Solar-Startups Make their Case at Intersolar

Monday, the day before the official opening of the Intersolar conference in San Francisco, newer solar companies with innovative technologies and business models had the chance to present.

Most of the companies that presented in the Solar Start-ups Forum are much larger than what I usually think of as a startup. However, when you compare them to Sharp, GE or even the younger First Solar, they ARE earlier-stage. But several have taken in over $100 million in capital, such as Enphase, a microinverter company based in Petaluma, CA or Brightsource Energy, which has taken in three times as much.

For investors considering the majority of startups (Internet and software startups), the current buzzword is “capital efficiency”. And the closest to that description in the Solar Start-ups panel was AQT, which creates drop-in replacements for silicon cells. CEO, Michael Bartholmeusz, claims AQT to be non-capital intensive because the Company leverages existing manufacturing technology and works with a partnering strategy.

But really, “Bankability” is the buzzword everywhere around this conference.Panels on utility-scale solar projects focused on the difficulty of getting financing for major solar projects, just as the participants in the Solar Start-ups Forum.

I wish that all of my clients, in any industry, could have heard the Start-ups discussion because it would make a great primer for two of the most important challenges for a start up company: attracting investors and winning the first customers.

Entrepreneurs naturally want to sell investors and customers on the potential of their technology and revenue–having an innovative solution to a market problem and addressing the needs of a very large potential market. What they don’t often think about is risk reduction, and this is key to getting another person or entity on board.

All of the presenters in the solar start-ups session discussed how they are addressing perceived risks in their businesses.

• Technical risk (does the electricity-generation technology work and work reliably and even can the company produce product with consistent quality). Several companies mentioned certifications and technology audits as a way to assure the market of the quality of their technology.
• Balance sheet risk encompasses all types of fears, which can be summarized as, “Will you still be here tomorrow?” How do the first customers know that these newer solar companies, even those who have raised tens of millions of dollars will be around to support the products they are selling now? There are insurance products to support products sold into the market at least for the lifetime of the financing of the project.
• Supply risk, such as if there will be enough silicon, or if a major component is supplied by a stable company that will remain in business and/or for which there will be a competitive supplier, to keep prices reasonable.

It was a major them in the utility-scale panels yesterday and the start-ups sessions on Monday that the Solar industry, in the US, is still stuck with a chicken-and-the-egg problem, where bankers and investors want the companies to be big and stable, but the companies need the funding in order to get there.  I don’t know if it is just a case of “the grass is always greener,” but the impression is that European governments have done more to help their solar industries through that impasse.