#22 - Is Your Solar ROI as Bright as Promised?

What if you could shop for solar panels like you do for cars? My name is Sam, your guide for this podcast. This is The Tech Optimist.

So we're seeing a huge shift from the grid to solar power at home to charge your EVs. The other side of Enact is new and is growing fast, which is the consumer, you know, the homeowner, and they can measure their outcome.

You're doing some wonderful things to help Proliferation of solar projects.

The mission has been, how do you bring at least an automotive buying experience to the solar industry?

In a world captivated by criticism, it's easy to overlook the groundbreaking technologies shaping our future. Let's shine a light on innovators who are propelling us forward. As the most active venture capital firm in the U.S., we have an exceptional view of tech's real-world impact. Join us As we explore, celebrate, and contribute to the stories of those creating tomorrow. Welcome to The Tech Optimist. As a reminder, The Tech Optimist podcast is for informational purposes only. It is not personalized advice, and it is not an offer to buy or sell securities. For additional important details, please see the text description accompanying this episode.

Hello everyone, and welcome to another edition of the Tech Optimist podcast. My name is Greg Baker. I'm a managing partner here at Alumni Ventures. I'm joined today by Deep Chakraborty, CEO of Enact Systems. Deep, welcome.

Thank you, Greg. Glad I'm here, and thank you for having me.

So, you know, we invested in Enact a few years ago. You're doing some wonderful things to help with the proliferation of solar projects. So why don't you tell us a little bit more about what you're doing?

Yes, thanks, Greg. Enact is a platform for solar, as you said, and battery storage projects. We focus on buildings. Homes and businesses. And it really automates the process of the customer journey. So buying these things and getting these things are complex. So we are helping the customer journey automation, which starts at the design of such projects using our proprietary software, and then the entire process of delivery, and most importantly, measuring the outcomes of such investments, which are long-term returns. over many years. So it's a SaaS play. We have been at it for over 7 years and we have a very interesting business model. We'd love to share more about that and tell you about our journey.

Yeah. Yeah. Why don't you tell me some of the great advantages that customers have using your system?

Yes. So Enact is a 2-sided platform. On the one side, it helps providers of solar projects, installers and designers and sales professionals on their journey, which is remotely designing these projects in minutes instead of hours. And so we have been very successful at that. We have eliminated pretty much the need to visit a site for a solar project. You can use Enact to design using satellite imagery, and we have all the data in one place— electric rates and different hardware options. So within minutes, you can prepare a very complete proposal. which leads to contracts and the sales process gets automated. And that's the core of Enact. It's active in many countries, not just in the US. The other side of Enact is new and is growing fast, which is the consumer, the homeowner or the business owner. They too have an app and they can measure the outcomes of all their project performance, financial savings, We are the only platform that gives such a financial-focused outcome tracking to the buyer, unlike some of the larger players that are very narrow in terms of the information. So we have nothing to hide. We have all our information, projections, proposals compared against actuals. So it gives a very transparent buying journey to anyone that is using enact to procure their solar storage projects. And it's also both residential and commercial.

And where are you seeing the biggest growth?

Great question. We are seeing, of course, within the US, a shift from California where we started to a lot of new markets. We are very West Coast central in our company. Most of our employees in the US are on the western side. But we are seeing a big shift on growth of solar in many states. Texas now is a top 5 state. The Northeast is very strong. And all major urban centers in the US where consumers are buying their electric cars now for the first time— last year was the highest number of electric cars sold— that's driving solar. Because once the customer gets an electric car, the electric bills go up. Right. And, um, and the dealer never tells you that. So you get your shock and then you get your solar next. So we're seeing a huge shift from, uh, the grid to solar power at home to charge your EVs. And that's in pretty much all 10, all 10 top metro cities in the US. But in terms of states, we're seeing a shift to the eastern states picking up. California has had a lot of policy changes last couple of years, especially last year. And so the market's adjusted quite a bit. And then internationally, we are active in Germany, Italy, the Middle East, India, many other countries. All the markets are growing. And we are seeing, of course, as you grow eastwards, the price of solar is lower for the same hardware cost. It's delivered at a much lower price, and therefore the paybacks are incredible. You're seeing under 3-year payback in pretty much all over India. And therefore, it's becoming easier to buy these things. It's not a very expensive purchase and can be paid off quickly.

