Perth-based energy trading startup Power Ledger has secured $34 million via an initial coin offering (ICO) in one of the largest successful raises by an Australian startup for this alternative mode of financing.
Power Ledger provides a blockchain-based peer-to-peer trading platform that allows households to trade excess solar power in the hopes of making energy more distributed and sustainable for consumers now and in the future.
“We want to focus on the democratisation of power and really using our resources efficiently to demonstrate leadership in that area,” Power Ledger co-founder Jemma Green tells StartupSmart.
This fresh round of funding builds on the $17 million the startup raised in its pre-sale ICO in September this year, which sold out in just 72 hours after its 190 million Power Ledger tokens — called POWRs — were snapped up by buyers on the Ethereum cryptocurrency network.
At the time, Power Ledger co-founder and managing director David Martin said it would be “not unreasonable to expect” that the startup’s forthcoming ICO would raise between $20-30 million.
This $34 million token sale has now exceeded Martin’s initial expectations, with 15,000 individual buyers purchasing 350 million POWR tokens before the offer closed on October 6. Green says the capital injection is comprised of roughly $5 million in cash and $29 million across the Ethereum, Bitcoin and Litecoin cryptocurrency networks.
These funds will now be used to expand Power Ledger’s blockchain-based offerings both in Australia and internationally, as well as building out its current team of 12 to around 20 staff, Green says.
She says Power Ledger will also be using these funds to also “successfully deploy” its product in a series of trials, including trialling the technology in India at the Mahindra Tech technology park in the city of Pune.
The startup is also conducting trials of its offerings in Auckland, New Zealand, and Busselton and Fremantle in Western Australia, and will soon be rolling out trials in Tasmania, according to Green.
Power Ledger says its platform is currently “full commercially deployed and supported by leading energy providers”, which include Vector NZ, Western Power WA, Origin Energy and TAS networks. The startup also counts Bill Tai among its investors and advisors and Green says the Silicon Valley venture capitalist invested an undisclosed sum in the startup earlier this year.
Navigating the “wild west” of ICOs
While ICOs may provide startups with a useful alternative to traditional venture capital raises or crowdfunding campaigns, the blockchain-based funding method, and cryptocurrencies more generally, has been a source of increased regulatory and political scrutiny in recent months.
China recently outlawed the controversial mode of capital raising, amid fears of its capacity to enable fraudulent activities like money laundering, while in the US, JP Morgan’s chief last month described Bitcoin as a “fraud” — a statement that was swiftly debunked by players in the Australian startup ecosystem.
The Australian Securities and Investments Commission has also weighed in, releasing guidelines outlining the legal status of ICOs last month as Commissioner John Price advised consumers to be cautious of the “highly speculative investments”.
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In the local startup ecosystem, Tim Lea, founder of Australian blockchain startup Veredictum, has expressed concerns over the “wild west” of unregulated ICOs in the space. Veredictum is one of the few Australian startups that has undertaken an ICO, but it fell short of its $2.5 million goal, instead raising under $500,000.
Green admits she agrees with the description of ICO’s as “highly speculative investments”, but explains that what sets Power Ledger apart is the high level of self-imposed regulation the startup has placed on this recent token sale.
“We worked with Allens Linkalaters to evaluate that the POWR token isn’t a security, and we had documentation to the standard of a financial product,” she says.
“A lot of these blockchain companies set up a foundation [entity] to run an ICO but that entity doesn’t have a jurisdiction, so purchasers have no recourse.”
“We set ourselves up as a proprietary limited Australian company [and] we are booking [this ICO] as income and paying tax. This is for the benefit of both Power Ledger and the Australian people,” she says.