Has Crowdfunding Evolved into Something Useful?

Has Crowdfunding Evolved into Something Useful?

We occasionally check in on the latest advances in crowdfunding to see if it provides some good funding opportunities.  It does seem to have turned a corner, but there are still many perils.  We are now watching what is happening with one of our regional cluster companies to see how things turn out and what lessons can be learned.  Is it time to push this higher up on the options available?

First of all, the massive amount of money being successfully raised through crowdfunding of all types cannot be ignored.  Here are some recent statistics from Fundera and the CrowdData Center which track the industry, and consider all types of crowdfunding—donations, sales of equity, pre-sales of products, reward-based campaigns, and lending:

  1. $17.2 billion is generated yearly through crowdfunding in North America.  The cumulative total since 2014 is $55 billion.
  2. Funds raised through crowdfunding grew 33.7% last year.
  3. There were 6,455,080 worldwide crowdfunding campaigns last year.
  4. Since 2014, the average raise just for fully-funded successful campaigns is $214,000.
  5. The average amount raised by all crowdfunding campaigns last year was $824.
  6. The average success rate of crowdfunding campaigns is about 22%.
  7. Overall crowdfunding projects have an average of (depending on the source) 47 backers (Fundera), or 341 backers (The CrowdData Center).

From the data we have reviewed, the typical successful equity raise for a business is a few hundred thousand dollars.  Raising over a million dollars is rare. 

Second, the SEC amended its rules to make crowdfunding more compatible with raising money in a subsequent, more traditional round.  One of the original concerns with crowdfunding was that it would result in a company having to manage hundreds of unsophisticated investors which not only could be time-consuming but a big hassle when it came time to bring in more traditional investors and existing investors would need to agree to the new investment.  The gaggle of rookies might not understand being presented with detailed terms and conditions that a more sophisticated investor would see as pretty standard.  The new rules provided for putting all the rookies in a separate entity with an established leader, and with clear rules on how decisions would be made by the group.  That would mean the main company would have only one investor to deal with.  To the extent that new money was coming into the company the leader of the special entity would arrange for a vote and have a decision rule like a supermajority (e.g., 75%) could approve a transaction, and the rest would be bound to go along.  This change made an earlier crowdfunding round much more palatable to future investors.  

Crowdfunding is appealing for several reasons.  It can provide critical early money to underwrite demo projects to provide evidence of customer traction.  It provides early exposure to some investors that would otherwise be hard to reach.  You don’t need to surrender much ownership of your company to raise early money.  Valuations tend to be very generous.

On the other hand, there are perils.  You have to expose your idea to the world, and potentially invite copycats.  Conducting a campaign requires a lot of preparation—financials, due diligence material, a slide presentation, a live Q&A session, and legal documentation.  Success is a function of the work you put into a campaign.  Close to 80% of all campaigns fail.  

You can choose a platform with very unfavorable terms, such as high fees and a requirement to refund investors’ money if the target goal is not reached.  Your platform may expect you to bring potential investors to the table.  They do not have a bench of eager investors.  You have to research the platforms very carefully.  There are scams out there. 

Platforms like Kickstarter and GoFundMe are not for equity crowdfunding.   They are more for donation-type and pre-sale campaigns.  You have to look very carefully for one that is appropriate.  There are hundreds of platforms out there now.  Research their track records carefully.  One we have identified that so far looks pretty good is netcapital.com.  It looks like they have a ready-made set of investors that visit the site often looking for deals.  And they tend to support their clients well.  There are probably others, but at least that is a place to start if you want to explore this opportunity.  But always be careful and be skeptical of anything that sounds too good to be true. Unfortunately, there are scammers out there.

Gary Simon

ABOUT THE AUTHOR

Gary Simon chairs the CleanStart Board, bringing with him a wealth of experience from over 45 years in business, government, and non-profit sectors. Gary applies his deep understanding and experience to support the growth of clean energy initiatives and startups. His work is instrumental in guiding the organization towards achieving its goals of promoting sustainable energy solutions.

