BlueSky Energy’s pre-money valuation for this raise is $20 million. While the company is taking in significant revenue, $20 million is a revenue multiple of nearly 60 times. Additionally, this isn’t an investment in parent company BlueSky Energy GmbH — just the American branch — making the valuation even more unreasonably high. As a result, the price score for BlueSky is below average.

When it comes to BlueSky’s target market, there is good news and bad news. The bad news is that the US battery energy storage system market is abysmally small, coming in at $336.6 million in 2019. Furthermore, BlueSky is specifically targeting batteries for renewables, which make up an even smaller part of the market.

The good news is that this market is growing at an estimated CAGR of 23.9% from 2020 to 2027 and is forecast to reach $1.8 billion by 2027. That number could be significantly larger, as these are estimates based on 2019 data that doesn’t take into account President Biden’s recently unveiled infrastructure investment plan, which could spark massive public spending on wind and solar energy in the coming years. The market also has an intense amount of interest from notable names like Bill Gates. While BlueSky faces a very limited market today, the potential for growth should not be ignored. Thus, the company’s market score is middle of the road.

Across BlueSky and its parent company in Austria, the company has 65 employees. BlueSky Energy was co-founded by Hansjorg Weisskopf and Horst Wolf. Information on Weisskopf’s career varies slightly from BlueSky’s raise page and Weisskopf’s LinkedIn profile. However, he does have ample experience in sales positions as technology firms, having worked for close to a decade in such roles. Before BlueSky, he founded Allied Panels, a medical engineering and manufacturing company. Allied Panels was acquired by electronics manufacturing company Celestica in 2010. Weisskopf went on to found BlueSky shortly thereafter.

Co-founder Horst Wolf has no LinkedIn profile. According to BlueSky’s raise page, he worked with Bosch, an automotive supplier, early in his career before going on to found the Wolf Group. Wolf Group is a Germany-based metal tools and parts manufacturer. Since its founding in 1985, the company has grown to have branches in India, China, Croatia, Russia, and the US. It’s unclear what role Wolf maintains in the company. At BlueSky, he is responsible for directing the technology and manufacturing agenda.

The person in charge of BlueSky Energy’s US branch is UCLA graduate Lyle Gold. After getting his start working in sales in Los Angeles, Gold eventually moved to Austria, where he worked with AlliedPanels on expanding its contract manufacturing business. He rose to vice president and plant director for the company until its acquisition by Celestica, when he became a director of sales and business development. In 2013, he moved to BlueSky in Austria, where he served as senior vice president. He now leads the company’s US branch. Gold has plenty in the way of hands-on management experience in industrial business, which will serve him well in his leadership role at BlueSky Energy.

The overall team at BlueSky is adequate, but the US branch is not especially impressive. While co-founder Weisskopf does have a successful exit under his belt, it’s unclear how directly involved he will be with the US branch’s operations. Thus, the team score for BlueSky Energy is middling.

Energy storage is a rough business. There is yet to be a breakout player in the US space, as business after business has attempted to provide comprehensive solutions and failed. While BlueSky isn’t bringing any new or patent-protected tech to the table, the product sets itself apart from the competition with its environmentally-conscious construction. Many competitors in the space make batteries using lithium phosphate or lithium, manganese, and cobalt. BlueSky uses none of these materials. Instead, its saltwater battery uses materials such as cotton, stainless steel, saltwater, and carbon. The company claims these materials are more sustainable than the competition’s, and that its batteries meet the Living Building Challenge. This emphasis on renewability is likely a major boon for BlueSky, as its innate green operating philosophy could attract public investment. The product is also proven safe in difficult operating conditions, which is essential for energy storage. Due to these factors, the differentiators score for BlueSky is strong.

BlueSky can boast significant revenue to date. Last year, the company took in $347,158 in revenue, a huge step up from $133,794 in revenue the year before. Unfortunately, the cost of goods has skyrocketed from $35,930 in 2019 to $325,624 in 2020, so the company’s net income has actually plummeted from -$13,842 to -$260,312. To make up for these shortfalls, BlueSky has taken on some short-term and long-term debt. Its total liabilities of $370,732 exceed all of its 2020 revenue.

With the Vigos battery now coming to the US and another product expected to be released this year, BlueSky’s products are either fully or mostly through the development phase. This is a point in BlueSky’s favor and could result in better margins in the future. In addition, having consistent and growing revenue in the hundreds of thousands of dollars is a positive sign for any startup. As a result, BlueSky’s performance score is its highest across all five metrics.

An investment in BlueSky is particularly risky. Potential investors should note a lack of public commitment from and information on most of its team as well as a small, low-margin market. A more significant note is the company’s financial outlook. BlueSky has already had to take on debt to make up for these shortfalls, and it’s unclear whether it will be able to raise sufficient funds to cover those liabilities.

In the end, even if BlueSky does overcome these challenges and expand its business, it will likely take a long time to become profitable. The battery market is growing at a rapid pace, but if a tiny market grows — even by a huge percentage — there still isn’t much room for a big company. BlueSky is also a branch of a larger company that might be down if it proves unprofitable.

One of the best ways to know how a startup will perform is to look at how similar startups have performed in the past, and in that regard, there is nothing but negatives. The battery storage market is so small and margins so narrow that achieving financial stability will likely be a massive challenge for BlueSky. Even as revenues creep up, costs are likely to continue  growing as stringent regulations on energy producers and competing interests drive prices ever lower.

BlueSky could fail and close down, seeking to concentrate on the parent company in Europe — and this investment isn’t for that parent company. To that end, BlueSky is a big gamble.

As the effects of climate change continue to spread and public opinion inches toward greater acceptance of renewable energy, there has never been a better time to be providing battery energy storage in the US. Potential massive infrastructure investments could transform the market. Increased public use of electric vehicles could also provide additional applications for BlueSky products, as electric vehicle charging stations are presented as a cornerstone of the government’s new infrastructure plan. Depending on how large the market grows, BlueSky could see its business expand quickly enough to overcome its low margins. If the company could bring costs down further — maybe by licensing innovative new battery technology to make its product even more efficient — it could see significant returns. Either way, that kind of change takes time, and investors will need to be patient.

A US branch of an Austrian-founded company, BlueSky Energy is providing battery-based energy storage systems. The systems are made with lithium titanate oxide technology and are environmentally-conscious and safe. The company has generated hundreds of thousands in revenue and is taking on a market that is expected to grow at a rapid pace.

However, BlueSky isn’t bringing any technological innovation to the table, and profit margins are exceedingly slim. Failed competitors have shown that it’s difficult to break into the battery storage market, and there’s little to indicate that BlueSky has solved this issue. The company also has an excessive valuation considering its revenue multiple. Therefore, BlueSky Energy is a Neutral Deal.

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Analysis written by Benjamin Potts.