Hey everyone, just taking a quick break so I can tell you about the Deep Tech Fund from Alumni Ventures. AV is one of the only VC firms focused on making venture capital accessible to individual investors like you. In fact, AV is one of the most active and best-performing VCs in the US. And we co-invest alongside renowned lead investors. With our Deep Tech Fund, you'll have the opportunity to invest in innovative solutions to major technical and scientific challenges, which can have a hugely positive effect on society. Companies that have the potential to redefine industries and create a more sustainable future and deliver significant financial returns. So if you're interested, visit us at av Now back to the show.

What's holding us back from having the 3-year payback?

We're having, obviously in California where I live, it's a 5 or 6-year payback. The same hardware is, the cost of hardware is about 40% of a total cost of an installed system. So there's a lot of soft costs. Permitting is a big piece of it. So the city and the utility both come to your home, inspections after every project. So the, The code ensures a safe system, but there's a lot of bureaucracy in how systems are sold and delivered, which is not the case in Germany. I mean, the local licensed contractor can do it with a one-piece paper signed. There's no visit to your home. So the German systems are half the price delivered than the US systems. There's definitely a lot of opportunity. Same in Australia, it's even lower than Germany. So I think the US method, of course, is very safe. You know, we protect the homes from any issues in electrical and fire code safety, but the process is long and it's extremely bureaucratic. And we have only 5 million homes now that have solar. To get to like 20 more, this cannot continue. It has to be digitized.

I am with Deep here. I totally understand what he's talking about, how this needs to be digitized so that they can expand and get more houses and more homes And more customers with solar panels. So I, I so understand what he's trying to say here, but I did want to add something in reference to the hardware cost for solar panels that Deep was talking about here. So the hardware cost through Enact is about 40% of the whole system. You know, the rest goes to permitting and code compliance stuff and just, you know, other stuff. of minuscule stuff that has to happen to get those installed. Since solar panels can cost between $2.40 and $3.60 per watt, the more energy your solar panel system needs to produce, the more you'll pay. Right. So, um, NerdWallet also says that per state, with a 6-kilowatt system, can cost anywhere between $18,000 to $36,000. In New Hampshire, on average, they cost about $21,000. And in Massachusetts, they average anywhere from $20,000 to like $20,800. But then again, let's keep in mind that these prices are before any tax rebates that you get. Let's get back into it and see what else is down the road in this interview.

Okay. What brought you to create Enact?

Great question. My background, I'm an engineer. I worked a lot in the automotive industry going back 10 years ago. Michigan 15 years ago. And like engineers, I like solving problems. When I switched to solar in 2009 and I worked in the solar industry for many years, I found that unlike automotive where you can go and pick up your car at a dealership and you pay your $30,000 or so or lease it, in solar there's nowhere to go. Very difficult buying journey. So obviously coming from automotive the mission has been how do you bring at least an automotive buying experience to the solar industry, which is very big now. We're talking millions of homes and about a million homes a year. So that has been the motivation. How do you bring, you know, a customer experience and journey that deserves the solar customer similar to a car customer? And that's been the mission at Enact. Of course, the one thing I will mention, it's the same industry now. When I left automotive, I thought I switched. to solar, but now the car companies are selling solar. So I think there's obviously a big shift there as well.

Now, are you— Enact is indifferent to the installer or the— and the solar panel company?

We are completely indifferent to the solar panel company or equipment providers. Every certified equipment option is on our platform. We're also completely indifferent to which installer uses Enact. We would love all of them to, but we know that there are other ways of building their businesses. Many don't have any software tools at all, and some use different types of homegrown software or combinations of design and some horizontal CRM-type platforms. So, there's many ways to get the same outcome, but we are an all-in-one approach. And that works for many installers. And so we are indifferent to who wants to join our platform. And of course, we also are bringing them projects now in certain parts of the US market. We are not just bringing them software. Our preferred installer partners also win consumer projects in California, which is a very interesting and new addition to our business.

Great. Now, if I happen to have a solar system and the installer didn't have a great operating system for me on the front, are you retrofittable?

We are retrofittable. So we have integrated with all the major manufacturers of solar inverters, and the top brands include SolarEdge, Enphase, Huawei, SMA, and so on. So regardless of who installed your system, highly likely that we already are integrated to inverter brand. And that allows us to connect with your system even after you've installed it and figure out how it's doing and how's your return on investment if you share with us some of your contracts. So we can onboard you to Enact even after you've purchased solar. We are doing that a lot also now in California. People come to us and they say, hey, I got my solar, but now I need some more. I am getting an EV. Should I add 4 more panels? So we are helping consumers in that journey directly now in evaluating the options and upgrades.

