Revel Energy is raising on StartEngine via common equity at a $40 million valuation. Its valuation is below average. In 2021, the company generated $12.1 million in revenue, yielding a revenue-to-valuation multiple of 3.3x. By comparison, the green energy industry average revenue-to-valuation multiple is 9x. Overall, $40 million is a great price for investors. 

Revel Energy’s target market is large and expanding quickly. The US solar power market is worth $16.9 billion in 2022. It’s growing at an annual rate of 21.7%, driven by federal and state tax credits. In recent years, large companies such as Apple, Walmart, and Amazon have launched corporate clean energy goals, propelling the commercial solar market to new heights.  

Revel Energy operates in California and specializes in designing solar solutions for commercial infrastructures. Around 25% of California’s electricity already comes from solar sources, which makes for a crowded market of close to 2,000 solar companies. Though that means Revel Energy faces a huge number of competitors, the established competition is actually a positive sign in this market. If close to 2,000 companies are surviving in California’s solar energy market, there’s likely room for one more. The market is fractured. Most solar companies have local clients. And the market is growing fast enough for new players to be able to join. 

The Californian government has committed to achieve 60% renewable energy by 2030 and 100% by 2050. A new mandate will also require new Californian commercial buildings to run on solar energy and battery systems starting in 2023. Revel Energy is well positioned to help new buildings and upgrade older commercial buildings to comply with the law.  

Overall, the solar power market will grow exponentially in the future with support from government policies and clean energy goals. Revel Energy has decent potential to acquire market share in California. 

Revel Energy’s founder and CEO, Alan Lee, has a Bachelor of Science in environmental engineering from the University of California Irvine. He worked for AECOM, an American multinational engineering firm, as a program manager from 2007 to 2008. In January 2008, he founded ecoSolargy, a renewable energy semiconductor manufacturing plant and a commercial and residential solar installation business located in Orange County, California. He went from operations manager to CEO during the 11 years he worked at ecoSolargy. Today, ecoSolargy’s website is inactive, and the founders did not tell KingsCrowd what happened to the company. Most of the few online reviews — both from customers and employees of ecoSolargy — are negative. But failure is not always a problem if the founder learned from their past experiences. Revel Energy’s operations are less ambitious than ecoSolargy’s, so this may help the company reduce delays and pressure.

Revel Energy co-founder and Vice President of Operations Paul Bakhoum also worked at ecoSolargy. He served as a director of sales and got promoted to vice president of operations. His shared experience with Lee is an asset for Revel Energy.

Mehmet Cercioglu, vice president of business development, has a Bachelor of Science in electrical engineering from Kocaeli University. He spent eight years working for Sunvalley Solar, where he designed commercial solar installations. He is Revel Energy’s only engineer aside from Lee. 

Although Revel Energy is a general contractor providing solar energy services, the majority of its members are project and business developers. They oversee the design and execution of solar energy projects and do not need to have strong technological backgrounds. The lack of engineers might become an issue as Revel Energy grows, though. At that point, it will need to hire more engineers capable of designing systems. 

Overall, the team has experience in the industry. Its members have complementary leadership, sales, marketing and project management backgrounds. They seem capable of driving the business forward and generating robust profits.

There are close to 2,000 solar providers in California, so the market is very crowded. And Revel Energy doesn’t really stand out. 

The company provides commercial solutions such as rooftop solar panels, carport solar systems, energy storage, and solar power plants for agricultural businesses. Revel Energy procures solar materials and equipment directly from distributors and contracts external technicians to install the solar systems on commercial locations. Revel Energy’s value lies in its ability to tailor solar systems to the needs of its customers. It doesn’t use its own technology or products. As such, the business is competing with hundreds of similar small-scale commercial solar companies in southern California, including SolarMax, Tenco Solar, and Altair Solar.

Revel Energy doesn’t have any differentiators to speak of. Customers choose their solar provider mainly based on their location, customer service, reputation, and availability. Revel Energy’s best chance to get customers is to advertise its product locally and take advantage of the growing market.

According to founder Alan Lee, Revel Energy has completed approximately 40 to 50 projects since its founding and currently has more than 10 projects in various stages of construction. The prices of these projects range from $250,000 to $3 million, with an average price of $1.1 million. Though Revel Energy is pretty small, it’s able to generate a large amount of revenue thanks to the high cost of its projects. Revel Energy’s revenue varies according to small increases or decreases in projects.

Revel Energy generated revenue of about $11.5 million in 2020 and $12 million in 2021. The company’s revenue grew by only 5.1%, which is particularly low. The company underperformed compared to the solar market growth rate of 21.7%. The low revenue growth rate should concern investors if — as would likely be the case — it slows down the company’s valuation increase. Additionally, Revel Energy didn’t take advantage of the growing market and lost market share in 2021. But Revel Energy was still profitable in 2021. This is the main reason why Revel Energy has potential to grow in its crowded market. If it can continue to manage its finances well, it can use its current raise to increase sales without running out of cash. 

