Individuals can now invest in renewable energy projects in Spain – a market once reserved for energy giants and financial institutions – thanks to Fundeen, the country's first renewable energy crowdfunding platform.
Last November, the Spanish government announced plans to switch the country's electricity system to 100% renewable energy by 2050, installing at least 3,000 MW of wind and solar power capacity every year in the next 10 years. In the first half of last year, 45.8% of the country's power needs, equivalent to 126,411 GW, had come from renewable energy sources.
For as little as €500, personal investors can use Fundeen to help fund the building of a photovoltaic facility, for example. The platform, which was launched in July 2017, is targeting 15,000 investors in 2019 to fund 15 projects estimated to be worth€18–20 million in total, and generate about 23 MW of renewable energy.
"We want to contribute to accelerating the energy transition and generate environmental impact," Fundeen's co-founder and CEO Juan Ignacio Bautista Sánchez tells CompassList in an interview.
Renewable energy has become one of the most attractive sectors for investors. Growing consciousness of the importance of environmental sustainability aside, demand for renewable energy is also set to surge as wind and solar sources – already cost-competitive – will become cheaper than fossil fuel by 2020.
In the US alone, private investment in renewable energy is forecast to reach US$1 trillion between 2018 and 2030. The largest investment funds that operate exclusively in the renewable energy sector raised a new record of US$280 billion in new investment in 2017.
Profit this year
Fundeen is based on a "hybrid fintech-energy broker" model, the brainchild of Sánchez who adapted the model of popular real estate crowdfunding platforms for the energy sector. His market research identified several crowdfunding companies that already invest in renewable energies in Europe, with combined projects valued at €300 million – all within a period of less than five years.
For renewable energy projects, funding relies on positive cash flows from energy sales, recently made feasible by technological improvements that cut the costs of photovoltaic energy projects by 90% compared with 2008. Fundeen, whose founding team come from civil engineering and risk management backgrounds, evaluates projects according to their technical, financial and legal viability.
The startup expects to be profitable from September 2019. By the end of 2023, the company aims to make annual profits of €4 million and to supply 250 MW of energy, equivalent to €220 million in financing, and reduce "1.3 million Madrid-New York flights worth of CO2 emissions," adds Sánchez.
The startup is also preparing a new funding round of €500,000, set to close around June 2019.It has also applied for a participative loan of €150,000 from Spanish public business grant provider Enisa. If the loan is granted, the quantum for the new investment round scheduled for June could be cut.
Fundeen raised its seed round of €120,000 in July 2018, adding to an initial pot of €45,000. Around this time, Jesús Domínguez, a former risk management consultant and now the company's CFO, and two other business angels also joined the team.
“We intend to use the money raised to scale marketing activities and to further develop the marketplace,” says Sánchez, speaking at the 2018 Madrid South Summit. “Fundeen’s income comes from a 5.5% success fee that is charged only when fundraising is successful, and a management fee of 1.2% of the financing volume".
In both cases, commissions are charged to the project promoter. However, "it would be fallacious to say that they don't affect the investors' profitability," he says. “In Fundeen we always talk about net returns, after taxes and commissions.”
Partnering corporates, startups
Although the company was co-founded in Madrid by CEO Sánchez and his brother Adrián, the pair soon moved the company to their native Ávila to reduce costs. The brothers, both civil engineers by training, began dedicating all their time to pre-evaluating potential energy projects for investment.
There are about 800 MW of energy projects in Spain that are currently looking for funding. Fundeen has shortlisted €17 million worth of projects to date, after analyzing about €37 million worth of deals.
“Since there are two products or investment possibilities through the platform, equity crowdfunding, and crowdlending, there are also two project selection procedures,” Sánchez says.
The first fundraiser awaiting authorization is a €219,000 equity project of 0.25 MW with projected profitability of 7.3%. Investment contributions of over €500 per person are required. The project is a photovoltaic self-consumption installation and will produce enough energy to cover 20% of the energy demand of the project developer's factory in Cádiz.
Fundeen currently has 229 registered potential investors. “We want to target workers in the renewable energy sector as potential investors too,” the CEO says.
Initial plans would be to raise funds for projects that are more likely to attract media coverage, such as those involving well-known Spanish companies. One example is an energy project to supply a canning factory linked to Spain's largest supermarket chain Mercadona.
Fundeen is also eyeing industry partners in the renewable energy sector, such as Acciona, which could attracted by the possible tax breaks earned from investing in sustainability, or other incentives. Fundeen already has strategic agreements with renewables company Constructora Gran Solar (GRS) and Blue Tree Assets Management, for whom Fundeen acts as the financial intermediary. Collaborations with startups like Auara will also enable Fundeen to allocate some assets to social projects, or fintechs for savings.
A major challenge in 2018 was getting final authorization from the CNMV, the body in charge of supervising and inspecting the Spanish securities markets and related parties. At the time of interview, the company was still awaiting the go-ahead from the CNMV since their application in January 2018 before embarking on the Cádiz factory project. Fundeen already had a favorable report on equity crowdfunding then. Finally, CNMV authorization was granted in December 2018.
Getting the word out to potential investors has also been a hurdle. For this reason, the crowdfunding platform leverages publicity-friendly initiatives to boost public recognition. For example, investors can neutralize their carbon footprints by investing €4,000 in cleantech projects.
For equity crowdfunding, each project's energy production must not be over 10 MW. For crowdlending projects, Fundeen performs credit score checks via the Spanish central bank to compute the risk level of each project. In addition, Fundeen will also operate a marketplace for trading debt and equity securities based on a bidding system that will be launched in June 2019.
“Fundeen is considering international expansion, especially to countries like Portugal, where there is little competition, and Italy, where there's no competition to date, as the markets similar to Spain," says Sánchez.
"However, our natural market is Spain because when it comes to attracting investors from other countries, it's necessary to previously obtain the authorizations of the competent bodies in each country. Another thing is the possibility of financing renewable energy projects outside Spain. In fact, we have analyzed projects in Chile and Morocco.
"Looking ahead, we plan to expand the crowdfunding platform to invest in other sectors, but always keeping the environmental component,” he concludes.