Impact Investing Fellow Marissa Silapaswan interviewed Kevin Krachman and Jonathan Abe of PSM Clean Energy about clean energy, their favorite entrepreneurs, and their experiences in our Social Business Accelerator.
What is your background before PSM?
Kevin: I was working in financial litigation and got to see all the things that could go wrong with an investment. I was working at Cornerstone Research and Analysis Group and saw the opportunity to make my next move. When the crowd funding app passed in 2012 and 2013, this opened the opportunity to publically advertise investments. I saw this as a great opportunity to expand the group of investors that could support clean energy products. I wanted to makes sure that we could create great investment products that could align everyone’s interests and accelerate the growth of clean energy and solar.
Jon: When I was in high school, it was the same time as the first Gulf War, so I be came very conscious about energy issues. At that time we were relying on foreign oil. When I graduated from college I went straight into energy consulting. After several years of energy consulting, mainly on energy efficiency issues, I had an opportunity to do a solar project; this was very early on in the solar industry stage. I found out how universal and simple solar was and how much people really like solar projects. There was something much more likeable about a solar project than working with someone to replace their chillers on an energy efficiency project. From there I had the opportunity to run the Massachusetts solar program, and from there work for Nexamp, which is a regional solar developer. I was exposed to the huge opportunity presented by commercial solar – primarily rooftops, adjacent property, and parking lots. I had the opportunity to do a lot of deals. All these deals encouraged huge legal costs and soft costs, and there was a huge opportunity for standardization. One of our seed investors saw a huge opportunity to streamline the commercial solar financing process and to tap into a new source of capital (namely accredited investors). I have the project finance experience in supporting large financial institutions, am developer, and know how to asset manage projects. Kevin brings the financial structuring, the legal experience, the deal structuring, and a CFA, so we complement each other well and he knows how to sell the products to investors.
What were some of your early milestones?
Kevin: The biggest milestone was completing the first project in 2015 – Greenpoint Solar in Brooklyn, New York – and having it operate as planned for the full first year.
Jon: Greenpoint is a building. We are leasing the site and selling the power to a nonprofit industrial real estate development company. They use the power to power a maker space. It’s a facility where artisans and local contractors operate and their mission is to support blue collar industry in rapidly gentrifying neighborhoods. The other cool thing about the Brooklyn project is that there were 10 individual investors, so we had a nice amount of people involved.
Another milestone was launching the new website in January 2016. Since then, we’ve built a pipeline of projects, everything from Hampshire College to fire stations in New York state, to a cemetery, to projects in the town of Fairfield, Connecticut. We basically closed a seed round that was capped by a convertible grant by the Massachusetts Clean Energy Center (MassCEC). We did the initial project, and then we got seed funding that allowed us to build our pipeline, get the deals ready to go, and structure the website.
It is essential to our business model to fund these projects with accredited investors, who are mainly impact investors. Getting into the SIF program was really good for us. We saw the pitch event in April as a big milestone as well. Being up front in a large group of impact investors and being able to offer all of these projects to them was great for us. If these projects are invested in, there will be instant impact.
What are your next steps?
Kevin: The next step is to present these opportunities to the next set of investors.
Jon: These projects in particular: Hampshire College, which features solar tracking systems both at the president’s house and at the CSA (Community Supported Agriculture) Barn, and projects in the town of Fairfield which range from the library to a baseball field.
What is your long term vision for PSM?
Jon: The long term vision is to accelerate investment in green power projects, starting with solar. We envision that over the next five years, we will facilitate the investment of almost one billion dollars in solar projects that might not have otherwise occurred. We will have a community of investors that is 1,000 strong that we can also use to help address other untapped green power opportunities.
How are you trying to move the needle environmentally?
Many of our projects are nonprofits, small businesses – we enable them to become more competitive and stay focused on their missions. We are supporting local companies – helping them save money and fulfill their local missions.
Kevin: Right now solar energy comprises 0.4% of the electricity generation in the United States. In order to limit the increase of global temperatures to two degrees Celsius, we need to dramatically increase the amount of clean energy that is used.
Jon: We aim for the significant reduction of carbon emissions and other fossil fueled related pollutions.
Kevin: Reduce costs, open up jobs. Many of our projects are nonprofits, small businesses – we enable them to become more competitive and stay focused on their missions. We are supporting local companies – helping them save money and fulfill their local missions. One, we lower solar customers’ energy bills. Our customers are these local businesses, smaller entities, non for profits, helping the community. Two, we work with partners – developers, construction teams – that are also small local companies. We’re providing them with business by working with them, as opposed to having a Solar City or a national company involved.
Who are your favorite entrepreneurs?
Jon: Jigar Shah. He’s a co-founder of Sun Edison. He introduced the power purchase agreement, which is the basis for accelerating, the first key building block to flow of capital to solar energy. He took the first step. Solar City’s business model is based on what he did five years before.
Kevin: The guy who funded LinkedIn, Reid Hoffman. The idea of StartUp of You really resonates with me – treating your own career as a startup – managing your career as if it were a startup, investing in yourself, taking intelligent risks and constantly working to be better.
What drew you to SIF?
Kevin: What attracted me is your efforts to build a community of impact investors, who are looking to come together to help impact businesses succeed. Helping to foster that early growth is crucial to any business and through SIF having that early support has been instrumental.
Jon: I think what really attracted me, was those initial discussions where Vikram made it clear that you were looking for companies that were ready to raise capital.
Kevin: You weren’t an incubator or accelerator in the traditional sense. You were here to help companies lift off, which differentiates you dramatically from other accelerators in talking to investors.