Climatize: Review of Crowd-financing App & Developer Partner Experience

The transcription of the video is below. 

Introduction of Climatize’s early developer partner, Lawrence Chan

Kerim: Hi, everyone. This is Kerim, Kerim Baran with SolarAcademy. I have with me today again, Will Wiseman, of Climatize. We shared a little bit of information about Climatize in a prior solar conversation. And today, as we are recording the second solar conversation with Climatize, we have one of Climatize’s early developer partners, Lawrence Chan, with us as well. Lawrence good to have you. Will.  

Lawrence: Thank you. 

Will: Thanks, Kerim. 

Kerim: You know, perhaps for, you know, the audience already knows Will’s story probably, but Lawrence, if you could, just share with us a little bit about yourself, your company, and what you’re working on these days. And then maybe we can jump on to the Climatize app from there.

Lawrence: Absolutely. All right. Thanks so much for having me on your cast here. So my name is Lawrence Chan. I’m actually a physician by training, and I’m still a practicing physician, but I got into renewable energies, a couple of years ago and saw that there was a distinct need in terms of early stage financing funding for the projects.

So while there are a lot of projects available, just the funding aspect has been really, really difficult, not just on the early stage, but at least on the debt side, meaning, to fund the entire process. And so a couple of years ago, I’ve been partnering up with different developers around the country, one of them, Associated Energy Developers out of Plymouth, Boston. 

And so we’ve taken three of those projects and brought them forth through Climatize. And so far, we’ve gotten two of them fully funded. One of them made it to what – 95%-ish. So we came very, very close to being fully funded, but it’s been a fantastic work with Climatize and very, very helpful to to get our projects through. 

Kerim: Thank you for sharing that. 

Demo of Climatize’s Crowd-financing App

Kerim: Will, we’d said in this conversation, we’d dive a little bit into the Climatize app, and then maybe highlight some of the projects.

Will: Sure. Yeah, definitely. So let me get this up here. Let me share my screen. So one moment. Bear with me here. 

Kerim: Are there any issues on that?

Will: There we go. Are you able to see this here? 

Kerim: Yep, we are. 

Will: All right, great. So with the Climatize app essentially, you can come in and browse various renewable energy projects across the country. And so, for example, this Shakespeare Theatre here was one of the projects that we did with Larry and Associated Energy Developers.

Additionally, Congregation Ahavas, based in New Jersey, and then previous before that as well, a community solar project based in East Longmeadow, Massachusetts. 

And so with these projects, Associated Energy Developers was able to come in and essentially use their operating project portfolio to then essentially raise new investments from the community. And from that, they were able to raise debt financing with those projects to now go and reinvest into their new early stage development and construction projects. 

I mean, looking at kind of Congregation Ahavas here, you could come in and see, ultimately, a little overview of the project, you know, kind of system specs, additionally, impact in the community, what it means from a carbon perspective, additionally, see their various social platforms. So they’re able to get some marketing value. And then you see Larry’s big smiling face there, as well as with these other execs of the AED team. And, you know, they have an incredible track record of doing over 300 projects in 30 states, so incredible track record. 

And we’re really excited to partner with AED on these first projects to really help them capitalize their projects and move that much faster. And so we have some overviews of the project and from that, that was, ultimately, we’re able to see kind of their power yield curves, cash flows of those projects, and then really dig into the proformas to better understand kind of what kind of debt could this project take on.

So as an investor, they were in a senior secured first lien position on the project. And from that, an investor was able to earn 8% annual interest through these debt notes. And with that, AED was able to go and reinvest into their project pipeline. 

And so we’re really excited to see some more community engagement on these projects and really kind of create a really tangible way for the communities to actually invest in the projects that were local to them.

And so in doing even some customer research, we had people from the surrounding cities saying, hey, you know, this was a project that I could drive, too. That’s something that I could really go and even see and meet the people behind the project. And that was something that was really exciting for us. So we’re really happy to support these projects at a very community level and provide a very transparent way for people to participate in the energy transition as an active stakeholder.

And so now we’ve just launched a new project with a different developer that is really now helping target projects actually in the southeast, so in North Carolina and Tennessee of all places. And so with that, you know, we’ve been seeing really exciting early attraction together across 74 different investors.

