Helix Power Corporation is raising through a convertible note at a valuation cap of $10 million. For this raise, it is offering a discount rate of 10%. The business took in $522,941 in revenue last year, resulting in a revenue multiple of just over 19x. While this is an above-average multiple, the company’s valuation is attractive when compared to other early stage startups currently raising capital. Balancing these factors, Helix’s price rating is decent.

Helix’s market rating is its lowest by far, largely due to limitations of its unproven technology. The US flywheel energy storage system market was valued at $111.8 million in 2020, and it is growing at around 7% annually. The entire market is around 11 times the size of Helix’s valuation cap. Should the market remain this size for some time — which seems likely given the small growth rate — Helix will need to secure a significant market capture to provide any return on investment. However, there is a growing need for uninterruptible and sustainable power supply, which Helix’s rapid power discharge could enable. This technology may be adopted more readily once sustainable energy becomes more commonplace. Until then, renewable energy trends do lean in the company’s favor. For example, governments are increasingly supplying incentives for clean power generation, a tangential, but dependent market for flywheel storage. In sum, adoption of the flywheel market is tied closely to the renewable energy market as a whole. Renewable energy is growing at a rate of 6.1% annually and is far more established at $881 billion globally. However, the flywheel storage system market specifically is so small that Helix has limited room to expand in the near future.

Helix founder and President Matthew Lazarewicz holds an MBA in technology and innovation and an MS in mechanical engineering from MIT. Lazarewicz got his start as a mechanical engineer for General Electric Energy (now GE Power), where he worked on the design of bearing systems for industrial gas turbines. He spent two decades working his way up at the company, serving in various engineering and project management roles working on aircraft engines. He then moved into a leadership role as vice president (VP) of engineering with Beacon Power where he worked on high-energy commercial flywheel storage systems in 1999. He later moved into a CTO role with Beacon, then briefly conducted consulting work as president of Energy Storage Solutions. Helix is his first proper startup. On the technical side, Lazarewicz has been working on this specific kind of technology for so long, he is unquestionably qualified. He has also gained high level managerial experience through his previous positions.

Co-founder and advisor Kevin Blackman holds a law degree from the University of Chicago and a master’s in public policy from Harvard Kennedy School. Blackman gained some early leadership experience as CEO of MyRestaurants. However, he worked in consulting and associate roles for American Express and global law firm Latham & Watkins until 2007. He served as managing director for several years for Terrawell Energy Group and Pickwick Capital Partners. Currently, he serves as the chief strategy officer for Revere Capital Advisors, a hedge fund based in New York City and London. Blackman’s experience with Terrawell could have been relevant to his role in founding Helix, though it’s difficult to tell, as Terrawell has since gone defunct. Regardless, his role with Helix appears limited at best.

VP of Operations and Engineering John Bourneuf holds an MS in management from MIT and an MS in mechanical engineering, heat transfer, and structures from Northeastern University. Like Lazarewicz, Bourneuf also got his start at General Electric working in turbine design. After 16 years at GE Power, he began moving up into leadership roles, winding up as VP of engineering for Belcan and VP of development for Terrafugia. Both of these companies were focused on sustainable development projects and serve as valuable experience for his current role with Helix.

Director of Engineering and Development Philip Meyer is a relative newcomer to Helix and holds an MBA from Xavier University. He also worked at Belcan, likely with Bourneuf, in mechanical engineering and business management roles. Belcan was focused on sustainable engineering and aerospace, so Meyer likely picked up plenty of relevant experience in his roles there.

Overall, the team employs some impressive academic credentials and is lean but strong with relevant experience. However, there is little diversity in the overall skills — Helix lacks any financial, sales, or operations positions. Balancing the founders’ expertise with the company’s skill gaps, Helix receives a moderate team score.

