Show Me the Money—How to Find It

Show Me the Money—How to Find It

There is a Green Tidal Wave of money coming for clean tech innovators, but the question is how to get it.  One has to read over 1000 pages of “summary guidance” to figure this out.  It takes a lot of work, but at our MeetUp on the evening of January 26th, we presented what we had found in our own review of all the paperwork.  We focused on what the opportunities are for innovators to tap the Inflation Reduction Act and the Infrastructure Act for contract and grant money.  Over $250 billion is earmarked to fund more than 100 line items in each of the federal laws.  In addition, $50-100 billion is available from the state, through a dozen agencies, with the CEC and CARB being the most relevant.  (See in particular our recent blog on the CARB Scoping Plan.)   And many tax incentives have been created in addition that add to the total amount innovators could tap, and add hundreds of billions of dollars of subsidies to projects.  

The biggest take-away is that the details of how to apply for the money are very sparse right now.  That means the best thing to do is to begin to get on mail lists for future funding opportunity notices and to develop relationships with the state and local agencies most likely to be the ones that will administer the money.  Networking can be very effective to get you a better place in line when the money begins to flow.

One of the newest innovations in these laws is the idea of the “Direct Pay” of tax incentives to project developers, even if they have no current tax liability.  This is a huge change from trying to sell tax incentives to an organization with huge tax liabilities, for 60 cents on the dollar.  The impact would be 100 cents on the dollar and paid up-front.  It is like a zero-interest loan.  But like with everything else the details are absent.  How is the up-front payment to be reconciled with actual outcomes?  From whom will the direct payments come?  

A venture investor in the audience agreed that small startups should go after this kind of funding, since it is not a sale of shares and therefore, is non-dilutive.  Moreover, this funding can provide the means to demonstrate and develop a technology that would never be paid for by investors at an early stage.

We also had a discussion as to what the process for actually doling out the dollars would be and whether the politics of the current Congress will get in the way.

To learn more, watch the video below. It contains live links to several other source documents to aid your exploration of how this funding may help you.  We undoubtedly will be returning to this topic as more information is revealed.

More Companies Turning to Crowdfunding

More Companies Turning to Crowdfunding

Last year we highlighted Wind Harvest Energy launching an equity crowdfunding campaign. They were successful. This year we have another regional company launching Area 13 eBikes, from the Bolton E Bikes team. Now we are getting more inquiries about this option. We are seeing more growth in the amounts raised year on year. I want to highlight some of the benefits of equity crowdfunding and what has changed.

The biggest change in Equity Crowdfunding is how the rest of the investment community and law firms see it. When we first asked people about it, we were warned it was complicated and would reduce future opportunities. This turned out to be true, but like all new innovations, people got better at it. SEC rules have gotten better, and the limit has been raised on the amount of money that can be gathered through crowdfunding. The downside of having a thousand small investors as a barrier to later stage investments has been mitigated by legal structures putting all the small investors into one vehicle which owns the shares in the funded company. The idea is to deal with the small investors as a group rather than individually. This makes later stage investors more understanding. 

Equity crowdfunding has enabled companies to break into public capital sources typically only available to those with the right networks. Historically, 80% of VC money was invested in just 5 metro areas. Compare this with numbers from Startup Engine, 42% went to the same 5 metros.There still are things you need to consider when choosing how to raise funds, but more and more early-stage companies are fundraising through crowd equity to reduce the geographic disadvantages of traditional fundraising. 

What can Equity Crowdfunding bring you?

With crowdfunding you can approach a wider audience who may better connect with your solution because they are the end user. Like Bolton E Bikes with thousands of YouTube followers and a large following online they can leverage that belief in their product into investment. Equity crowdfunding gives companies control to use exposure, create brand ambassadors, and build sales channels in parallel with continual fundraising.

How tough is it? 

For a technical founder, this fundraising involves more social media and marketing. That probably isn’t any closer to their skill set than public speaking and pitching for investment. Companies need to have a good plan and team to execute If your equity crowdfunding campaign is successful, you still have investors to be held accountable to and you need a team (Including quality legal and accounting support) to guide you. If a company cannot build a balanced team they are still going to struggle. 

Traditional fundraising through partnerships and VC brings new networks, validation, potential for additional funding and experience. They become a valuable part of your team. If you are struggling, they may be more understanding and willing to provide additional resources and capital. 

