ImpactAlpha, July 21 – Stimulus measures pushed by Joe Biden and other Democrats could channel billions or even trillions into clean energy, green infrastructure and jobs – a Green New Deal in all but name.
But new investment crowdfunding platforms are not waiting for the outcome of this fall’s bruising U.S. election, or the gantlet of partisan politics that is sure to follow. Raise Green, WaterWorks and other investment marketplaces are enabling everyday investors to finance renewable energy and clean water in their own communities, with as little as $100.
“We have a bias towards action,” Raise Green’s Franz Hochstrasser told ImpactAlpha. “We want to push everyone to act now as opposed to waiting for some of those bills to pass, because we don’t have time to wait.”
The two platforms, which launched this month, make use of a securities law exemption that enables crowdfunding portals to raise just over $1 million from unaccredited investors, alongside unlimited amounts from high-net-worth individuals and other “accredited” investors.
Somerville, Mass.-based Raise Green’s initial focus is on developing and financing community-scale solar projects. WaterWorks, based in Detroit, Mich., has built an investment marketplace for local water infrastructure projects as well as water-related data analytics, artificial intelligence, and ‘internet of things’ startups.
The new platforms help bridge a financing gap for small and mid-sized green infrastructure projects and ventures. Such ventures can make a big difference in communities, yet are typically too small for institutional investors.
Both are founded by alumni from the Obama administration. Raise Green’s Hochstrasser was an Obama environmental appointee who helped negotiate the Paris Agreement. WaterWorks cofounder Julianna Smoot was Obama’s national finance director and deputy campaign manager (cofounder and husband, Lon Johnson, was chairman of the Michigan Democratic Party and a staffer for former vice president Al Gore and others).
WaterWorks advisors include former Environmental Protection Agency administrator Carol Browner, as well as staffers from Bernie Sanders’ presidential campaign.
Raise Green grew out of a 2018 project at Yale’s School of the Environment, where Hochstrasser met his cofounder, data scientist Matthew Moroney. The pair helped raise capital for a Yale School of Architecture project called New Haven Community Solar that installed solar panels on a new two-unit building for homeless people, providing the nonprofit that owns the building with low-cost electricity.
The project raised $40,000 through the crowdfunding platform StartEngine to finance the installation. Last fall, it raised another $40,000 on another site, Mainvest, to finance a second solar array. On Earth Day this year, New Haven Community Solar paid its first dividend to its community owners.
Hochstrasser and Moroney started Raise Green to create hundreds or thousands of such projects across the U.S. The key: providing templates to help community members structure projects and capital raises without needing specialized knowledge. “Replicability is a huge part of what we do,” says Moroney. Every project on the site will generate a template that other project creators can use, creating a “GitHub-style repository for doing project finance,” adds Hochstrasser.
When community members create and finance their own local renewable energy projects, they not only save money on energy, but pay themselves and their neighbors rather than a big, nonlocal company.
For investors, solar offers annuity-like returns. Raise Green sees similar opportunities for EV charging stations, microgrids, community-supported agriculture, affordable housing and other green projects. “Everyone is talking about blended capital, but for the retail investor it’s hard to find,” says Moroney. “That’s missing from the whole sector-wide discussion.”
The National Energy Improvement Fund, a B Corp. that offers affordable loans for families and small businesses making energy efficiency and resiliency improvements, is offering Climate Action Investment Notes through the platform.
Hochstrasser and Moroney say they have more than 50 projects in the pipeline. Raise Green is targeting churches, schools, towns, tribal lands, small businesses and community groups. A local grocery store, for example, could install solar panels to reduce overhead and provide a new income stream. Or solar arrays installed on tribal lands could offer ownership and a revenue stream for tribal communities.
The 2015 water crisis in Flint Michigan made an impression on Julianna Smoot, who lives in nearby Detroit. High levels of lead flooded the water supply after a cost-saving maneuver disrupted the local water supply, precipitating a crisis that is more often associated with “developing” countries.
“You could see how that could happen in any community,” she said. The American Water Association estimates that more than $1 trillion in water infrastructure investment is needed over the next 25 years.
Smoot cofounded WaterWorks with her husband and financier Lon Johnson to create a marketplace to connect citizen-investors, as well as the institutional variety, with water solutions.
Water is an inherently local issue, and therefore a fragmented market, says Johnson, who has had a career in private equity. “It’s drawn locally, processed locally and put back into the local watershed.” Like other local infrastructure, small and mid-sized water projects often struggle to attract institutional investment. Many solutions are held back by a lack of early-stage capital for water startups.
Yet, given the nation’s aging infrastructure, stretched municipal budgets and the added strain of climate change, “we believe our water problems are going to increase at a pace and scale that we’re too often not prepared for,” says Johnson. A few examples: boil water alerts, the presence of toxic PFAS chemicals in water, and algae blooms. WaterWorks “will help bring capital to people working to address this,” Smoot says. (The company says it will not buy, sell or privatize water).
WaterWorks aims to build an investor base of more than 100,000 individuals and to become a one-stop investment platform for water-related technology and project finance.
Since the Regulation Crowdfunding exemption went into effect in 2016, individual investors have committed nearly $400 million to investment crowdfunding campaigns. There are more than 50 crowdfunding portals approved by regulators, but to date few have focused on renewable energy, infrastructure or impact investments.
WaterWorks’ first investment campaign is a California company that detects and eliminates pollution and pathogens in wastewater, such as poultry plant wastewater. The investment platform is also conducting its own capital-raise via the site, under an exemption (Regulation D) for accredited investors. (WaterWorks has raised over $900,000 in investment capital to date).
Smoot sees parallels with her work as a political fundraiser. The internet has changed the dynamics of political campaigns by facilitating contributions from many small donors. Similarly, small investors can provide valuable new channels of capital for sustainable projects and enterprises.
“This is the perfect intersection of what I’ve been doing,” says Smoot. “And it’s something that can’t be undone every election.”