Renewable energy startup DC Power Co has raised $1.63 million in its second equity crowdfunding campaign, as it strives to disrupt Australia’s incumbent big-power players.
The Birchal campaign saw 1,688 investors back the Melbourne startup to the tune of an average of $964 each.
DC Power Co was founded in late-2017 by chief executive Nic Frances Gilley, along with Monique Conheady, Emma Jenkin and Nick Brass.
The startup raised $2.5 million in April 2018, in what was at the time the world’s most popular equity crowdfunding campaign, involving about 17,500 investors.
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However, Gilley tells StartupSmart the founders have learnt a few things, and altered their focus and their business model slightly.
“The energy market is owned by the incumbents,” Gilley says.
“As a startup in the space trying to do something different, to compete on price, if they don’t want you to, it’s impossible.”
Now, the startup is playing “a longer game”, he explains.
It’s finding a new way to compete, by moving into the battery space and helping customers generate and store their own energy.
“It’s an interesting space that’s emerging,” he says.
Gilley says by going down the equity crowdfunding route, the co-founders thought they were tapping into a new customer base — one that would want to support the startup’s growth going forward.
As it happens, only about 20% of investors in the first round actually converted to customers.
“We’ve really noticed that actually, in Australia, we’ve got to get sharper with the price”, Gilley says.
One investor, he recalls, told him he didn’t move to DC Power Co because he thought he would be worse off over the space of a year — by about $10.
“That says something about the importance we place on money,” the co-founder says.
And it provided something of a wake-up call to the DC Power Co team, prompting them to be “more realistic” in their expectations this time around.
“Just because someone has invested, doesn’t mean they’re going to support you as a customer,” Gilley says.
“We need a strong market offer, and we need to deliver more strongly as a business.”
For its almost 20,000 investors, DC Power Co is looking at two potential exit routes that could see them secure a return on investment, Gilley says.
First, it could be acquired by a larger renewable energy generation company, to create a modern generator model for homes with batteries.
“Then we can get more competitive in our pricing,” he explains.
The second option, however, is the one the startup is currently more focused on. That being, an IPO.
The startup is pushing to get to 10,000 customers by Christmas, the co-founder says.
“We will have demonstrated the consumers get climate change is an issue.”
According to Gilley, DC Power Co has one of the highest Net Promoter Scores in the energy sector in Australia, driven by its strong customer service and support.
Therefore, he sees potential for significant growth through word-of-mouth, that could see it generate enough interest for an IPO.
However, while the startup is focused on the latter option for now, Gilley says the team are willing to wait and see.
“If you’re a startup in an industry that’s owned by four big players … and it’s been that way for 100 years, you’ve got to stay flexible,” he says.
Write your list, check it twice
Having gone through the equity crowdfunding experience twice now, Gilley has some pertinent advice for others considering that route.
First, he encourages founders to tap into what it is their investors are truly passionate about.
While DC Power Co thought it was attracting people who were passionate about climate change, actually “most of the market bought solar because they care about money”, he says.
Equity crowdfunding can work best for niche products — craft breweries for example — that tap into a non-monetary passion, Gilley suggests.
“Crowdfunding is great if the thing they’re doing, money isn’t central to,” he says.
This is partly why DC Power Co is now focusing on showing customers easy alternatives to damaging power providers, and working on ways to make renewable energy a more financially viable option.
“We’re trying to link that passion up,” he says.
Gilley also advises startups to do a proper amount of preparation before embarking on an equity crowdfunding campaign.
Specifically, he recommends identifying how much you want to raise, estimating the number of investors you will need to get there, and then multiplying that number by four. This is how many people you should have on your list of ‘interested’ potential investors, he says.
These interested people are literally people who have said they would like to invest, Gilley stresses.
Typically, “25% of your list is good”, he says.
Although DC Power Co comfortably surpassed its $1 million minimum investment target eventually, it was a close-run thing. A significant chunk of the investment came in the final few days of the campaign.
The startup’s list was three times the size of the number of investors needed, Gilley explains. In the end, they managed to convert 40% of that list, but it was a hard slog.
“We were really close, and we had to work really hard … it was really touch and go,” he says.
“If you don’t have that list, don’t expect to succeed,” he says.