Valuation Trends in Green Energy Startups: Revenue vs. Potential

CHART OF THE WEEK 📈

By Léa Bouhelier-Gautreau | Read

The green energy industry is one of the fastest-growing sectors, offering investors a unique chance to back the critical transformation of the energy grid. Far from being a bubble, this growth is driven by tangible technological breakthroughs. Many startups raising funds online are hardware deep-tech ventures, making it tough to pin down their true value due to the complexity of their innovations. We’ve analyzed the valuations of energy startups currently raising capital through Reg CF and Reg A+ equity rounds.

• Interestingly, only 36.6% of these startups have revenue, signaling that most are either still developing products or strategizing their market launch. Despite this, pre-revenue startups are valued at an average of $59 million, compared to $57 million for those with revenue, suggesting that revenue isn’t a key driver of valuation in this space.

• To uncover well-valued opportunities, we zeroed in on five energy startups with the lowest valuation-to-revenue multiples. Leading the pack are Neighborhood Sun and Infinity Fuel Cell & Hydrogen. Neighborhood Sun stands out with impressive revenue from its community solar business, while Infinity has secured government grants and contracts to sustain future revenue. GoSun recently adjusted its valuation after a revenue dip, keeping its multiple lower than the industry average.

• Emerging Fuels Technology (EFT) and EarthGrid, despite their higher multiples, also made the list. EFT is advancing sustainable fuels, and EarthGrid boasts technology that connects renewable energy farms to customers 100 times faster and 10 times cheaper than current methods. For these companies, revenue is more about proving product-market fit than defining their true worth.

• Investing in early-stage energy startups requires more than just a look at their revenue; it demands an appreciation for the uniqueness and potential of their technology. These startups are thrilling prospects with the potential for high returns, but their lofty valuations and early-stage nature require investors to approach with cool-headed precision.

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PITCH REVIEW 💸

By Teddy Lyons \ Deal Report

Brief: Elemeno Health is a healthcare technology company offering custom-built training platforms for hospitals and clinics. Elemeno's cloud-based app offers "just-in-time" information allowing staff 24/7 access to essential information to equipment setups, procedure guides, and actionable information specific to the hospital/clinic. Using Elemeno's platform, customers have seen 75% reductions in time to implement training, 40% decrease in orientation time, and 75% reduction in serious patient harm events. The company has raised two prior equity crowdfunding rounds in 2021 and 2020, raising a total of $2.3 million. Overall, the company has raised $21.7 million in capital over the life of the company.

Key People: Elemeno Health is led by Founder and Chief Medical Officer Dr. Arup Roy-Burman, who completed his education and medical residencies at Stanford School of Medicine, University of California, San Francisco, and University of California, Berkeley. He began his career at Marin General Hospital, where he served as a Pediatric Hospitalist for 9 years. He then served as President of Children’s Critical Care Medical Group and Pediatric Intensivist at Children's Hospital Oakland. From there, he went on to serve as Assistant Medical Director at REACH Air Medical Services and California Shock Trauma Air Rescue. Finally, he actively serves as a part-time Pediatric Intensivist at UCSF Health. 

Linda Hand, who was appointed CEO in November 2023, also oversees Elemeno and brings deep executive expertise in healthcare technology. She previously led Cardinal Analytx Solutions, a healthcare data analytics and management platform, and DecisionView, a clinical-trial performance management software. She has also served as General Manager of Clinical Trial Optimization Solutions at IQVIA.

Summary

Here's what we like: Elemeno Health has seen strong annual recurring revenue growth over the past 12 months (50%) and boasts extremely strong net dollar retention of 130%. These improving metrics have led two prior VC investors, SJF Ventures and SustainVC, to make follow-on investments in this round. This is a positive signal that existing institutional investors are willing to continue funding the company. In total, these two firms have invested $8.4 million into Elemeno Health. Additionally, as mentioned above, Elemeno has strong case studies with Benioff Children’s Hospital Oakland (75% reduction in time to implement training), North Bay Health (40% decrease in orientation time), and Children’s Hospital New Orleans (75% reduction in serious patient harm events).

Here's what we don't: This equity crowdfunding round is a substantial down-round for Elemeno Health, raising at a pre-money valuation of $6 million ($5 million early-bird). For comparison, the company’s 2021 and 2020 rounds were at $20 million and $12 million valuations, respectively. In response to questions about this, the company admitted that revenue growth and margin improvement, while both rising, have not met the expectations of the company’s venture capital investors. As a result, SJF Ventures and SwiftVC severely adjusted the valuation down to reflect this. While certainly a risk and evidence of underperformance, this allows new investors to invest in the company at a favorable valuation-to-revenue multiple.

LAST WEEK’S POLL RESULTS

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STAFF PICKS 🌶️

LEXI

LEXI provides advanced AI-powered building management systems focused on decarbonizing commercial buildings. Their flagship product, SmartBMS, retrofits existing structures with automated energy management solutions that help meet stringent climate mandates in North America and Europe. The company has generated $3.3 million in revenue and established a strong presence in the U.S. decarbonization market.

• Valuation Cap: $30 million

• Minimum Investment: $100

Pingree Detroit

Pingree Detroit creates sustainable goods using upcycled leather and materials from the auto industry, producing footwear, bags, and accessories. Since its founding by Jarret Schlaff in January 2015, Pingree Detroit has generated $1.5 million in revenue and has been profitable for two consecutive years. The business has also received the Social Impact Award from Gingras Global annually since 2018.

• Pre-Money Valuation: $1.6 million

• Minimum Investment: $100

Sphere

Sphere offers a multi-modal and context-dependent input system to AI, facilitating spatial collaboration with humanized interactions. Sphere is already being utilized by leading enterprises like Pfizer, Micron, and Volkswagen, generating $1.4 million in revenue in 2023.

• Valuation Cap: $60 million

• Minimum Investment: $250