SAN FRANCISCO -- What's not to like about Mosaic? The startup's lure lies in its melding of clean energy and crowdfunding, two concepts that easily trigger good vibes among the environmentally conscious and supporters of grassroots efforts. Barely three years old, the company has attracted over 1,200 investors to finance solar power generation projects, with contributions ranging from $25 to $10,000.
"Up to this point, investing in clean energy has been dominated by a few banks, Google, Apple and Warren Buffett," said Billy Parish, co-founder and president of Mosaic, as we sat on the balcony of Mosaic's office overlooking the Oakland estuary, which connects with San Francisco Bay. "Mosaic makes it possible for all of us to participate."
Mosaic offers investment opportunities to individuals who can earn a return between 4.5 percent and 6.38 percent over five to 10 years. It's akin to a bond or annuity, and the interest rates are more attractive than what you can score with CD and Treasury bills these days. The startup, founded in 2010, rolled out a new investment opportunity last week, a roughly $700,000 project to install 487 kW at the Wildwoods Convention Center in New Jersey. That is the third financing round for the same project, which raised about $597,000 during the first two rounds.
The company formally launched its investment products to the public in January this year, though it had carried out some test projects that offered no interest and one that was open to only a small group of investors. So far, projects are available to individual investors in California and New York and accredited investors nationwide.
It's not surprising that the startup is mainly attracting young and tech-savvy people in their late 20s, as well as the Boomers. The age range in fact runs from 18 to 95, Parish said. The average investment is $1,000.
While Mosaic is building its marketing campaign around the idea of making solar investments available to the masses, it's keen on attracting institutional and corporate investors. That has started to happen and "will be an increasing focus for us," Parish said.
Mosaic connects with developers who approach the startup for funding. Mosaic makes money mainly in two ways: an upfront origination fee that is typically 2 percent to 5 percent of the loan, and a 1 percent fee from the payment made by the borrower throughout the term of the loan. The rest of that payment then goes to the investors that funded the project.
So far, the interest-bearing projects are located on commercial properties, affordable housing and nonprofits. Mosaic is interested in funding utility-scale projects. The company also is considering international projects, including the off-grid variety that you often hear about in places such as rural India, where there is no electric grid or unreliable delivery of power. Parish laughed when I pressed him for details.
"We are not talking about it too much," he said. "I really shouldn't comment."
The company started off with the name Solar Mosaic but shortened it to reflect its long-term plan to offer investment opportunity in other types of clean energy projects, which could include wind power generation, electric car charging networks and energy storage. Though Mosaic is looking at all these possibilities, its plan is to focus on offering solar investments in the next three to six months, Parish said.
The company is a standout now because it's ahead of the curve. The idea of solar as an investment that offers reliable returns is really just taking roots. That also means that startup will not be alone for long before established investment houses start to offer similar products. Mosaic will need to spend more resources marketing itself.
How well Mosaic could draw investors will partly depend on the availability of public subsidies, which still play an important role in making solar an attractive investment. One of the key subsidies is a 30 percent federal investment tax credit that is due to expire by the end of 2016. How will the end of that tax credit affect Mosaic?
"I think the hard and soft cost reduction will make up for the loss of ITC. Or ITC becomes permanent and refundable," he said.
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