Oscilla Power is raising capital through sale of common equity at a $20 million pre-money valuation. The business has very little revenue, resulting in a low price rating on the surface. However, the technology’s potential for market disruption and stage of development make this valuation reasonable. Globally, the average revenue multiple for energy companies is eight to 10 times. Once Oscilla moves past the prototype stage and begins to take in more revenue, this will be an important benchmark for investors to keep in mind.

After piloting the Triton off the coast of Hawaii, Oscilla Power plans to deploy in India. In addition to India, Oscilla is targeting the UK, Portugal, Canada, Japan, South Africa, Australia, New Zealand and coastal communities in the US. As such, the appropriate addressable market for the company is wave energy on a global scale. In 2021, the global wave energy market is approximately $6.1 billion. The annual growth rate for the market is 23.5%.

The addressable market is sizable, but what is truly impressive is the growth rate. It is rare for a market to have a growth rate above 20%. According to FiorMarkets, the extreme growth is “driven by an increased number of projects, technological development, rapid commercialization, rise in investments, electricity cost reduction and new policies by local governments.” All of these trends lean heavily in favor of Oscilla Power, especially since the company is an early mover. Collectively, this resulted in a very impressive market score.

Oscilla Power founder and President Balky Nair heads a diverse team with decades of renewable energy experience. Nair has a PhD in materials science from the University of Wisconsin. After his studies, he served as a research associate at Argonne National Laboratory, a facility associated with the US Department of Energy. After a few years of program management with Ceramatec, he led EmiSense, an emissions sensors developer, until Coorstek acquired EmiSense in 2008. After his time with EmiSense, he founded HiFunda, a technology incubator that gave rise to Oscilla Power. Nair has led Oscilla since its founding in 2009. Overall, his technical and entrepreneurial experience — especially leading a company into an acquisition — makes him a strong and highly qualified leader for Oscilla. 

Co-founder and board chairman Rahul Shendure served as Oscilla’s CEO through 2016. Shendure is a graduate of MIT and received an MBA from Harvard. Before obtaining his MBA, Shendure got his start at General Electric. He then became the manager of strategic marketing for Ballard Power Systems in Vancouver, Canada. He stepped away from the energy sector for a few years to serve as vice president of product marketing for Amyris, a synthetic biology company, before coming on at the start of Oscilla. Since leaving his hands-on role at Oscilla, Shendure has helmed a pair of startups: a cancer diagnostics technology company called Bellwether Bio, which was acquired by Guardant Health, and CarbonBuilt, a building materials company that injects carbon dioxide emissions into low-carbon concrete. Despite no longer being fully committed at Oscilla, Shendure maintains his interest in carbon-reduction technology and has proven expertise in exiting a company, making him a valuable advisor for Oscilla.

To drive Oscilla’s product development, the founders have expanded the team to include engineers and hydrodynamicists, as well as general and intellectual property counsel. The Oscilla team’s extensive technical expertise and business experience earns the company a strong team score.

Despite wave energy technology’s massive potential, Oscilla Power doesn’t face much competition in this space yet. The engineering and scientific expertise required to make wave energy production viable represents a huge barrier to entry. Siemens Energy, one of Oscilla’s few direct competitors, is developing a HydroAir turbine to harness wave energy. Renewable energy providers as a whole also compete with Oscilla. For that reason, the technology needs to compete with existing renewable sources.

Oscilla’s product has some key differentiators that give it an advantage. The Triton Wave Energy Converter was tested by the US Department of Energy for its Wave Energy Prize and was among four out of 90 entrants to meet commercialization targets. During testing, the Triton was able to provide electricity at less than half the cost of what was then considered state-of-the-art technology. The Triton captures energy across all modes of motion, meaning movement in any direction generates electricity. The Triton also features a low-cost means of installation as well as high efficiency and survivability. These designs have been protected by an extensive web of 16 patents. 

Though it is yet to be commercialized, should all go according to plan, the Triton is both differentiated by quality and price of existing solutions. This differentiation paired with the patents and otherwise high barriers to entry made for an impressive differentiation score.

Oscilla has been in product development since 2009. It is currently in the midst of a trial phase in Hawaii, with the first prototype scheduled for deployment this year. Reaching this point has required massive funding. Most of that funding has come through millions in grants, including $1.1 million from the US Department of Energy in August 2020. In its prior rounds, Oscilla  raised more than $850,000. In all, massive development costs have resulted in total liabilities of more than $1.7 million.

All of this is to be expected for a hardware company on the verge of a new frontier in renewable energy, but it does present risk. The product has yet to be commercialized and there is no proof of product-market fit. Overall the performance score was just below average, with the impressive prior fundraising canceling out the product phase and high burn rate.

Oscilla has been in product development for 12 years and is just now deploying its first prototype. That’s a lot of development time, and at the end of the day, it is unknown how well the product actually works. The device requires complicated converters that will need to be manufactured at scale, and a suitable location for such manufacturing is undetermined. Additionally, the product must prove cost-effective alongside existing renewable energy solutions, which are getting cheaper all the time. 

Regardless of whether the product proves cost-effective in the long run, reaching that point will take time. President Balky Nair has explained that Oscilla’s technology won’t be cost-effective for many years until it can sufficiently scale. The company believes wave energy technology will be price-competitive at 50 megawatts. To reach that point, Oscilla will have to rely on subsidies and incentives from governments, such as the grants it has already received from the US Department of Energy and other entities. This technology requires massive up-front investment. These factors contributed to a high time and product risk that drove the high overall risk score.

After 12 years and massive investments, Oscilla is further behind than it planned. Product testing is yet to begin in the field, and there is always the possibility that tests will fail. More conservative investors may not feel comfortable with the startup’s seemingly lofty ambitions. 

This is also not a short-term investment. While $20 million is a reasonable valuation, the requirement of scaling the technology before it can be cost-competitive means investors will need to wait many years before seeing returns. Given that Oscilla has already fallen behind schedule, investors likely won’t see those returns anytime soon.

For a technology as disruptive as wave energy, $20 million is a fair valuation. Investors aren’t buying into a thought experiment or a concept. Oscilla Power has a prototype, and past funding from outside agencies demonstrate its potential. Right now is the perfect moment to be pushing for such funding, as governments are incentivized to meet renewable energy goals. Reaching for global consumers also provides some safety in the event that political instability closes off certain sources of funding. If India decides to abruptly turn away from renewable sources, for example, Oscilla can focus on its customers in Australia or elsewhere. 

Technology that captures all kinds of motion may have myriad uses beyond electricity generation. Oscilla’s extensive patent protection is a real asset. In the long term, if the company reaches even a $200 million valuation before acquisition, it could generate a return of around 10 times for investors.

Oscilla Power is an early-stage renewable energy company that’s harnessing wave energy. Its Triton Wave Energy Converter is designed to absorb kinetic energy from the pressure of waves and convert it into power. Oscilla’s pre-money valuation is reasonable given its massive potential. Its wave energy technology has the potential to be hugely disruptive to the renewable energy market and is protected by 16 patents. Furthermore, Oscilla has demonstrated ample capacity to win grant funding in the millions, which has been necessary for the painfully long development process. 

Oscilla’s product is not yet tested. Even if it works as intended, massive scaling is required to make wave energy cost-competitive. Scaling to that point will likely take years. During that time, a massive government buy-in may be required to subsidize this experimental technology. Still, now is the right time to push for wave energy, and Oscilla is at the forefront of this particular form of renewable energy development. Therefore, Oscilla Power is a Deal to Watch.

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Analysis written by Benjamin Potts.