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Venture Capital in Energy Abdulla Al-Subyani, President Gulf Venture Capital Association

Venture Capital in Energy Abdulla Al-Subyani, President Gulf Venture Capital Association November 20, 2006. Objectives. Introduce Venture Capital Highlight the Strategic Benefits of Venture Capital to the Saudi Energy Industry. Outline. Gulf Venture Capital Association

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Venture Capital in Energy Abdulla Al-Subyani, President Gulf Venture Capital Association

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  1. Venture Capital in Energy Abdulla Al-Subyani, President Gulf Venture Capital Association November 20, 2006

  2. Objectives • Introduce Venture Capital • Highlight the Strategic Benefits of Venture Capital to the Saudi Energy Industry

  3. Outline • Gulf Venture Capital Association • Introduction to Venture Capital (VC) • Venture Capital in Energy • Recommendation

  4. Gulf Venture Capital Association

  5. Gulf Venture Capital Association

  6. Venture Capital (VC) • Venture Capital is the catalyst for creating, nurturing, and growing new ventures for financial gain to its shareholders, i.e., its investors • New Venture = Entrepreneurs + Venture Capital • Venture Capitalists contribute • Funding & experience • Strategy & insight • Powerful networks including access to key customers • Professional and management foresight

  7. Risk Price Seed Start-up Early stage Expansion Buy-outs,buy-ins Venture Capital M&A Private Equity Life Cycle of a New Venture EXIT 5 - 7 years Trade Sale IPO Market Established First Sales First Product Patent Prototype Idea, Concept R&D Pre-seed Source: PolyTechnos Venture Partners

  8. 2-3% Mgt Fee Money • Investors • Limited Partners Pension ≈ 40% Institutions ≈ 20% Endowment ≈ 13% Insurance ≈ 12% Corporations≈10% Individuals ≈ 5% VC Firm General Partners Fund Managers Portfolio Companies Entrepreneurs ≈ 80% of Capital Gains ≈ 20% Capital Gains Source Deals Monitor/Add value Raise Money Provide Capital Use Capital Typical Fund Structure

  9. Saudi Arabia PE Equivalent ≈ $340 MM/Yr World AVG = 0.11% Private Equity (PE) Investment To GDP - 2005 0.80% 0.74 0.70% 0.60% 0.50% 0.41 0.40% % GDP 0.30% 0.25 0.23 0.20% 0.12 0.10 0.10% 0.07 0.06 0.06 0.05 0.02 0.007 0.00% India China Japan France Ireland Finland Taiwan Germany Singapore South Korea United States United Kingdom Source: IMF/Thomson Financial

  10. PE/VC Investment To GDP-2004 0.74 % GDP Source: World Bank/Pricewaterhouse/Venture Economics/NVCA Money tree

  11. PE/VC Investment - 2004 $ Billion Source: Pricewaterhouse/Venture Economics/NVCA Money tree

  12. PE/VC Investment in Asia - 2004 $ Billion Source: Pricewaterhouse/Venture Economics/NVCA Money tree

  13. Venture Capital Drives Economic Growth • Economic Benefits • New markets and technologies • Increased GDP and job creation • Economic growth and diversification • US Economic Benefits (1978-2004) • 27.5 million jobs • Three times more export than established companies • Key sources of technological and business innovation

  14. Global Raised Venture Capital Funds in Energy 20.0 17.7 18.0 16.0 14.0 12.0 $ Billions 10.0 8.0 5.3 5.3 5.1 6.0 2.3 2.4 4.0 2.0 0.0 2001 2002 2003 2004 2005 2006 YTD Source: Thompsom Financial

  15. Key Players in Energy Investing Venture CapitalPrivate Equity Altira First Reserve Arch Venture Partners SCF Partners Braemar Energy Ventures Limerock NGP Energy Technology Partners Natural Gas Partners Nth Power Chevron Technology Venture Shell Technology Ventures Siemens Venture Capital

  16. Top Venture Capital Firms are Targeting Clean Energy • Kleiner Perkins • Highland Capital Partners • Davidow Ventures • VantagePoint Venture Partners • General Catalyst • Polaris • PolyTechnos

  17. Venture Capital-Backed Energy Companies • Capstone (micro-turbine) • Weatherford • Maverick Tube • National Oil Well • Superior Energy Services • Spinnaker Exploration • Geomechanical International • Chart Industries

  18. Potential Benefits to the Saudi Energy Industry • Access and ownership to key technologies and new markets • Achieve growth by acquiring significant products, technologies, people, and companies • Stimulate entrepreneurial behavior • Influence pace and direction of markets and technologies (e.g., clean energy) • Achieve above average financial return

  19. Recommendations • Private sector should engage in Energy PE/VC • Create an energy innovation ecosystem in Saudi Arabia • Corporations should consider getting into venture capital • Organize a biannual workshop/seminar on VC in Energy coupled with exhibition for startup companies

  20. Gulf Venture Capital Association

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