by Abi Skipp
Dot Chat: From Energy Campaigners to Solar Finance Entrepreneurs
[Via Dot Earth]
An online conversation with a young energy activist turned solar entrepreneur.
Here we have a couple of entrepreneurs who are leading new approaches to financing the needs we will have for future energy.
What is interesting is both were clean energy activists who have taken to new approaches for raising capital to fund needed cleantech projects. Instead of fighting capitalism, they are bending it to their needs.
Mosaic allows people to make microinvestments (as low as $25) into clean energy projects with perhaps 4.5% interest on their investment. The projects were funded with hours. It has invested over $2 million using about $1000 in marketing expenses.
Mosaic raises money for solar projects and as the projects generate revenue, some of that revenue accrues to the investors. Those investors are regular people.
And they are doing this with just 3 employees focussed full time on origination, underwriting and servicing of loans. No Wall Street firm could ebven look at this with just 3 employees. (Mosaic actualy has 7 people working on its IT.)
Think of that – a financial services company with over twice as many people working on IT than working on the financial services.
It does not even build its own IT infrastructure. Mosaic uses Amazon Web Services to do its work. It can expand as much as it needs by leveraging what AWS provides.
And it does it by directly brokering projects with community investors. Wall Street is not in on the process.
There are other groups using these sorts of approaches but this one is even more focussed – it just does solar.
It can work because the cost for solar panels has dropped tremendously. And crowdsourcing approaches permit them to disintermediate Wall Street brokers.
That is, ‘notes’ can be issued for projects that would not be moneymakers for Wall Street. A community project costing $100,000 would not be worthwhile to most companies because their profit would be too low. Their models require tens of million or more for it to make money for them.
Here, being able to broker many, many notes to people can work. They make it up in quantity, along with the drop in actually doing the process.
They take a small fee for administrating the note of 1% of the total interest. So the note is actually at perhaps 5.5% and they pay out 4.5%.
Read a prospectus to understand more. As with most investments, there are risks. But the ability to directly invest in local community projects that would have a very hard time selling binds is truly amazing.
It is like a whole new way to create bonds in the days of the Information Age.
Mosaic has over 10,000 people waiting to invest in the next projects.
And things will really change when the SEC publishes the rules about crowdinvesting. That will make it easier for microinvestment in corporations, altering the way stocks are sold in the same way this is changing the way bonds are created.
The other company is taking a non-profit approach to the same thing – letting people donate money rather than invest.
Both will be hugely disruptive to Wall Street, all while making capital flow more easily for small investors.
So expect the big guys to do what they can to stop it.