Geostellar — Crowdfunding the Community Solar Revolution
The Company
Geostellar, founded in February 2010, is a Martinsburg, WV based online solar energy marketplace that aims to be the top solar platform of the future. The company is currently raising funds on Republic.co, an equity crowdfunding platform that allows non-accredited investors to invest as little as $100 for an equity stake in growing startups. The company differentiates itself from other solar energy providers by providing an instant estimate of the benefits of solar energy based on individual characteristics of each individual property, and by reaching its customers through unique, low cost channels such as corporate employee benefit programs.
Disclosure: Geostellar describes itself as a direct competitor to my employer, Tesla/SolarCity. This article in no way represents the views of Tesla/SolarCity. My interest and perspective for this article is based on a combination of my knowledge and interest in equity crowdfunding for non-accredited investors, cryptocurrencies, renewable energy, business model innovation, and being a potential investor in Geostellar.
The founder and CEO of Geostellar is David Levine, a serial entrepreneur who has founded three companies in the past. The team comprises 25 employees in total, according to the Republic.co page.
The Products and Services
Note the use of plural in the heading. The Republic pitch reads like a laundry list of the services that Geostellar will provide, an issue I will touch on later in my analysis of the investment opportunity. I will divide this section into present and future to put it into better context.
Present — Solar Mapping
According to a Greentech Media article, Geostellar first started out by providing solar simulations for solar installers such as Sunrun and Sungevity. The company then advanced to developing a platform that lets residents simulate the value of a rooftop solar system at a specific location, by leveraging patented big data technology that utilizes LiDAR data from aircraft, and other data inputs, to model the energy production and cost-saving potential for customers.
Geostellar Solar Mapping (https://republic.co/geostellar)
This is great technology that could reduce customer acquisition costs and make it easier to identify the customers who will benefit most from going solar. While their particular model is patented, there is still a great deal of competition that provides a similar service. Google offers basically the same service, for free, via Project Sunroof. Whether a customer goes with Geostellar’s or Project Sunroof’s estimate, they will still need the solar installer to verify the accuracy of the estimate on site. Other startups, such as HST Solar, are also fighting in this space of identifying and optimizing the selection of sites for solar energy.
The fact that Project Sunroof exists might explain the pivot to the business models I will continue describing below.
Present — Online Solar Marketplace
Geostellar aims to be the Kayak of solar energy — it allows people to input their address into a search box and see a list of potential solar systems. I did a test run of the service. After receiving the summary of the system size, savings, and equipment, I cannot figure out how to move forward. The presentation is also sloppy with incorrect capitalization, and the search box did not function properly with text being cut off on the side.
Screenshot of Geostellar’s online marketplace results for my address (https://geostellar.com/solar-stories/providers)
There is also no indication of who the contractor would be for the install of the system. Geostellar’s 25 employees are not installing systems across the country. Energysage, on the other hand, gives full transparency with quotes from different installers.
My options to go solar with Energysage (www.energysage.com)
The results from Energysage feel a lot more like Kayak than Geostellar’s — easy to digest, informative, and actionable.
Present — Solar Clubs
Geostellar promotes its use of “Solar Clubs” as a value proposition. The company offers customers and solar energy advocates incentives and revenue sharing if they refer customers. Geostellar describes in its Republic pitch, which I copy and pasted from their Republic pitch without removing typos:
“When a promoter starts or joins a Solar Club, theyearn compensation by helping homes and businesses switch to solar energy. Promoters can also build a team or enroll whole organizations in a Solar Club and share in the total revenue!”
I want to see a professional sales force that can carve out space in the competitive landscape that is the US solar market. You have to pay if you want to play. This approach is too reminiscent of my high school friends trying to sell Cutco knives to my parents.
Geostellar is advertising a church group as a potent sales channel for their product. (https://republic.co/geostellar)
Future — Community Solar
Although this section comes later in their pitch, I believe Community Solar is going to be the main focus for Geostellar’s business going forward. Homes and businesses will have the opportunity to host a solar system and sell extra power via a subscription model to other consumers. At the same time, homes and businesses which are unable to have solar installed on their own property (due to tree shading, HOA rules, utility restrictions, inadequate roof space, etc.) will be able to procure solar energy produced by those community producers. Their platform will empower communities to produce and consume more solar energy overall, and Geostellar plans on hosting its own solar facilities for revenue generation as well.