All right. So, you've been doing this for 7 years. Where are you in the journey and what do you see the next 5 or so years doing?

Yes. We started early in 2015 and the market wasn't ready for what we built early on. I think a few years early. But, once we got traction with our platform, we bootstrapped the company. And, like many first-time founders, we did everything we could to build the product revenue without raising a lot of money. And, we were successful in doing it and even going international with it during those COVID years when, if you remember, you couldn't visit a home, right? And, people wanted to get more solar because their bills went up. So, it was really a perfect storm for us. We were able to penetrate many markets even internationally without ever visiting these countries. And then, we raised our large Series A financing, which was about 2 years ago. And, that's really helped us now in expanding the company. Since we raised the money, we have more than doubled our revenue and we have not quite doubled the spend. We have, of course, increased the spend a bit and we're trying to have long runways to growth so that it's accretive for us. So, we are not one of those that has raised a lot of money. I'm sure you've seen our books. We are one of those that has raised less than our competitors and trying to grow with it. And we think that's the right approach because solar is a very difficult space, unlike the traditional tech sector.

It was a little surprising that there were definitely some headwinds last year for the solar industry.

Yes, absolutely. We have, we have battled through several headwinds last year. One is interest rates. As you know, consumers are dependent on financing for solar, and interest rates going up was not a good idea for any of our solar-based business platforms. And the other big shift we have seen is that the electric utilities have pushed back on the growth of solar at its current pace. And it's not just doing it to pull it down, it's also doing it to balance the grid. So the rate solar is growing in California, for example, they needed a way to incentivize the use of batteries, which is finally happening, and that stabilizes the evening grid mix of power. It's happened already, the same thing in Hawaii and Germany. So we're seeing all of those shifts at the same time, and so we are battling through those headwinds. A lot of big companies have not been able to navigate this change, and so we have been very focused on making sure installers succeed and they can keep growing their businesses and you know, stay in business so that we can be in business.

Great. Um, where, where do you see Series B and, and beyond for Enact?

Yeah, we are, um, looking at a Series B early next year, and we're also looking at, of course, along the way, a pretty steep revenue climb. We're seeing lots of interesting markets which we have invested last few years grow quickly. We have not expected the growth we have seen in Europe, especially markets like Italy and Germany, where there's lesser competition, fewer players like us, and also very high need for good software platforms because traditionally these markets have been very protected. There was not enough— number of installers have doubled, for example, parts of southern Germany per city. 2 or 3 times more installers. And the reason is the market has grown since the Ukraine war. There's a lot of pressure on energy. So, so we're seeing a lot of interesting dynamics of the same product in many markets. The growth rates are all good, but some better than others. So that makes our Series B story very compelling. But at the same time, we're also trying to make sure that as we grow, the platform is able to quadruple its network. And so we are a two-sided play and we want more homes to buy solar through Enact and more installers to deliver solar through Enact. And it's not an easy two-sided play when you do a marketplace like ours. And that's where the Series B is positioned to help us grow into. We know that the network effect is very hard to build, but once it's built, it's very hard to replicate. And that's what we are betting on.

We're going to take a quick break right now, and we'll be back with more of our conversation with Deep about Enact.

Ever wonder how the ultra-wealthy invest their money? They often back startups before they go public through venture capital. Now individual investors like you can too with Alumni Ventures. Visit av.vc to get started.

Well, welcome back. Um, so Deep, uh, no one does this alone. Why don't you How did you build your team and what are your strengths?

Yes, we were very fortunate to have myself and my co-founder in India, Manasi Jharkar, who are both from the same college. We're college friends. And very interestingly, we both had our similar journeys in solar. When he went through a solar company in India, which was at the same time I was working in the US, we kept in touch. So the insights we gathered were at the same time, and that led to the birth of Enact, which has been very compelling for the markets. And that's also the reason why we've been doing so well internationally, because we have a 24-hour clock, we have a huge team in India, and we're able to service customers on both sides of the ocean. Very different from our competitors, for example, that are mainly US-centric. And that, I feel, has been a big reason why we've been able to grow our customer base without a lot of capital. Because we had the round-the-clock, you know, motion. And, um, the rest of the team, of course, is on both sides of the ocean. We have been very fortunate in getting people from the industry, like from the solar industry, coming from very good backgrounds in maintenance and O&M, design, sales, right? So we've pulled in some of the best talent, and we've now done that in Europe as well. Very experienced folks coming in our team. And of course, in India. So we're able to cover those 3 main continents with the very experienced team. Also, I would mention that our tech team is, of course, although mainly in India, we are very fortunate to have some of the best team members who are remote cities in India sometimes, not at one place. And that's how during COVID we were able to work and deliver good software.

