Becoming an entrepreneur in the renewable energy business used to be suicide. But now some rather prominent authorities on the matter are rethinking their positions. Sites like Investopedia have come out and said that renewable energy is here to stay. But why?
Much of the speculation about solar is being driven by the likes of Elon Musk and Jeff Bezos. Both are heavily invested in solar technology. And both see it as a way to solve humanity’s pressing climate change issues.
What’s more, they’re both relatively high profile, especially in tech circles. And that means that their message tends to get across in the business and tech media.
So what does all this mean for startups? Well, for starters, it means that there’s a proof of concept. If Musk and Bezos can build businesses on top of solar tech, then venture capitalists are more likely to believe it’s possible. But it also suggests that the underlying technology is viable.
At some point in the future, the world will have to move off dirty fossil fuel technology. And when it does, it’ll open the door to a new energy revolution. What’s cool about the renewables sector is that it isn’t a utility in the traditional sense.
Utilities in the past had high fixed costs which meant that there was usually only one supplier. But fixed costs for solar companies are relatively small.
And that means that we’re likely to see a lot more of them. What’s more, they’ll all be competing against each other to build the best product and generate the highest return.
It’s important, therefore, that solar startups think carefully about their business plan. They’ll need to do rigorous market research. For instance, will the startup be focusing on making panels, or adapting the grid?
Will it need to hire out rig mats and machinery, or will it invest in its own? Will it be an online-only business, or will it serve a local community?
Most advisors recommend that startups spend some time contacting their potential customers. They need to get a sense of the demand out there for their particular product, before appealing for capital.
You’ll also have to contact various suppliers in the industry and ask them to lay out their costs. Prices can often be a lot higher than startups expect, and this can affect their ROI.
The next big step is to get finance for the business. Financing a business can be tricky. But investors are always a lot more willing to give money to people in newer, more promising industries. Right now, solar is just that.
It should be noted, however, that 90 percent of small business owners fund their businesses from their own savings. 74 percent also say that their personal savings are the primary source of business finance.
You might have to stump up a lot of your own money. But that is a sign to investors you’re serious about entering the solar business.
Once your business is up and running, then you should approach banks, VCs, and the government. Once they’ve seen your company has a strong foundation, they’re more likely to commit their own money.