Startups that finance climate-friendly home improvement projects are raking in venture capital as the slow-but-steady electrification movement eyes its e-commerce moment.

Why it’s the BFD: Financing these projects as a sort of home improvement BNPL could tip the scales in favor of mass electrification across the U.S. if the startups — and their investors — are successful.

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  • Achieving mass adoption among regular consumers is always a high bar. Factor in the costs associated with replacing appliances or adding solar panels and the bar jumps significantly higher.

  • Plus, consumers are a fickle bunch. They are hard to predict, incredibly price sensitive and subject to changing tastes on little more than a whim.

State of play: Startups like Sealed are experimenting with new financing models to help homeowners get over the initial cost burden with the hope of making the improvements as easy as adding to cart.

  • The overall costs of climate-friendly home improvements have plummeted in recent years, largely thanks to the rapidly declining costs of solar panels.

  • However, the upfront cost of a major home renovation is still out of reach for most Americans.

How it works: Sealed is just one of several such startups looking at new ways of paying for climate-friendly home projects. It pays for the project entirely up front and is paid back on energy productions, CEO Lauren Salz tells Megan.

  • Sealed has a debt facility that it taps to finance each project instead of relying on the company’s equity financing, Salz says.

  • The debt facility is underpinned by the company’s predictable revenue stream based on data collected from previous projects.

  • Salz says a predictive model is used that can accurately say how much a family will save once the retrofit is complete, which translates into revenue for the company that can be leveraged for additional debt equity.

Yes, but: Getting to the e-commerce moment requires ubiquity across regions, and Sealed currently only operates in New York, New Jersey, Connecticut and Pennsylvania.

The bottom line: Homeowners care more about cutting their own costs and improving their home values than they do nebulous promises of saving the planet. Getting the industry to the e-commerce moment will require a mass shift in how companies speak to consumers.

  • “I think many people looking at climate space have the perspective of, it’s imperative to electrify homes. They throw money at that problem to get results, but it won’t get us where we need to be without a deep understanding of homeowners,” Salz says.

Megan Hernbroth will co-author the Axios Pro Climate deals newsletter. Join the waitlist now.

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