We’ve already raised $1.4 million in just the last five months since we launched in May. And so this has been a really exciting channel to help fund some of these kind of smaller, distributed energy projects that, otherwise, we had seen were really struggling to kind of attract that debt financing from banks and traditional financing, kind of financing institutions.

And so our goal is to really help developers like AED and Ovanova to be able to retain their project portfolios, acquire that debt at competitive rates, and help them really reinvest into the development of new projects in their pipelines so that they can accelerate the really impactful work that they’re doing in communities.

How did Climatize Add Value to an Early-stage Developer of a Community Solar Project

Kerim: Good. Thank you. Thank you for all this overview, Will. So jumping back on to the early days of your relationship with Lawrence and developing your first set of projects, what were some of the some problems that were arising? And maybe, Lawrence, you can chime in a little bit, like what issues you were facing. And how did Climatize engage and add value to the process?

Lawrence: Yeah, the process itself was, I think, we were very new to the whole Reg CF crowdfunding platform. And so there was a little bit of a learning process, especially for the first project. But by the time we got to the third project, it was much easier. All of us were familiar with the next process. 

You know, there’s a couple of those stepping stones that need to happen, but I think we’ve pretty well ironed out many of the issues we had initially to get us there. So when we come up with our fourth project and fifth project, it’s just going to be so much more easier to do and seamless, to be honest. I mean, we’ve automated some of that process and made it so much more simpler

Kerim: Got it. And Lawrence, you were financing projects before. 

Lawrence: That’s correct. 

Kerim: What made you consider Climatize?

Lawrence: Well, so when we first started, it was actually funding from my family. So we’ve taken some money, and we were financing just the early stage development. And so that’s from signing to what we call NTP, meaning it’s notice to proceed, right?

Kerim: Notice to proceed, yeah.

Lawrence: And then from there, we needed to finance the construction financing. So buying panels, to pay EPCs to go and do the construction. And finally, it’s the debt portion of it to be able to refinance the whole piece. 

Well, we found that within the C&I space, meaning, the commercial and industrial space, it’s very, very difficult. And you go to banks and you say, Hey, I want to finance this thing. They have no problems with financing a house or a rental property or a self storage – not solar. They just don’t understand it. It’s a very, very difficult process for them. And since there’s not that many people doing it, they just don’t understand it. And the majority of the answer is no. You know, they don’t even spend the time to try to figure that out.

So once we got to a certain point, we realized that the money we had put into these three projects, we needed to get out. Because in order to get to the next project, we need to refinance all of it into some sort of debt structure, so that we can now take that extra money in this case, $1.4 million, and now apply it to the next 3, 5, 7 projects to keep going and keep moving forward. Otherwise, we’re stuck with this $1.4 million and say, well, now, what do we do with it? Because we’re making return, but we can’t pick more projects. 

Onboarding, Due Diligence, and Financing Processes of Climatize’s Crowdfunding Service

Kerim: Got it. Got it. Thank you very much for this information. So if we dive a little bit into the process of establishing a partnership with Climatize for other developers, Will, can you tell us a little bit what that process looks like?

Maybe talk a little bit about how you got connected with Lawrence, as well. And then what does your current pipeline look like? How do you engage other developers? What does the onboarding process look like, and then the due diligence process after that?

Will: Yeah, definitely. So, Lawrence and I were connected by a mutual business acquaintance. And so through that, he reached out to us and said, hey, you know, I’ve been really thinking about this kind of crowdfunding community engagement model for solar and, you know, we had thought about spinning it up, but there were so many hurdles to the regulatory approval process that in the end, we kind of didn’t end up moving and ended up coming across you all.

And so through that, then he reached out to us and with these three projects, you know, essentially, they had their data rooms ready. They had their performance ready. And so really, the only outstanding things were to get a CPA review on the first project and audits for the other two. And from there, we looked at, okay, you know, what kind of technology have they selected the interconnection permits, site leases, O&M Contracts.

