This is basically a variation on the SolarCity business model, but focusing on commercial properties. There is probably a business here, but not one that tries to recruit individual investors because it will only be profitable at scale, and the kind of financial backing needed to do this is available to qualified teams. The recruiting individuals thing is basically an admission that this team does not have access to that kind of backing.
A perusal of the LinkedIn profiles for the team shows a set of people with no relevant experience and probably no business running this kind of company. The low dollar amounts also emphasize this aspect.
> The recruiting individuals thing is basically an admission that this team does not have access to that kind of backing.
I would assume they plan to finance the large installations and then pay off the financing by re-selling the projects to retail investors in increments mapping to approximately 1 panel.
In theory they'd only need to keep enough working capital to fund installations until PTO (power turn on) at which point they could "sell" them to retail investors and turn over the capital for the next install.
In practice I'd be worried about what happens if (or when) the company goes out of business. Does my initial investment disappear and someone else now owns the solar installation?
This feels like an offer to become an investor in a risky solar install without any of the actual rights that come from being an investor in a solar install. If the company fails for whatever reason, your solar install goes to the company's investors and you get nothing.
A much better structure would be to operate as a solar holding and operations company and allow people to invest in the company (eventually publicly traded). This lets the investors keep actual ownership of the company and panels, not just some notional ownership on their platform that disappears the moment anything changes.
The way it's proposed here, they're breaking the traditional investment ownership chain and replacing it with some IOUs on the platform. What you really want is to own shares of the company that owns the solar installs, otherwise you get nothing and have no claim as a creditor when the business stops working.
I don't want shares of a speculative solar startup, I want a safe solar investment with predictable returns. If a company goes bankrupt then shares go to zero, the assets are sold, and the proceeds split between everyone they owe money to. So structuring customer investments as a loan is safer for the investor, no?
That is a nice way for operators / investors in utility scale solar to improve their cash position. The banks backing those utility scale projects, I assume, love the idea.
On a general note, so, it seems people are coming up with lots of ideas to drop their investments on unassuming retail investors. Kind of makes sense, with potentially increasing interest rates, recovering their investments that might be affected by that sounds like a good idea.
We've lined up a number of finance partners to help facilitate transactions. Our first priority on our seed raise will be to bring some qualified finance experts in house.
We've been working with accredited investors who are making 100K+ investments for entire solar facilities. We think of those transactions as our training wheels as we build out our software, financial knowledge, and design.
As we evolve to a larger scale we will certainly bring on specialists to support the product.
Naïve question, utility scale solar is a solved problem with lots of different financing solutions available. Why go for retail investing / crowd funding? And why does the industry need design and software knowledge it doesn't have already? and wouldn't be financial knowledge in that industry one of the core things to bring on-board from day one?
I see, your argument is that like (for instance) LendingClub, the economies of scale always favor large investors, and that this platform simply cannot get large investors onboard. That may be due to a lack of connections, or due to some other potential fundamental issues with the business model. At the end of the day if the business is sound it makes more sense to target fewer large investors - not many, smaller ones. If this model makes sense, it would probably just pivot like LendingClub and cut off access for small investors. And if not, small investors will be holding bag.
What we are doing is super simple. Equity ownership in real, operating solar panels. There is nothing particularly synthetic or structured about these investments (i.e. like BNPL, etc.)
We need enough scale to move a large (20M+) facility, but beyond that scale will only help insofar as bringing on follow on investments and referrals becomes a bit easier. We may also do some institutional stuff, but for the time being, we are 100% consumer focused and always will be.
Our innovation is to bring a consumer experience and true design focus to investing. Instead of treating retail investors like tiny little hedge funds, we design the product to match their expectations of what 'ownership' should be.
You can buy dividend paying shares of companies who operate utility scale solar power plants. No, those shares dont equal a specific panel, but should that really matter to an investor?
Owning a specific solar panel seems strictly worse. What if yours malfunctions and has to be replaced? Averaged over all the solar panels in the plant that might be a negligible risk, but if you own just one then you could be the unlucky investor that randomly suffers a total loss
Fair point. But what about insurance? Certainly that would cover it.
That said, for some there's the appeal of investing locally, presuming the panel is say intra-state. That type of investing pays different dividends (e.g., grow local tax base, grows local jobs, etc.) Some accept the trade-offs.
No one in their right mind wants to build a pseudo-investment company dealing with tons of small investors in the few hundreds of dollars to few thousands of dollars range. The only thing missing here is a crypto coin.
If they really have a business model that can yield 8+% annual, assuming they get a cut, then they would raise real capital and not deal with randos. They don’t.
We will never work with crypto because we care about our investors and don't intend on defrauding them.
There are plenty of small retail investing companies that deal with small account sizes. Acorns, Robinhood, etc. come to mind. Over time, I'd hope that our average account size would be in the 10K+ range, but depending on CAC, small dollar would be fine.
Our innovation here is investment UX. The realized return might be a point or two north or south of 8% depending on the risk profile we go with - not far off course for the industry. Our current accredited investors get about 10%, but that's with tax equity incentives we might not be able to pass to retail investors.
We will be 100% transparent about our pricing model.
I'm ~20 pages from finishing the book "Local Dollar, Local Sense" by Michael Shuman. Your approach is refreshing and creative yet (I presume) SEC compliant.
Kudos for letting the unaccredited have an influence on the future too.
There's quite a few companies doing this where I live (Japan), e.g., https://change-x.jp/equipment. One important clause I saw was that the ownership of the panels automatically transfers back to the operating company after the panel's useful lifespan (defined to be 20 years). I also saw an example that originally did small investors but then at some point found a large investor, but can't remember their name at the moment.
