Archive for August, 2012

Article from GigaOm.

Zscaler a four-year-old startup that has bootstrapped its business by providing a new form of security designed for a mobile and cloud-dependent workforce, has raised $38 million in first-time financing. The round was led by Lightspeed Venture Partners and an unnamed strategic investor.

Zscaler has been fairly successful in its four years building a significant base of clients including Crutchfield Corporation, La-Z-Boy and Telefonica. The company’s software as a service is hosted in more than 100 data centers around the world and essentially protects a company’s web traffic. It does this by routing requests through Zscaler’s software. But there’s no software for users to download on their clients and there’s also no appliance for corporate IT to worry about.

As the cloud and mobility do away with the perimeter model of security where a firewall may prevent harmful traffic from getting in and corporate secrets from getting out, Zscaler is one of several new companies trying to adapt security to a world where there is no perimeter. And even if the corporate IT thought it had a perimeter, the corporation may not own it or have a say in what runs on it. A perfect example of this might be the CEO’s iPad (a aapl).

Zscaler doesn’t solve all problems, but it’s certainly ahead of the pack in thinking about security in a forward-looking way. Other companies trying to address the changes in security required by BYOD and corporate access to the cloud applications are Bromium and CloudPassage. And by waiting to take on venture capital Zscaler’s CEO Jay Chaudhry has joined a select group of established companies who are finally succumbing to the lure of VC cash. For example Qualtrics, a ten-year-old company this year raised $70 million in its first round of outside investment. Another company, Code 42, avoided VC dollars for 11 years before this year raising $52.5 million.

Read more here.

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Article from GigaOm.

Spotify's Daniel Ek And Martin Lorentzon

Spotify more than doubled its revenue through 2011/12 after expanding to new countries like the U.S.. But the cost of doing so ballooned by the same proportion. The company spent 97 percent of the the €187.8 million it earned. So annual loss widened to €45.4 million.

In its 2011/12 Luxembourg filing, the company acknowledges: “In a low-margin business dependent on rapid growth to cover fixed costs, it is crucial that the group continues to penetrate existing and new markets as quickly as possible…”

With economics like this, global scale may be the only thing that can make Spotify truly sing. But, with Asia and Latin America build-out next on the horizon, it could be at least another year before roll-out costs ebb to the point where profitability is remotely in sight.

If Spotify is not yet a successful business, it is nevertheless a strategically significant one for others in the music industry. It has become the number-two income source for some labels in some countries. More interesting, however, is its direct relationship with labels, the four majors of which are believed to own 18 percent of the firm.

Through that relationship and through Spotify’s underlying API and third-party apps initiatives, it could yet become the industry’s de facto streaming platform – a fabric used by a thousand other services; part-operated by the labels themselves. As one friend described it to me: “A social not-for-profit for the good of the music industry, a rights clearing house.”

Herein may lay a dilemma…

As Spotify continues laying the costly groundwork for global dominance of subscription streaming, it needs more funding to make up for what is, so far, its unsustainability.

“To cover losses during the expansion phase, the group has been financed by existing and new equity owners,” Spotify’s Luxembourg filing says. “We cannot exclude the need or desire to raise more funds in the future.”

The problem is, if Spotify takes a fifth investment round to go on globalising, as has been rumoured, that could dilute the equity of its most vital partners – the labels.

To the labels, their stake is likely of more strategic than financial value – as already stated, they are helping create a digital streaming API that could bear great fruit. So they may want to hang on to the influence that they currently have.

If a new investment in Spotify diluted the labels, they may start charging Spotify more standard royalty rates, rather than the favourable rates it is believed it has been granted until now. That could mean Spotify’s costs escalate still further.

Spotify could dodge this problem by attracting investors only to spin-off regional subsidiaries in its next two target markets – Asia and Latin America – thereby ringfencing its core from dilution.

Four years after its foundation, trailblazing Spotify is the music business’ greatest chance at meaningful new revenue in a digital generation. But it remains to be seen exactly to whom it will provide the most value.

The well-run company is investing heavily in what could become a very valuable global business. But, until its international expansion is completed, we will be hard-pressed to ascertain its true value.

Read more here.

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The Fashion Whip: Michael Steele On What to Wear At The Convention

Some fashionistas dream about Mercedes Benz Fashion Week – I dream about the Republican and Democratic National Conventions. Who will wear what? Will my “bundle” method of packing suitcases with shirt, tie and accessory combos make it safely to baggage claim? Will the political elite log in to check their online style albums? Many of my clients are moving from C-SPAN to Primetime for the next two weeks and the stakes are higher.

While most politicians are not aiming for a spot on the best-dressed list, there is a uniform for standing at the podium: navy suit, white shirt, red tie (sometimes blue). The conventions are Poliwood’s Sundance Film Festival with lots of meeting, greeting, and speaking; outfits even get better as the week comes to a close. Like walking the red carpet, the RNC and DNC conventions are a time to shine, so don’t re-wear last year’s best threads!

