How & What Growth-stage CEOs Are Ending 2011 & Planning for 2012

Below is the hyperlink to take the Q4 CEO peers speed-survey, exclusively for growth-stage CEOs. This survey focuses on “How & What Growth-stage CEOs are Ending 2011 & Planning for 2012″

This shouldn’t take more than 5 minutes of a busy CEO’s time–

We here at BSG Team Ventures periodically take the temperature of the markets we serve. The survey is no more than 15 questions, most simple multiple-choice.

These surveys are created and compiled by BSG Team Ventures as a courtesy to our executive ecosystem with the belief that knowledge is power. Aggregated peer-provided knowledge is “actionable power.”

To compare how you’re feeling a year later with the survey results from Q4 2010, titled “CEOs Plan for 2011”, go to http://www.bostonsearchgroup.com/blog/q4-2010-ceo-survey-of-growth-stage-companies/

We make an effort to survey only those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if you don't fit the aforementioned description, please refrain from responding.]

Feel free to forward to the qualified CEOs in your sphere of influence. The more data generated, the more accurate the trend lines.

All responses are anonymous due to the web-based survey technology employed.

We will forward the survey results within the next two weeks to the email address on file. Please let us know if there is another email address you wish us to send the results to as well.

BSG Team Ventures is pleased to have assisted in the recent search for Telkonet’s new Executive Vice President, Sales & Marketing.

Subscribing to the renewable energy industry mantra, “Efficiency is the first fuel,” Telkonet provides energy efficiency systems for residency intensive buildings.

BSG Team Ventures completed the search in 90 calendar days.  Key success attributes for the executive sought included deep experience and credibility with the ESCo (energy services company) industry, power purchase agreements, and energy performance contract creation within the commercial sector, including hotels, government, and education.

Telkonet, Inc. (www.telkonet.com) develops, manufactures, and sells energy efficiency and smart grid networking technology products and platforms in the United States and Canada. Its powerline communications technology (PLC) utilizes a building’s internal electrical wiring as a data communications network, turning power outlets into data ports while leaving the electrical functionality unaffected. The company offers Telkonet SmartEnergy products, including thermostats, sensors, controllers, and wireless networking products, as well as Networked Telkonet SmartEnergy platforms that incorporate Recovery Time technology for the monitoring of climate conditions and automatically adjust a room’s temperature accounting for the presence or absence of an occupant. It also provides smart grid networking technology products comprising Telkonet iWire System and Telkonet Series 5 PLC products, which include gateways, extenders, couplers, and ibridges to transform a site’s existing internal electrical infrastructure into an Internet protocol. In addition, the company offers high-speed wireless Internet access solutions and technology to the hospitality industry. It serves the hospitality, education, healthcare, and government/military markets.

For the full Telkonet corporate press release, see  http://www.marketwire.com/press-release/Telkonet-Appoints-Gerrit-Reinders-New-Executive-Vice-President-for-Sales-Marketing-OTCQB-TKOI-1405366.htm .

BSG Team Ventures has been retained to recruit the UK Managing Director and Advisory Board Directors  for a new British energy generation business that targets the commercial customer with a unique onsite co-generation solution that reduces their cost of heat and power while at the same time requiring no up front capital expenditure nor addition of employee overhead.

You can think of it as an “On-Site Utility” offering clean electricity, heat, hot water and cooling to hotel, healthcare, and multifamily housing properties in the United Kingdom. The company sells the energy produced on-site as an alternative to the outright sale of energy equipment; designing, installing, owning, operating and maintaining the complete CHP system. Customers pay only for the energy they need and use, at a rate guaranteed to be below their local utility rates, via a prenegotiated power purchase agreement.

Reporting directly to the President of the parent company, the UK Managing Director is responsible for all activities of the subsidiary.