What makes a company successful?

I don’t know. Honestly, I would never have expected companies with B2B solutions, who will never make a consumer product, to have success with Crowdfunding. It might be more about companies taking advantage of market conditions. Crowdfunding is still pretty new, and in that time the market has been hot and, until this year, hasn’t faced a sustained downturn. Crowdfunding will never be a panacea, but it appears to be a viable option if a company can bring together the right team.

One important thing to remember is there are many legal and accounting parts of fundraising, so don’t go it alone. CleanStart is supported by GreenbergTraurig Law, Weintraub Tobin Law, and Moss Adams Accounting. Reach out to them for help. Also, connect with us. We have developed a network of people we can connect you to. 

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.

CleanStart Sponsors

Weintraub | Tobin, Moss Adams GreenbergTraurig

BlueTech Valley, PowerSoft.biz, Revrnt, Synbyo, Califronia Mobility Center

CleanStart Perspectives with New Energy Nexus

CleanStart Perspectives with New Energy Nexus

Join us as we chat with Denise Rushing, California Managing Director of New Energy Nexus about programs & support for cleantech startups.

Our guest, Denise Rushing, is the New Energy Nexus California Managing Director. New Energy Nexus isa non-profit global organization that strives towards an abundant world with a 100% clean energy economy for 100% of the population in the shortest time possible. To achieve this goal, they support diverse clean energy entrepreneurs with funds, accelerators, and networks.

CleanStart Perspectives are short online conversations to connect the greater Sacramento clean tech entrepreneurship community and share insights, experiences, and outlooks. Join us as we welcome our featured guests to share their perspective on what entrepreneurs and innovators can do to thrive and grow.

Register and we’ll send you the Zoom login information prior to the meeting time.

CleanStart Perspectives are recorded through Zoom.

CleanStart Perspectives with Lloyed Lobo

CleanStart Perspectives with Lloyed Lobo

Join us as we chat with Lloyed Lobo, cofounder and co-chair of the Traction Conference and cofounder and president of Boast.AI.

Lloyed Lobo is the cofounder and president of Boast.AI, a company developing software that automates the process of claiming R&D tax credits. He’s also the cofounder of the Traction Conference, a non profit initiative by Boast.AI & Launch Academy to bring founders and leaders from the fastest growing companies to share learnings on building, growing and scaling startups via weekly webinars and an annual conference.

Previously, Lloyed led sales, marketing and product for several venture-backed companies. Lloyed holds a B.Eng. in Software Engineering from Lakehead University.

CleanStart Perspectives are short online conversations to connect the greater Sacramento clean tech entrepreneurship community and share insights, experiences, and outlooks. Join us as we welcome our featured guests to share their perspective on what entrepreneurs and innovators can do to thrive and grow.

Register and we’ll send you the Zoom login information prior to the meeting time.

CleanStart Perspectives are recorded through Zoom.

CleanStart Perspectives on EPIC Funding from the CA Energy Commission

CleanStart Perspectives on EPIC Funding from the CA Energy Commission

Join us as we chat with Erik Stokes about the California Energy Commission’s EPIC Funding program.

The California Energy Commission’s Electric Program Investment Charge (EPIC) program invests in scientific and technological research to accelerate the transformation of the electricity sector to meet the state’s energy and climate goals. Join us as we chat with Erik Stokes about how companies can connect with the CEC and take part in the future of Epic Funding.

Erik Stokes is the head of the Energy Deployment and Market Facilitation Office at the California Energy Commission. In his 13+ years at the Commission, Erik has spearheaded numerous initiatives to advance low-carbon technology solutions. Over the past five years, Erik has worked to strengthen California’s innovation ecosystem for cleantech entrepreneurship. This included establishing a statewide network of incubator/accelerator programs, testing facilities and other entrepreneurial support services; as well as developing several non-dilutive funding programs for clean energy entrepreneurs including the world-renowned CalSEED program. These efforts have helped cleantech startups supported by the California Energy Commission attract over $1.8 billion in private investment.

CleanStart Perspectives are short online conversations to connect the greater Sacramento clean tech entrepreneurship community and share insights, experiences, and outlooks. Join us as we welcome our featured guests to share their perspective on what entrepreneurs and innovators can do to thrive and grow.

Register and we’ll send you the Zoom login information prior to the meeting time.

CleanStart Perspectives are recorded through Zoom.


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