The Investment Opportunity
Firstly, kudos to The Solar Cloth Company – which has provided a level of transparency and detail that is rarely found amongst equity crowdfunding sites.
The company had a target of £750k for 10% equity attached to the raise, but has already surpassed expectation and is now into overfunding (offering proportionately more interest).
The company is currently being valued at roughly £7.5m. That’s not far at all from a 1:1 ratio with year 1 (October 2014-September 2015) revenues – which are anticipated to also stand at around £7.5m.
Sales are slated to rise dramatically from year 2 onwards – and are expected to fall just shy of £50m in year 3. Costs will be commensurately high – and indeed the primary reason for the Crowdcube fundraise is to ramp up expenditure on sales and marketing. The Solar Cloth Company’s pitch includes a good level of detail about the modeling of future sales figures. It also explains how the funds raised through Crowdcube will impact revenue generation.
Crucially, the company expects to be profitable from the get-go, and indeed has already turned a £303,771 profit over the year preceding October 2014.
The Solar Cloth Company is planning for an exit in 2017/18 in the form of a trade sale. The plan will be to sell the company for £100 million – based upon achieving certain targets (i.e. a turnover of £40m a year). Again, the company has provided unusually high levels of disclosure around its exit strategy.
The shares on offer via Crowdcube are B shares. They carry no voting rights – only economic rights, such as the right to any dividend yield. The transferral of these shares needs to be approved by the Company. The Solar Cloth Company has also suggested that it may look to issue a further 10% of the fully diluted share capital of the company over the next 12 months. This would dilute all investors in the Crowdcube pitch equally.
The Tech-Take by Oli Batchelor
For many years now the importance of finding renewable solutions for the planet's ever increasing demand for energy has been well understood. Recent environmental trends seem to indicate a high level of urgency to find these answers and therefore increasing amounts of research and funding goes into the sector. Initially most solutions such as wind-turbines and solar-panels were unrefined and designed to retrofit into existing scenarios meaning that they were inefficient and costly, making the case for installation in most locations financially unfeasible. Today however, the technologies have been fine tuned for increased efficiency while cities are planned around their energy demands and architects design buildings to at least be efficient if not playing a positive part in the energy ecosystem. For solar-panel manufacturer The Solar Cloth Company this has led to an opportunity.
The first generations of photo-voltaic cells capable of significant levels of power from an allocated area were very heavy, meaning that only a small portion of rooftops would be able to support them. Add to that the restriction of needing to accurately face the direction of the sun to offset their outlay and very few spaces are actually viable for installation. The Solar Cloth Company's product uses thin-film technologies to deliver a far lighter panel that can be placed across non-load bearing roofs which is priced to quickly pay off its initial outlay. It's the sort of innovation many property developers have been waiting for and that existing owners have needed in order to make the step toward renewable energy.
The only that question remains is the size of the market. Thin-film photo-voltaic cells are not as efficient as their heavier multijunction counterparts nor are they as cheap or light as the emerging organic technologies could be. And then there are wonder-molecules like graphene that threaten to turn what is currently thought of as the norm on its head – one day. Every product has its time, and now is the time for The Solar Cloth Company, They just need to roll as many panels out as they can until their time is up.
Target raise: £750,000
Amount raised so far: £825,450
Equity offered (for original amount): 10%
Days left: 7
Tax relief: EIS