Revel Energy has a short-term debt of $76,891 and long-term debt of $150,432 as of 2021. Those debts come from Lee and government loans. But a close look at Revel Energy’s balance sheet reveals that the company has a negative net working capital (the difference between current assets and current liabilities) of $864,911. In other words, there is a risk that Revel Energy won’t have enough cash to reimburse its short-term liabilities. However, its short-term liabilities include $1.3 million of deferred revenue. This means that the company received cash from its customers but hasn’t yet completed the projects and thus cannot yet recognize the revenue. As long as Revel Energy can complete its projects, this negative net working capital shouldn’t be an issue. But it is worth noting that this is an additional risk.

Overall, Revel Energy is profitable and in good financial health. Despite showing signs of slow growth, the company has a stable foundation and can likely use this raise to grow further. 

Revel Energy bears moderate investment risk. Investing in solar installations can be a lengthy process for businesses. Even if Revel Energy increases its marketing and sales efforts, it will still take time to see a jump in revenue. As a result, Revel Energy’s valuation cannot be expected to grow quickly. 

The company also operates in a crowded market. Even if this market is quickly growing, Revel Energy must constantly work to get new clients. Because customers can turn to other companies for similar services, Revel Energy is vulnerable to all kinds of adverse events such as bad online reviews or a shortage of workers. 

Revel Energy is dependent on external suppliers and installation contractors. It is also sensitive to disruptions in the solar supply chain. That is mainly a problem because Revel Energy has a high deferred revenue of $1.3 million — meaning it received cash from its clients for projects it hasn’t completed yet. If Revel Energy is not able to finish these projects, it might have to reimburse those customers. But with its current negative net working capital — the difference between current assets and liabilities — of $864,911, it probably couldn’t cover the entire deferred revenue. This puts the company at financial risk. 

Finally, there’s a funding risk. Revel Energy has bootstrapped until this point, meaning it has grown with no outside capital. The company hasn’t proven that it can raise funding from investors yet. And it is uncommon to see solar installation firms raising from investors. It is also very unlikely that more than just a handful of the 2,000 solar companies in California will get acquired. Therefore, Revel Energy’s future valuation and exit possibilities are uncertain. Investors may take note and be unwilling to invest.

Revel Energy is operating in a crowded market. The company doesn’t have any patents or distinctive features. It lacks defensibility and doesn’t have many assets to face its strong competition. 

Furthermore, Revel Energy has many risks for investors to consider. Its revenue didn’t grow much between 2020 and 2021. The heavy competition challenges the growth of the company. And even if Revel Energy can grow, commercial solar contracts take time to complete. A new wave of projects generating an uptick in revenue will take time to develop. Revel Energy is also at financial risk in case of client cancellation or supply chain disruption.

Revel Energy was profitable in 2021 — an important accomplishment for a company that operates in a crowded market. The company has seen little growth, but that could be just a temporary hiccup. Revel Energy should be able to use the funds collected during this raise to build a strong future. 

The Californian commercial solar energy market is growing rapidly. It’ll get an additional jolt with the new law mandating upcoming commercial buildings to install solar energy systems in 2023. Revel Energy should easily find new customers thanks to this coming demand for commercial solar installations.  

Revel Energy is also operated by an experienced team. The company already successfully installed 40 to 50 projects and is currently working on 10 other commercial solar systems. This signals positive traction for the company. 

Finally, Revel Energy is raising at a fair valuation for investors with a low revenue-to-valuation multiple of 3.3x. If Revel Energy manages to grow and exit, investors could see enticing returns.

Revel Energy helps commercial, agricultural and industrial businesses in California with tailored solar energy system installations. Solar energy reduces electricity costs while having a positive environmental impact. 

Revel Energy has some potential. The company was profitable in 2021 and offers a low valuation-to-revenue multiple, an attractive metric for investors. It is led by an experienced team and a founder who previously managed a similar firm, which may help the company navigate its ups and downs. Revel Energy is also operating in a large and fast growing market. Recently, California mandated that new commercial buildings must operate using solar energy systems starting in 2023. This is an opportunity for Revel Energy to reinvigorate its growth prospects. 

Yet there is a serious question as to whether the company can take advantage of the moment. Revel Energy’s growth was limited last year. The company operates in a highly competitive landscape, which might compromise opportunities for an acquisition or public offering. Additionally, the company does not have major points of differentiation. Therefore, investors are betting that Revel Energy will eventually learn how to compete effectively in a crowded market — and victory isn’t guaranteed. For these reasons, Revel Energy has been rated a Neutral Deal. 

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

Analysis written by Xiaowen Chen and Léa Bouhelier-Gautreau, August 4, 2022.