Crowd-funding emerges as source of capital for cleantech
With early stage capital for cleantech innovation becoming increasingly scarce, crowdfunding sites like听,听听and a new crop of clean/green ones are beginning to emerge as significant sources of funding for selected next-gen clean technologies.
Hurdles remain, particularly for investors seeking returns, but I鈥檓 more optimistic about these sites鈥� usefulness to cleantech entrepreneurs than I used to be.
础蝉办别诲听听about how significant crowdfunding was likely to become in fostering disruptive cleantech innovation, I wasn鈥檛 exactly effusive. As GE鈥檚 Ecomagination Magazine wrote, 鈥溾�橶hen it comes to the tens and hundreds of millions of dollars needed for new breakthrough science, that still best comes from institutional investors,鈥� says Kachan. Kachan says big investors like to get seats on a company鈥檚 board and hope to get a sizable chunk of profits. Clearly, someone who plunks down a small pledge on Kickstarter has different motivations.鈥�
Today, a year later, a lot has changed. Cleantech venture investment worldwide in 2012 was听, with early stage funding particularly hard hit. And now with good, relevant听听补苍诲听, at least some startups are starting to find today鈥檚 crowdfunding options emerging as a source for the equivalent of friends & family seed capital. While it鈥檚 unlikely to ever produce the millions that institutional or corporate deep pockets will continue to provide, it may鈥攋ust听may鈥攕erve entrepreneurs seeking early stage money in a time when early stage money has become harder to come by than ever.
And then there鈥檚 new, fledgling policy support. In America, today is coincidentally the one-year anniversary of House passage of a bill听, which is intended to make it easier for companies to raise money through crowdfunding. Charities have used crowdfunding for years to raise money. The new bill is to streamline the process of companies raising up to $1 million a year in equity, not the simple donations as in today鈥檚 crowdfunding, but U.S. Securities and Exchange Commission (SEC) regulations to govern the process are still forthcoming as of this writing. Today, small businesses wanting to raise money from more than 500 investors have to go through a long and often expensive process of registering documents with the SEC.
Barriers to equity investors aside, it鈥檚 clear that crowdfunding activity has been ramping up in cleantech. A random smattering of latest developments:
- This week, a startup called听听launched a听听looking for $54,000 to build a large prototype of a new type of less expensive flywheel for energy storage. The company seeks to build a large 750-pound prototype of its fiberglass flywheel. The company鈥檚 founder has bootstrapped the company to date, but says he needs more money to buy larger magnets needed by the new prototype.
- , which produces power from gravity-fed water pipelines,听听from Israeli venture platform听. The Portland, Oregon-based company has commercial traction in Israel, and plans to use the capital to launch a wider roll-out of its technology. OurCrowd is a combined venture capital firm and crowdfunding platform. Lucid was formed in 2007 and has invented an in-pipe turbine that captures energy from fast-moving liquid inside water pipelines without affecting operations.
- It only has a few weeks to go and is far short of its target, but听听辞蹿 Las Vegas is seeking $50,000听听to produce a first run of fast chargers for consumer electronics devices such as cell phones and tablets. The company鈥檚 patented power management algorithms, licensed from Georgia Tech and with applicability to EVs and听, it says, aim to reduce the charge time of lithium ion battery packs from 30 minutes to 12 minutes.
Entrepreneurs and project developers of all walks are being increasingly drawn to crowdfunding sites. Especially those without a university education, who don鈥檛 have government backing, or, for whatever reason, choose not to go traditional venture or debt routes.
And, for clean technology startups, there are now no shortage of sites to cater to them. In addition to Kickstarter, Indiegogo and their general ilk like听,听听补苍诲听,听听is a crowdfunding platform for green, sustainable and related projects. Germany-产补蝉别诲听听launched late in 2012 to support (mostly) local German renewable energy projects. On its heels,听听has launched its solar crowdfunding site, and within 24 hours, its first four projects sold out. More than 400 investors put up amounts ranging from $25 to $30,000 (the average was nearly $700), for a total investment of more than $313,000. Similarly,听听has introduced a 鈥渃rowdfunding platform to connect individual investors with quality, vetted, high impact solar businesses working on the ground in Africa, Asia, Latin America and the Caribbean.鈥� Next week at the South by Southwest (SxSW) conference in Austin, social enterprise听, based in Singapore, is to formally introduce its crowdfunding platform, where participants are to contribute as little as a few dollars a month to sponsor green projects that have been selected by CarbonStory.
The final remaining barrier, however, is reconciling returns on investment and crowdfunding. There鈥檚 more of a provision for, and expectation of, returns for investors in the more-established microlending mechanisms pioneered by听听and others than there is in crowdfunding as it鈥檚 known today.
Because crowdfunding today is essentially a metaphor for 鈥渄onation,鈥� establishing a mechanism for investor returns as is being attempted via the听听Act, and blurring the lines with what we currently know and think of separately as microfinance, will be critical to unlock the vast amounts of private capital waiting to be applied to innovative cleantech innovation and products by you, me, our rich uncles and other private investors seeking returns on our hard-earned money. Only then will crowdfunding really get its day in the clean/green tech sun.
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This was originally published听听and is republished by permission. Agree? Disagree? Weigh in on our original article.
A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of听, a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver.
