Houston’s Mentor-driven Seed Accelerator

SPRING 2012

Seed Accelerator Overview• Provide Entrepreneurs with

Capital, Mentorship & Connections, in Return for Equity

• Structured 12 week curriculum culminating in “Pitch Day” to Angels, VCs and Industry Execs

• Similar programs have achieved strong returns in other IT verticals

There is NO accelerator focused on ENERGY IT vertical

Why SURGE?Growth/Success of US Seed Accelerators

Case Studies: IT Successes Another Y-Combinator Win: WuFoo Exits for $35M, After Raising Only $118,000

Salesforce.com has just announced that it is acquiring Heroku for $212M in cash

AOL acquired SocialThing with $550k in fund raising post TechStars

$35M

$212M

Limbo merges with Brightkite and announces $9M funding round

$9M

Localytics Raises $2.5M for Mobile Analytics Platform

$3M

Dallas’ TechWildcatters ImageVisionLabs raises $2M from Walden Venture Capital

$2M

$10M

SURGE• Houston’s For-Profit, Mentor-Driven Seed

Accelerator

• 12-week Bootcamp launching in Spring 2012

• 1st & Only Accelerator Focused on ENERGY + IT

• Progress 50+ Mentors: Leading VC’s, Energy Execs, Entrepreneurs

Raised over $500K (DFJ Mercury, HAN, Energy Co’s)

Launched Website and Attracted PR

Paying Sponsors including Energy Focused Service Providers

Joined TechStars Network for global Accelerators best practices

Core Purpose

To be the pre-eminent mentor driven seed accelerator focused solely on enabling entrepreneurs to create the efficient energy software technologies of the future, thus reducing the country's reliance on fossil fuels and improving overall energy efficiency.

SMART GRID

IT applications used to increase grid efficiency, measure demand, and

reduce waste

Includes Smart Grid, Smart Meter, and EV

Grid

TRADING & RISK MGMT (ETRM)

Capital Markets + IT = Increased visibility and

flexible response to supply or demand

shocks

DIGITAL OILFIELD

Data + IT used to maximize production, safety, and efficiency

at the wellhead

Efficient Energy Software Technologies

Portfolio StrategyFOCUS: Entrepreneurs developing innovative applications at the intersection of Energy + IT

GOAL: Take startups from theory & prototype to pilot, next round of funding and commercialization

INVESTMENT:• 10 teams

• $30k per team

• 6% common equity

CAPITAL

CUSTOMERS

World Class Ecosystem

COMMUNITY

SERVICE PROVIDERS

ACCOLADES

Leadership: Steering Committee

Kirk Coburn – Managing Director3-time Entrepreneur: PGA TOUR Network, Chief Outsiders. Dell Exec

Blair Garrou – Board MemberCo-founder DFJ Mercury. Incubator Expert. Entrepreneur. Rice Faculty.

Andrew Clark – Board MemberFormer Chairman of HAN. HTC EIR. DFJ Mercury Venture Advisor. Compaq Exec.

Brett Perlman – Smart Grid LeadFormer Public Utilities Commissioner. McKinsey & Co. Smart Grid Expert.

Brian Landrum – Board MemberFormer COO Reliant Energy. Compaq GM. McKinsey & Co.

Why HOUSTON

The Energy Capital of the World

Home to more than 5,000 Energy

Companies

#1 IT Services Economy

Fully Deregulated Utility Market (Gen to

Cust)

Largest Population of Deployed Smart

Meters

Largest Purchaser of Green Power in

Nation

#1 Wind Generation

Keys to Program: Mentors

Week 1

Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Week 8

Week 9

Week 12

SURGE DAY

STAGE 1: Connections

STAGE 2: Product

Readiness

STAGE 3: Pilot Landing

Term Sheet Prep

SURGE: Custom Curriculum

Customer Validation

Customer

Discovery

Customer

Creation

Company

Building

Pivot

Connections to Capital, Customers, Entrepreneurs, Expertise, Talent

Business Plan and Financial Model Development

Product Development and Market Validation

Mentor Workshops (Marketing, Sales, Ops, IT, Legal, etc.)