Similarly, what do you think about the fact that solar panel manufacturers and all inbetweeners could "just" build their own power plants rather than sell to individuals?
Solar panel companies are in business of making the panels, wholesalers are in wholesaling business, those who install are in installation business. Each setup to be somewhat optimal in their own segment.
This just looks like extra costs for actual running of sola plant. Compared to straight up existing structures for funding.
There's a "wallet". They keep your returns until you ask for them and get them to pay out.
If you're really buying a solar panel, you're buying a depreciating asset. Someday the solar panel will wear out and your investment is gone. So the return has to cover the amount invested. An annual percentage rate is not the way to evaluate this.
What you buy does not seem to be resellable. It looks like you're stuck with it for the life of the hardware.
Who audits this thing?
This is almost exactly the classic situation in SEC vs. Howey, where investors bought trees in an orange grove. So this is probably an unregistered public offering.
P2P lending is a thing, and was quite popular in the UK until most of the big players (e.g. Zopa) went private. You can invest a small amount, usually as low as $100 and it goes either to personal or business loans. There are companies that offer both. Usually they'll offer automatic diversification, so every $10 goes to a different investment.
Your point is valid though. These places typically lend to companies that would struggle to get loans from banks. While I've worked for legitimate places that had this problem, you do need to ask why these places need crowdfunding. A lot of them are sole proprietors who want to start e.g. a food company. So it's still up to you as an investor to understand the risk and to go through company financials before lending. With personal loans you usually get details of default rates, etc.
I have the resources to simply hire a bunch of people to do stuff, but it turns out the best people aren't going to drop on a dime and build your product for you before you have validation, knowledge, a story, and cogent plan.
We are 5 months old (though I was working on this solo for more than a year before that), and in that time I've built the team that will build this product.
> I don't think that is a given - crowd funding can raise significant sums these days
Crowd funding is great as a sales vehicle (i.e. the people that invest in you will buy your product in the end). I don't remember a successful example where the crowd was purely there to invest.
I've been looking for something just like this! I find that people get really weird about solar stuff, so I'll explain why I've been looking for something like this.
1. I believe that man-made climate change is real and we should do something about it.
2. I want to limit/eliminate my own family's personal contribution to the warming of the planet for ethical and emotional reasons
3. I believe that solar is a "green" way to generate electricity, and at the limit if every house and building was covered in solar panels that would be a great world to live in
4. I want to help make that world a reality, and I'm not looking to maximize my ROI on the investment, it's not just about the money
5. I'd prefer much more solar energy production even if it's not the most efficient
6. I currently only have access to install solar panels on my own roof (which I'm already doing)
7. I think non-green energy production will only get more expensive, so solar energy is a decent diversified asset in a broader investment portfolio.
I've actually gone pretty deep in thinking about how I could do this, i.e. get a bunch of investors together and install solar panels on business roofs like schools, warehouses, etc.
You should also check out Midday Tech: middaytech.com
There isn't the investment/ROI angle – instead it focuses on putting up new solar by providing $1000-$5000 incentives to families considering rooftop solar. It focuses on lower income families and places that get most of their electricity from coal for maximum impact + additionality.
All good motivations, but from an investment standpoint it seems everything about this would be better served by a publicly-traded company that owns and operates solar installations. They could pay dividends from the return on the installations.
The way this is structured isn't great for retail investors. You're not really owning anything the way you would with a traditional investment. You're basically just giving them money and trusting that they'll continue to be in business long enough to pay it back. If they go bust, the panels and installations go to creditors and you get nothing. Great deal for their creditors, bad deal for you.
I like your idea. I wonder if we could create an ABS bond (asset backed securities) where a solar installation is securitised. Think: (David) Bowie bonds. Then we can sell the bonds to retail investors. The main problem is scalability: ABS bonds works for big investment banks because the notional is huge (100M USD+) and buyers are institutional. To me: The value to be added is two fold: (1) pipeline of reliable projects (just like sourcing assets / loans for MBS/ABS), (2) efficient buy/sell/coupon payments.
My thinking is much the same, though living in a higher and winder latitude I'm participating in a wind turbine co-operative (UK only though) [0]
It's not classed as an investment for tax reasons and limits you to 120% of your estimated residential consumption. It will essentially remove the wholesale cost of electricity from my bill for 25 years - so protects me from price spikes like the past 12 months.
My town has a river running through it and would love to invest in a similar hydro scheme. The LCOE for wind/solar/hydro would seemingly always beat fossil fuels, given how finite the latter is.
Your speculation #7 notwithstanding, this kind of scheme is being targeted at retail investors [1] (instead of just accredited investors, sovereign wealth funds, pension funds, and the like) because it is more of a feel-good investment than something that makes financial sense. Firms with similar business models include Rally Road (equity shares in collectible cars). Similarities include the establish-an-emotional-connection tactic of identifying a specific panel or specific car.
This is a step up from Rally Road in my book — there's real earnings, it's not purely speculative — but from an investment perspective, you're only really involved because you're not as demanding as a serious investor (I expect rising interest rates have something to do with the shift away from accredited investors) and you are more vulnerable to this kind of feelgood pitch. Heck, you're competing with funding sources like a commercial loan, and for some reason you're winning?? That's a red flag.
You may see depressingly low returns. Read the prospectus end to end, understand the risks, and figure out how to do the math and properly discount a future income stream in a rising-interest-rate environment.
[1] (Elsewhere in this discussion: "We are currently working with accredited investors, but we are working to launch a product for retail investors.")
4. What contracts are in place to maintain the panel, and lease the space? What happens if the building decides to discontinue service. Will the solar panel be delivered to me (at what fee?) will the solar panel be re-placed on top of another building? (at what fee?)