So here, Deep really wanted to make sure to give his team and his co-founders a bit of a spotlight. And I think that's, you know, a really fascinating testament to a good leader if they can really help the other people within their team shine. So I wanted to share some of Enact's vision and their sort of core values as a company, which they have made note on their website that all of their values are based on empathy. all members of their team have approved, um, as of 2019. So, um, their vision— this is directly from their website— um, their vision, quote, we strive to transform the end customer's purchase and ownership experience of renewable energy systems like solar and energy storage. We leverage data and automation to build trust as well as improve the services delivered by partners using our platform. And then their mission statement, quote, provide an intelligent digital platform that enables development and management of solar and energy storage projects, easy, transparent, and affordable for all. And then their core values, which I wanted to share really quickly. I won't get too into depth about, you know, each value itself. It's on their website. You can go for yourself and research and read them. I think they're fascinating. But their core values are sustainability, customer trust, They want to be data-driven. They want to provide, you know, mutual respect between parties and perseverance. So after sharing this, keep this in mind for the rest of this interview. Let's have Greg sort of help, help us round out the rest of this interview and the rest of this episode. Enjoy.

You were virtual before it was forced on us.

Exactly. We were virtual long before COVID forced us to. That helped us scale when COVID hit. We didn't, of course, knew it would be that way. And so, we have stayed virtual since. We're still a hybrid company. We don't think we'll ever go back to the office full-time, but we try to meet every so often, at least once a week in the Bay Area and so on. And it's been very helpful. I mean, for us, it's one of the reasons we have grown is because of our hybrid policy. I think you can do great work at home, right? And balance the commute.

Yeah, well, um, we at Alumni Ventures, one of the things that we have is a very large community and, uh, always like to ask how we can help. And I, I think I know— I might know the answer, but, uh, I'll let you go with that.

Sure. As I told you, we have launched since our Series A a very interesting new offering where we can help any homeowner in America, mainly California right now, but even in other cities to get their solar answers from Enact directly. You can just schedule time with us on our website. We have no, no barriers. We're open to all manufacturers. As I said, we're open to all installers. So all we need is your electric bill and your address, and we'll design the best solar system for you which meets your needs, not more, not less, and then even help you on your journey to find the local installer that will be the right partner for you. It's very successful. We've done over 500 such projects now, uh, different stages of execution in California. We also have our first projects in many new cities like Pittsburgh, Philadelphia, New York, Chicago. We're seeing the same need— people buying EVs, people having high bills. So I think your network, Greg, can be very powerful in reaching college alumni and maybe helping them on their journeys. And we want to be a part of that solar transition.

And there are a few EVs in our parking lots of our offices too. So I'm sure those homeowners could use a benefit. Hopefully they had a rewiring done for the charger they put in their garage because I kind of come from that world. I'm very nervous about Anyone charging their EV, plugging it into a standard outlet. But it works for a while, but it doesn't work for years.

Absolutely. I just got a new EV last month, and it's not been easy finding the fast chargers on the highways. I think we are— I read somewhere there's 70,000 fast chargers we need in the US by 2027, and there's only 1,000 of them or so. There's a huge, huge lift ahead and solar can reduce the cost of charging significantly. So solar and charging go together. And so we're seeing that, of course, on the highways. We see these solar carports now coming up, but we're just at the beginning, I think, of that.

Yeah. Well, it's been a pleasure working with you and having this conversation. Wish you the best of luck and look forward to continuing our partnership. And thank you for being a part of the Tech Optimist podcast.

Thank you, Greg, and thank you for your support all these years and look forward to staying in touch and working with your alumni.

All right. And for everyone who watched, thank you very much for watching this episode and look forward to our next episode coming soon.

Thanks again for tuning into The Tech Optimist. If you enjoyed this episode, we'd really appreciate it if you'd give us a rating on whichever podcast app you're using, and remember to subscribe to keep up with each episode. The Tech Optimist welcomes any questions, comments, or segment suggestions, so please email us at info@techoptimist.vc with any of those, and be sure to visit our website at av.vc. As always, keep building.