Connect Lead Mentors to Teams

Program Next StepsPILOT INCUBATION &

FUNDINGIDEA

Global Entrepreneurs

Texas Universities

Industry

Incubators

Pilots

Funding

40+ VC’s from SURGE DAY

Timeline

Date Activity

9/15/11 Launch Website / Video at Rice Energy Forum

12/01/11 Open Applications

1/15/12 Close Applications

1/20/12 Investment Committee narrows down finalists

2/01/12 Pitch Day (20 teams) – mentors invited to provide feedback

2/10/12 Select 10 teams – Committee makes final decision

3/01/12 Begin First Class

5/23/12 End First Class

5/24/12 SURGE DAY (Pitch Day to 300-400 Angels, VC’s, Corp.)

Next Steps to SURGE

STEP 1: Become a Mentor

STEP 2: Identify Other World-Class

Mentors

STEP 3: Identify Key Problems to

Solve

STEP 4: Participate in SURGE Day

STEP 5: Agree to Pilot/Connect

STEP 6: Invest

Mentoring at SURGE

• Giving Back and Building an EcoSystem• Lead Mentoring vs. Ad Hoc Input • Exclusive and World-Class• Timing Commitment: 2-3 hours per

week • Focus: business model, go to market

strategy, branding, pricing, the investor pitch, connecting to customers

• Long-term: Board, Invest, Connect, Give-Back

SURGE Day

• What: Class 1 Presents Plan and Demo • When: June 2012• Who: 300 – 400 venture capitalists,

angel investors, energy companies and corporate development teams, media, entrepreneurs

• Where: House of Blues • Goal: 50%+ to land follow-on funding

(>$500k) and land critical pilots in next 6 mos.

Investing in SURGEWhy Invest: Cat Bird Seat, Second Order Effects, HAN Energy

Ecosystem

Investment Structure: LLC Model used by Leading

Accelerators

• Raising $900,000 ($500k already funded)• DFJ Mercury

• HAN Members (Kirk Coburn, Andrew Clark, David Steakley, Scott Southall,

Hayden Hill and Brad Wilson)

• Kemal Farid

• Investors buy membership interests in LLC

• Carried interest in lieu of salary, No Mgt Fee, Standard

Practice

Expected Returns

• TechStars sees 2-3x return in 5-7 years, potential for

larger upside.

BACKUP

Target Entrepreneurs LOCATION: Willing to locate in Houston for 3 month

bootcamp FOUNDERS: Coachable Intelligence, Integrity and

Energy★ Strong value proposition★ Strong competitive advantage★ Target a large market

CAPITAL: Will bootstrap with seed funding COMPANY FOCUS:

★ Information Technology that Improves Energy Efficiency★ Existing Prototype/Product★ Capital Efficient ★ Leverage Texas Ecosystem

• Global: Partnerships Leading Industry Networks including Energy, CleanTech, and Entrepreneur

• Regional: Alliance with TechStars Network, Start-up America, Kaufmann Foundation

• Local: ~30 Efficient Energy Companies in HTC, Rice, UH Systems, & Local Startup Groups

• Local: Connect with existing Energy ecoSystem to promote Entrepreneurship

Attracting Entrepreneurs

Budgeting & FundingStart-up Costs: $50k (Legal, Website,

Recruitment)

2012 Program & Operational Costs: $250k

2012 Company Investments: $300k

Sponsorships & Donations: $40k

Equity Investment Y1: ~$600k - $900k

Equity Investments Secured (Aug 2011):

$300k

Investor Commitment Range: $25k to $150k

Financial ProjectionsOriginal Investment =

$648,710

Total Return = $2,200,000

Return Multiple: 3.4

IRR (10 year): 13%

Comparative Track Record

Y-Combinator > 5x Return

Omnisio sold > $15M to Google

Heroku sold > $220M to Salesforce.com

• TechStars >15% acquired over $2M with investment of $20k

• 7 out of 10 companies are raising outside funding

Smart Grid: $138B market

Key Application Areas:Distribution Automation

Data AnalyticsDemand Response

Cyber SecurityCarbon Management

Home Energy ManagementElectric Vehicle

Customers:

UtilitiesResidential ConsumersCommercial Buildings

Cities

Key Application Areas:Market data acquisition

Real-time position trackingPredictive analytics & reporting

Carbon tradingWeather Integration

Demand-Response integration

Customers:

Energy CompaniesUtilities

Commodity TradersCompanies that hedge energy

use (i.e. airlines, freight logistics)

Energy Trading & Risk Management: $500M market

Digital Oilfield

Key Application Areas:Real time data acquisition

Reservoir managementWell modeling

4D Seismic Wireless remote operations

Customers:

E&P companiesOil field service companies

Technology vendors

Smart Grid defined...

Smart Grid defined...

Energy Trading & Risk Management Management

Digital Oilfield: defined