The Funding Gap
The renewable energy business is kind of odd. On the one hand, there is a large established and entrenched infrastructure on both the electricity and the transportation sides served by giant companies with huge profits. On the other hand, there is something of a gold rush mentality of entreprenuers setting up Silicon Valley like startups ranging from new technology to acquisition of “old world” assets to “operations” companies.
The easiest bits to get a grip on are established players (like Florida Power and Light) who are entering the renewable space aggressively and expect the renewable portion of their portfolio to represent growth and the small technology startup that really does look like a traditional Silicon Valley startup. The other companies, like renewable project developers, are a little tougher for investors to grok.
For example, take a company like Raser Technologies. Raser has expertise in motors and generators, has acquired geothermal leases, has acquired binary technology, and is publicly traded. If one looked only at Raser’s sales and earnings, the valuation of the company would be miniscule. Yet Raser inexplicably has a listed enterprise value of $250M. The right answer seems to be between the enterprise value and a strict earnings valuation.
As Raser develops its properties, it will likely require more funding. Where will that funding come from? Debt or further dilution of equity? That seems to be the gap – developers and operators don’t have access to traditional venture capital. They can gain access to funding through private placement and PIPE offerings, but the market to match funds with these sorts of capital intensive activities is fractured, small, and immature.
So if you’re not a traditional startup aiming for technology breakthrough or an established utility, you’re likely living in that gap. We’d be interested to hear what you’re doing to bridge it.