I asked Michael Steele, fashion plate and former Chairman of the Republican National Committee, to share his top three style tips for speakers at this year’s RNC and DNC conventions. Here is what the political analyst for MSNBC and partner at Purple Nation Solutions advises:

“Wear a suit your mother would be proud to see you dressed in!” Your suit should reflect your style even if you’re not stylish. Add a pocket square and accentuate with a nice tie. Michael says many politicians are partial to the “George Bush baby blue” tie in a solid light blue, calling it one of the prettiest shades of blue connoting softness and strength.

“Adding a tie pin and cuff links will set off a nice suit perfectly!” Michael says this is definitely an occasion to wear cuff links (even if you’re not a cuff links person). Michael encourages speakers to “frame your words with your cuff links and tie pin” to complete your powerful look.

“Comfortable underwear and shoes are a necessity.” You will spend at least 12 hours walking around – Michael advises to be comfortable and make sure your clothes “fit in a way that you don’t feel trapped.” Need we say more?

Be sure to add your American flag pin and leave your button cuff shirts at home. And, look out for a stylish Michael Steele – he will be the tall guy in wild colors, striped shirts, and a purple seersucker suit.

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Silicon Valley Venture Survey – Second Quarter 2012

August 23, 2012

Background—We analyzed the terms of venture financings for 115 companies headquartered in Silicon Valley that raised money in the second quarter of 2012.

Overview of Fenwick & West Results

  • Up rounds exceeded down rounds in 2Q12, 74% to 11%, with 15% of rounds flat. This was better than 1Q12, when up rounds exceeded down rounds 65% to 22%, and the best quarter since 2007. Series B rounds were especially strong, although we note that the percentage of Series B financings in the survey has declined for three straight quarters, perhaps indicating that companies are having difficulty securing Series B funding, but those that do are being rewarded with substantial valuation increases. This was the twelfth quarter in a row in which up rounds exceeded down rounds.
  • The Fenwick & West Venture Capital Barometer™ showed an average price increase of 99% in 2Q12, an increase from 52% in 1Q12. This was the highest Barometer result since we began calculating the Barometer in 2004. That said, we note that there were two financings (one in the internet industry and one in the software industry) that were each up over 1000% (i.e. over 10x), and if they were excluded, the Barometer result would have been 70%. The median price increase in 2Q12 was 30%.
  • The results by industry are set forth below. In general, internet/digital media and software continued to be the strongest industries by far, with Barometer increases of 248% and 123% respectively (which would have been 176% and 86% respectively if the two aforementioned 10x deals were excluded). The median price increase for internet/digital media and software financings were 105% and 56%, respectively. Cleantech and life science trailed significantly.

Overview of Other Industry Data

    • Venture investment was up in the software and internet/digital media industries in 2Q12 versus 1Q12, while cleantech and life science lagged. However, overall venture funding in 2012 is modestly lagging 2011 to date.
    • M&A was up slightly in 2Q12 versus 1Q12, and 2012 is generally flat in dollars compared to 2011.
    • The number of IPOs was down in 2Q12 compared to 1Q12, but dollars raised were up, as the Facebook IPO dominated the quarter. 2012 is ahead of 2011 year to date.
    • Venture fundraising in dollars was up, but the number of funds raising money declined in 2Q12, compared to 1Q12. Fundraising in 2012 is ahead of 2011 in dollars.The venture environment continues to be a “tale of two cities” with software and internet/digital media thriving and life science and cleantech lagging. Additionally, we note that venture investment, M&A and IPOs have all returned to 2007 (pre financial industry meltdown) levels, but fundraising by venture capitalists continues to be significantly below those levels.

The effects of the increasing concentration of venture capital in fewer funds also bears watching. There are understandable reasons for this trend (capital moving to managers with the best results, early stage companies going global sooner and benefitting from venture capitalists with a more global reach) but this increased financial concentration could leave companies with fewer alternatives. However, the growth of super angels and micro VCs discussed below, and the commitment of some of the larger funds to continue making smaller investments, may offset this trend.

    • Venture Capital Investment.Dow Jones VentureSource (“VentureSource”) reported that U.S.-based companies raised $8.1 billion in 863 venture deals in 2Q12, a 31% increase in dollars and a 20% increase in deals compared to 1Q12, when $6.2 billion was raised in 717 deals (as reported in April 2012). However, investment in the first half of 2012 slightly lags the first half of 2011. Over half of all venture capital was invested in California in 2Q12, with 42% of the total in Northern California.

      Similarly, the PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters (the “MoneyTree Report”) reported $7.0 billion of venture investments in 898 deals in 2Q12, a 21% increase in dollars and a 18% increase in deals from the $5.8 billion invested in 758 deals in 1Q12 (as reported in April 2012). The MoneyTree reported that the software and internet industries were especially strong, while life science was weak.

    • Merger and Acquisitions Activity.Dow Jones reported 110 acquisitions of venture-backed companies in 2Q12 for $13.6 billion, a 7% increase in transaction dollars, and a 12% increase in transactions, from the 98 acquisitions for $12.7 billion in 1Q12 (as reported in July 2012 – the initial April 2012 numbers were subsequently revised substantially and so are not being used). The largest acquisition in the quarter was Facebook’s acquisition of Instagram for $1 billion.

      Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 102 transactions in 2Q12, a 19% increase from the 86 transactions reported in 1Q12 (as reported in April 2012). IT companies dominated, with 77 of the 102 deals.

    • IPO Activity.VentureSource reported 11 venture-backed IPOs raising $7.7 billion in 2Q12 ($6.8 billion from Facebook), compared to 20 IPOs raising $1.4 billion in 1Q12 (as reported in April 2012). 72% of the companies going public were based in Silicon Valley, as opposed to 35% in 1Q12.

      Similarly, Thomson/NVCA reported 11 IPOs raising $17.1 billion in 2Q12 ($15.8 billion from Facebook) compared to 19 IPOs raising $1.5 billion in 1Q12. (It appears that Thomson/NVCA includes shares sold by shareholders in the IPO amount, while VentureSource does not.) Nine of the eleven IPOs were IT companies and all were U.S. based.

    • Venture Capital Fundraising.Dow Jones reported that for the first half of 2012, 82 U.S. venture capital funds raised $13 billion, a 31% increase in dollars over the first half of 2011.

      Thomson/NVCA reported that 38 U.S. venture capital funds raised $5.9 billion in 2Q12, a 20% increase in dollar commitments and a 10% decrease in the number of funds compared to the $4.9 billion raised by 42 funds in 1Q12 (as reported in April 2012). The top 5 funds accounted for almost 80% of the total fundraising in the quarter. Mark Heesen, President of the NVCA, noted that this concentration of capital in fewer funds has narrowed the field of venture funds for both entrepreneurs seeking venture capital, and limited partners looking to invest in venture capital.

      Some traditional investors in venture capital are also indicating a reduction in commitment to the asset class when they cannot get into the best funds. For example, the Mercury News has reported that CalPERS will likely decrease its venture commitment from 6% of its private equity portfolio to 1%, due to poor returns on its investments. And the Kauffman Foundation has indicated similar plans (see “Kauffman Foundation Venture Capital Report” below).

      Venture fundraising by venture capital funds in 2Q12 was again less than the amount of venture capital invested in companies in the quarter.

      The SBA, after 8 years out of the market, has recently allocated $1 billion over the next five years to increase access to early stage venture capital – i.e. companies looking to raise $1‑4 million.  Early stage venture funds can borrow from the SBA an amount equal to what they can raise privately.

    • Secondary Trading.Secondary trading was estimated to be $10 billion in 2011.  The Venture Capital Journal reported that 80% of such trading occurred in negotiated one-on-one transactions (as opposed to on secondary exchanges), and that half of late stage primary financings included a secondary component, triple the amount from five years ago.

      That said, secondary exchanges had a good year in 2011, with Second Market reporting $558 million in trades and SharesPost reporting $625 million.  However, with the IPOs of Zynga, LinkedIn, GroupOn and now Facebook, it seems doubtful that secondary exchange trading of other venture-backed companies will be able to take up the slack in 2012.  Some exchanges are working to address this by proactively working with late stage companies to facilitate liquidity arrangements for the companies’ employees and early stage investors with the exchange’s investor base.

      In general, it seems that late stage companies are becoming more comfortable with secondary sales, and are leaning towards negotiated sales where information provided to investors can remain confidential, the purchasers are known and the transaction can be combined with a primary sale, if desired.

    • Seed Investment.Although concern continues that the valuations of seed stage companies are getting frothy, the expansion of the accelerator/incubator model continues.  Accelerators focused on Swiss, Danish, Israeli and German entrepreneurs have each been started in the past year, or are in the process of being started, in Silicon Valley.  And General Catalyst Partners has joined Yuri Milner, SV Angel and Andreesen Horowitz in the Start Fund which commits to loan $150,000 to each Y Combinator company (foregoing information from Venture Wire).

      Additionally, the two most active venture capitalists in 2Q12 were 500 Startups and First Round Capital (tied for second with NEA), both of whom are seed investors.  (VentureSource)

      And perhaps most interestingly, a significant number of super angels/micro VCs are seeking to raise larger funds or taking on LPs, which if successful could act as a counterweight to the decreasing number of venture capital funds (Venture Capital Journal).

    • The Kauffman Foundation Venture Capital Report.In May 2012 the respected Kauffman Foundation issued a report that concluded, based on their 20 year history of venture investing experience in nearly 100 funds, that “the Limited Partner investment model is broken.”  The report based its conclusion on, among other things, poor returns from most venture funds, incentives for managers to create larger funds to increase management fees, the increasing length of life of venture funds and the relatively small amounts invested personally by many fund managers.  It recommended that limited partners require a better alignment of interests between LPs and GPs, more transparency and better governance provisions.

