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Thin-film startup Nanosolar on Wednesday announced it has raised a long-rumored $300 million equity round.
According to a blog post by CEO Martin Roscheisen, AES Corp, the Carlyle Group, EDF and Energy Capital Partners invested in Nanosolar through Riverstone Holdings and EDF Renewables. Other investors included Lone Pine Capital, the Skoll Foundation and the Omidyar Network, as well as returning investors such as GLG Partners, Beck Energy and Grazia Equity.
In an email, Roscheisen told Greentech Media that, unlike many other firms' rounds, no bankers were used as part of this transaction.
"Bankers charge 5 percent or so," he said. "For our round, it was just me putting in 40,000 miles in January through March - all in economy class!"
The round, which Roscheisen said was oversubscribed and closed in March, is the company's fourth. Nanosolar in 2006 announced a $75 million Series C round, which it claimed amounted to $100 million when combined with government subsidies.
In his blog post Wednesday, CEO Martin Roscheisen said the cash brings the company's total funding to "just below" $500 million.
The San Jose, Calif.-based company will use the money to accelerate its production expansion for the 430-megawatt factory it is building in its hometown, and the 620-megawatt factory slated for Berlin, he wrote, adding that Nanosolar already has secured a subsidy for 50 percent of the capital expenses of building the German facility.
The company in December confirmed it had begun preparatory work for the German factory at Luckenwalde, a town south of Berlin, and also announced it had begun production at its San Jose facility. Nanosolar hasn't discussed its actual production numbers since then.
In his blog post, Roscheisen described the financing as "strategic," saying the company's backers are ideally suited to advancing the business strategy through production supply agreements, strategic collaboration and, of course, equity investments.
"Starting in late 2007, our strategic partners spent many months examining virtually every solar company in the industry and conducting one of the most thorough due diligence efforts imaginable on our manufacturing operation and scale-up capabilities," he wrote. "We are honored to have been selected as the company of choice to partner with by such a sophisticated group."
In an email, Aloe Driscoll, an executive assistant at Nanosolar, said the round is the first to include utilities as investors, and is also "the largest private funding round of any solar company ever."
(Fotowatio in July raised $350 million from GE Energy Financial Services and Grupo Corporativo Landon, but that round included both equity and convertible debt.)
The funding is the latest in a series of large thin-film solar deals.
According to Greentech Media's Green Light blog, AVA Solar is raising $100 million at a $750 million pre-money valuation, while Solyndra is looking to raise $350 million and is spending $15 million per month. Last month, the blog noted that Miasole is rumored to be raising $200 million, with a valuation above $1 billion, and that OptiSolar has raised $132 million at a valuation of $850 million.
Some industry insiders have questioned whether "overwhelming" VC interest has made it difficult to find good deals in solar (see Solar Venture-Capital Funding Powers Past Biofuels and these Cleantech Investing posts: There are no more good solar deals and But there are plenty of other great deals).
Eric Wesoff, a senior analyst at Greentech Media, said the news that Nanosolar has joined the ranks of the highly funded is hardly surprising.
"I would say that it would be news if they didn't get the funding round," he said. "They've played the financial markets with finesse."
But he called it odd that EDF, a Nanosolar customer, appeared to be a lead investor.
"To some extent it smacks of the vendor financing that fueled the telecom bubble," he said. "When your lead customer is your lead investor, that can provide somewhat of a reality distortion field."
Wesoff also pointed out that the lead investors aren't venture capitalists.
"Carlyle has a lot of money and strategic reason to invest in that company, but doesn't have a lot of experience in cleantech investing to figure out whether this is going to be a high-return bet," he said. "Here they are ponying up for one of their first cleantech plays with very high stakes and very very high valuations that some more conservative investors have shied away from."
Todd Kimmel, a principal at Advanced Technology Ventures, pointed out that Nanosolar's $300 million round indicates a "pretty substantial" valuation.
"I would doubt that people would give up more than 20 percent to 30 percent of the company at this point," he said, which indicates a valuation of more than $1 billion.
In April, Roscheisen said a rumor the company had a pre-money valuation of $2.3 billion was untrue. Still, even $1 billion would qualify as a substantial chunk of change.
"I would think they are probably dancing around," Kimmel said. "But at the same time, it means they have to get a product in people's hands and get it into the marketplace. There's no shortage of people trying ... and First Solar's the only one that has been successful."
In other words, all that money on the line has raised industry expectations.
"I think this will be a very good test for the next wave of thin-film solar," Kimmel said. "I hope they can really ramp manufacturing and meet their objectives and get out there like First Solar."
Wesoff said Nanosolar could face some challenges along the way.
For example, he said that industry insiders have questioned whether Nanosolar has achieved average production efficiencies of even 8 percent, which – if it hasn't – could give the company a disadvantage if government subsidies subside.
In June, when Roscheisen said the company had created the industry's largest solar production tool, he said the new tool delivered cells that could covert sunlight into electricity with up to 14.5 percent efficiency.
He declined to answer a question about the average efficiency of the cells already being produced, but claimed the company's copper-indium-gallium-diselenide panels are the world's most efficient.
"Efficiency matters," Wesoff said. "When subsidies disappear, their value proposition disappears [if they don't have the efficiency], and that doesn't apply to high-efficiency companies. ... They're doing everything right as a VC-funded company, but they may not be doing everything right as a here-to-stay long-term solar company."
Glenn Croston, author of the book "75 Green Businesses You Can Start to Make Money and Make a Difference," which was published in August, said the news is a sign of faith from investors.
Investors "believe that renewables like solar energy are a huge long-term trend, not just a fad," he said. "Not every individual company will win, but – if the government provides the right incentives, especially – I think there will be a lot of future growth. It's a huge opportunity that today is still a tiny part of the energy supply."
Croston, who also is the founder of Starting Up Green, a Website for green entrepreneurs, emphasized the need to take a long-term view in solar investments.
"There will be ups and downs along the way and not everybody will succeed," he said. "Does that mean we should not invest in this field? No. Investors just have to be in it for the long haul and anticipate that. I think it's a great opportunity - and I'm obviously not the only one - and I'm sure [investors] recognize that this is not a quick buck, but a long-term investment."
And because the industry is just starting, he said, investors are building a lot of future growth into these valuations. "It's not just what [these companies] are doing today that is going to support a valuation like that," he said. "Yet if the industry can produce what they say they can, they probably will be worth that much."
Meanwhile, Wesoff warned that not all the highly valued solar companies will be successful.
"We're a little bit ahead of our skis," Wesoff said. "One of those companies might emerge as victors, but most of them won't, and at least one – maybe not Nanosolar – is going to leave a smoking crater in the ground."