Tom Konrad CFA
Andrew Shapiro
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Speaking at the Renewable Energy Finance Forum – Wall Street this morning, Andrew Shapiro, the Founder of Broadscale Group, presented his ideas on how small clean energy companies can succeed: Collaborate with big corporations. That does not mean going cap in hand looking for the cash those companies can bring, but forging collaborative partnerships where interests are aligned with a corporate investment, and leveraging the reach and scale of those companies to rapidly achieve scale that entrepreneurs have trouble finding on their own.
Stock Market Implications
If you’re wondering how this is relevant to clean energy stock market investors, you need look no farther than the recent blistering performance of Tesla Motors (NASD:TSLA) and SolarCity (NASD:SCTY), two examples he used in his presentation.
Shapiro sees a new stage in the approach of large corporations towards the clean energy space, one which he dubs “transformative.” Corporations are now looking for new business models of open collaboration, not just in clean energy, but throughout the corporate world.
For small, innovative companies, large corporations can help with what Shapiro says is their greatest need: commercialization and scaling. Scaling is key to mainstream success. Without rapid scaling, we may continue to increase investment in clean energy but not fast enough to bring down worldwide carbon emissions.
He sees Elon Musk-backed Tesla and SolarCity as examples of this collaboration with large, established corporations. Musk realized he needed major strategic partners to make his ideas reality, while the big corporations were able to tap into the small companies’ innovative talents. For Tesla, Musk brought in Daimler with a 10% stake, Toyota (NYSE:TM) with a $50m investment, and Panasonic (OTC:PCRFY) with a $30m investment. These were self-interested investments: Toyota has collaborated Tesla on the technology of its new Electric RAV-4. Panasonic also collaborated with Tesla on new battery technology, and is now benefiting from Tesla’s rise. Panasonic will is expected to ship 100,000 automotive grade lithium-ion battery cells to Tesla by the end of the month.
SolarCity (SCTY) also worked in collaboration with big corporate partners. SolarCity’s financing partnerships with Google (NASD:GOOG) and Goldman Sachs (NYSE:GS) are well known, but Shapiro highlights its lesser-known partnership with Honda as the most innovative. Honda is not only seeking cost savings and green credentials by installing SolarCity systems on its dealerships, but it is also lending SolarCity some of its marketing muscle. Honda and Acura car owners get a $400 discount on SolarCity systems.
Conclusion
Want to find the next IPO like SolarCity or Tesla? Look for the company with established corporate partners that are committed to the success of their clean energy partners.
Disclosure: No position in any of the companies mentioned.
This article was first published on the author’s Forbes blog on June 25th.
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