      The Kauffman Foundation has indicated that it intends to focus its future venture investment in funds of less than $400 million, with historical performance above what could be achieved in equivalent public market funds (which it believes are better performance measures than IRR, top quartile, vintage year and gross return measurements), and in which GPs commit at least 5% of the capital.  They also plan to increase their direct investing and to move a portion of their capital allocated to venture capital into the public markets, as they do not believe that there are enough strong venture capitalists to absorb the available capital.

      Other suggestions from the Kauffman report include (i) that management fees should be based on a budget, not a percentage of funds under management, (ii) that investors should receive their funds back plus a preferred return before venture capitalists share in profits, and (iii) that there should be more transparency in how the venture capital management company is structured to understand how the individual venture capitalists are incented.

    • Venture Capital Return.Cambridge Associates reported that the value of its venture capital index increased by 4.7% in 1Q12 (2Q12 information has not been publicly released) compared to 18.7% for Nasdaq, although for the 12 month period ended March 31, 2012, the venture capital index was up 12.8%, which slightly beat Nasdaq which was up 11.2%.  The Cambridge venture index is net of fees, expenses and carried interest.

      For the ten years ended March 31, 2012 the Cambridge venture capital index was up 4.4% per year, while Nasdaq was up 5.30%.

    • Venture Capital Sentiment.The Silicon Valley Venture Capitalist Confidence Index® produced by Professor Mark Cannice at the University of San Francisco reported that the confidence level of Silicon Valley venture capitalists was 3.47 on a 5-point scale in 2Q12, a decrease from the 3.79 reported in 1Q12.  Reasons given for the decrease in confidence were primarily macro oriented (global economy, life science regulation), as there was general agreement that the entrepreneurial environment viewed in isolation was strong.

      The Deloitte/NVCA Global Confidence Survey reported that global venture capitalists were most confident about the prospects of the cloud computing, software, new media, healthcare IT and consumer businesses (in order of higher confidence to lower) and were least confident about the medical device, financial services, biopharmaceuticals, cleantech, telecom and semiconductor industries (in order of higher confidence to lower).

  • Nasdaq.
    Nasdaq decreased 4.9% in 2Q12, but has increased 2.8% in 3Q12 through August 10, 2012.

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Fashion Whip is a political style column in the Huffington Post by Lauren A. Rothman, inspired by Lauren’s experience as the founder of  Styleauteur, a style and fashion consulting firm.

WASHINGTON – The GOP 2012 campaign is off and running with the Republican ticket almost officially complete, and Paul Ryan as Mitt Romney’s choice for veep. Politics aside, style gossip surrounding the new ticket has zoomed in on Ryan’s baggy suits a la Ron Paul, his consistent choice of checked shirts and his cowlick. And though we’d like to think otherwise, a campaign is not just run (or won) come November with the names on the ballot – it is influenced by the image of the foursome America is just getting to know.

The Romneys and Ryans photograph well together; Ann, Mitt, Janna, and Paul look like coeds frolicking on the lawn of an Ivy League campus, but with a dash of reality. This campaign lacks the plastic Barbies from Stepford (Cindy McCain, Callista Gingrich, Michele Bachmann ) and the ‘ambush makeover’ of Sarah Palin. In fact, of the four, only Mitt never has a hair out of place or a bead of sweat on his face.

President Obama and first lady Michelle are the reigning homecoming king and queen, but Mitt and Ann Romney are like the head of Greek life. Powerful, but not yet in charge. Both are power couples but only one will consolidate their hold on leadership. The Obama’s social presence in Washington, DC has been said to have the Oprah effect – even in a tough economy, such a couple can help keep a restaurant or hamburger joint on the map with one visit. Just the type of positive PR the tourism bureau needs!

America is only now starting to picture a different future. One led by two dark-haired good-looking men with a strong physical resemblance (they appear as almost a father/son duo) supported by blue-eyed friendly blondes. Mitt in his man-of-the-people Gap jeans and button down or his GOP leading man uniform of a debonair suit. At his side, Ann could be in couture or trying hard to master business casual. The dated, ill-fitting pants Paul Ryan wears indicate he does not share Mitt’s tailor, while Janna is a happy bargain shopper . We may hate to think people vote based on image, but there is no doubt the GOP wants you questioning which “team image” should represent this country.

Although American history is full of forgotten men, the role of a strong VP is bolstered by an indelible and unforgettable professional image. We want to see a super fit Ryan campaigning in clothing that actually fits and then teaching Hoda and Kathy Lee his P90X moves on the Today Show showing off his ‘human’ side. We want to see Janna debuting Kirna Zabete for Target because shopping on a budget is chic. Michelle Obama herself is a pro at mixing high and low brands – and adding a belt to her ensembles. Don’t steal her look but do use your enviable figure. The Bidens are a stylish couple who keep the status quo – Jill enjoys fashion and Joe always looks polished.

The Obamas edge out the competition when it comes to style, accessibility and poise. They are relatable, stylish, and a rags-to-riches success story that helps keep dreams alive. They have perfected the updated “Americana” look with Sasha and Malia wearing J.Crew, Michelle supporting independent designers like Jason Wu, Thakoon, Isabel Toledo , and President Obama in Hart Schaffner Marx.