5. are the devices insured against common forms of damage? (wind, hail, acts of humankind)
6. Can we implement at "DRIP" style reinvestment program where our ROI just funnels back into more?
These are all great questions - so far we've worked with accredited investors to place $100K+ solar facilities while we've built our product. They are basically beta testers while de get out design, software, payments integrations, etc going.
We answered those questions for accredited, for everyday retail investors it will depend on the solar facility we select and the financial structuring design.
I really wanted to take you seriously but that's impossible if you won't answer any fo these simple questions. This is a real bad look that does not inspire confidence.
Great questions, lacking in answers... would you care to share what you expect the answers to be? It is hard to get on board with the number of unanswered questions.
Never mind my peer's noise. Thanks for helping me understand where you're at. I kinda guessed that this really was a launch testing kind of scenario where you'd check for demand before fully "finishing" the offering. No problem, it's a good idea to do research before sinking your life into something no one wants.
I dont know if you heard of or followed sweater ventures. But this kinda feels like a similar niche, but w/ a solar angle instead of VC .
Happy to answer any questions. The fact is that financial return will depend on the risk profile - which we will depend on factors like
a) Will the investor take on construction risk
b) Will the facility be insured
c) Who is the power customer (off taker) how creditworthy are they, and what are the terms?
d) Will the financing include tax equity incentives and how will they be distributed.
These questions are all a matter of design and pragmatism. I want the financial design to be as considered as, and will integrated to, the user experience design.
We hope to eventually operate a secondary market where you could do this. Depends on a few regulatory factors we are still considering. Definitely a priority.
I'm curious the legal structure of what you're selling here. The terms and conditions on your website[0] seem generic, and don't describe the offering.
You're promoting something you call "shares"[1], which promise to pay a dividend. Regardless of whether or not they can be resold, I assume your counsel has figured out a way that these aren't considered "marketable securities" within the meaning of the Securities Act of 1933, which would trigger all sorts of SEC scrutiny.
I assume you're familiar with the early business model of Prosper Marketplace and their struggles[2] with the SEC over a similar issue.
Does this fall under the Regulation Crowdfunding exception[3] or is there another loophole?
(This is not meant as criticism; I'm genuinely curious. I'm not an expert, and the legal landscape has quite possibly changed since I last researched this issue.)
We are still structuring our first product - so it will depend, but we have options for all of these questions. From the securities side, we might consider Reg A+ or other crowdfunding regulation. I'd look into the structure Masterworks.io uses to learn more (I've in fact discussed this with their GC).
We've been building our beta with accredited investors under Reg D.
For others (like me) that haven't heard of Masterworks:
Masterworks creates a Delaware LLC issuer (taxed as a partnership) and files an offering of ordinary shares with the United States SEC under Regulation A. Each issuer will use proceeds from the offering to acquire a single work of art and title to the artwork will be contributed to a Cayman Islands segregated portfolio company for the benefit of the issuer. The issuer will have no indebtedness, no other assets and will conduct no operations other than relating to the ownership, maintenance and eventual sale of the artwork. The issuer is administered by Masterworks pursuant to an administrative services agreement that provides that Masterworks pays all ordinary and necessary fees, costs and expenses in exchange for membership interests in the issuer.
The Regulation A amendments from the JOBS Act ("Regulation A+", circa 2015) are indeed more recent than my last look at this, so I can't comment further. The Cayman Islands domicile rubs me the wrong way, but that may be out of ignorance.
Great question! We've often contemplated the Vinovest.io model. Vinovest sells fine wine as an investment. Because you own the individual bottles and are entitled, for a fee, to have them sent to your door, they avoid most securities headaches.
I wonder if we could do that for individual panels, particularly given deployment of module level Enphase micro inverters.
Both Texas and Maine would be unlikely candidates. Maine has some pretty stringent and arbitrary rules about behind-the-meter commercial power arrangements. Texas is possible with commercial facilities, but their regulatory framework is also deterrent, really to any kind of development.
To be honest, in all odds the financial return is more likely to be dependent on factors like who the off-taker is, if the financing includes construction risk, if we are insuring the facility, etc than its physical location.
You can’t join unless you’re an accredited investor. That’s because, like for many other fun similar things, the enterprise passes the Howey Test and is considered a security under the Securities Act of 1933.
It’s funny how they try to disclose-away the problem at the bottom, even though they’re obviously worried about it enough to block retail investors (if a security only sells to accredited investors, you can basically do whatever you want.)
This is an excellent point! I found the disclaimer at bottom of home page:
No offers to sell or solicitations of an offer to buy securities or any other type of investment are being made or solicited by Legends Incorporated at this time.
I am very familiar with the Howey Test. From time to time, HN try to "hack" the Howey Test with various mental gymnastics, but always fail.
Real question: Could Legends Solar structure the investment like Cadence Real Estate? (Not a shill for them!) Cadence is basically mortgage-backed securities on multi-family properties for retail / mass affluent. They are operating for more than 10 years now. If their legal structure was not sound, I assume they would be enforced upon by SEC & friends.
I feel "direct green energy investment" for retail / mass affluent investors has huge untapped potential -- like 10s of billions of USD, maybe 100s. It makes me so frustrated that I cannot push ahead solar and wind projects with my own money. I want to transition power supply as fast as possible. Oh yeah, please add utility-sized battery installations to that list also. When I look at solar potential in India (see "Bhadla Solar Park"), it boggles my mind. There is SO much potential. Same for Middle East, North Africa, and Australia. All could use/export the electricity or convert water to hydrogen, then use/export.