Essential Job Functions/Responsibilities

Below is a Venn diagram of the success attributes for the Managing Director position–

Energy Efficiency Systems for Residency Intensive Buildings

“Efficiency is the First Fuel”

Our client develops, manufactures, and sells energy efficiency and smart grid networking technology products and platforms in the United States and Canada. Its powerline communications technology.

The Position

The Vice President of Sales for the Smart Energy division will report to the CEO, and be responsible for all revenue generating activities within the division.

Essential Responsibilities

• - Divisional revenue ownership
• - Sales team-building
• - Sales & marketing strategy (sales, marketing, operations)
• - Sales leadership and sales pipeline management
• - Developing and managing detailed budgeting & forecasting
• - Developing sales and distribution plan
• - Developing partnerships in upstream indirect sales channels
• …

Ideal Candidate Profile

The diagram below illustrates the intersection of competencies critical in the VP Sales position:

Compensation

Compensation is competitive with the position’s requirements.  In a performance-based environment, this will include base salary, incentive bonus structure based on both individual, department, and corporate qualitative and quantitative MBOs, and a stakeholder position in the company.

“]

Rob Day, Black Coral Capital | Michael Balmuth, Edison Ventures | Alexis Borisy, Third Rock Ventures

Once or twice a year we as a firm gather CEOs from the Boston innovation ecosystem to share thoughts amongst themselves.  Often, the format is lubricated by a panel to kick things off.  Always, the format is lubricated by an open bar and dinner.

 This Fall’s CEO gathering in early November brought together 50 or so CEOs around the topic of planning for 2011, and what to expect as a CEO. 

Whether early-stage venture, or mid-stage growth, investors are adopting a different approach to what they are looking for, how much they are putting to work, and what they expect to see as an end result.  This is proving true not just in the tech sector, but cleantech, medical device, and biotech.

 If CEOs are looking for more investment, whether growth equity, seed capital, or something in between, what are the “new normals” to think about going into 2011.  And if CEOs aren’t looking for money, but looking for exits, what are the expectations of investors in 2011 and beyond? 

 We assembled a panel of venture capital investors who all had raised new funds in the last year or so.  These investors also represented a different flavor than traditional venture capital.

 On the panel? 

• Michael Balmuth, General Partner, Edison Venture Fund
• Alexis Borisy, Partner, Third Rock Ventures
• Rob Day, Partner, Black Coral Capital

 What were the “new normals” CEOs and VCs talked about?

 Here are a few that got some air time:

2011 is likely to be an economic “ground hog year.”  The current economic cycle of “flat is the new up” is here to stay for the medium term;  In taking a flash vote of the room, the overwhelming majority felt that the economic conditions in which companies are being created are not going to change for the better any time soon.  Simply turning the calendar over from 2010 to 2011 is not likely to yield a more fertile or forgiving economic climate in which to grow innovation-stage companies.  In our recent survey  of growth-stage CEOsfor Q4 2010, we noted in a prior blog post that the vast majority of CEOs had already shifted their strategies or were planning to in the near future as a direct result of an expectation that 2011 might look a lot more like the end of 2009 or 2010 than ‘07 [see CEO survey pie chart below]

Seed rounds are becoming pervasive compared to prior quarters.  And these aren’t for Web 2.0 companies only.  CB Insights in their Q3 2010 summary demonstrated that this is a trend that is occurring in cleantech / greentech as well as healthcare IT.  All 3 investors on the panel agreed that seed funding makes sense.  Alexis Borisy, Partner at Third Rock Ventures, talked about their approach to seeding, saying that they tend to help start the companies, not just fund them, often taking an interim role on the executive team to incubate to a point of value inflection.  Michael Balmuth mentioned that although Edison Ventures doesn’t do “seed stage investing” per se, he loves to see companies that get seed rounds, as it often is an effort to drive toward profitability faster.  At that point, Edison may be more interested in a seed-funded company that achieves an early positive cash flow position than a typical heavily syndicated, multi-series venture-backed portfolio company.  Black Coral’s Rob Day added that he felt that investing in capital-efficient companies, even in the cleantech sector, was something he has advocated for a long time.  [see CB Insights graph of growth in seed round funding over last 5 trailing quarters, 2009-2010]

• As an asset class, venture funds have lost money for a while now.  Limited partner investors in venture capital and even private equity believe that they still have to invest in this asset class because it does make money during economic or industry sector bubble periods, and to invest once a bubble has been established would mean missing the upside.  During other times, LPs try their best to pick the funds that outperform their peers.

