Green Start-Ups Turn to Crowdfunding

Select solar stocks have been on a tear lately. SunPower, First Solar and Elon Musk's SolarCity have had increases of between 60 percent and over 100 percent year-to-date.
So for those of you who think you've missed the solar run-up or are searching for a new entry point into the solar space—consider solar crowdfunding.
Sites such as Kickstarter have helped amateur artists, small businesses and established filmmakers raise millions for independent projects. Now green-energy start-ups, including solar, have tapped the funding platform to raise capital.
A casual search of the words "solar" and "green" on the large crowdfunding site Kickstarter yields a wide range of projects seeking funding (not loans) from friends, family and strangers. Projects include a self-watering planter for growing herbs and greens, and solar chargers for gadgets such as smartphones and tablets. Fundly, a website devoted to crowd funding for charities, also features some solar projects.
Mosaic: Crowdfunding Clean Energy
Another green start-up trying to woo new investors: Oakland, Calif-based Mosaic. Taking a cue from the crowdfunding model, Mosaic essentially is an online matchmaking service that connects environmentally conscious investors with solar projects for schools, community centers and housing complexes.
Launched in 2011, Mosaic lets people invest directly in solar projects through loans as small as $25. Investors collect their loan repayments and interest as projects earn revenue.
To be clear, regulators are drafting guidelines on so-called equity crowdfunding, which lets funders own a piece of new businesses. But Mosaic is technically crowdfunding debt on solar projects, not offering equity stakes in businesses as crowdfunding is defined by the federal JOBS Act.
Mosaic's online platform allows investment from residents of New York and California, and is working closely with regulators in those states, said Lisa Curtis, a Mosaic spokeswoman. Mosaic investments also are available to high-net worth individuals, who are regulated differently.
Bottom line: As regulators try to wrap their arms around growing crowdfunding, start-ups are creatively mining the new funding ecosystem in search of investors for projects such as solar panels for a grocery store, convention center or apartment complex for students.
Solar entrepreneurs who sign up with Mosaic aim for visibility and financing for projects ranging from a few hundred thousand to $1 million.
Total investments through the Mosaic platform have topped $2 million. The project leaders pay Mosaic 2 percent to 5 percent of the amount of the loan, and investors pay 1 percent on their returns.
"The idea originated when we saw a huge problem when it comes to financing green-energy projects," said Dan Rosen, the co-founder and chief executive officer of Mosaic.
Solar: From Boom to Bust, to Boom, Again?
The solar market broadly had been hit by a supply glut, particularly from Asia.
Betting on a surge in global demand, Asian players, including China, rapidly expanded solar panel manufacturing in 2009-10. But after European countries cut subsidies, the solar-panel market ended up with massive production overcapacity, hurting U.S. companies, said David Gee, energy practice leader of the Boston Consulting Group.
Recently, a key shift for U.S. solar players has been to focus on projects as opposed to parts.
"The hottest by far is the emerging rooftop solar market," Gee said. Companies that install solar panels have seen a rise in consumer demand as the panels have become more affordable.
U.S. rooftop solar produced 50 percent more energy in 2012 than in 2011 and is projected to grow 25 percent to 30 percent annually through 2020, according to the Boston Consulting Group.
But for smaller, solar rooftop companies, accessing financing has been a challenge.
"As in any emerging market, a lot of little guys try to establish themselves, and 90 percent will not make it," Gee said.
Investing With Green Values
That's where Mosaic comes into play. The platform now wants to attract large institutional investors. "We let people choose where their money is going," said Rosen at Mosaic.
James Cunningham, 23, who works for a solar company, has invested more than $500 in several projects through the Mosaic platform. He was still in college during the 2008 financial crisis and said that his generation "lost faith in Wall Street."
"It was really refreshing that I can invest in what is also in line with my values," he said.
Investor Rosana Francescato, a San Francisco program manager in her 40s, supports renewable energy and in the past has given money to environmental charities. She has invested over $700 with Mosaic.
"Mosaic is a step further than just donating money," she said.