The exact legal and financial structuring is still in progress. We will likely use a structure similar to that used by Reg A+ crowdfunding platforms like Masterworks.io. In fact, I've been in regular contact with their GC to validate this. There are other structures we could use, as well.
My plan is to keep things simple, to answer your other question. As little abstraction and structured securitization as possible. We want it to be as close to a one-for-one analogy for true direct equity ownership in an actual panel as we can make it.
This one is easier to get around Howey test if done right. But I can't tell from the site whether they'll do it this way.
As a buyer the key is to provide direct ownership of the panel, and a contract where I pay for a service to install / upkeep the panels, and a contract to sell electricity. In this case I am buying an asset, and my profits don't depend on greater or less input by the company.
The Howey test is: "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party."
The key for this service is that my profit is not tied to the efforts of the 3rd party, it's tied to weather, and electricity prices.
Now they may structure it, such that it is a common enterprise, in that case it will pass the Howey test, and be a security. However if they sell the asset, and include a service agreement, then it doesn't pass the test.
Edit: as an example, when you buy crypto miners from Compass, and pay them monthly to host them for you. Compass is not selling a security, they are selling as asset that generates revenue, but profit is not tied to the effort of the 3rd party.
Edit2: Nevermind their site uses language like 7.3% return, shares, and cash dividend, so indeed it's a security and passes the Howey test.
We are currently working with accredited investors, but we are working to launch a product for retail investors. Recent changes in crowdfunding regulation, Reg A+ in particular, make our lives a bit easier, and we have some very committed finance partners working to structure a financial product that will be appealing to retail investors.
Solar panels are fairly simple and inexpensive to install, relative to other energy sources. Best of all, they can be scaled to on-site demand since there is not a large upfront cost.
I would not say that is the problem we are solving. The problem as I see it is that most people have no idea what they actually own through their investment. We make it simple to know through great design and communication, that carries through from the financial structuring to the UI/UX, we are doing it all custom from the ground up.
We start with solar because its a pretty safe investment and people love it.
My frustration comes partially due to some of my personal circumstances:
-Filthy unlanded tech scribe peasant.
-Have some savings, it is time to invest, but I don't have hundreds of thousands.
-Cannot afford land close enough to where I live (Tokyo) to fruitfully manage it.
-Due to legal reasons, there is a language barrier to the better ones among more accessible investment platforms I have found I can use.
I would love to be able to invest something like a couple thousand dollars in an endeavour such as Legends Solar. I would like to get into a real investment of some sort. Ideally without prohibitive amounts of red tape.
I thought this was going to be about solar panels installed synergistically on food farms, running more efficiently because of the lower temperature, and increasing farm yield by reducing heat and water stress on the plants. (Most plants can turn only a fixed maximum of photons into sugar, daily, easily exceeded in an hour or three of full sun, with exposure after just endured.)
There is a clever form of this where the panels are mounted vertically in fencerows running north-south. The "bifacial" panels collect both morning and afternoon sun, with room between for a tractor.
Another form is to mount the panels horizontally directly above the plants, so they get sun only in morning and afternoon, and are protected from harshest noon light, and also freak hailstorms. The panels are cantilevered out from both sides of fenceposts running down a row, with the tractor driving in space between rows and running its attachments under.
In pasture you can do whatever is cheap, so long as the herd can get to grass under them. The herd might also do better with less exposure, and they keep the weeds down.
Usually there is a little less room for the plants, per acre, but possibly higher yield anyway, and the field produces saleable power year round. The panels are not as close together as in a dedicated solar farm, but dual-use land is free, so there is no need to scrimp.
It is easy to find loud complaints in England about farms that have converted 100% to solar because it makes the farmer more money than actually farming. This seems like a good compromise.
Because natural photosynthesis is more complex and is in service of growing a plant, so it only needs to run for a little part of the day. It also takes water and needs to be protected from pests, diseases, and herbivores.
But it also sequesters carbon, and if planted well can be entirely self sustaining.
So, neither is better, both are good. We need to plant more trees and place more solar panels.
Who thinks that? But solar panels can convert north of 20% of incident light to usable power. The most efficient known plant chemistry can convert 4% of incident light to sugar, the principal constituent of cellulose. Most plants are at 2%. But of course we have needs for such output not satisfied by electric current.
I don't think it's "worse" is the intention, but rather that we need electricity as well as photosynthesis, and combining the two effectively is efficient for us. And now "it from bit" rears its beautiful head.
Very cool concept, I can see a lot of people being interested in this. The site does a good job of simplifying things to make it very accessible as well. After poking around in the FAQ, I don't see anything about selling your investment if you want out. Once you "purchase" some panels/shares, how and where do you sell them? And how is the price of that sale determined? Look forward to learning more about this.
I can't guarantee a secondary market quite yet, certainly not on launch, but it's something that will be a priority. I may find a way to build in liquidity short of a secondary market (our accredited investors have a 7 year term).
I'm not interested in investing in solar power. But I wouldn't mind owning solar generating capacity that covers my family's energy needs; I don't think I need that routed to my own home. That's what the power grid is for.
I've been thinking about this kind of "solar condo" or "solar co-op" for a while. City people use energy, and might want to know that their personal energy usage is positively covered by solar.
Ripple Energy (https://rippleenergy.com/) in the UK are offering exactly that, but with Wind Farms. You buy into a cooperative that builds and owns the wind farm. The generated energy is sold back to your utility and taken off you energy bill. It's very much like having local renewable generation, but can be used by those like me who live in an apartment and have no way to install solar.
I was paying extra for green energy from my local power utility (ENMAX) and it turns out, by green they meant they were burning biomass and using some form of carbon offset for it at the time I was paying. (https://www.enmax.com/home/electricity-and-natural-gas/easym...)