• Using investment banks to raise equity capital  should be done selectively.  If the industry is a small one, and the network is well established (like biotech investing Alexis pointed out), using an i-bank at an early stage is not the best idea.  However, in the cleantech sector where there are more total number of investors, they are internationally distributed, the industry is younger and less well-networked, and there is an imbalance in demand-supply (more money chasing fewer good deals), the investment banking solution may be just the right one.  One CEO, Larry Letteney of Second Wind in the cleantech sector, shared just such a recent positive experience in going out for their next round. 

• Seek out funds that have real capital to invest, preferably “fresh.”  Each of the three funds represented on the panel had all raised funds in the last twelve months or so.  But there are a lot of funds that are at the end of their last fund.  Many are unlikely to raise another fund.  Many investors are taking meetings, but setting the bar exceedingly high because they have only an investment or two left, and they don’t want to get caught making a bad one given the challenge in delivering returns to LPs in the most recent investing vintages.  There was also a “beware” comment about funds who are making seed round investments at the end of their funds.  They are more likely to do so, as it is an easier story to message an investment mulligan to LPs if you can just say, “It was just a small seed investment, so no biggie.”  Caution was also expressed that an investor at the end of a fund making a seed investment will be less likely to have additional capital to invest even if the company is doing well.

We hope to post a video snippet of the the VC-CEO dialogue for a flavor of the evening’s conversation in the near future.

Each quarter we survey growth stage CEOs who are running innovation driven companies.  This quarter,  we had more than 60 CEOs responding.  CEOs were running companies in broadly defined technology (software, hardware, semiconductor, telecom), Internet (e-commerce, media, social, entertainment), medical devices, biotech, and cleantech / renewable energy sectors.

A note on methodology.  We send these surveys only to those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies).    All responses were anonymous due to the web-based survey technology employed. The majority of respondents were in the United States, with the highest concentration on the East and West coasts (New York, Boston, and San Francisco/Silicon Valley areas).

For prior survey results from Q2 2010, titled “Impact of Economy and Renewed Growth”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%e2%80%93-impact-of-economy-renewed-growth/ .

ECONOMIC CLIMATE

The first set of questions was around the economic conditions in which each CEO felt s/he was operating.    One question we continue to ask and re-ask over the last six quarters or so targets the turbulence in the macro- economic climate.  It is interesting to compare CEO responses to the same question, “Do you anticipate a double dip in the near term future?”

* In Q3 2009, more than half  (54%) of CEOs polled were expecting a double dip, and planning accordingly

* In our Q2 2010 survey,  again 50% felt a second economic correction was likely, the biggest percentage of those CEOs believing it would be in either Q3 2010 or sometime in 2011.  The other half  of CEOs felt the specter of recession was behind them

* Currently in Q4 CEOs were consistent with prior quarters with a bit more than 50% indicating they didn’t feel a double dip was likely, and the other half of the CEOs saying either a 50/50 probability or greater (16% feeling more likely than not)

So less than 1 in 5 CEOs feel another economic dip is likely.  No CEOs selected the ” greater than 75%” probability.

It’s interesting to do a meta graph of the changing CEO sentiment on this question.  Surprisingly, the graph would be sloping downward, but not as much as many would hope.  The high point was certainly back in Q3 2009, but even throughout 2010, as many CEOs were fearful of a negative correction as those who felt it was behind us.  No doubt this “lack of confidence” index doesn’t inspire the CEO with a swashbuckling, damn-the-torpedoes-full-speed-ahead attitude toward growing their companies.  Rather, it makes CEOs think in short-term windows, perhaps 3 months at a time, with little appetite to make medium or long-term bets.

