SolarGaps

SolarGaps is raising capital via a SAFE with a valuation cap of $13 million and a discount of 20%. With a revenue of $67,000 in 2020, the company yields a revenue-to-valuation multiple of 192x. This revenue multiple is very high, especially when taking into account the company’s decline in revenue from the previous year. However, $13 million is a fair deal compared to other early stage startups raising capital online. Balancing these factors together, SolarGaps’ valuation in this round is decent but slightly overpriced.

SolarGaps operates in the solar power and solar photovoltaic (PV) markets. The global solar PV market was estimated to be worth $180.3 billion in 2021 with a rather slow annual growth rate of 5.3% between 2019 and 2027. In the United States alone, the solar power market was valued at $10.8 billion in 2021. The US market had a more impressive annual growth rate of 21.8% between 2016 and 2021. Overall, the solar market is large enough that capturing a small percentage of it can generate decent revenue. The market’s growth is driven by an incentive to develop an alternative source to non-renewable energy and an increased demand for energy. Those trends are likely to continue – or even strengthen – in the coming years.

Although the solar power market has a lot of potential and is growing steadily, the COVID-19 pandemic has impacted the solar PV supply chain. In the US during 2020, total solar power installed was 37% lower than prior expectations. However, the solar power industry remains essential due to environmental regulations and the need for cheaper electricity sources. Therefore, SolarGaps operates in a market that has inevitable demand and potential.

SolarGaps co-founder Eugene Erik has been serving as the CEO of the company since 2015. He has a master’s degree in computer science from Kiev State University, Ukraine. Prior to SolarGaps, Erik served as the CEO of Zerringer International Inc., a construction company that provides solutions for the structure facades of buildings. He has also served as a vice president for an investment management company. Erik’s experiences seem to be sparse, and his LinkedIn profile is rather lacking. Although he has held leadership positions, he doesn’t seem to have experience in the solar industry. Additionally, none of his previous roles lasted more than a year, which makes it questionable whether he will stay committed to SolarGaps in the future.

SolarGaps co-founder Andrew Koval has been serving as chief technology officer since 2016. There was no information about Koval’s education, background, or experience on either the raise page or LinkedIn. This makes it difficult to evaluate his skills.

Another key team member is Chief Operating Officer Oleksandr Krotenko. Krotenko’s previous few positions in business management and operation could make him a valuable asset to SolarGaps.

SolarGaps’ leadership team lacks in startup experience, and the lack of information about the team makes it hard to evaluate their skills. Furthermore, the team’s lack of marketing and sales leadership is concerning. The company’s revenue performance decreased from 2019 to 2020, so its lack of essential team members could hinder the company’s progress moving forward.

SolarGaps looks to be creating the first solar window blinds for energy. Most solar panels need roof installation, can be attached behind window glass, or use the glass itself as solar panels. There are currently no solar blinds competitors – a significant boon for SolarGaps. However, there are companies making solar panels, windows, or smart blinds that can be charged by the sun without providing electricity. One of SolarGaps main competitors is Physee, a company that makes solar panel windows. These windows can generate eight to 10 Watts per 10 square feet. Physee claims this energy is enough to charge phones or provide power for small needs. Another company called tilt uses solar energy to motorize window covering but does not provide energy for anything else.

SolarGaps can generate 100 to 150 Watts per 10 square feet and cost around $70 for an average window size. Most modern solar photovoltaic panels produce around 80 to 100 Watts per 10 square feet and cost around $4 to $10 per square foot. SolarGaps’ product is clearly competitive in terms of energy generation. While the cost might seem more expensive, SolarGaps’ blinds can be installed by anyone, saving consumers the costs of professional installation

SolarGaps’ technology is also smart and convenient. The blinds track the sun and adjust their angle to capture as much solar energy as possible. Especially for large buildings, this feature can increase energy efficiency more than installing small panels at fixed angles on the rooftop. Customers can also use smartphones to open and close blinds or set them to a timer, and this all can be done remotely anywhere in the world. SolarGaps’ blinds also store electricity in a battery. This battery comes with the blinds, so customers can store excess energy to use or sell to electricity companies. Regular rooftop solar panels don’t usually come with storage batteries.

SolarGaps has three patents for its technology and has developed a unique, competitive product. The company is well-differentiated and defended at this time.