That's greenwashing and I won't have any of it.
I am getting panels put in this year; for some people that isn't an option.
At the end of the day, it all comes down to ROI. If this had a good ROI, it probably already attracted enough investors without needing to create such a investment product. If not, then I might as well buy SP500.
Note that ROI is not the only criteria for investment. Some people invest on lower ROI investments if they think the positive externalities align with their values, and risk is just as important as ROI anyway.
While I don't think this investment is effective either way, there is probably a market for people that want a more visible way to track their impact.
I strongly disagree. I would quite happy to invest a venture like if I was confident it would help us make a transition to renewable energy faster, even if the ROI was significantly worse on average than S&P. My concern is how do I know that buying solar panels with them will actually help to increase the percent of renewable energy being supplied by the grid. I don't want to just help some commercial investor who has built out a solar project recover the capital they've put into it unless they'll guarantee they are going to put that capital back into building more renewable generation.
One interesting thing I found is that there is a downward trend for electricity prices (adjusted for inflation) for the last 40 years so it doesn’t seem like there’s no future growth:
The return, for some people, will be more than the just the money though (because they'll attribute some value to the green aspect). For them it doesn't necessarily have to beat the SP500. The sum of the money earned and their perceived green value will likely have to exceed it, I agree.
Joking aside, why would that be? They're creating an investment vehicle that pays 7% return subject to various conditions and taking some cut for themselves. You can't just assume that all investments are already fully sold on the market and no one can create new ones.
The ROI exists - Goldman, Walburg, etc all have billions invested. Most solar developers are private companies. A lot of the oil giants have been investing in these developers to diversify. The issue is not whether this asset class generates a return, but rather is it available to non-institutional investors. Diversification normally preserves wealth - we tend to recommend our investors to allocate 5% of their portfolio in this asset class - its not correlated and annuity generating). Full disclaimer - I'm a co-founder at renewables.org.
It might be useful to think of Legends Solar panels as a kind of fixed income security. It depreciates over time but produces a steady stream of dividends. Significantly lower risk than the stock market, but with somewhat predictable returns.
The important thing we hope to capture is the experience... it'll feel much more like owning a consumer product than an investment.
It sounds more like real estate investment than fixed income security. You get electricity instead of rent.
Similarities include physical depreciation, need for maintenance, insurance, importance of location, vacancy risk (vs bad weather), tenant risk (vs power customer), how each case is special snowflake, etc.
Fixed assets depreciate over time, but fixed-income securities do not unless you are assuming inflation.
1. How are you defining risk in this context and comparing it to the stock market? There is no track record shown in the FAQs.
2. What is the "somewhat" in "somewhat predictable"? The 7.3% estimated returns seem to come out of thin air with no backing calculations to them.
3. How are you returning capital to investors? This is nowhere in the FAQ. Do I actually get what I put in back or am I buying an interest rate depending on the life of the panels hoping to break even at some point?
4. If there is no secondary market, how do I re-coup any of my initial investment? Am I locked in for life? Circles back to question 3, is the principal returned after a fixed amount of time?
5. Do I receive a K-1 and operating losses due to panel depreciation?
ROI is not knowable ahead of time. This might fit one person's risk profile and not someone else's.
It's also a good asset for people who are OK with lower returns if the investment slows climate change, or for people who want to make a bet that solar will be in higher demand in the future.
ROI is only one factor - the other is risk. These are an interesting asset because, while they have some risk, that risk is at least partially decoupled from market risk. It could also be a hedge against energy prices rising (depends how the power purchase agreement is structured).
This doesn't apply to the stock market because the stock market is the alternate investment for retail investors.
But this does apply to most investments. Most investments that are looking for retail investors are scams. If they delivered ROIs better than or as good as the S&P they'd attract large sophisticated investors.
You can say that about any ESG investment, though.
Matt Levine writes about this sometimes. One possible justification to invest in ESG is that you believe that investments that are relatively good for the environment (or whatever) will beat the stock market. Another justification is that it makes the cost of raising funds cheaper for companies that are good for the environment and more expensive for companies that are worse for the environment.
According to the latter theory, if it's working, you should earn less than the S&P 500. If you're not earning less, you haven't lowered the cost of raising funds.
(On the other hand, if a company is advertising a niche investment to small investors, they probably have a cost of customer acquisition that's going to be cutting even more into investment returns? Isn't their cost of raising funds going to be pretty high?)
A company named "Legend Solar" had some heartburn in Utah, about 3-4 years ago. Cashflow problems, incomplete installations, customers left hanging, the usual story. Utah wanted to pull their business license. So is this "Legends Solar" a reboot? The name is spelled a little differently.
One "product designer", one former art gallery manager, and one embedded engineer with a couple years of experience.
Advisors include another "product designer", someone who describes themselves as a "storyteller film maker", and someone in the solar financing space. At least there's one person in here with semi-related solar financing experience.
Of course, it's entirely possible for a scrappy team like this to execute on a startup if they can get all of the right pieces aligned. I do get skeptical when the founding team and advisors have more "designers" than doers, though. Seeing the founder have "summer design associate" as a title within the past few years doesn't really inspire confidence in a capital-intensive solar company.
Would love to see them succeed! However, I would need to see some proof that they can execute before I'd even consider touching this. This is the kind of business where you lose any claim to your solar panels the second they go out of business, and many lenders are happy to prey on those scenarios.
The numbers on their example page also raise a huge red flag that they don't seem to understand the economics at all: https://www.legends.solar/get-early-access $250 as an estimated investment for a panel they show as 350W is way below the installed cost that anyone is pulling off right now. I'm guessing they picked random numbers to collect interest to fundraise with, not from actual models.
