Crowdfunding: a new route to cash?

UK crowdfunding campaign successes for Renovagen, Highview Power Storage and Powervault, as venture capital investment decreases for energy storage start-ups.

UK crowdfunding successes for Renovagen, Highview Power Storage and Powervault, as venture capital investment decreases for energy storage start-ups. Photo: Renovagen

By Jason Deign

A UK campaign this month underscored the value of crowdfunding as new figures showed energy storage venture capital financing on the wane.

Renovagen, an integrated solar-plus-storage technology developer, had raised GBP£1m from 807 investors when its crowdfunding campaign on Crowdcube came to an end last week.

The campaign saw the start-up getting 167% of its £600,000 target, with the largest single investment amounting to £100,000.

The money will be used to fund go-to-market costs for Renovagen’s Roll-Array portable solar power system, which consists of flexible, transportable solar farm units with integrated energy storage.

Renovagen claims the technology enables deployment of large solar power capacity more quickly than competing methods.

Should developers consider crowdfunding?

It can deliver an 18kW solar array from a small trailer unit within two minutes or up to 300kW from a shipping container in less than an hour, said the company.

“The plug-and-play design makes it easy to use without requiring solar engineers on-site, a key benefit for deploying in remote locations … such as in disaster relief and humanitarian aid, military and mining industries,” it said.

Renovagen’s success on Crowdcube raises questions over whether other energy storage technology developers should be considering crowdfunding following a drop in venture capital financing for the sector.

This week Mercom Capital Group revealed venture capital funding for battery and storage companies had dropped 50% in the first quarter of 2016 compared to the last three months of 2015.

Although the number of deals grew slightly, from eight to 10, total investment fell from USD$108m to $54m. Year-on-year funding was also down, from $69m across seven deals in the first quarter of 2015.

Drop in mergers and acquisitions

Finally, the first quarter of 2016 saw a year-on-year drop in mergers and acquisitions, with two deals compared to five from January through March in 2015.

In the meantime, renewables consultancy Everoze predicted UK energy storage start-ups would continue to benefit from crowdfunding investor interest this year.

For technology developers, crowdfunding has the benefit of opening up the business to a much larger potential number of investors. Plus it is arguably less challenging to secure crowdfunding than venture capital finance.

Admittedly, through, crowdfunding could prove a somewhat patchy substitute for falling venture capital investment, even if some technology developers can claim to have had significant success with the process.

The UK firm Powervault managed to raise £900,000 through what has been described as “two of the world’s fastest crowdfunding campaigns” in 2014 and 2015, for example.

Other players not so lucky

And in September 2014, another UK start-up, Highview Power Storage, achieved 193% of an original £400,000 target and ended up raising almost £768,000 on a crowdfunding platform called SyndicateRoom.

Other energy storage players have not been so lucky, however. Moixa Energy Holdings, for instance, managed to pull in almost £212,000 via a Crowdcube campaign last year but still fell far short of its £875,000 target.

Similarly, the US solar-plus-thermal-storage start-upFocused Sun failed to ignite investor interest with a crowdfunding drive on Indiegogo in 2014.

“Our own crowdfunding was spectacularly unsuccessful,” admitted Focused Sun founder Shawn Buckley. “We only got 1% of our goal.”

Start-up bosses should also be aware that the amounts of money that can usually be pulled in through crowdfunding are typically one or two orders of magnitude less than what is on offer through venture capital.

More money from venture capital

Thus, while the most ever made by crowdfunding for an energy-related project was just over $2.2m, for a controversial Solar Roadways concept, in the first quarter of this year Sunverge Energy alone raised $36.5m from venture capital.

This means venture capital is likely to remain the main source of energy storage funding for some time to come.

Other potential funding avenues, such as institutional investor backing or bank finance, will remain difficult to secure as long as energy storage is not seen as an established asset class.

Clearly, then, while crowdfunding may represent part of the answer for energy storage financing, it will only be a small part for the foreseeable future.

Let us know what you think. Please leave a comment.