The renewable energy industry is all too familiar with the “valley of death.” This is the
troublesome and significant funding gap that arises between the invention of a promising
new technology or system and having sufficient capital to bring that great idea to market.
Unfortunately, many renewable energy breakthroughs die on the vine due to the risk
aversion of venture capitalists, a phenomenon that is impeding our industry’s growth and
There is hope, however, for bridging that valley of death: crowdfunding. While still in relatively infancy (the first online platform for crowdfunding was created in 2003), it has grown exponentially over the last decade, raising $5.1 billion dollars in 2013 for products, services the arts and even renewable energy.
The most common type of crowdfunding for renewables is investment crowdfunding, where investors purchase equity in a project or business. This kind of crowdfunding works best for mid-stage technologies that have proved their concept. The gap in funding remains for idea conception/early stage development and a proven concept that can more easily attract capital investment. A different type of crowdfunding, rewards-based crowdfunding, can help fill this early-stage funding gap.
Rewards-based crowdfunding is public facing and nearly anyone anywhere can contribute toward a campaign. In return, contributors receive a reward that recognizes their generosity and makes them feel part of a larger community sharing a common goal.
Contributors do not take an equity stake in the company—instead, they are driven to contribute by wanting to support a great idea and reinforced through a reward. Kickstarter and Indiegogo are arguable the best-known and most successful rewards-based crowdfunding platforms, and attract primarily creative projects like film, music, art, food and games. The impact of these platforms is substantial. In March 2014, Kickstarter exceeded $1 billion in pledges. But the rewards-based concept shouldn’t be limited to consumer products—it can also be applied easily to the renewable energy industry.
Rewards campaigns and investment campaigns can work together
A successful rewards-based crowdfunding campaign demonstrates credibility, gains visibility and can attract new funders, traditional and non-traditional alike.
A recent study by Crowdfund Capital Investors examined several hundred companies that completed successful rewards, debt or investment crowdfunding campaigns. Results showed that within three months of a crowdfunding campaign, 28 percent of companies closed an angel investor or venture capital round. An additional 43 percent were in discussions with institutional investors.
Results showed that within three months of a crowdfunding campaign, 28 percent of companies closed an angel investor or venture capital round.
And, participation in a rewards-based campaign can position a company for a successful investment crowdfunding campaign later. For example, a rewards-based campaign can generate funding for the environmental research needed by renewable energy companies in order to apply and receive permits. Once the permit is secured, the company will have an easier time convincing investors of project viability. Rewards-based crowdfunding can also fund critical advancements that investmentcrowdfunding cannot, including securing matching funds for large government grants, supporting a prototype launch, or holding information-sharing workshops and conferences.Even better, the financial risk of rewards-based crowdfunding is relatively low. Fundraisers maintain complete ownership of their project, and there is no charge to execute a project on a rewards-based platform, including renewable energy specific platforms like Clean Reach. There is also no charge if you don’t succeed. The financial requirement for an organization or company to execute a successful campaign is typically only 5 to 10 percent of the target fundraising amount. What should not be underestimated is the time commitment. Achieving a funding goal requires thoughtful planning and execution—before, during and after your campaign.
Expanding your reach
Clean Reach exists to raise funds, and, equally important, to build a powerful international community of renewable energy supporters. Unlike investment crowdfunding, contributors aren’t restricted to individual countries, nor governed by financial security laws. This global reach fosters public engagement and pulls together the collective assets oflarge, diverse networks of people. Passionate supporters and early donors will often spread the word of your campaign themselves, on social media and within their own networks.A well-executed campaign can achieve both fundraising and marketing success. It gives fundraisers a place to tell their story in a compelling way, leverage current relationships and create new ones. Multi-way communication with a new crowd of supporters can be invaluable. When done right, the campaign will favorably position a project in the marketplace and open doors to new opportunities. Those considering a crowdfunding endeavor should evaluate their options carefully and select a platform—or platforms—that best align with business goals. People around the world care about renewable energy and its potential to power our planet. Investment crowdfunding has been a game changer for renewables, and rewards-based crowdfunding should be as well. Platforms like Clean Reach are a valuable fundraising tool and a way to leverage future funding for your great idea.
Learn more at www.cleanreach.com.
About the Author
Stephanie Thornton is the CEO and Founder of Clean Reach, a crowdfunding platform for ocean energy. She has served as the executive director of the Oregon Wave Energy Trust, worked directly with technology developers in Norway and Australia, and co-founded and served as CEO of Ocean Energy Industry Australia. She has a B.S. in marine science from Humboldt State University and an MBA from Golden Gate University.