances and difficulties for cheaper and better battery technology.


55

Future research on the role of venture capital in clean technologies can take several directions.

EVs are just one of the technology trajectories that aim for a more sustainable world. Clean

technologies are environmental friendly and are shown to offer competitive returns for investors. It

is therefore important to investigate where VC funds can play an active role in the further

development of such clean technologies. Not only to increase economic activity and foster young

firm growth, but also to further stimulate an economy and a society which is sustainable and more

environmental friendly.


56

Contact

Name: Maarten Siemen van der Vlist

Address: Nieuwe Keizersgracht 36bis

Postal Code: 3514 TZ Utrecht, the Netherlands

Email: [email protected]

Telephone: +31 (0)6 143 843 10

Acknowledgements Firstly, I would like to thank Denitsa Stefanova, my thesis supervisor, for her support. Also, I would

like to thank Albert Fischer, director at Yellow&Blue Investment Management BV, for giving me the

opportunity to combine an internship with the writing of my thesis. I would like to thank all the

people at Yellow&Blue Investment Management BV for the support, especially Tao Ren. All the

people that I interviewed, thanks for your time and enthusiasm! As well, many thanks to Alwin

Nagel from Nuon, who provided me with a load of useful reports. They proved to be a vital source

of information! All the other people that helped this thesis become a reality: Thank you!


57

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Universitat St.Gallen Doctoral Seminar. Rechts- und Sozialwissenschaften Corporate Finance.

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• Anderman, M. Status and Prospects of Battery Technology for Hybrid Electric Vehicles,

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and the State of Technology circa 2008. Institute of Transportation Studies, University of

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Reports

Frost & Sullivan: Strategic Assessment of European Passenger Electric Vehicle Market (May 2008)

McKinsey: Drive, The Future of Automotive Power (2006)

McKinsey Quarterly: Electrifying Cars, How Three Industries Evolve (2009)

Boston Consultancy Group: The Comeback of the Electric Car? (2009)

Deutsche Bank: Electric Cars: Plugged In, Batteries must be included (Juni 2008)


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Spinnovation: Batterijen voor Electrische Voertuigen. (2008)

Electric Power Research Institute: Technology Primer: The Plug-in Hybrid Electric Vehicle. (2007)

U.S. Department of Energy: Plug-in Hybrid Electric Vehicle Infrastructure Review (2008)

Press

Elektrische auto komt echt: De sterren staan goed. Metro, date unkown.

Sportief, snel en schoon. Financieel Dagblad, September 23, 2008

Joris Luyendijk begint bij zichzelf. Weekblad M (NRC), weekly column on Electric Vehicles.

200 Million for Electric Cars. Business Week Online. October 30, 2007.

Elektrisch rijden raakt eindelijk een klein beetje ingeburgerd. De Pers, March 31, 2009.

Bangkok Plugging into Electric Taxis. Christian Science Monitor, March 29, 1995.

Electric Vehicles: Batteries now included. Economist, March 12, 2009

Investors Strain to Sell Start-Up Companies. NY Times, January 5, 2009.

Alternative Energy Storage: Price vs. Performance. Seeking Alpha, December 26, 2008.

LeasePlan brengt met Nuon eerste elektrische poolauto’s op de weg voor ABN. March 31, 2009 .

Beltway for electrical energy solves long-standing problem. MIT News Office, March 11, 2009

Toyota to Develop New Batteries for 'Green' Autos. The Wall Street Journal, June 2008

The high price of the green machine. Financial Times. June 12, 1996

Databases

CleanTech Group LLC. www.cleantech.com

New Energy Finance. www.newenergyfinance.com

Interv iews

Prof. dr. E Masurel – Director Centre of Entrepreneurship at the VU Amsterdam

Roderick van den Berg – Entrepreneur at Eco-Movement

Lars Falch – Manager Sustainable Energy Strategies at Corporate Strategy NUON

Peter van der Sluijs – Manager Strategy at Alliander

Geert Kroon – Structural Design at Nuon Solar Team TU Delft

Ton van den Brink – CEO at PEEC Power Range Extenders

Dr. ir. Marnix Wagemaker – Expert Nanostructured Lithium-Ion Batteries at TU Delft

Joris Knigge – Innovator Asset Management at Enexis

Frits Hermans – Chair of Dutch Platform for Sustainable Mobility

Fabian Roobeek – Analyst at Triple Bottom Line Investment

Wor ld Wide Web:

Autobloggreen.com

Elektrischvervoernederland.nl


60

Elektrischescooterwinkel.nl

Evtransportal.org

Wikipedia.org

Investopedia.com

Olino.org

EVCA.com

ACEA.com

ANFAC.com

USCAR.com

CBS.nl

Betterplace.com

Internsh ip

Yellow&Blue Investment Management B.V.

Atoomweg 7

3542 AA Utrecht

The Netherlands

Tel: +31 (30) 2472 716

Fax: +31 (84) 7184 753

www.yellowandblue.nl

3-month Internship (April - May - June)

Internship Mentor: Tao Ren, E: [email protected]

Events

Autorai 2009

Documents

Master Thesis Business Administration, M.S. Van Der Vlist. VU Amsterdam