Power-storage startup raises $4.75 million, after five years of very deliberate bootstrapping
Tuesday, August 13, 2019/
Brisbane startup RedEarth Energy Storage has secured $4.75 million in Series A funding, as it ramps up manufacturing of its all-Australian power-storage solution.
The funding comes from Aussie institutional and family-office investors, and is matched by the Queensland Business Development Fund.
RedEarth was founded in 2013 by Charles Walker and Chris Winter, who previously co-founded battery storage manufacturer Redflow.
The pair built the startup to produce a full energy storage solution tailored to Aussie customers and Aussie conditions.
Most competition in the space try to apply products designed in the US or Europe in the Australian markets, and just “market their way around the drawbacks”, Walker tells StartupSmart.
“But Australia is the leading energy storage market in the whole world … it’s a very, very big market, and it’s here to stay, it’s not a fad,” he adds.
Electricity is “the last great piece of infrastructure to properly modernise”, Walker explains.
Developing a battery is extremely expensive and time-consuming, he says.
So, developing the battery itself was not where RedEarth would be able to add value.
“Making the system and designing the system here is where you can add value,” the co-founder says.
Walker compares the manufacturing of the system to building a Formula One car.
“You can pick from all the available technologies,” he explains.
The startup strives to create a system that works for Aussies, and then uses data analysis to keep an eye on that system for the duration of its life. It means RedEarth can let customers know when their system needs servicing, rather than the other way around.
“If you’re a manufacturer these days you have to keep an eye on what you’re manufacturing — especially if it’s technical — and monitor and use data effectively,” Walker says.
Timing it right
Although RedEarth has been up and running for some six years now, this is the first external funding the startup has received.
The founders made the decision to bootstrap for as long as possible following Winter’s experience at Redflow, where “he got very diluted”, Walker explains.
“We decided we would make a company that would make a profit, and we would focus on keeping as much of it to ourselves.”
So far, the co-founders haven’t taken a salary, and have invested all of the startup’s revenue back into the business.
Now, they’ve got to a point where they have products they know they can sell, and some satisfied customers too.
“Happily, that’s the point to raise money,” Walker says.
“The reality is, we wanted to prevent as much dilution as possible. But in the end, you just need a volume of money that you can’t produce yourself.”
While he admits he and Winter might have had an easier time if they had taken on investment, they were determined to hold on to as much equity as possible, “by absorbing that pain”, he says.
He also notes the startup benefited from being independent, and somewhat under the radar, as it was iterating and failing.
“We tried and tested a lot of products during that time,” he says.
If you’re a high-profile startup that has a high-profile failure, “it doesn’t matter if it’s part of the normal engineering process, it’s still a failure”.
It’s going to happen
Now it has almost $5 million of cash on hand, Walker says RedEarth will be “really coming out of the shadows”.
Already, it’s invested in two new production lines, a new premises and boots on the ground selling the products. It’s also working on certification of its systems, and establishing fleet management capabilities.
Now, it’s looking to hit new milestones, and to launch “a new product or two”.
Looking to the future, Walker and Winter are working towards creating a community of RedEarth users that can “trade electricity”.
Such a system would allow people who generate their own power to sell any surplus to others in the community, or on the open market.
“That’s the big product,” Walker says.
“We’re not there yet.”
The co-founders see Australia moving further towards renewable energy solutions.
“Australia is massive, the population is tiny,” Walker says.
Currently, power travels from a power station, through a very long wire, to power individual homes or areas.
Previously, that electricity would power a lightbulb or two. Now, it has to power air conditioning systems and charge electric vehicles.
“People can make and use their own electricity these days, so that is part of the solution,” Walker explains.
“It’s just one of those technologies that is going to happen.”
“Everyone can do it”
When it comes to running a startup, Walker advises other founders to trust their own judgement. It can be easy for entrepreneurs to get sucked into an idea of how their startup should be run.
“Subconsciously they’re reticent, because they see other companies doing certain things in a particular way,” he says.
But every startup, and every founder, is different. You don’t have to take the same route as the high-profile, headline-making tech companies.
“Use your intelligence, work it out,” Walker adds.
“You can do it — everyone can do it.”
For Walker and Winter, this was particularly pertinent when it came to financing RedEarth. Several VCs encouraged the founders to take on investment earlier, Walker says.
“You can’t lecture someone on anti-dilution if you’re doing the diluting,” he notes.
He urges founders to think about the long game, and consider how much of their venture they would like to own once it’s turning a profit.
“With a VC, you can end up owning very little.”
If someone is telling you not to worry about dilution, “if that’s coming from a diluter, then you have to ignore what they’re saying”, he warns.
“If you just do a bit of thinking about it, you can put a plan together and you can achieve it.”
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