We wanted to look at, you know, ultimately, how much cash flow are these projects throwing off so that we can appropriately size and kind of get service coverage ratio. And then from there, once we had a degree of certainty that these were high quality projects, then we worked with them to draft the kind of offering circulars that were submitted with PSCC, and from that, helped with the paperwork filing of that documentation, getting EDGAR codes and whatnot, that goes with the actual kind of execution of the issuance of new securities. 

And so from that, we got the projects up and live, and then we were able to get out and start marketing both through organic video content, through some paid advertising, through newsletters, through podcasts like this, and that was how we were able to then go in and get those first three projects capitalized.

And so as for a new developer who wanted to come and essentially raise on Climatize, they can go to the website. We have a get-funded tab. From there you can kind of submit early information and book a consultation. We take that first meeting to kind of take a sniff test of a project. You know, is this a high quality project?

You know, where are they kind of in the project’s life cycle? How much are they seeking to raise? Is this a good fit? Is there a nice story behind the project? I mean, that’s something that we’re always really looking for is that especially with kind of this community centric funding method, you know, projects that have that human element to it is really important.

And so, you know, some of the projects now that we’re working on with AED that we’re seeing in the future, something like the Boys & Girls Club. You know, that has a really great story. And we found that in particular, if a project has a kind of greater community impact, like that community solar project that benefited a low-income community or things with kids, in particular, kind of transcend borders and is something that people are really excited to support.

So looking forward to doing more of those projects in the future. 

But if a new developer came to us, you know, we would sign an NDA with them to be able to kind of really dig in on the specifics of the project. And from there, if it seems like something that is going to be a good fit for the platform, we’d sign an LOI.

We’d then do the data intake of the data room and begin kind of really digging into the project specs. 

Additionally, we recently signed a partnership with Banyan Infrastructure. They’re tailor-made kind of portfolio management tool for clean energy, and from that, that’s going to help us really kind of compress our DD cycles so that all of that information is, you know, in a single place, single source of truth, and provides us a single dashboard for management of all of these projects.

And so, you know, with that, once we get through DD with the developers, we help them draft that offering circular and post it to the platform. And then from there, kind of give them best practices for marketing their projects, kind of where to put it out, provide some pre-populated kind of media, to be able to get it out to social media.

And then also, in the future, we’re going to be building in kind of referral incentives, so that the developers can share with friends, family, their community to really help bring them along, as well.

Kerim: Right. Sounds like you guys are rolling forward really nicely, since we recorded the last conversation, probably a couple of months ago now.

Climatize’s Future Vision: Growing the Team, Bringing on Partners, Expanding Climate Action Locally

Kerim: So what is next, Will? What’s in the near future of Climatize as we conclude this recording?

Will: Yes, I mean, we’re in the process of hiring a growth marketing lead so that we can scale that customer acquisition and continue to really get more investors onto the platform and looking forward to do projects 4 and 5 with Larry and AED, so that we can keep them moving and accelerating and then bringing new developers onto the platform helps us just to prove out that this is a really exciting pathway for developers to really now engage their communities. 

And we hope that this kind of builds broad coalition so that, you know, it is not just you know, kind of clean energy walks like ourselves, but rather, you know, actually building really tangible and transparent ways for people to feel like they’re creating climate action in their community.

And then looking to, you know, also create bigger partnerships. You know, we’ve signed a partnership with Arcadia, and that’s really exciting for us because through that, you know, they are the largest community solar subscriber in the country. And we want to enable their subscribers to be able to co-invest in their projects and vice-versa. 

You know, if you invest in a project, wouldn’t it be great to be able to subscribe to that project and save 10% to 15% under energy at the same time? And so creating these kinds of synergistic relationships in the industry will help us kind of open the door, and I think, really kind of release the floodgates of this pent-up demand for climate action, where people feel like climate is a really urgent problem, but they felt kind of powerless to do anything. 

And so with this high degree of transparency and impact in your community, we really want to be that platform that enables transparent and really impactful climate investing.

Kerim: Beautiful, beautiful. Thanks for this update, Will. Looking forward to the next one already. 

Will: Sounds great. Thanks, Kerim.  

Kerim: Thank you, Lawrence, for your time, as well. 

Lawrence: Yeah, thanks for having me.