In order to complete the development of its Triton-C System and test it this year for the US Navy in Hawaii, Oscilla is seeking to raise more capital through a convertible note. The terms of the convertible note call for it to convert subject to a valuation cap of $13 million, which is the same as last year’s raise. It’s also subject to a 20% discount upon conversion. For a company with no revenue, this valuation is quite lofty. Thus, Oscilla’s price score is below average.

Solar, wind, and hydroelectric are three major forms of alternative energy that have been at the forefront of the clean energy space. What is clear, though, is that no single fuel source will be the replacement for fossil fuel. That leaves plenty of opportunities for companies like Oscilla to come into play. There’s no reason why the forces generated from the ocean’s powerful waves shouldn’t play a vital role in reducing greenhouse gas emissions.

According to one source we found, the global market for wave power was valued at about $3.24 billion in 2018. With an annualized growth rate of 23.5%, the industry should expand to about $17.54 billion by 2027. This growth rate also means that the market should be worth about $6.11 billion this year. A second source pegged the market at $4 billion in 2019, with an annualized growth rate of 23.5% taking it to $21.65 billion by 2027. This places the market in 2021 at about $6.10 billion. A third source, meanwhile, pegged the market at $11.01 billion this year, with an annualized growth rate of 17.84% taking it to $15.29 billion by 2023. This small size weakens the value proposition of the firm. But this is somewhat balanced by the robust growth rate that the wave power industry has. As a result, Oscilla Power’s market score is middle-of-the-road.

At present, there are three people leading Oscilla. The first of these is Balky Nair, one of Oscilla’s two co-founders. Nair also serves as the business’ President and CTO. He holds a PhD in Materials Science and served in the past as President of HiFunda. While there, he focused on taking early-stage technologies in the energy space and finding ways to reduce their risk profile. The end goal here was to prepare them for commercialization. Before that, he served as the President and CEO of EmiSense. That firm operates as an emissions reductions company. The technological nature of the company was certainly different than Oscilla’s is. But the target of aiming for a cleaner environment at least puts it in the same wheelhouse.

The other co-founder of the firm, as well as its Board Chair, is Rahul Shendure. He previously served as an Advisor for Beyond Meat. Shendure also served as the co-founder and CEO of Bellwether Bio and worked as the VP of Product Marketing for Amyris. Bellwether Bio focused on developing cell-free DNA-based diagnostic technologies. It was later acquired. Amyris was a biotechnology company as well. Shendure is also presently the CEO of a new construction materials spinout.  None of these really relate to what Oscilla is focused on today. But the high level that Shendure played at these firms illustrates his excellence, and the successful exit of Bellwether Bio is encouraging. 

The last key person working on Oscilla is Tim Mundon. Mundon holds a PhD in Wave Engineering. He is also an Affiliate Assistant Professor in the Mechanical Engineering Department of the University of Washington. Previously, he was employed as a Senior Engineer at Kleinschmidt Associates. Kleinschmidt focuses on hydropower, which is incredibly relevant to what Oscilla is working on today.

The strength of this core team is reflected in Oscilla’s above average team score.

Differentiation is a tough point of discussion for a firm like Oscilla. On one hand, the company has no fewer than 16 patents protecting its technologies. In addition, the vast majority of the funding it has received over the years has come from the US government. This shows that the company has support on that side. On the other hand, there are other players in the wave energy market. Firms like Ocean Power Technologies and AW-Energy are just a couple of the nine different players we found in the industry. Each participant has its own answer to the question of how to generate energy from wave technology — meaning they are all differentiated from each other. Given the young nature of wave energy and the market’s strong growth, it’s likely that multiple players will succeed in securing a niche for themselves.

Oscilla Power’s many patents provide it with strong defensibility in its chosen wave energy strategy. Additionally, it takes a high level of capital and significant time commitment to develop the technology for wave energy generation. Oscilla has already made those commitments, and the promise of its technology is shown by the multiple grants it has received. Due to all these factors, the differentiators score for Oscilla Power is very strong.

Performance is a tricky topic for Oscilla Power. On the positive side, the company has managed to raise a lot of money over the years. It has managed to deploy this capital and successfully build (or come close to completing) large-scale prototypes and systems surrounding its technologies. Having said that, the firm has been lacking on the financial side of the equation. Financials have not been provided for 2020 yet, but the firm is currently still pre-revenue. In 2018, the business generated a loss of $444,635, and in 2019 this loss was $86,485. Because Oscilla is finalizing the development of its product and has no revenue at this time, the company’s performance score is its lowest across all five metrics.

Some positive changes have come about for Oscilla Power since we initially rated it last year. Even so, there are still plenty of bearish considerations for investors to ponder. The valuation, for starters, seems lofty. The market is small for the business, and its performance over time has been less than ideal. It will likely be a couple of more years before real revenue opportunities come its way. During that time, investors will need to rely on the generosity of the government — in the form of grants — in order to avoid what could be costly dilution. And that generosity is never guaranteed.

This is not to say that there aren’t any bullish aspects for investors to consider. The industry, while small, is growing rapidly and will almost certainly fare well as the world moves away from fossil fuels. Oscilla Power is making progress on its way to a full-scale device, and management looks to be fairly strong. The patents and how they play into the differentiation of the company are a huge selling point. There’s also the fact that the company’s successful track record of locking down grants is indicative of more grants down the road.

Taking all of these facts into consideration, it appears as though Oscilla is an interesting company that could benefit from a paradigm shift in energy generation. The company has developed a unique device for wave energy capture with 16 secured patents. The wave energy market is small, but it is growing at a rapid pace. The main concerns for investors at this time are Oscilla’s high valuation and its lack of financial performance. If the company can succeed in monetizing its solution soon, it could secure a solid market niche for itself. Thus, Oscilla Power is a Deal to Watch.

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

Analysis written by Daniel Jones.