Honestly, I'd much rather see a corporation set up as a publicly-traded company that builds solar installations and pays out a dividend to investors. That keeps investors aligned with the company and maintains their claim over the installations. The way this is set up feels like it's designed to strip rights from individual retail investors by funneling their investment through the platform while someone else owns the company.
Resident 'Summer Design Associate' here - (might be time to take that one off my LinkedIn).
We've been placing 100K+ solar facilities with accredited investors for a few months now as we've gotten our private beta version off the ground. We've also been working with more experienced finance partners to structure future investments available on Legends Solar.
My wonderful cofounder hails from the art world, and has been helping to place our accredited product. She will be key in helping Legends create a resonant brand with cultural currency as we grow and evolve.
Before we raise seed or launch our retail product, we will bring some project finance experience in-house. Recruiting has been easy because people outside of climate love our brand and mission, and people inside of solar finance are often finance professionals who rarely have an outlet to share what they do for the world and the industry publicly. (You should see us as solar finance conferences, we're the bell of the ball - not kidding, we found many of our finance partners there).
I wanna push back on the idea that designers are no 'doers'... 'Doing' is an ethic, not a discipline, and there are plenty of examples of designers rising to be successful entrepreneurs (AirBnB, et al.).
Rooting for you to succeed, but to be candid your response kind of proved my point. Many of us on this site have a lot of experience with early stage startups and get nervous when we hear founder roles described like this:
> She will be key in helping Legends create a resonant brand with cultural currency as we grow and evolve.
Brand is no doubt important, but execution is what makes a startup work.
> I wanna push back on the idea that designers are no 'doers'... 'Doing' is an ethic, not a discipline,
Hard disagree. Plenty of startups have risen to fame on impressive branding only to fail because they treated execution as an afterthought. Execution is at the core of every startup, and it's certainly not just a mindset. Someone has to execute.
> there are plenty of examples of designers rising to be successful entrepreneurs (AirBnB, et al.).
True! But in the startup world I've also seen many, many founding teams who thought they'd design the product and then figure out how to execute it later using future hires.
It's basically a meme: Usually "we have it all figured out, we just need a few engineers..."
It doesn't work out. Getting someone on the team who knows how to execute should be the top priority.
We are more than just a website/hype machine... we've sold a few $100K worth of panels to accredited investors while we get our app and platform off the ground. We are only 5 months old, but plan on bringing on project finance experience ASAP. For the time being, we lean on some of our pre-seed investors for help on that front.
I am running things fairly conservatively, the marketing site is the tip of the iceberg. We need to prove retail demand to get off the ground but the other pieces are also coming together (project finance, deal flow, transactions, engineering, etc).
Per 'doers' - my point is that 'doing' is not taught in engineering school or consulting or Goldman Sachs any more than it is in product design. In that sense it is an ethic, not a credential or professional discipline. I think we are more or less simpatico here.
> we've sold a few $100K worth of panels to accredited investors
(Accredited investor with solar experience here) - On a commercial scale that's 1 or 2 installs. Good for getting your feet wet with solar but what you're proposing is a different game entirely.
> Per 'doers' - my point is that 'doing' is not taught in engineering school or consulting or Goldman Sachs any more than it is in product design. In that sense it is an ethic, not a credential or professional discipline. I think we are more or less simpatico here.
"Doing" is definitely taught in engineering school in the context of doing engineering things.
I don't think anybody here doubts that you can "do" designs. The point is that the type of "doing" this startup needs has little to no overlap with the founders' experience. It's not enough to make hand-wavy claims that "doing is an ethic". Someone still has to do all of the business things and execution.
EXACTLY, I was thinking the exact same thing. Like a team of folks who do not have any experience in Energy are trying to build a distributed energy company that also includes shared real estate. This looks like someone's summer project that got published accidently
Your latter suggestion (public corporation) exists. Check out Renew Power - they're a large developer from India. The challenge historically has been there are very few such listed developers. Most of this asset class so far has only been available to very large funds - Goldman, Walburg, etc who operate privately. That's why we entered the space too (see: www.renewables.org - only for accredited investors for now)
Really like the idea that you're making a bet on the commercial return of these panels. Obviously, it doesn't have the advantage of something like Net Energy Meeting, but that is only available in a few places anyway.
To me, the most important thing would be assured that this investment truly creates new panel installations vs just being an arbitrage play on reselling existing solar capacity. Is there anything about this program that ensures the solar panels create net new capacity?
This is high on our minds, as well. Particularly as we add dozens or hundreds of facilities, an important question will be how the investor chooses (they will likely all have similar economics).
For our first offerings, we will likely purchase existing facilities or contribute financing to new ones. Over time, we hope to select facilities where our member's additive benefit is more clear.
Sounds like a variation of a few companies in the UK/Europe where people jointly buy a wind mill and exploit it via some complicated constructions via their power bill. Great if it works and there are probably all sorts of benefits via subsidies and what not.
The notion of tapping into unused space (commercial roof tops) is genius. Give companies enough of an incentive and they'll happily join. Especially since the capex is basically taken care off by others. The main challenges would be related to scaling operationally and sourcing the hardware.
Smart but in the end it's just a way of owning shares with limited rights in a company. The share sales are used for capex. The capex drives the dividends (through power sold). Presumably that's a better deal than what private home owners would get. And of course the majority share holder gets their cut as well on top of service fees and what not. So, win win.
Of course the question is what happens when things don't go so well (e.g. bankruptcy). In principle the same as with any other kind of investment probably. The devil is in the details. But this kind of cooperative model works very well in other sectors. E.g. milk producers commonly pool resources and some regional banks operate like cooperatives. So, it's not a strange idea.