We will undoubtedly become infatuated with the GOP foursome over the next two months and compare their political love story to the Obama-Biden relationship. America, take notice – the best outfits are yet to come.

Fashion Whip is a political style column in the Huffington Post by Lauren A. Rothman, inspired by Lauren’s experience as the founder of Styleauteur, a style and fashion consulting firm.
Follow @Styleauteur on Twitter & ‘Like’ Styleauteur on Facebook.

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The Daily Start-Up: AQT Solar Looks to Sell Off Assets, IP

Top stories in today’s VentureWire:

dailystartup_D_20090806101628.jpgArt by Mike Lucas

AQT Solar has joined several other small private solar manufacturers in search of a partner or an acquirer, as conditions in the market continue to deteriorate for such companies. The Sunnyvale, Calif.-based company, which raised about $32 million in equity since founding, retained Gerbsman Partners to handle the sale of its assets and intellectual property, VentureWire has learned.

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Date Certain M&A of AQT Solar, Inc.

www.gerbsmanpartnes.com Gerbsman Partners has been retained by AQT Solar, Inc. (http://www.aqtsolar.com/ ) to solicit interest for the acquisition of all, or substantially all, of AQT’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “AQT Assets”).

The sale is being conducted with cooperation of AQT.  AQT and its employees will be available to assist the purchasers with due diligence and assist with a prompt and efficient transition.


The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to AQT’s Assets has been supplied by AQT Solar, Inc.  It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, andcompleteness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of AQT Solar, Inc.’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the AQT Solar, Inc.’s Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on or behalf of AQT Solar, Inc. and Gerbsman Partners.  Without limiting the generality of the foregoing, AQT Solar, Inc. and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the AQT Solar, Inc. Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non disclosure agreement attached hereto as Exhibit A.


AQT Solar, Inc. (“AQT” or the “Company”) was founded in 2007, to develop and exploit a high-volume; low cost production process for building solar cells based on copper-indium-gallium-selenide (CIGS) and copper-zinc-tin-sulfide (CZTS) materials. The company’s unique, patented, proprietary process has been developed on a platform architecture that allows for continuous cost and efficiency improvements.

AQT is a privately held, private investor backed company. $32.2 million was raised by the company in its first two funding rounds.

AQT presently employs approximately 34 full-time employees and its product development and pilot line is based in Sunnyvale, CA.

Cost is the fundamental metric of market competitiveness in the solar business. AQT’s unique value proposition delivers the best-in-class costs in three distinct ways:

1)    Use of production-proven high-volume equipment enables world’s lowest TFPV Capex of $0.32/W at scale.

2)   Small form-factor cells (equivalent to Silicon cells) enables a rapid R&D learning curve, which coupled with the low equipment Capex is projected to deliver the world’s lowest module cost of £$0.50/W at scale.

3)   Utilization of a Silicon compatible module structure leverages existing backend capacity, costs, and reliability metrics while simultaneously providing the electrical compatibility to allow mix-and-match of AQT CIGS modules with standard Silicon modules in field installations. Thisinsures ready access to a market that has been growing at a 32% CAGR and therefore can facilitate a rapid revenue ramp.

These three components will enable AQT and its strategic partners to deliver the world’s lowest cost solar photovoltaic module. The company’s ‘low cost by design’ approach matches best-in-class thin film competitor costs in 2014 and remains well below the 10% discount benchmark that thin film suppliers are typically expected to meet.

AQT Solar, Inc. believes its assets are attractive for a number of reasons:

The Company’s proprietary process technology leverages off-the-shelf equipment to build standard-sized solar cells. The central piece of equipment provides automated “deposition” (i.e. “sputtering”) steps in multiple chambers. This approach directly impacts the numerator and denominator of the cost per watt ($/W) equation in multiple ways; and allows for continuous process improvement.

·       Low capital equipment cost – The equipment cost of the process currently stands at $0.43 per watt of annual capacity with a near-term target to bring this to $0.32/w, nearly half of the lowest estimates of silicon costs (wafer + cell). The use of readily available off-the-shelf equipment assures low technology risk and contrasts with other thin film competitors who spend large amounts to develop custom CIGS equipment with varying levels of success.

·       In-line volume cell manufacturing – During manufacturing the cell construction occurs in an in-line process, almost entirely conducted inside the machine in high-volume (as is done today with hard disks and optical disks such as CDs and DVDs), as opposed to other, costlier multiple-step processes (co-evaporation, chemical bath ..).

·       No extra back-end module equipment costs – The process results in standard small-format cells which are drop-in replacements for silicon cells and are packaged using standard silicon module-making equipment. This essentially requires no new technology or cost to build modules and basically eliminates the typical TFPV balance-of-system penalty due to the ease of fabricating large panels.

·       Rapid process development – The Company achieved its near world-record CZTS efficiency in less than 11 months, in contrast to the many years and significant investment required by IBM, the current record holder.  The Company’s rapid success is an inherent feature of its’ novel automated multiple deposition process that allows rapid and precise experimentation with processes and materials.

