Rainwater, Inc ET CitySmart Smart Irrigation for the Future

Rainwater, Inc ET CitySmart

Smart Irrigation for the Future[Karen Cheng] [Eddy Fong] [Paras Gandhi] [Julia Pashin]

Background – Water Conservation

Austin Key Measures Total Usage/Peak Day Outdoor summer water use

Water Conservation Task force Conservation initiatives

Goal: 1% water use reduction Grant

$500,000 Solution for outdoor water use

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Background - Rainwater, Inc

4th: irrigation industry Products: sprinkler/drip irrigation systems, basic

controllers Develops, manufactures and markets

Goal: product differentiation Pursue enhanced technology Utilize strategic conservation strategy

Grant competition as launching pad

Assume Existing research/production facilities

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Strategy

The Genesis Way

Current Technology

Competitive Environment

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

STRATEGY

Overall Strategy – The Genesis Way

Grant &

Partnership

Util

ity

Sav

ings

Rebates

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

STRATEGY

Overall Strategy: Current Tech

Basic controllers – timer feature ET ‘smart’ controllers:

Calculate optimal water need creates watering schedule

Methods to adjust original schedules Solar/rain/soil moisture sensors Real-time weather data

Proven successful SWAT testing Experimentation

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

STRATEGY

Overall Strategy – Competitive Environment

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

STRATEGY

Our Solution

The ET CitySmart

Competitive Environment

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Our Solution – The ET CitySmart

Expand into the smart controller market Best available technology

Differentiate: Utilize LCRA water usage data Emphasize low cost to customers

Bigger rebates Using phone line Using minimal sensors

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Our Solution – Competitive Environment

STRATEGY

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

SOLUTION

Technology

ET

Healthy Range

How It Works

Database

NRE Costs

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Current ET algorithms combine Sensors Weather forecasts Landscape information

Calculates optimal level of water needed

Technology - ET

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Customize your Water Zone

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY

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Solar Sensor Homeowner Profile

Rainwater Servers

City Water Data

Weather Forecast

1. Data is collected at home1. Data is collected at home

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY

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3344


2. ET CitySmart sends data to servers2. ET CitySmart sends data to servers

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY


Rainwater Servers

City Water Data

Weather Forecast

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3. Rainwater servers are updated hourly3. Rainwater servers are updated hourly

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY


Rainwater Servers

City Water Data

Weather Forecast

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3. Rainwater servers are updated hourly3. Rainwater servers are updated hourly4. Rainwater sends customized water schedule to household4. Rainwater sends customized water schedule to household

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY


Rainwater Servers

City Water Data

Weather Forecast

Technology: Database

tblCustomer

PK CustomerID

FK1 ZipCode LocationID Username Password Subscription Algorithm

tblSensor

PK SensorID

Sensor Time RadiationIndex

tblZone

PK ZoneID

PlantType GrassType SoilType LandSlope SunnyTypeFK1 CustomerID

tblLocation

PK,FK1 ZipCode

City State

tblForecast

PK Forecast ID

Temperature Humidity Wind UV Radiation

tbWaterLevel

PK LakeID

LakeTravis LakeAustin LakeBuchanan

tblAlgorithm

PK PenmanID

FK4 CustomerIDFK2 Forecast IDFK1 SensorID Air Density Irradiance Heat capacity Conductance Vapor Pressure Latent HeatFK3 LakeID

tblZipMaster

PK ZipCode

City State

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY

Software engineering: Algorithm revisions $115,000 Web interface $65,000

Mechanical engineering: Engineering/Circuit Development $85,000 Prototype Development $35,000

Testing: $37,500 IBM Server: $17,500 LCRA Link: $25,000 Training: $112,500

Technology - NRE Costs

STRATEGY

SOLUTION

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

TECHNOLOGY

Total NRE: $492,500

Implementation

Timeline

Partnerships

Marketing/Distribution

Sustainability

Scalability

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Implementation - Timeline

Partner with LCRA/Austin

R&D: Design, Build and Test Prototype

Manufacture Controllers

Sell Controllers

Target High-Water Users

Widespread Advertising

2 4 6 8 10 20 25 30 3515Months

Year 1 Year 2 Year 3

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Implementation – Partnerships

Partner with the City of Austin City provides:

$200 rebates Utilities bill mailings Access to usage database Rainwater provides: Water consumption decrease of over 1% by 2011