Those CEOs who felt another downturn was likey referenced several factors that might tip the scales negative–  gridlock in Congress due to midterm elections and likelihood that Democrats lose congressional majority, a belief that a bad Q4 holiday retail shopping was likely, and the persistent overhang of ongoing commercial and residential loan defaults.

As for when another economic dip might occur if it were to occur, the vast majority of CEOs pointed to Q1, 2011, with Q4 of this year and Q2 2011 tying for second at 18% each.

STRATEGY

Almost 50% of CEOs polled said that they had either made a shift in strategy in 2010, or were planning to in the near future.  Granted, growth-stage companies are prone to shifting strategy until they land upon the best formula for significant and sustainable growth.  However ~50% is a big number, and clearly a chunk of those companies have been driven to rethink their strategies because of the challenging economic climate, the concern over the future, and the possibility that 2010 might represent “the new normal” where with no economic “rising tide” no help generated to float all company boats as in periods of economic expansion in the past (1997-2000, 2005-2008, etc).

CASH FLOW

The majority of CEO survey respondents (49%) indicated that they were still planning on burning cash over the next 2 quarters.  24% indicated they would be profitable.  CEO comments regarding this question indicated an overwhelming drive toward cash flow break even.  That was the big push and focus for their companies in 2010, and if they hadn’t achieved it yet, they were gunning to by end of the first quarter of 2011.  CEOs also commented that they were trying to run their companies at break even, with any extra EBIT being reinvested back into the company for additional growth.

COST REDUCTION PLANS

When asked what were the top 3 areas CEOs were targeting for cost reduction, the following table summarizes their responses, representing a combination of spend reduction and staff reduction in non-core areas.  There was a preference by CEOs to favor non-staff cuts over cutting headcount if at all possible, but many acknowledged that in order to make meaningful cuts, staff had  to be considered in the equation.

CEO responses when asked about increasesin spend were logical.  The top three in order were sales, marketing, and R&D.  Many of the comments about this question noted the fact that outside of directly growing revenues, additional spend was hard to build in when many CEOs are driving toward a minimum cash-neutral mandate and economic uncertainties are driving CEOs to think conservatively rather than expansively.

[Click on "more" below for remaining 8 slides and narrative from Q4 2010 CEO survey]

More…

As Chair of this year’s 2010 Finals, I would like to welcome you to the 6^th Annual Ignite Clean Energy Competition here at Babson College.

There are two simple messages I would like to share this year.

The first— We have reunited West Coast and East Coast cleantech competitions this year to create now the oldest and largest cleantech competition.  Ignite Clean Energy Competition is now the Northeast regional competition for the national CleanTech Open (www.cleantechopen.com ).  The CleanTech Open now has 5 regional competitions that feed regional winners to a national finals held this year out in Northern California in November.  Participating regions in addition to the Northeast include Rocky Mountain based out of Denver, North Central based out of Minneapolis, Northwest based out of Seattle, and California anchored in the Bay area.  We’re excited to be part of what is a growing organization, and we welcome all interested to participate in any of the other regions and/or spread the word to those you know share our passion for cleantech innovation at the seed stage.

The second message  is a simple “thank you.”  And that thank you is to all volunteers in ICE over the past 6 years, competitors, mentors, sponsors, and other passionate supporters who have sustained our success through the unprecedented growth of the cleantech sector.   From our first year of the competition to 2010, we have seen the New England cleantech ecosystem grow from a small yet unorganized band of passionate visionaries, to a veritable army of well-organized constituents of a new industry sector and connected ecosystem.  The Massachusetts Clean Energy Center, headed by Patrick Cloney, is the latest evolution of our anchor underwiter for Ignite Clean Energy.  Across those 6 years they have made ICE possible, organizations like the New England Clean Energy Council was born and under Nick Darbeloff and now Peter Rothstein’s leadership, they have become the nucleus to no less than a dozen other cleantech-related organizations in New England from the Massachusetts Hydrogen Coalition (http://www.massh2.org/ )to the Clean Economy Network (http://www.cleaneconomynetwork.org ), from New England’s own cleantech-focused angel investing group, Clean Energy Venture Group (http://www.cleanenergyvg.com ) to a website dedicated exclusively to cleantech ecosystem events CleanTech Boston (www.cleantechboston.com).