Longer-term advantages that have been demonstrated today and are scheduled to enter volume production in the next two years include:

·       High-efficiency Nano-engineered structures – The automated, multiple-deposition process uniquely allows for construction of band-gap graded or quantum confined architectures that capture more of the sun’s energy. Sophisticated CIGS structures are problematic with large-area formats using roll-to-roll processes (e.g. Miasole and Solopower) or inks and paints (e.g. Nanosolar).

·       Dual-sided cells – The process can produce dual-sided (“bifacial”) solar cells adding 15-25% in efficiency gain; a 14% efficient bifacial CIGS or CZTS cell thus exceeds the performance of 16%+ silicon. This is difficult or impossible with other silicon or CIGS processes but is achieved with little impact on manufacturing cost using the Company’s process which comprises a machine already designed for dual-side devices (hard disk drives).

·       Use of CZTS materials – The use of CZTS reduces active material costs by 85% resulting in 12% cheaper modules. The Company’s 9.4% CZTS is close to the world record of 11.4 % held by IBM, whose process, despite being costly and complex (metal slurry spin deposition process), is receiving high interest (licensed to Solar Frontier and Del Solar). CZTS should match CIGS efficiency in the 2014 timeframe providing a notable cost per watt advantage.

AQT Intellectual Property Summary

AQT has extensive protected intellectual property consisting of 25 U.S. Patents applications; granted (2) and/or filed (23) in core process technology and critical up and downstream innovations. In addition there are 21 International Patent applications filed. All, the patents are wholly assigned to AQT. AQT’s Core IP is primarily in the area of technologypertaining to sputtered elemental, alloy and compound targets in conjunction with thermal processing. The result is: 1) broad flexibility in the choice of starting materials, 2) tight control of constituents and of process reactions, 3) simple construction of complex materials and/or structures, 4) ready attainment of high yields and productivity, 5) simple production implementation and control, 6) attainment of best-in-class cost basis at scale. The patentportfolio represents a broad array of strategic variables including:

·  Proprietary CIGS and CZTS target (raw material) formulations and novel methods of fabricating the same
·  Novel CIGS and CZTS solar cell device structures and designs including future high efficiency quantum confined structures
·  Simple pathways for the fabrication of CIGS and CZTS solar cell absorbers using PVD (sputter) deposited pre-cursors and methods for the inclusion of selenium at this step instead of the conventional complex selenization process
·  A variety of novel enclosures and fixtures to enhance the thermal processing of CIGS and CZTS solar cell absorbers
·  Creation of bandgap graded structures using coated donor covers and enclosures in the annealing process
·  Novel cell interconnection designs and configurations

AQT Market and Competition

Today’s solar industry is largely dependent on Silicon, for which little IP or barriers to entry exist, resulting in extreme cost competition driving many tier-2 players, and even some tier-1 players, to exit despite robust demand fundamentals. To compete on a $/W basis, remaining silicon players must endure expensive recapitalization to produce better (multi-crystalline or mono-crystalline) silicon processes. An estimated capital investment of $0.62/W or more of integrated cell manufacturing capacity is required to reach what is likely to be a long-term, floor module production cost of around $0.60/W (current module costs are $0.70 to $0.85/W). The Company believes its’ process requires close to half of the silicon capex upgrade burden to achieve a significantly lower floor module production cost. It follows that a strategic partner will invest much less capex, to produce modules that cost much less.

Cell + Module Capex Costs’ Effect on Module Costs, 2012 (GTM Research, 2012)
At scale, the Company’s process is projected to achieve both capex and manufacturing costs lower than silicon. When combined with continued reduction in balance-of-systems (inverters, mounting, racking, etc.) pricing, this solution represents the most viable pathway to Levelized Cost of Electricity (LCOE) rates of less than 10 cents/watt within the next 36 months, on par with conventional non-renewable energy sources.

CIGS processes such as roll-to-roll, inks and plating require complex and costly development of new types of manufacturing equipment, are problematic for complex and higher-efficiency nanostructures, and have balance-of-systems (BOS) cost penalties in the case of monolithically integrated modules (higher voltages therefore fewer modules per string). The Company avoids all these challenges by using off-the-shelf equipment to make low-cost discrete cells that can be packaged into high-power/low-voltage modules using existing silicon packaging equipment and capacity. A further advantage of the Company’s approach is that its’ modules can be seamlessly integrated with silicon modules in blended installations to optimally satisfy both cost and bankability requirements.

In spite of its current difficulties, the solar PV market is just getting started. The projections are for 30GW growing to 100GW+ per year to be installed through the end of the decade. The resulting TAM will be in excess of $500B. It followsthat it isn’t too late for a new entrant with a disruptive technology and that the size of the market makes the taking of an intelligent risk more than worthwhile, particularly when significant new capital expansion is undertaken in the next few years.

