Sungevity, the solar leasing start-up backed by actress Cate Blanchett, executed a (in my opinion) well-timed exit strategy yesterday by selling a minority stake to Lowe’s, which will now sell its services through its stores.
I call this well-timed because, as readers have been quick to note, the company has a lot of competition and the race was already on among solar leasing outfits to build a national footprint and national brand.
As editor Jennifer Runyon noted in her profile of Brightgrid, these companies don’t make anything, and don’t install anything. They provide a business model, a bridge between the desire of homeowners for something bright and money-saving on their roofs, and the simple reality that these things cost thousands of dollars, and have to be linked to a local utility grid to prove their value.
But, this deal also asks a profound question that will be asked, increasingly, of other renewable energy players over the next few years. When is the right time to get out, to bring in the big boys, maybe for a minority stake at first (as in this instance), knowing that they will in time dominate the niche?
It should be clear that big companies are going to want into this space. Energy is the biggest industry in the world. One reason oil companies don’t invest, except so they can advertise the fact on TV, is because the industry is not yet scaled to a point where huge players will be interested. They are biding their time, and their time will come.
The Lowe’s entry illustrates a second fact. There are industries other than the oil business that are going to want in. Retailers, banks, high-tech outfits, manufacturing and chemical companies. Anyone who is interested in scale, and energy is all about scale, will in time want a piece of this space. And one idea behind many of the start-ups in this industry is that they’ll be the guys getting bought out.
The question is, when? What’s the right time to make a deal, on both sides? Sell out too early and the big partner may fail, because they may not understand the fast-changing industry and may have trouble getting their arms around a small, fast-growing unit. Sell out too late and someone else may have gotten the opportunity right, meaning your price is going to be low.
Your answers are welcome below.