And this could be a great solution for people that would like to get some clean power but maybe don't have a place suitable for solar panels. Otherwise, it's a normal investment with risks and rewards. On paper, the notion of buy panels and sell power seems like it should be a straightforward one. But of course the devil is in the details with the terms and conditions. The sales pitch is great though and I could see how this would work well.
Say I want to invest in solar to generate revenue to pay for charging my EV driven 15k miles a year, or about 3750kWh (@250Wh/mi).
In my area, that will require about 2.6kW of PV, which at local rooftop PV rates of about $3/W would be $7800 pre Federal tax credit, or $5772 after the Federal tax credit.
Meanwhile, 3750 kWh purchased from my utility will cost me about $1000/year at today's electricity rates. So the payback time for my hypothetical rooftop PV array is about 6 years, give or take, after which I get free miles.
If I instead chose to invest in a group solar scheme like this, what is the upfront investment required to generate a guaranteed $1000/year. Extrapolating from the 7.3% rate of return on your website (the tool only allows 10 panels to be selected), it seems line that would require a $13698 investment.
For my rooftop solar example, the rate is return is 17% annualized, and the investment is $5772.
Other questions:
After 25 years when the panels are performing at 85% capacity can I keep using them?
Can I claim depreciation on the panels, since they are a purely depreciating investment (both in physical and in financial terms)?
What if a worker accidentally damages my panel(s). Does your insurance pay for that or mine?
My questions are sincere, not an attempt to shoot down the idea.
I'd much prefer to own PV in a field somewhere instead of
more attached to my house (I already have enough PV to provide for domestic electricity), and not much more roof space.
We are going to structure the investment so that your returns will be post tax-equity and post-depreciation. We would be opening up a can of worms if each retail investor's return were dependent on their particular tax situation (although we are now working with accredited investors who are availing themselves of MACERS and ITC).
We could never guarantee any amount of generation since this is an equity investment, but to generate 1K worth of power on a facility that returned 7.25% would require about a 14K investment. Of course, if you really wanted to get technical, you would also incorporate the dirtiness of the grid you were selling to into your equation. I hope to one day build those types of tools, too.
For sure, if you can build rooftop solar or use some sort of community solar arrangement, you should do that first before considering Legends Solar - it will likely have a strong financial benefit. But you can only offset as much as you consume using those tools, so if you still have an appetite or would like to offset your non-utility consumption, you might still consider us.
For people who live in the city or who rent and don't have access to those tools, or people who like a good product and just want to understand what they actually own through their investment, you might consider us sooner.
Sorry I can't answer with more detail - I really love quantifying and contextualizing the carbon you'll offset and financial returns you can earn in detail, but I'll need to break out my spreadsheets to really get into it.
"3750 kWh purchased from my utility will cost me about $1000/year at today's electricity rates" - that's 26c per kWh. In most states, electricity is under 15c per kWh.
If you need electricity in an area with high electricity prices, and you're getting a tax credit, and you're cutting out the middleman, it would be expected that a local system would have a better rate of return.
We hope to operate a secondary market, may introduce some other form of periodic liquidity.
Ideally yes, you will own a real individual panel. But we may settle on a different structure if necessary from a regulatory or tax perspective (its a long story).
Very interested in this. You may or may not know many stable coin investment platforms just went bust. There are a lot of people out there including myself holding legit USDC and GUSD that want to put their money somewhere to get a stable return. If we can help the environment at the same time it’s win win. Give us the ability to deposit the coin, pay ROI in mind and I’ll invest tomorrow. Even at 5% you’d get a ton of investment. As long as you’re transparent to your users, clear rules, and have a low barrier to entry this could be a winner.
You could even do something crazy like tokenize the panels themselves and let people buy/sell rights to them on an open market. Be the first company that makes NFTs not a joke.
Utility scale solar projects with investment grade counter-parties (off-takers) produce an IRR of ~6% to ~7% over say a 30-year assumed life. This company is not delivering an 8% yield to investors putting up $1k for fractional ownership in a panel.
This product is targeted at people who want rooftop solar, presumably because of the environmental benefits, but don't have a good location for rooftop solar.
If this is appealing to you, you might also want to check into your power company's offerings. It may be possible to buy carbon-neutral power directly for a relatively small fee. This is what I do, and it costs about $10-12 per month.
(Buying "carbon-neutral power" means that the power company guarantees that the combined usage of everyone on such a plan is less than combined carbon-neutral power generation. It incentives power company investment in carbon-neutral sources.)
Is there any "buy equity in X" in similar form that did not turn out to be a scam or unprofitable?
E.g. "cloud mining", "fractional share in high value collectible games" were all nonsense.
After all, maybe the ruthless SEC is there for something - even if I don't agree with all that "accredited investor" gatekeeping that prevents competent individuals form getting a tiniest slice of the VC windfall.
Why didn't the company have the ability to get the cash from a bank in the first place? I imagine there is less stress created for a investor by purchasing panels for their own home or business and pocketing the savings, instead of giving the same money to a business that apparently wasn't able to secure the same loan from an investor.
Often new solar facilities come with tax benefits (ITC and MACERS depreciation) that the power consumer is unable to monetize - this is particularly true of non-profits and other businesses with very low tax bills. So they sell their solar facility to a private investor who is better able to exploit the tax benefits (i.e. people and orgs who have a lot of highly taxable income).
Legends can come in either at the beginning of that life cycle by selling off the tax equity to private investors and the panels themselves and the revenue they generate (i.e. sponsor equity) to retail investors. We can also come in after the tax benefits have been exploited (5-7 years after commissioning) and purchase the solar facility from the tax motivated investor.
In the future, we plan to bring project finance in house and do some origination work, as well. We are still at the start of our journey.