AQT Technology Solutions
The Company’s unique process is tailored to run on low-cost, high-volume and production proven equipment. Fitting the process to the equipment, while the mainstream approach in the semiconductor industry, has not been the norm in the Solar PV thin film industry. This has resulted in a long and high investment cost equipment development cycle being required by AQT’s thin film competitors. By skipping this step AQT has been able to make efficiency improvements (relative to months since founding) significantly faster and at a much lower investedcapital than its thin film competitors.

The AQT process results in a streamline, fast-cycle-time, dry (sputtered) process that can fabricate a completed CIGS or CZTS solar cell in just hours. A unique set of compound targets mimics the CIGS reaction, which allows for a short, lowtemperature, Selenide-Free anneal. This last is critical as the selenization process, besides being environmentally sensitive, has historically been themost difficult step to control in conventional CIGS cell production and is the bane of many of AQT’s CIGS competitors. The company’s process also incorporates band-gap grading for high efficiency and has already yielded intrinsic efficiencies of 15.6%. Finally, the same basic process has been demonstrated to be applicable to both the CIGS and CZTS material set. An interesting aspect of the technology is that the precise process pathways adopted to give the final CIGS (or CZTS) structure, aside from being protected by patents and trade secrets, cannot be reversed engineered.

The net result of AQT’s differentiated strategy is a business plan based on the following three principles:

Production Proven Equipment + Small Cell + Simple Process

Taken individually, each of these three components may not appear to be that powerful. But collectively the resulting learning rate have enabled AQT rapid progress to date and will enable the company to catch up with the Best-in-Class CIGS suppliers in 2013 in a highly capital efficient manner; literally requiring hundreds of millions of dollars less investment than equivalent competitors.

AQT’s Low Risk – High Reward Strategy
Delivers High Efficiency PV with Low Investment

 Fixed Assets

AQT has approximately $10 million of removable assets. The assets include analytical equipment modeled after NREL’s analytical lab, R&D & pilot production equipment, and facility support equipment. The analytical assets include: Hall Effect Tester; XRD and XRF Systems; Spectro-photometer; small and large IV Cell testers; Optical Microscope; LBIC Measurement System; Laser Profilometer; and various other test equipment. R&D & pilot production equipment include: Intevac 20 chamber PVD system; DEK Automated Screen Printer; Optek Laser Scriber; Belt Annealing Furnace; AJA 2 chamber, multiple target, PVD R&D system; and,various other production related equipment. Facility support equipment includes: chillers, back-up generator, compressed air systems, DI water systems and gas abatement systems.


AQT has developed a revolutionary thin film solar cell manufacturing & packaging paradigm resulting in:

·  proven, robust, low cost manufacturing equipment
·  simple & capital efficient process
·  flexible capacity increments
·  applicable to multiple material systems
·  flexible module design (size, power)
·  Silicon module materials & equipmentcompatibility
·  pathway to un-subsidized grid parity

Appendix: Key Personnel

The Company’s staff of over 40 employees includes eight senior executives having a combined 180-years of experience and 100+ patents in thin-film technologies with solid operation experience in establishing and growing major worldwide manufacturing operations, establishing and integrating international strategic partnerships and joint ventures, directing R&D and bringing technology platforms to market for companies such as Cypress, Kodak, Moser Baer, WC Heraeus, Seagate, Applied Materials, Hewlett Packard, Marvell, among others.

Dr. Michael Bartholomeusz
CEO and Co-founder
Michael brings over 15 years of executive experience to AQT Solar, and has consistently grown businesses organically and via joint ventures and acquisitions, throughout his career, including two manufacturing start-up companies in China. Michael’s expertise in global enterprise management— including operations, technology, organizational development, channel management and raw materials sourcing—have been instrumental to AQT’s growth to-date.  Michael holds a Bachelor of Science inPhysics from the University of California, Santa Cruz; a Master of Science and Ph.D. in Materials Engineering from the University of Virginia; and executive business credentials from The Darden School of Business and The St. Gallen Management Institute in Switzerland. He has 26 published and pending patents and is extensively published in refereed industry journals.

Mariana Munteanu
Vice President of Technology and Co-founder
Mariana has over 11 years of R&D and manufacturing experience in thin-film in the magnetic recording industry. Mariana came to AQT Solar from hard disk drivemanufacturer Seagate Technology. During her time with Seagate, Mariana played a pivotal role in the commercialization and release of advanced new media formats. As a recognized expert with a proven track record in the vacuum deposition of complex thin-film structures, Mariana is ideally qualified tomanage the cost effective mass manufacture of AQT Solar’s novel thin-film PV devices. Mariana holds a Master of Science in aeronautical engineering from The Politechnical Institute in Bucharest, Romania, and a Master of Science in mechanical engineering from San Jose State University.  She has also completed three years of graduate studies towards her Ph.D. in mechanical engineering at Stanford University.