Despite the small market for flywheel energy storage, plenty of other companies are also providing and developing flywheel energy storage technology. OXTO Energy in the UK, for example, has been around for about as long and is conducting its own raise to bolster its Inertia Drive. In the US, VYCON has been around since 2002 and has been providing flywheel energy storage to improve system uptime for servers and other high-intensity systems. Helix faces a fair number of competitors in a low growth market, which means it will need to significantly set itself apart to gain traction.

In its initial development, Helix has secured a patent for the flywheel itself and has patents pending for its rotor, hub, and cooling systems. Its device will be capable of regulating a megawatt of energy, which is massive. Developing the right materials to create this spinning device in a vacuum requires intensive development work — hence the two-year period to commercialization. This creates a massive defensibility moat for Helix Power. It is rare to see a startup with such a strong moat already in place, and with more patents pending, Helix could further protect itself from copycats. Due to this strength, the company scores quite well in the differentiators metric.

Helix has generated some reasonable traction thus far. After an impressive $1.06 million in 2019 revenue, earnings decreased to $522,941 in 2020. Even with this decrease, Helix has managed to remain profitable and has very low debt. Profitability is a huge deal for a company, even if its funding comes from grants. The business has maintained a limited burn rate while it works toward development of the prototype, yet it has drawn in $2.3 million in previous fundraising.

It is unlikely that Helix will be able to maintain its comfortable profit margins in the next couple of years as it moves toward full commercialization and capital intensity increases. However, it has established a solid footing to build on and has integrated a co-development team including Belcan Engineering and other startups to develop the flywheel. As such, the performance rating is among Helix’s highest across all five metrics.

For the most part, Helix has low risk levels. The team is largely committed and covers many of the relevant bases for product development, though it will need to expand for commercialization in the next two years. The terms of the investment, while not stellar, are reasonable. The biggest concern in Helix’s high valuation is the limited size of the market itself. 

The business’s future plans are a more significant risk. It will need to secure funding for two additional years of testing and development before scaling up — and those two years are also an area of concern. Such timelines rarely go according to plan, and while two years is a long time to wait for a commercial product, development could take even longer. In addition, once commercialization begins, it is likely to take years for the company to return to profitability. While Helix averts many of the usual concerns, investors likely won’t be seeing returns, if any, for a long time. Thus, the time risk subscore is highly elevated.

When it comes to caution on this raise, investors should keep in mind three primary concerns: the market, the valuation, and the timeline. Flywheel energy storage has its place, but the market is still extremely small and is growing slowly. To live up to its $10 million valuation, Helix will need to conquer a considerable portion of the current US market which sits at just $111 million — a high goal for a startup facing existing competitors. While Helix has consistently secured grant funding, that’s not the same as engaging committed customers or gaining credibility through tech awards. The long development timeline also means that Helix probably won’t be reaching true profitability for years, assuming its product retains its market value in the meantime.

While energy storage isn’t a particularly exciting aspect of energy modernization, it is essential. Flywheel energy storage can provide specific, niche benefits that few other means of storage can, and Helix looks to offer some significant advantage over existing offerings. While its valuation is a bit high, it’s not unreasonable, and Helix has operated leanly as it moves toward development of its prototype. Its prior fundraising and grant funding has given it a fairly solid financial footing. Overall risk is low, and Helix is developing excellent defensibility in its patent protection. 

Helix Power Corporation is developing a flywheel for short-term energy storage purposes. The technology is niche but has applications in providing consistent power for systems that require it and balancing the nationwide grid. Helix’s prototype — currently under development — will be able to hold large amounts of energy and charge or discharge it within 30 seconds.  

Helix’s market is small and growing slowly, with a surprising number of existing competitors.  The startup is facing a long timeline to real profitability, and product differentiation has yet to be demonstrated in practice. Investors are likely to wait years before the business’s plan of operation comes to fruition. However, the small team is deeply experienced in the relevant areas, and the price, though a bit high, is reasonable. Helix is building a web of patents and has performed well in its early development stages. Therefore, Helix Power Corporation is a Neutral Deal.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Benjamin Potts.