Jigar Shah’s Next Breakthrough Cleantech Company

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If you aren’t familiar with Jigar Shah, you should be. In my list of 17 cleantech champions published at the beginning of the year, Jigar was tied with Elon Musk at #1. If you’re familiar with Jigar and his work, you know why. If not, you’re probably thinking “What? How can he be tied with Elon?#8221; It would be too much for this short intro to go through everything, but a few things to quickly note include: Jigar was the founder and CEO of SunEdison, where he pioneered the “no money down solar” model, which has been key to the growth of the solar market; he was the founding CEO of the Carbon War Room (founded by Sir Richard Branson and Virgin Unite); he sits on the board of a large number of cleantech companies and climate-fighting organizations, including the highly regarded Rocky Mountain Institute.

Getting to the story of the day, alongside CEO & co-founder Scott Jacobs and Chief Investment Officer & co-founder Matan Friedman, Jigar has co-founded and is the president of Generate Capital.

As summarized in an email Jigar sent to me late last week, “Generate Capital is a specialty finance company based in San Francisco, California, founded by several leading entrepreneurs and financiers in the renewable energy, technology, finance and sustainability sectors. It partners with project developers and technology manufacturers globally to finance the Resource Revolution – doing more with less of our critical resources like energy, water, food and materials.”

Getting more specific, he wrote: “We have been testing this concept since 2010 with outstanding returns to investors.  The goal here is to bring project finance to the hundreds of technologies that cost more upfront but save money over time that are either too confusing or too small for the traditional players to invest in.  These technologies aren’t limited to just Solar PV, but expand throughout energy use from solar hot water to waste water pre-treatment to ice storage systems for HVAC and many others.”

Attending top cleantech conferences and reading countless reports on cleantech and climate action, several themes develop. One of the most important is the barrier Generate Capital is aiming to break down, fitting well with Jigar’s recent book, Creating Climate Wealth. Cleantech solutions often make a great deal of financial sense in the medium to long term. However, they are often more expensive than business as usual on the first day, in the first month, and in the first year. One of the foundational points of cleantech is that it’s more efficient than the dominant alternative. That efficiency saves money in operations over time. However, the more advanced tech behind these cleantech solutions, and the disadvantage compared to the incumbents in terms of economies of scale, mean that they have a higher purchase price. This is what Generate Capital will help to address.

But hey, why can’t people just get a loan from a bank, or investments from people with cash, in order to switch to cleantech? Many can do so, but many cannot because the banks or investors are not familiar with the technologies, the returns are too small for their appetite, or the customer simply doesn’t fit their preferred customer profile. That’s where Generate Capital will step in.

“Generate Capital offers multiple types of financial services products, including short-term asset-based financing, equipment leasing and small-scale project finance. Typical projects will be between $2M and $20M in size, primarily in areas like commercial scale renewable energy generation, heating equipment retrofits, energy storage projects, urban farms and wastewater treatment technologies,” a press release announcing the company states.

“Generate Capital believes it has assembled one of the largest pools of capital available for these types of projects and already is underwriting projects in the renewable energy, energy storage and energy efficiency sectors. The company has identified more than $500M of opportunities meeting its underwriting criteria and anticipates announcing the first projects in Q1 2015.”

That’s exciting. Instead of simply complaining about the financing gap, as I’ve seen time and time again, Generate Capital is stepping in and helping to fill it.

 

It would be disingenuous to frame this company as a product of Jigar’s insight and experience alone. The two other co-founders have a wealth of experience in this field as well. Co-founder and CEO Scott Jacobs was a co-founder of McKinsey & Company’s global CleanTech practice as well as a co-founder of resource-focused investment firm EFW Partners. Co-founder and CIO Matan Friedman is a former venture capitalist and the co-founder and Managing Partner of Resource Efficiency Finance.

Furthermore, Jason Fish, a specialty finance veteran who co-founded both Capital Source (NYSE: CSE, merged in April 2014 with PACW) and Alliance Partners. He provided an excellent quote in association with Generate Capital’s unveiling: “From my own experience, I have seen how challenging it is for banks to underwrite smaller projects efficiently, and new, often non-bank lenders have entered the marketplace to fill that void…. Generate Capital will apply well-proven financial products to the smaller scale renewable energy and energy efficiency assets which have lacked this capital historically, and this team is capable of doing it profitably and at scale.”

One of Generate Capital’s key investors is Ceniarth, “a mission-driven family office whose Director, Greg Neichin, previously served as head of the Cleantech Group’s consulting business.” Neichin also provided and excellent quote to capture what Generate Capital is doing and why it’s so important:

“We believe that the biggest impacts in sustainability will be found in scaling the adoption of existing technology. While significant capital has flowed to inventing new venture-backed technologies, we believe that the best risk-adjusted returns are available in financing the deployment of proven products and services. Generate Capital is a purpose-built firm filling a critical gap in the financing landscape that we believe is poised to be a leading capital partner to the sustainable infrastructure world.”

This looks like an excellent company filling a huge gap in the world of cleantech and climate action. I think it will be rewarded with a healthy dose of profits.