Future — Zydeco Cryptocurrency
Geostellar is planning on jumping on the ICO (initial coin offering) bandwagon and holding an ICO for Zydeco, a “solar-powered cryptocurrency”. The funds raised by selling these blockchain tokens will be used to develop solar projects. Eventually those tokens will give holders a right to recurring revenues from those projects, or could be sold back. Each token would represent one Watt of solar power. At the bottom of the pitch, with an asterisk, are more details of the Zydeco token in which the company discloses they have only developed the initial code, they do not know if the token will comply with U.S. securities laws, and they are unable to guarantee and are under no obligation to hold the ICO.
Key Risks
The main risk I see here is that Geostellar does not demonstrate focus. The Republic pitch includes mention of their solar modeling/mapping service, an online solar marketplace, “solar clubs”, community solar, and a cryptocurrency. With 25 employees, they can have about six people completely focused on each product. And for sure, this is not the case, with maybe a few employees specializing on a specific product and the rest of the team constantly having attention diverted from one to the next. They started off with a great solar resource mapping product that has become effectively obsolete due to Project Sunroof. I also see big weaknesses in the rest of the services they promise.
As I mentioned earlier, I see community solar as where Geostellar is focusing its efforts. I applaud the approach Geostellar is taking by making strong efforts to reach out to the community via the solar clubs and by holding a fundraising round for non-accredited investors. However, I do not see how the company is particularly positioned to succeed in this area. The main barrier to community solar is regulation. If you are receiving revenue from people for the power you are producing, you are basically operating a power plant on existing grid infrastructure that has been built and paid for by a utility. The system operators are responsible for ensuring a reliable grid, one of the reasons they are slow to encourage innovations such as distributed solar energy penetration, which could make their task more difficult. I do believe that regulations will adapt and community solar will become widespread in the coming years. Geostellar also plans on owning its own facilities and offering power to customers via a subscription model, which sounds like building a small power plant. Being able to take community solar from idea to reality will require excellent execution. I do not see any evidence of an advantageous position or exceptional ability to execute that positions Geostellar as a leader when regulations open up for community solar.
I have conflicting views on the company’s proposal of the Zydeco cryptocurrency. At first glance it seems like a gimmick, an attempt to ride the recent ICO craze for publicity. However, the ICO craze exists because cryptocurrencies promise to enable exciting new ways of doing business and bringing people together, ironically, through a decentralized platform. In this case I was a bit disappointed in the use case of the cryptocurrency. While Brooklyn Microgrid is piloting a way to use the blockchain to manage the transactions of energy generation and consumption within a community sharing a microgrid, Geostellar seems to be using it simply as an alternate fundraising channel. If you want to invest in solar projects, you can already do so via Wunder Capital, and not worry about the SEC raining on your crypto-parade.
Besides, holding an ICO is an expensive and complex undertaking. During a recent episode of angel investor Jason Calacanis’s (jason) podcast “This Week in Startups”, Jason Goldberg stated he already spent $600,000 on the ICO for his cryptocurrency platform Simple Token, largely on legal fees, token design, economists, and accounting. This is not a prudent use of capital.
In the Republic pitch, Geostellar mentions they are not cash-flow positive, but hope to be in the next year. The company had $3.5 million revenue in 2016. That’s about $300k/month. With 25 employees, assuming $10k per employee, I am surprised the company is not already cash flow positive. Perhaps the company is paying large AWS fees to host its solar mapping and online marketplace. The company has raised over $27 million six rounds since 2011. They do not seem very capital efficient.
Recommendation
When I first saw Geostellar listed on Republic.co, I was excited. I am a huge advocate of solar energy, equity crowdfunding for non-accredited investors, and am excited for the innovation potential of cryptocurrencies. It sounded like my dream company! As I dug deeper to write this article, I did not find anything they have built of value since the original solar resource mapping product that they launched years ago. The Dallas-based VC firm Matador Capital Partners put $7 million into the company just a year ago. Maybe Matador sees something that I overlooked. I wanted to invest in Geostellar, but I won’t, because I don’t want to lose my money.