Is it a fad?  A bubble? Unlikely.  Sustainable energy solutions are a fundamental part of making the 21^st century not our last century of civilization as we know it, but rather a bridge to sustainable centuries of civilization, innovation, and evolution that lie beyond.

TOPIC: How & What Growth-stage CEOs Are Planning for 2011

Below is the hyperlink to take the Q4 CEO peers speed-survey, exclusively for growth-stage CEOs.  This survey focuses on “How & What Growth-stage CEOs are Planning for 2011″

This shouldn’t take more than 5 minutes of a busy CEO’s time–

We here at BSG Team Ventures periodically take the temperature of the markets we serve. The survey is no more than 15 questions, most simple multiple-choice.

These surveys are created and compiled by BSG Team Ventures as a courtesy to our executive ecosystem with the belief that knowledge is power.  Aggregated peer-provided knowledge is “actionable power.”

For the survey results from Q2 2010, titled “Impact of Economy & Renewed Growth Planning”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%E2%80%93-impact-of-economy-renewed-growth/

We make an effort to survey only those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if you don't fit the aforementioned description, please refrain from responding.]

Feel free to forward to the qualified CEOs in your sphere of influence. The more data generated, the more accurate the trend lines.

All responses are anonymous due to the web-based survey technology employed.

We will forward the survey results within the next two weeks to the email address on file. Please let us know if there is another email address you wish us to send the results to as well.

Registration is Now Open

4th Annual Benefit

VCs vs. Entrepreneurs – Davis Cup Challenge

Thursday, September 23, 2010
Longwood Grass Courts  /  2:00 – 7:30pm

Welcome Back!  BSG Team Ventures is proud to once again host the 4th Annual  Benefit: VC vs.  Entrepreneur Tennis Tournament – Davis Cup Challenge, and we are thrilled to have you join us.

The VC/Entrepreneur tennis community has been growing every year so please register now so we can build the teams early.

Entry is by donation of $175.00.  Please click here to register!

For questions, please email Cristina Vieira Abramson at cvieira@bsgtv.com or call 617.784.4987

Agenda Overview

VCs vs. Entrepreneurs - Thursday, September 23, 2010

Format - Round Robin, Doubles

Time - 2:00 – 7:30pm (includes tournament, finals, cocktails, dinner and networking)

Location – Longwood Cricket Club, Chestnut Hill, MA

REGISTER

The UK’s sustainable energy program is a public-private partnership at work.  And thus far, working well.

I recently had the opportunity to participate in what has become an annual “Cleantech Trade Mission” of Boston and New York cleantechers to the United Kingdom.    Our hosts?  The UK Trade & Investment team based here in the Northeast, part of the large mandate of the British Consulate  here in the U.S. to continue to put planks in the bridge between our two countries, especially when it comes to cleantech and sustainable energy solutions.

Although I joined midweek as was over there for a European-based executive search we were interviewing on, the group moved from North to South, starting on Monday up in Edinburgh, Scotland, then down through Newcastle, Cambridge, and ending with two days in London.

It was a comprehensive gathering of the UK cleantech ecosystem for an exchange of ideas and “show-and-tell” around the UK of their commitment to sustainability and cleantech thought leadership.   Our US band of cleantech brethren among others included investors from Rockport Capital and Kleiner Perkins.