Partner with Home Builders/Landscapers/Irrigators Target new homes

STRATEGY

SOLUTION

TECHNOLOGY

RISK

BOTTOM LINE

BACKGROUND

IMPLEMENTATION

Implementation - Marketing

Marketing High vs. General users

High users consume over 25,000 gallons a month Target High users initially Extend advertising to general public after 2 years

Pricing Controller: $249 After rebate: $49 Annual subscription fee: $36

STRATEGY

SOLUTION

TECHNOLOGY

RISK

BOTTOM LINE

BACKGROUND

IMPLEMENTATION

Implementation - Distribution

Sales Channels Hardware stores Website Landscapers Irrigation

Installers

STRATEGY

SOLUTION

TECHNOLOGY

RISK

BOTTOM LINE

BACKGROUND

IMPLEMENTATION

Implementation - Sustainability

STRATEGY

SOLUTION

TECHNOLOGY

RISK

BOTTOM LINE

BACKGROUND

IMPLEMENTATION

Short-Term Low price Quickly and aggressively penetrate market

Long-Term New Homes: Maintain home builders partnership Communication: Include broadband/wireless

Implementation - Scalability

STRATEGY

SOLUTION

TECHNOLOGY

RISK

BOTTOM LINE

BACKGROUND

IMPLEMENTATION

Expand into other cities Las Virgenes, CA (76.2% outdoor) Scottsdale/Tempe, AZ (66.5%) Walnut, CA (63.9%) San Diego, CA (62.8%) Denver, CO (59.7%) Phoenix, AZ (58.7%)

Risk Analysis

City of Austin Partnership

LCRA Partnership

Price Match

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Risk Analysis

No City of Austin Partnership Unlikely because Rainwater saves water

and money for Austin Marketing Rebates

Contingency (No Partnership) Higher Prices = Lower Market Share

(3%) 2008: 151% ROI 2011: 254% ROI

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Risk Analysis

No LCRA Partnership - minimal risk LCRA statistics are a core component Publicly available

Competitors Price-Match Low price is competitive advantage City Partnership: Cost below Manufacture No Partnership: Cost still below

Manufacture

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

BOTTOM LINE

BACKGROUND

RISK

Bottom Line

Rainwater

City of Austin

Consumers

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Net Income 2011: $2,000,000Cash Flows 2011: $1,300,000

Bottom Line: Rainwater

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Year ROI2008 271%

2009 306%

2010 351%

2011 410%

Bottom Line: City of Austin

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BACKGROUND

YearTotal Water

Saved2008 0.78%2009 0.86%2010 0.97%2011 1.11%

BOTTOM LINE

Bottom Line: Consumers

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BACKGROUND

Consumer Years to Break Even

High 1.01General 1.55

BOTTOM LINE

The Genesis Result

Rainwater

City of Austin

Consumers

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

The Genesis Result

Grant &

Partnership

Util

ity

Sav

ings

Rebates

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BACKGROUND

BOTTOM LINE

The Genesis Result

Util

ity

Sav

ings

Rebates

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BACKGROUND

Grant &

Partnership

BOTTOM LINE

Thank you.

Appendices

STRATEGY

SOLUTION

TECHNOLOGY

IMPLEMENTATION

RISK

BOTTOM LINE

BACKGROUND

Appendix: Rainwater Projected Financials

ValuationDiscounted Cash Flows 2007 2008 2009 2010 2011 Total

Low 472,623 1,152,927 1,200,326 1,272,406 1,374,164 52,253,961Mid 464,030 1,111,383 1,136,037 1,182,361 1,253,701 40,156,522High 455,743 1,072,045 1,076,258 1,100,142 1,145,691 32,995,775

2007 2008 2009 2010 2011 2012ROI: Average (525.31%) 205.06% 438.29% 494.28% 567.08% 661.75% 785.37%

Net Income 625,432 1,336,774 1,507,566 1,729,594 2,018,348 2,395,369Investment Capital 305,000 305,000 305,000 305,000 305,000 305,000

Income Statement 2007 2008 2009 2010 2011 2012Operating Revenue

Total Revenue 4,258,199 7,622,657 8,582,640 9,837,635 11,475,705 13,619,329Controller Sales 3,720,321 3,720,321 6,659,795 7,498,517 8,594,987 10,026,142Subscription Sales 537,878 537,878 962,862 1,084,123 1,242,649 1,449,563