Dr. Brian Bartholomeusz
Vice President of Corporate Development and Co-founder
Brian possesses over 21 years of international experience in the high-tech industry where he has focused on R&D, corporate strategy and business development in companies ranging from start-ups to large companies. Brian most recently served as executive vice president of strategic initiatives at Moser Baer, a multinational photo voltaic (PV) and optical disc manufacturing company, where he was responsible for technology acquisition, joint ventures and diversification initiatives, most notably in the PV space. As part of the core team that launched Moser Baer Photo Voltaic Ltd. from the ground up, Brian has broad domain expertise and a global network of contacts in the PV technology, manufacturing and business segments. Brian holds a Bachelor of Arts in chemical engineering from Cambridge and a Ph.D. in materials engineering from Stanford University.
Kaichui “Skip” Wong
Vice President of Operations
Skip has spent 20 years of his career in the semiconductor industry, focusing on process technology development and operations. Skip most recently served as executive vice president of operations and sales for Leadis Technology Inc., where hesuccessfully built a global operations organization and improved the cost structure. Skip holds Bachelor and Masters of Science degrees in electricalengineering from Case Western Reserve University, and an Executive MBA Degree from Harvard Business School.

Rajeev Krishnan
Vice President of Business Development
Rajeev has over 20 years of business development, sales and marketing experience. At AQT, Rajeev is responsible for developing and implementing the world wide go-to-market strategy for the company’s CIGS cell technology and products. Prior to joining AQT, Rajeev worked as senior vice president of strategy and business development at Moser Baer Photo Voltaic Ltd. for four years. Whileworking at Moser Baer, Rajeev was responsible for developing international markets, while developing a competitive strategy focused on competitor weaknesses and segmented markets. Rajeev holds a Master’s Degree in environmental engineering from Oregon State University and a Masters of Chemical Engineering and Bachelor of Chemical Engineering from Madras University in India.

Gene Altomari
Vice President of Finance
Gene has over 30 years of financial, controller and operations experience with high-tech companies including Applied Materials, Material Research Corp, and WC Heraeus GmbH. As the CFO and general manager of one of WC Heraeus’ largest global manufacturing sites, he was responsible for ramping manufacturing and operations to meet market demand, while at the same time updating and implementing ERP systems from 4th Shift and SAP, and securing ISO certification. Gene has a Bachelor of Science in business and finance from Manhattan College and an Executive MBA from The St. Gallen Management Institute in Switzerland.

Dr. Yuanda “Randy” Cheng
VP and GM China
Randy is responsible for developing and managing strategic partnerships in the Greater China region. He has over 20years of experience in thin film materials, devices, and business development.  Prior to joining AQT Randy distinguished himself in senior management and executive positions at world class companies such as Seagate, IBM, Akashic and WC Heraeus.  Most recently Randy was Vice President for WC Heraeus’ Thin Film Material Division, China.  Randy holds a Ph.D. in Physics from Arizona State University as well as an EMBA from China Europe International Business School.  He is a six Sigma black belt with a very successful track record of implementing six-sigma methodologies in manufacturing to drive yield improvement and cost reduction. He holds 10 US patents in thin film materials and devices.

Appendix: Summary of AQT Solar, Inc.’s Carry Forward Losses
Currently AQT has a loss carry forward of approximately $19 million Federal and $10 million California. This amount is expected to increase by an additional $11 – 12 million in 2012. This implies a total potential loss carry-back and/or forward to an acquiring company of approximately $30 million Federal and $20 million California. The benefit to an acquiring company is limited to 3.26% per year (current limit, subject to change) of the purchase price. Note that these losses will not carry forward in the case of an asset sale.

The Bidding Process for Interested Buyers

The Bidding Process for interested  and qualified parties will be required to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”).  Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the AQT Solar, Inc.’s Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the AQT Solar, Inc.’s Assets.  A sealed bid must be submitted so that it is actually received by Gerbsman Partners no later than Thursday, Sept 20th 2012 at 3 p.m.Pacific Daylight Time (the “Bid Deadline”) at AQT Solar, Inc.’s office, located at 1145 Sonora Court, Sunnyvale, CA – 94086. . Please also send an email to  steve@gerbsmanpartners.com with your bid.

Bids should identify those assets being tendered for in a specific and identifiable way.  The attached fixed asset list may not be complete and Bidders interested in any fixed assets must submit a separate bid for such assets, be specific as to the assets and any sale of the fixed assets or Intellectual Property of AQT Solar, Inc.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable.  All bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to AQT Solar, Inc.). The deposit should be wired to AQT’s attorneys Murray & Murray, a Professional Corporation. The winning bidder will be notified within 3 business days of the Bid Deadline.  The deposit will be held in trust by Company’s counsel.  Unsuccessful bidders will have their deposit returned to them within three business days of notification that they are an unsuccessful bidder.  AQT Solar, Inc. reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.

AQT Solar, Inc. will require the successful bidder to close within a 7 day period. Any or all of the assets of AQT Solar, Inc. will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.  All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the AQT Solar, Inc. Assets shall be the sole responsibility of the successful bidder and shall be paid to AQT Solar, Inc.’s at the closing of each transaction.

For additional information, please do not contact the company directly, please contact:

Steven R. Gerbsman
415 456-0628

Kenneth Hardesty
408 591-7528

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