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NewNet Industry Profile: Better Placep

10 Dec 2010

Shai Agassi, chief executive, Better Place
While the electric automotive sector has been the subject of much interest in recent years, its growth has been hindered by the lack of infrastructure to support consumer take-up. With this in mind, Palo Alto-based electric vehicle network company Better Place aims to rejuvenate flagging demand for an emerging electric transport sector with a global rollout of a new electric vehicle infrastructure.

The key, according to company founder and CEO Shai Agassi was to create an offering that did not rely on government stimulus or radical technology, but rather offered consumers a genuinely workable transport solution.

‘The thought I started with, is how do you do this still within the boundary of the science we know today – no waiting for the magic battery to show up. How do you do it from the power of the consumer up, not from the power of an edict down?’, said Agassi, speaking at the Technology, Entertainment, Design conference last year.

Prior to the inception of Better Place, Agassi was already established as a prominent technology entrepreneur, following the $400m acquisition of TopTier Software, a company he founded with his father. Following his resignation from German software development company SAP, he set his sights on a solution to the growth of the emerging electric mobility sector, first using ethanol, then hydrogen, before settling on batteries as an effective solution to the theme of low carbon mobility.

The notion developed into a white paper, which he presented to governments across the world. ‘I handed it out to governments, and some governments told me that it’s fascinating that the young generation actually thinks about these things, until I got to Shimon Peres,’ said Agassi. The turning point came when he delivered his concept to an audience, including the Israeli president.

After reading Agassi’s white paper, entitled Scenarios: The End of Oil, Peres put his weight behind the project, gaining Agassi audiences with the heads of large automotive companies. Agassi found a keen partner in Carlos Ghosn, head of car-maker Renault–Nissan, who pledged to produce electric cars compatible with Better Place’s offering.

Better placed

The company received a further boost from an unlikely source, when Idan Ofer of Israel Corp, the country’s leading oil refiner, pledged $100m to the first fundraising round, which closed in October 2007. Israel Corp was joined by venture capital firm Vantagepoint Venture Partners, investment bank Morgan Stanley and a smaller group of angel investors, officially launching the company. Since then, Better Place has raised $700m, valuing the company at $1.25bn, an almost unheard of amount for a pre-commercialised company less than three years old.

The company also recently raised $350m in a massive venture capital fundraising round with new investors including investment bank Lazard and the notably risk-averse HSBC. The bank led the round with a $125m investment, taking a ten per cent stake in the company, following a stringent review process.

‘It was probably an 11-month process with HSBC, where they came in and did extensive diligence – very thorough – on every element of our business: our executive team, our tech platform, our partners,’ says Better Place spokesperson Julie Mullins. ‘And then, once they concluded their due diligence, they brought in the top hardware and software consultants: the top automotive consultants, the top business consultants, and used those outside sources to then go back and start searching through their own diligence, and then report back to HSBC.’

‘One of the absolute beauties of Better Place,’ adds Anthony Bernbaum, global head of special opportunities at HSBC, ‘is that it allows for the build-out of infrastructure to make electric cars a success, without significant or even any government funding and without consumers making any great sacrifice.’

Better Place is primarily an infrastructure developer, based on Agassi’s conclusion that a network of electrical vehicle infrastructure was essential for the growth of the sector, and that whatever solution was arrived at would have to be as efficient and affordable as existing vehicles, or better. The Better Place solution envisaged the creation of a network of charge spots and battery replacement sites for the use of a number of makes of electric car.

For consumers, the proposition functions like a mobile phone package, where the user pays for a certain number of miles per month. The battery technology remains part of Better Place’s corporate infrastructure, which allows the company to retain control of its technology, and allows customers to benefit from improvements in technology as they develop.

The platform is based on the idea that drivers rarely travel more than 100 miles in one day, meaning that they can travel with the battery, and recharge it from a point installed outside their houses. The Better Place infrastructure of charge spots and battery replacement points is a solution in the event of longer journeys, bolstered by onboard GPS technology, which identifies recharge points en route and offers journey plans to include them if necessary.

Mullins said, ‘The system has GPS, as well as remote access to the EV energy information, so you can basically drive from San Francisco and it will plan your route and tell you if you need to switch, should you need to.

‘It really helps for that personal energy management, o nobody ever needs to have that fear of being stranded, because you will always know where your next point of charge will be,’ she adds.

Paradigm shift

The first regions where Better Place expects to go live are Israel and Denmark, in the first half of 2011. Charge infrastructure is already installed in Jerusalem, as well as charge points at railways stations and shopping malls, and a demonstration centre. Next will be Denmark, where a sympathetic regulatory framework and high fuel prices make electric vehicle technology a good fit. The company’s partners in the country are Renault and Dong Energy, and Better Place has to date raised $100m for its operating company there.

Mullins said, ‘Denmark made perfect sense to be the next, because they do have this extra supply of wind, and they have very progressive policies around clean energy vehicles and low emission vehicles, where they basically have 180 per cent tax on gasoline-powered cars and a zero percent tax on the zero emission cars, so that in itself made it compelling.’

The first two are small, self-contained territories, but Agassi was also keen to prove that the technology could work in much larger areas. This challenge was approached through the concept of ‘cell areas’, where regions such as Australia could be divided into more manageable regions closer to the size of Israel or Denmark by targeting its densely-populated coastal metropolitan conurbations, starting with Canberra in late 2011, followed by Sydney and Brisbane.

The company has also targeted corporate allies including Fed Ex, Intel and Nike, who have committed to converting a portion of their fleets to electric vehicles when the cars are released. Better Place is expanding fast, signing agreements and setting up operating companies across the world, with EV power networks planned for Hawaii, California, Japan, and Canada. It also recently took its first steps into China with the signing of a memorandum of understanding with Chery Automobile, China’s largest independent auto producer, to collaborate on EV technology in the country. China represents the world’s largest untapped market for vehicles, with 80 per cent of sales going to first-time buyers in 2009 and two per cent of the country’s population owning cars. China has the potential to leapfrog fossil fuel cars entirely, depending on the efficacy and take-up of EVs.

‘We will be looking to expand into new markets, and we are looking at countries and areas where they have progressive policies towards electric vehicles in place. The government is already on board. In our mind, a lot of that will probably happen in Europe, where the price of petrol is high and in China, but I wouldn’t expect us to be signing up ten countries in the next year because of this financing. It won’t be like that,’ said Mullins.

While there exist many other companies in the electric vehicle space, Better Place does not see them as competition.

‘We don’t build electric cars,’ she says. ‘We put the infrastructure in place that will support them, so if anything with a company like Tesla, it’s a very complimentary relationship in the sense that their cars can work on our networks.’

Copyright © 2010 NewNet


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