Total Operational Expenses 2,612,193 4,676,121 5,265,023 6,034,900 7,039,775 8,354,781Cost of Goods Sold 2,477,724 2,477,724 4,993,992 5,724,238 6,677,384 7,924,697Maintenance 134,469 134,469 271,031 310,662 362,391 430,084

Net Income 625,432 1,336,774 1,507,566 1,729,594 2,018,348 2,395,369Free Cash Flow 510,432 1,344,774 1,512,066 1,731,094 2,019,098 2,395,619

Appendix: Water Conservation and Costs

Govt Costs 2007 2008 2009 2010 2011 2012New Buyers 14,941 4,017 4,071 4,126 4,181 4,237Cost to Govt 2,988,210 803,410 814,210 825,189 836,249 847,490

Existing Govt Budget 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000 6,200,000Watered Saved by RW 208,616,295 378,193,307 426,039,510 488,585,695 570,229,810 677,089,762H20 Cost Saving for Govt 36,813 66,736 75,179 86,216 100,623 119,480Water Facility Savings 62,688 111,611 123,481 139,075 159,410 185,896

Net Costs to Govt 2,888,709 625,063 615,550 599,898 576,215 542,114% of Budget 46.59% 10.08% 9.93% 9.68% 9.29% 8.74%

Total Saved 2007 2008 2009 2010 2011 2012Water Saved 208,616,295 378,193,307 426,039,510 488,585,695 570,229,810 677,089,762Austin Muncipal Water Demand Projections 47,588,476,467 48,455,586,097 49,338,495,331 50,237,492,055 51,152,869,398 52,084,925,831

% of Total Austin Water Saved 0.44% 0.78% 0.86% 0.97% 1.11% 1.30%

Appendix: Consumer Costs and Savings

Consumer CostsInitial Costs 249

Rebates 200Cost to Consumer 49

Net Savings Monthly YearlyHigh 4.04 48.50Regular 2.63 31.60

Consumer Breakeven TimeMonths YearsHigh 12 1.01Regular 19 1.55

Appendix – Water Assumptions -Percent Households – High Water vs. General:

normalized distribution graph of water use by frequency (16,000 household sample); sample from Austin Green Building Program Database March 2001-2003

- Average Water Use –180 gallons per day (TWDB Water Use Survey X 3 ppl per household (US Census data) X % High Use/General water use growth rate equal to household

growth rate -58% Outdoor Water Use – given in case -12% Outdoor Water Saved - Study

Appendix – Market Assumptions Number of Austin households: City of Austin data

for 2005 and 2010, annualized for growth rate) Market penetration estimates

General: 5%, 9, 10, 11, 12; growth rate in teens High: 5%, 9, 10, 11, 12, 15; growth rate in teens

Appendix – Product Cost/Price Assumptions

Product cost: $165 cost comparison of competitor products (based on

80% mark-ups) closest product from ET Water

save about $30 from using only a phone line (no broadband) for internet access

Selling price: $249; 50% markup of cost

Appendix – City Cost Assumptions Amount of rebate: $200: existing rebate is

$100 for replacing residential controllers with smart controller equivalents Justification: cost analysis to city of Austin: percent

of water conservation budget that will go toward rebates net of savings in water bought (under 10% after 2007)

cost of gallon by acre-foot: $57.50 (LCRA website – rate for pre-bought water) 1 acre foot ~ 281K gallons

Austin water conservation budget: Austin Statesman article: With conservation, city

could delay $330 million water plant, 2/12/2007

Appendix: Rainwater Assumptions

Rainwater has existing, and the new product will make use of: Research facilities Production facilities Labor Website

Sources Irrigation Controller Report for Orange County

US Department of the Interior – Bureau of Reclamation Water Conservation Task Force – City of Austin

2007 Water Conservation Strategies Summary, rebate info. http://www.ci.austin.tx.us/watercon/taskforce.htm

Texas Water Development Board Water Use Survey 2004, Water for Texas 2007 http://www.twdb.state.tx.us/home/index.asp

Smart controller company websites: http://www.accuwater.com/app http://www.weathertrak.com/ http://www.irritrol.com/ http://www.etwater.com/public/index.html

Irrigation Association – conservation and SWAT industry info

http://www.irrigation.org/SWAT/Industry/

Rainwater, Inc ET CitySmart Smart Irrigation for the Future

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