SolarGaps’ revenue decreased by 32.7%, going from $100,195 in 2019 to $67,349 in 2020. While lower revenue is concerning, this decrease can likely be traced back to COVID-19 pandemic. The pandemic has disrupted the supply chain of solar products. Additionally, electricity demand temporarily fell in many parts of the world during the pandemic lockdown, although it has more than recovered since then.

Regardless, SolarGaps remained profitable during the last two years – an impressive feat. According to the financial statements, profitability increased by 58% from 2019 to 2020. The company has also raised $2.3 million through grants and investors as well as $102,354 from a Kickstarter campaign with 331 backers. This funding level is a huge accomplishment for any startup. However, it is difficult to confirm whether the company included these past raises as part of its profit or whether the profit was from actual sales. But having no monthly burn means the company is not losing money from its sales, which is a huge sign for success. 

SolarGaps also has good traction. It has more than 400 customers and 17 distributors and has had partnerships from government and real estate investors. SolarGaps also has international attention. It has been awarded by organizations from China, Poland, and Germany for its technology and innovations. SolarGaps has also received an investment from the European Union’s Horizon 2020 program.

Overall, SolarGaps has maintained profitability for multiple years while growing its customer base and receiving industry accolades. The company’s performance has been quite impressive so far, and it looks well-positioned to continue growing.

An investment in SolarGaps comes with a low-to-moderate risk profile. The main area of concern for the company is financial. SolarGaps’ revenue declined by 32.7% between 2019 and 2020. Decreasing revenue is always a warning sign, though this loss can likely be attributed to supply chain disruptions caused by COVID-19. There are also some risks with this funding round’s investment terms. Although the company’s valuation itself is not very high, the revenue multiple is above average. It doesn’t match the company’s performance, which makes it overpriced for investors.

SolarGaps’ revenue decreased from 2019 to 2020. If SolarGaps doesn’t have a clear go-to-market strategy, it might not meet its expected goals, and revenue could suffer further. The company wants to increase its revenue by 587% and achieve $4 million by 2022. This goal seems unrealistic. The company’s lack of a strong marketing and sales team seems to be taking its toll. Without members to target both business-to-business and business-to-consumer customers, SolarGaps will likely struggle to scale its sales and business. Having a strong team is critical for SolarGaps’ success.

Although SolarGaps’ revenue decreased from 2019 to 2020, this is likely due to temporary disruptions caused by COVID-19. With the lockdown being eased and energy demand increasing again, this could be a good time for SolarGaps to bounce back. Solar energy is a growing industry that shows no signs of slowing. In the US, there is a strong push to produce almost half of the country’s electricity using solar energy by 2050. There is also a tax incentive where taxpayers in the US can claim 26% tax credit for units installed between 2020 and 2022. Now seems to be the perfect time to incorporate solar energy into a residence or business.

As a company, SolarGaps is profitable and operating with a margin of more than 40%. Most startups raising capital operate at a negative income loss. A deep technology company like SolarGaps having a medium margin is a good sign that it can stay profitable in the future. SolarGaps also has partnerships with enterprises and hotels in different parts of the world, which means it is gaining attention worldwide. The company has also won multiple international awards and been mentioned on TechCrunch, which further adds to the company’s value. 

SolarGaps is a deep technology startup manufacturing solar panel window blinds that can generate and store electricity. The company’s blinds are easy to install, can be controlled remotely by a smartphone, and automatically adjust their angles for optimal sunlight exposure. SolarGaps’ team lacks a few main roles, especially in marketing and sales, and the founders don’t seem to have a lot of executive or industry experience. The company’s revenue also decreased by 32.7% between 2019 and 2020. 

Despite these downsides, SolarGaps is operating in a growing market where the demand for renewable energy is rising. The company also has good traction. So far, it has had more than 400 customers, and it’s received a lot of international attention as being the first solar blinds company. Although SolarGaps’ revenue decreased recently, the company has maintained profitability. It is rare for startups to not operate on a loss, and it shows that SolarGaps has excellent operating efficiency. SolarGaps’ technology is simple but innovative and disruptive. The company has also developed a healthy defensive moat with three patents. It also appears to be the first solar window blinds company currently in operation. Therefore, SolarGaps has been rated a Deal To Watch.

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Analysis written by Yasmin Sharbaf, December 6, 2021.