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Weintraub | Tobin, Revrnt, Moss Adams, PowerSoft.biz, Greenberg Traurig

Winners of Circular Economy Pitch: Innovating Waste Management

Winners of Circular Economy Pitch: Innovating Waste Management

This week we heard from new innovators at the local Circular Economy Pitch Competition.  Western Placer Waste Management Authority (WPWMA) is spending $120 million to upgrade their Placer County facility and they want it to spur innovation in the region. So, WPWMA collaborated with the Carlsen Center at Sac State to hold the Circular Economy Innovation competition. In its second year, the competition is an opportunity for regional innovators to pitch their ideas to WPWMA and win $20,000, a pretty serious prize.  

It is a tough competition because WPWMA is looking for innovations that could be tested and improve their new facility. Most companies are used to pitching for financing to investors, who most likely are not potential customers. WPWMA could be both, financiers and customers. So the pitch is two-fold. Show you have a genuine business opportunity that is also a fit for them as a potential customer.  The evaluation criteria are closely reflected in innovations WPWMA sees as important to their waste recovery efforts.

Companies’ innovations were evaluated on their ability to allow WPWMA to:

  • Maximize recovery of materials, avoiding increases in landfill disposals
  • Reducing costs (transportation, energy usage, etc.)
  • Enhancing revenues
  • Creating consistency (decreasing volatility of international markets)1

Eight Companies pitched Wednesday, and some addressed global issues, like FabricFeed’s ERP and platform for managing textile waste. Others focused on issues close to home, like PalmBin’s composting (currently running a Kickstarter campaign) and Clean & Go’s waste removal for the unhoused. There were even some pitches close to clean tech from Sustainable Energy Inc. (who was part of the second cohort of the CEO Crash Course) and GreenGo, a recent Sacramento State graduate who has designed a carbon capture add-on for exhaust.

The $20,000 was won by Fiber Global, which has a solution that closely fits the criteria. It is a funded company that has demonstrated traction by having a production facility in Indiana taking cardboard and creating fiber boards. But it was close. WPWMA also announced a surprise award of $5,000 for a similar but earlier-stage company Eco Builder, which are looking to convert plastic waste into building materials. Both innovations focused on recovering materials and enhancing revenues, two important parts of WPWMA’s metrics.

The Circular Economy Innovation Competition is likely to return in 2025. It is a great experience for companies looking to get their solution in front of WPWMA and learn what a potential future customer and stakeholder views as important. If you have an idea, follow the Carlsen Center and WPWMA for future opportunities.

1 https://www.csus.edu/center/carlsen/build-with-carlsen-center/circular-economy.html#:~:text=Maximize%20recovery%20of,of%20international%20markets)

Thomas Hall

ABOUT THE AUTHOR

Thomas is the Executive Director of CleanStart. Thomas has a strong background in supporting small businesses, leadership, financial management and is proficient in working with nonprofits. He has a BS in Finance and a BA in Economics from California State University, Chico. Thomas has a passion for sustainability and a commitment to supporting non-profits in the region.

Sponsors

SMUD
CMC
RiverCity Bank

Weintraub | Tobin, Revrnt, Moss Adams, PowerSoft.biz, Greenberg Traurig

Solar Breakthroughs: Record Growth and Innovations Unveiled

Solar Breakthroughs: Record Growth and Innovations Unveiled

Solar innovation, manufacturing, and adoption are growing faster than ever. Over 30 gigawatts of PV were added in 2023, setting a record in residential and utility segments. The recent CleanStart Meetup featured this whirlwind of innovation, focusing on the latest advancements in solar technology. The event featured key speakers Kevin Logue, Commercial EPC Sales Manager at Capital Valley Electric, and Diana DiGangi, a reporter at Utility Dive, who shared insights into the dynamic world of solar energy solutions.

Cutting-Edge Solar Technologies

The discussions covered a wide array of topics, from inverters, racking systems, and Battery Energy Storage Systems (BESS) to novel concepts like Floating Photovoltaics (PV) and Agrovoltaics. Kevin Logue emphasized the evolution of racking systems designed to lower costs and improve efficiency. Innovations such as Floating PV and vertical solar installations are gaining traction, offering versatile applications without compromising valuable land resources.

One of the standout ideas was the concept of Solar Canvases, designed to drape over canals, simultaneously generating energy and reducing water evaporation. Additionally, the advent of Integrated Solar Glass and advancements in solar module efficiency were highlighted, pointing towards a future where solar energy is seamlessly integrated into everyday structures.

