Mosaic came out of the gate on Monday with its online platform for crowdfunding solar, hamstrung a bit by state and federal regulations but optimistic that it can do for solar power development what Kickstarter has done for creative projects and the people who love to back them. (And the optimism seems to be well-founded – see our update at the bottom of this story.)
Solar financing in the U.S. has mainly been the province of Wall Street, with the likes of Citi, Credit Suisse and U.S. Bancorp reaping returns from the growing sector. But now on the Mosaic website, regular folks – if they live in California or New York – can put money behind solar power projects and earn a 4.5 percent return.
Not bad, with 10-year Treasuries below 2 percent and CDs even lower.
“Energy investing has traditionally been a bank only game, but already, hundreds of people from across the United States have invested to finance solar projects through Mosaic. We expect millions more to follow,” Dan Rosen, Mosaic’s CEO, said in a statement.
Oakland, Calif.-based Mosaic began fleshing out its plans to offer solid returns through solar crowdfunding last June – it called itself Solar Mosaic then – not long after Congress and President Obama, in a rare show of bipartisanship, passed and signed into law the Jumpstart our Business Startups (JOBS) Act. That law was supposed to open the door to unaccredited investors easily making equity investments in small or startup businesses through crowdfunding.
Unfortunately, the Securities and Exchange Commission has been slow to fully implement the law. As a result, Solar Mosaic is having to work through state regulators to open up its platform to average investors, and so far only California and New York are on board, although “high-net worth” investors can be eligible elsewhere.
“We’re eager to see the JOBS Act move forward, but we don’t need it to run our business,” co-founder and CFO Steve Richmond said during a Monday Web-based news conference.
The company isn’t promising risk-free investing, but is vowing strict due diligence and to pursue what CEO Rosen called “relatively low-risk, high-quality projects.”
Three projects to put solar on affordable housing complexes in California were available to average investors at launch Monday morning, but the one for a 55-kilowatt array in Corte Madera had soon reached its $40,350 funding goal.
With that project, the housing complex owner agreed to buy power through a power purchase agreement from an entity that will own the system. The benefit to the nonprofit building owner will be cheaper power than the local utility can sell it. The borrower/system owner, who will pay Mosaic 5.5 percent interest on a 109-month loan, will get a steady stream of revenue from the sale of the electricity. Mosaic will then charge its investors in the project a “platform fee,” trimming that 5.5 percent down to a 4.5 percent rate of return.
Mosaic has won backing both from private investors – it got $2.5 million in early stage funding from Spring Ventures last year – as well as the Obama administration, which awarded the company a $2 million SunShot Initiative grant, hoping that the emergence of such platforms could drive down the cost of developing projects.
UPDATE: Well, that went well. Mosaic sent out word Tuesday afternoon that it had sold out its first four projects in less than 24 hours “with over 400 investors putting in between $25 and $30,000.” The company added that investors “put in over $313,000 with an average investment of nearly $700.” As of Tuesday afternoon, one project remained available for accredited investors who meet certain financial suitability requirements, the company said.