One of the problems with mass solar panel deployment is that the sun only shines during the day, but people want electricity at night. Batteries are expensive, so initial deployments often rely on slack in the system.
Once you are at a substantial part of the production in an area, that won't work.
Absolutely! That could be one of our next categories after solar. Depending on the facility, there could be on-site battery storage owned and operated by other non-Legends investors for the time being.
This reminds me a lot of those companies that sell Bitcoin mining shares (though obviously way more environment friendly). I guess it makes sense, but if the thing makes money...why do you need my money?
Good Idea, for those who live in places that are not optimal for Solar on the roof , they can fund one of these and feel good about it. The biggest problem is the green-washers have unlimited marketing budgets.
Totally, I've often thought about how I could contrast Legends Solar with different ESG and impact products offered by large financial institutions with one hand, while they finance oil and financially destructive activities. To do that credibly, we'll have to be insanely transparent and good, which I plan to be.
Viability and business model aside, can I just say I love the style and layout of the site? Its simple, but also a little bit quirky(in a good way) and approachable. Best of luck with this endeavor!
Aw, thanks! My background is in product design and I made it myself using WebFlow. Sadly, its one of the first things I've had to give up as other concerns within Legends have dominated my time. I still art direct it though, and design is gonna be essential to all our products.
Interesting product, I'm curious how the ongoing fees (operations and maintenace, etc.) are managed. Does the provider of the installation take a cut? Does Legends do the O&M?
We are still structuring our first retail investment (though we've done a few with accredited investors). We pledge to be upfront about our fee/cost structure which is likely to be an upfront financing fee and a portion of payments.
> 7% (assuming yearly) returns seems a lot, is it sustainable even in the medium term (~3/5 years)? Sorry for being suspicious but it sounds like a Ponzi scheme.
It would be pretty tough to get exposure to solar panel equity by any means - aside from providing a great experience, we actually will be pretty much the next closest thing to owning solar panels if you don't have a suburban home.
We are different from investing in a utility for two reasons. First, you'll own simple direct ownership in a panel, not in an entire organization and all its bureaucracies and stakeholders. I want it to be as close to a consumer product as possible, to feel personal, not like an investment. Second, you panel will slowly depreciate over time and eventually be liquidated where a utility is hypothetically perpetual.
Aside from that, utilities typically pay $.04 or so for power generated. We'll likely have a behind-the-meter arrangement with a commercial power purchaser (like a factory or hospital), which can boost the return but be somewhat more risky.
Nearly all public utilities are traded on the open markets. In the normal course of things, the minimum investment is either one dollar (if your broker supports fractional share trades) or one share (generally less than $200: there are few companies that like to follow Berkshire Hathaway's practice).
None of them, to the best of my knowledge, are currently planning on being 100% solar. It's unlikely, although a 100% renewable company is pretty likely to either now exist or happen shortly. Hydro-Quebec is, courtesy Wikipedia:
I haven't looked into solar panels but I have some money invested in a 'wind infrastructure fund' which perhaps is the kind of thing you'd be interested in. Market cap of £2.5bn
It turns out its tough to get exposure to direct equity in renewable infrastructure, particularly as a retail investor. Do you mind if I put that in my business plan?
It will depend on so many factors. Our current accredited investors are getting about 10%+, but that's only because they have access to tax equity benefits.
We are still in an early stage of creating the financial product, and the realized returns will be a function of the risk profile we choose (i.e. will there be construction risk, insurance, who is the power purchaser, etc.)
Don't worry, you'll get a detailed financial profile/pro forma before you have to make a investment decision.
I'd say we are 80% of the way there - every solar facility will have different traits and economics as an investment. We have the legal infrastructure and finance partners to make it happen pretty quick.
As with any investment, we can't make claims about financials until everything is finalized and vetted. That will have to wait until we have a pro forma ready to go. Soliciting 'indications of interest' is a fairly common practice across all industries.
To be clear, we are already financing larger $100K+ deals with friendly investors in our network as we design and engineer a product for a larger audience.
That's why it's 'no commitment', but I would not set exceptions at 7.3% if I did not expect the product to be at or near that number. Our accredited investors do better, but again, that's with tax equity.
Without explaining your expectations that 7.3 number is nothing more than wishful thinking to someone that might be interested in your product. On top of that, your accredited investors have a short track record of returns and do not reflect the product you are soliciting - you admit it isn’t the same return structure. Without showing your work you are going to have a hard time convincing someone this is worthy of a commitment.
For the time being, we are working with either newly operational or existing solar farms. Once we have a community of investors, a lot of doors will open in terms of the kinds of financings we'll be able to accommodate.
For the time being, we want to keep our investors our of construction risk and tell a super simple story through our design. More to come though.
A product I'd jump at is if you pay me back in electron volts
end-to-end, wherever I am. Is that feasible? Say I live in an
apartment block. I really want to go solar, but have no roof or
land. I'll pay you to erect and manage 1kW of panels out on the farm
for me and I get back, say 750W (you skim 25%). But I get it through
my utility company (it just comes off my bill).
I'd say that we are like Community Solar (what you described) but more portable. We combine aspects of stock equity with aspects of community solar. A different model, but one that can exist in symbiosis with Community.
I think about it as the opposite of securitization. We are designing a produce to have as few layers of abstraction, complexity, and bureaucracy as possible so that it feels like owning a real product, not like an investment.
I wasn’t under the impression that solar panels actually generate more revenue in their service life than their production and installation costs. Has this changed in the last few years?
A perusal of the LinkedIn profiles for the team shows a set of people with no relevant experience and probably no business running this kind of company. The low dollar amounts also emphasize this aspect.