Local and Global Impacts

Logue shared intriguing local projects, including solar trees and charging stations, exemplifying the practical application of these innovations. Logue is most optimistic about Solar Paint envisioning a future where virtually any surface could become a solar energy generator.

Diana DiGangi shed light on industry changes and the National Renewable Energy Laboratory’s (NREL) breakthroughs in solar efficiency and recycling. The industry is moving to improved solar cells, from passivated emitter rear contact (PERC) cells to tunnel oxide passivated contact (TOPCon) cells, making a significant leap forward. With the looming influx of millions of old solar panels, NREL is also focusing on recycling techniques that can also reduce the reliance on mining new material. 

We asked DiGangi about perovskite cells, which have been increasing in efficiency, and she relayed a relayed a quote from NREL Research Engineer Chris Deline “Fundamentally, though, the fact that [perovskite is] so easy to make may be part of why it’s so hard to get it to be stable.” You can read her article on innovation here. 

Another big influence was incentives from governments and the Inflation Reduction Act (IRA). The IRA is playing a pivotal role in spurring the growth of solar innovation and production. So if you are interested in solar you need to pay attention.

The CleanStart Meetup on Solar was a testament to the rapid advancements in solar technology. From the integration of solar power into diverse environments to the strategic improvements in efficiency and sustainability, the meetup illuminated the path forward in harnessing solar energy more effectively and innovatively.

Make sure you follow CleanStart and don’t miss the next meetup.

Get pictures from Kevin’s slides

Thomas Hall

ABOUT THE AUTHOR

Thomas is the Executive Director of CleanStart. Thomas has a strong background in supporting small businesses, leadership, financial management and is proficient in working with nonprofits. He has a BS in Finance and a BA in Economics from California State University, Chico. Thomas has a passion for sustainability and a commitment to supporting non-profits in the region.

Sponsors

SMUD
CMC
RiverCity Bank

Weintraub | Tobin, Revrnt, Moss Adams, PowerSoft.biz, Greenberg Traurig

Unlocking Sustainable Energy through Material Innovations

Unlocking Sustainable Energy through Material Innovations

In case you missed it, Zack Spencer of NZT Group joined the CleanStart Perspective and delved into how material science is accelerating the energy transition. At NZT Group they are working on groundbreaking advancements in energy storage and materials science that are not just innovative but pivotal for the clean energy transition. They are continuing to work on cutting-edge flywheel technology and its potential to outperform traditional energy storage methods, offering a glimpse into a sustainable future with reduced maintenance, lower costs, and higher efficiency. We profiled the technology they worked on in the past at SPIN storage systems.

NZT has also been providing advancements in gas storage, particularly for natural gas and hydrogen, focusing on improving energy density by safely storing fuels at high pressure. He mentions the importance of materials in these technologies, with a focus on composites for their strength, durability, and efficiency, especially in high-pressure environments.

Materials play a crucial role in hydrogen storage. Spencer shared the effectiveness of storing hydrogen depends significantly on material properties, particularly due to hydrogen’s small molecule size and high permeability. Composites, especially those with carbon fiber, are preferred for their strength, lightweight, and ability to handle high pressures without significant degradation. They overcome the limitations of metals, which can suffer from issues like crack propagation under high pressure. Innovative materials solutions are therefore essential for developing efficient, safe, and cost-effective hydrogen storage systems, as they directly impact the energy density and integrity of storage units.

The conversation covers the broader implications of these technologies for clean energy transitions, including their potential to reduce CO2 emissions, improve energy efficiency, and provide cleaner fuel alternatives. NZT Group and Spencer are looking for ways to collaborate on the energy transition.

You can watch the full discussion here.

Thomas Hall

ABOUT THE AUTHOR

Thomas is the Executive Director of CleanStart. Thomas has a strong background in supporting small businesses, leadership, financial management and is proficient in working with nonprofits. He has a BS in Finance and a BA in Economics from California State University, Chico. Thomas has a passion for sustainability and a commitment to supporting non-profits in the region.

Sponsors

SMUD
CMC
RiverCity Bank

Weintraub | Tobin, Revrnt, Moss Adams, PowerSoft.biz, Greenberg Traurig