There were  three notable differences between the UK and US surrounding renewable energy & cleantech:

1) Government superstructure like the Carbon Trust (keep in mind, the UK has cap-and-trade and the U.S. doesn’t) Cap & trade drives a true dynamic market in the UK while the US version is still mired in politics on Capitol Hill.  The UK succeeded in passing sweeping energy-related legislation in 2008 (http://www.carbontrust.co.uk/about-carbon-trust/pages/default.aspx ), and the result has been a fueling of the entrepreneurial engine in Britain to come up with new technologies, sciences, and Internet-driven efficiency and monitoring solutions to help drive adoption and integration of the new laws.

2) Landfills and methane is another interesting difference again brought about by the UK’s progressive legislation.  Britain is an island, and a small one at that compared to the U.S. (60+ million citizens, one fifth the size of the U.S.)   There is limited real estate for landfills, and one of the big offenders from landfill is methane gas.  A host of science-driven entrepreneurs have tackled what is referred to as anaerobic digesters (http://www.foe.co.uk/resource/briefings/anaerobic_digestion.pdf )

3) Massive investment in offshore wind generation capacity is the third area. It was truly remarkable the detail behind Britain’s likely ascendance to global leadership in offshore wind generation.   Historically, Scandinavia has held that claim.  However, with Britain’s aggressive 2020 goals, they’re going to no doubt lead in offshore wind expertise and GW installed base.

Some quick numbers related to the 2020 initiative:

* Capital expenditures:  £14 billion already spent in the last 5  years.

* £5.6 billion more in cap-ex planned for the next 5 years (keep in mind, this is a country with a population of ~ 62 million, about one fifth the size of the United States)

* Closure of 25% of traditional power stations (coal or other non-renewable sources)

* 25% of natural gas generated from UK sources

* Addition of 44GW of offshore wind power at distances up to 200km from shore, and in water depths down to 80m

Something like 40% of energy capacity is going to be wind, with a vast majority of that coming from offshore wind.  However, UK power generators like NationalGrid recognize that there needs to be a large redundancy due to the intermittent nature of wind as a resource.  NationalGrid is planning primary failover in the form of LNG and CCS capacity to power conventional generation, replacing virtually 100% of existing coal-fired plants with carbon-capture versions.  The best hope to reduce this reliance on traditional energy sources is to innovate a wind power storage solution that can be commercialized between now and the completion of the 2020 UK offshore wind initiative.

Britain is pioneering a number of other innovations, including a CO2 transportation network that transports CO2 for storage (think CO2 “pipeline”), taking a chunk of  the industrial complex’s CO2 emissions and capturing, storing and or repurposing it.

After all that cleantech knowledge transfer, what did the UK serve for dessert?  A cocktail party with London-based cleantech entrepreneurs and investors at Taylor Wessing’s offices on the top floor wrap-around patio on a gorgeous London summer evening (below was the mis en scene).

In addition, we had an opportunity to take a sneak peek from “The View, ”  an official viewing site of the 2012 Summer Olympic Park, at the top of an adjacent apartment building in East London that has impressively grown from a former area challenged by urban decay.   And the London Olympics stand to be the greenest one yet from what we were told, with prolific and cool sustainable innovation even built right into the very steps of the stadiums that use spectator energy expended in climbing up and down the stadium to power an LED lighting system.  One of their sustainability goals is to try to construct the Olympic venue with a net-zero carbon footprint.

Footnote:  Rob Dietel, Vice Consul, who heads the cleantech vertical for the British Consulate’s UK Trade & Investment New England office, is a terrific resource along with his colleague, Kevin McCarthy, also out of the Boston office.  Rebecca Lewis is  Rob’s New York-region counterpart. All three are bringing a select group of UK cleantech entrepreneurs to Boston and New York this Fall.  In addition, they’re planning on putting on a one-day “master class” of sorts showcasing UK offshore wind expertise here in the U.S.  Invitation-only, and for those who are lucky enough to get the invite, it should prove to be great content.  For more detail, Rob is at rob.dietel@fco.gov.uk.