Part: 1, 2, 3

Winning the Business Cup


Matt Caspari from Aurora BioFuels presents his case at the Intel/Berkely Challenge.
Photo: Bruce Cook/Lester Center

A key ingredient for any successful startup is attracting the right investors. But in a booming market, competition for investment dollars is fierce.

"The odds aren't with you to get venture financing," Matt Caspari tells us. "Once you get venture financing, the odds aren't with you that it will be at all successful. And even the successful ones, you hear the company's sold for $100 million. Well, how much do the entrepreneurs really own?"

To get ahead of the competition, and get Aurora's name in lights, the company entered one of the world's premier business plan competitions, the Intel/Berkeley Challenge. The annual Intel Challenge, as most people call it, is a bracing three-day competition that pits young companies from America against teams from around the globe.

In recent years, clean tech proposals have dominated top business plan competitions. On the first day of the Intel Challenge, Matt Caspari mulls over Aurora's prospects as he surveys teams from Russia and China.

"A lot of people who have done well in their careers are saying, 'What do I want to do next?'" he says. "They see energy in the news and they don't like the reliance on fossil fuels in the Middle East; they don't like high prices; they don't like the environmental impacts. So, a lot of people with political clout and capital are trying to solve this problem. Fortunately for us and the other entrepreneurs here, they're looking to some of the top universities around the world to try to find people who are willing to do the hard work day in and day out to make it happen."


Marianne Wu, a partner at Mohr Davidow Ventures and a judge at the Intel/Berkeley Challenge.
Photo: Bruce Cook/Lester Center

A major attraction of business plan competitions is hob-nobbing with the judges. At the Intel Challenge, many judges are investors from Silicon Valley's leading venture capital firms who pick the winners and scout out possible deals. One of the judges at this year's competition is Marianne Wu, a partner at Mohr Davidow Ventures. Wu has already been talking about a deal with Aurora.

"The area that they're focused on, which is algae as a feed stock for bio-fuel, is one that we have great interest in," Wu says. "Energy is the fundamental driver behind daily activity, behind industrial growth, behind our commercial infrastructure."

At the competition, teams make short pitches and are grilled by judges in small, wood-paneled meeting rooms. On day two, Aurora passes into the semi-finals where the team makes the pitch before four judges, including Marianne Wu.

Guido Radaelli opens in gravely accented English. "We are Aurora BioFuels. And we are doing something magic. We are turning wastewater into bio-diesel using our proprietary super-algae."

Company CEO Caspari sketches out the big picture.

"We're all aware of extremely high oil prices, geopolitical issues that are tied in with our dependence on fossil fuels that has resulted in subsidies and mandates on the federal and state level," he says. "Adding to that environmental concerns and it's really a perfect environment for alternative energy and bio diesel. The market itself is new and rapidly expanding. We had a production of 20 million gallons of bio-diesel in 2004. Last year, production was 75 million gallons."

But, he adds, "The problem with bio-diesel today is that it mostly comes from agricultural crops. Agricultural crops are expensive. They have better uses than being burned for fuel. Our method allows us to produce vast quantities of bio-fuel cheaply."

Aurora asked us not to reveal proprietary information discussed in private meetings with judges, but in an earlier public gathering at Berkeley, the Aurora team gave clues about their business plan.

"The heart of this business, we call it our secret sauce, is our biotechnology," Caspari told the audience. He explained that the "secret sauce" was derived from a strain of algae "whose bio-yields are three times higher than what occur naturally."

Back at the competition, Aurora's pitch ends smoothly. The judges give the team a round of applause. In the halls of Berkeley's Haas School of Business, home to the Intel Challenge, Aurora is generating buzz. Dan Lankford, a judge and partner at Wavepoint Ventures, tells us bio-fuel companies like Aurora could offer consumers, businesses and municipalities a simple way to reduce carbon emissions.

"There's no question," says Lankford, "that from a venture capital standpoint, the whole issue of global warming and [reducing] carbon emissions has become a very interesting space. This is real business, real money, with very draconian consequences for people who don't meet the standards."

Lankford tells us he's impressed with Aurora's business plan.

"In order to have any value at all, you have to have a big enough market," he says. "So you have to solve a need. You have to address, as we often say, somebody's pain. You have to make the pain go away. Two of the biggest problems we're trying to solve in society today, one is energy, the other's environmental. Aurora addresses both."

At the evening awards ceremony, each team gives a one-minute "elevator pitch," a rapid-fire monologue set in an imaginary elevator ride with an investor. When the first-place winner is announced, Aurora Biofuels name flashes across a large screen. Matt Caspari and his partners stroll to the stage in fashionable black suits to collect the $25,000 winning check.

Investors, including Noventi's James Horn, take notice of Aurora's success at Berkeley.

"Winning the competition clearly means a lot about the viability of their idea. So it kind of started the ball rolling for us," he says. Soon after, Horn's firm Noventi agrees to fund Aurora.

Continue to part 3

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