Clean energy startups are going public at a rate I've never seen in my years covering this sector. It's all happening through special-purpose acquisition companies or SPACs, which are shell companies that merge with existing companies to take them public.
Lately, at Canary's newsroom meetings, it's gotten hard to get through one SPAC news pitch without some other SPAC news coming over the wire.
Why do we keep talking about SPACs?
This financial vehicle is turning clean energy companies into billion-dollar enterprises.
- At its best, SPACs unlock new money to scale clean energy faster than would happen otherwise.
- But the lure of cash could attract companies that aren't ready for public market scrutiny, creating a risk of high-profile losses for investors who buy into the clean energy narrative.
High risks + high rewards = a good storyline to follow. Here are three updates from just the last few days.
Two-year-old Heliogen to SPAC for $2 billion
Some startups toiled for a decade before going public with a SPAC. Heliogen, which uses AI-controlled mirrors to concentrate the sun's heat, unveiled itself just two years ago. Now the company is going public and expects to raise more than $400 million and be worth $2 billion.
Heliogen comes out of serial entrepreneur Bill Gross' Idealab incubator, which has backed numerous energy concepts that didn't pan out but did inform subsequent startups. This one takes the mainstream tech concept of machine vision, which uses AI for fast visual computing, and applies it to a type of solar power that's fallen by the wayside.
Years ago, there was a surge of concentrated solar plants, which reflect sunlight at a tower until it gets super hot and generates power from that heat. This ultimately became more expensive than mass-produced photovoltaic panels, which simply turn sunlight into electricity.
Heliogen found that using machine vision to adjust the angles of the mirrors makes the system far more effective than the conventional approach.
- It initially marketed this as a carbon-free source for industrial-grade heat.
- Heavy industry is looking for clean ways to manufacture things like glass and cement that require really hot temperatures.
But lately, Heliogen started talking about itself as a source for 24/7 clean power, achieved by adding thermal storage to the system. Between the marketing claim and a fleet of operational power plants lies the shadow.
The startup has succeeded at lining up billionaire backers and corporate investors. I covered its latest fundraising success just last month. Now it will prove whether public markets care about a track record of sales and operational projects, or if that's just an old-fashioned hang-up. Stay tuned!
Sunlight Financial takes its solar lending to Wall Street
Investors who like established business models and revenue may be more jazzed about Sunlight Financial, which is officially listing this very day.
It’s the second-largest provider of loans for home solar systems, behind only GoodLeap (formerly Loanpal), Emma Foehringer Merchant reports. Sunlight funded more than $4 billion in home solar loans since mid-2016 and expects to exceed $120 million in annual revenue this year.
What's the value of the second-largest player in the billion-dollar home solar lending market? $1.3 billion is what Sunlight hopes to hit today.
It's not pitching any breakthrough technology. This is more of the proverbial "sell pickaxes to gold miners" type of venture. The fortunes of individual solar installers may wax and wane. But if the market continues to grow as expected, there will certainly be a need for billions of dollars of loans.
After going public via SPAC, Eos raises more money from Koch
CEOs often narrate the SPAC process as a way to raise all the capital they'll need so they can set aside fundraising and sail to a profitable future.
It doesn't always work out that way. We saw electric truck-maker Lordstown Motors raise a bunch of money in its SPAC and then disclose that it could still run out of funds.
Last week, zinc battery company Eos revealed it had raised $100 million in convertible notes from Koch Strategic Platforms, an investment arm of Koch Industries, which has its fingers in a lot of pies. The notes mature in 2026 and come with an interest rate of 5 to 6 percent annually.
It's an interesting move because Eos just raised money from a SPAC merger in November. At the time, CEO Joe Mastrangelo told me:
"Now we have the capital to really realize the potential of the company."
Eos still had $100 million in the bank as of March 31, so it's not running on fumes. I'm still waiting to hear back about the motivation behind this latest round of fundraising.
A SPAC offers an exit from the world of venture capital, but it's just the beginning of life as a public company. Even the seemingly vast funds acquired in the process aren't always enough to reach maturity.
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