Sirocco Energy is a pre-revenue hardware startup valued at $8.9 million. This is a fair price for investors. The company has patents for its distinctive wind turbine and started selling some of its preorders. During its last raise on Wefunder, the company announced a pipeline of $80 million in preorders, which justifies its valuation. However, investors should know that the company didn't share this information during its current Netcapital raise. Therefore, there is a risk that some customers will cancel their preorders.

Wind energy companies have an average revenue multiple of 5x. So if Sirocco Energy achieves revenue of $18 million a year, it could reach a valuation of $90 million and give investors a 10x return. It could generate this revenue by selling 1,125 4-kW wind turbines -- worth $16,000 -- per year, which is doable given the current level of interest in the company’s product.

Sirocco Energy is evolving in a niche of the wind turbine industry: small distributed wind turbines (less than 101 kW). These turbines can be off-grid or grid-connected. The main clients for these products are residential customers, governments, and businesses. 

In 2021, 1,742 distributed wind turbines were installed in the U.S., representing an investment of $9.2 million and an additional capacity of 1,800 kW. Minnesota led the country by developing 305 kW of new small wind turbine capacity. Retrofits accounted for 42% of the new small wind turbine capacity, which was installed on existing turbines and foundations to upgrade the technology or replace non-functioning turbines. Overall, the U.S. market for new small distributed wind turbines is extremely small -- around $5.34 million -- and doesn’t seem to have grown much in recent years.

That’s why Sirocco Energy is operating in the global market. And the company is heading in the right direction. In 2021, 40,200 kW of small wind capacity was installed globally. The U.S. accounts for only 4.48% of the global small-distributed wind market, while China accounts for 83% of the documented new capacity in 2021. Based on the U.S. Department of Energy’s annual wind turbine report, we can estimate that the global small-distributed wind turbine market is worth around $200 million.

So the global market is far larger than the American market. But the global market hasn’t grown much over the past few years. Will it grow fast enough to allow Sirocco Energy to expand its business?

Let’s look at the demand for Sirocco’s product to answer this question. During its last raise, Sirocco Energy had $80 million of preorders in its pipeline and wanted to fulfill those orders in the next three years. That alone can give investors a 10x return. But the value of the company’s preorders was very large when the 2021 small distributed wind turbine market was worth just $200 million.

Because Sirocco isn't mentioning these preorders during this raise, investors can ask themselves questions. Did some customers cancel pre-orders? Would it be a sign of failed investments in wind turbine farms due to the rising cost of materials? Did Sirocco decide to stop mentioning these preorders due to new internal or external rules related to its communication?

If they are still up to date, the company’s large number of preorders signals future market growth. The 2021 capacity of small distributed wind turbines reflects small orders made in 2018 and 2019. Since 2019, we’ve seen the emergence of COVID-19, the Russia-Ukraine war, and a surge of interest in climate mitigation solutions. Therefore, Sirocco Energy’s potential orders will be reflected in the 2024 and 2025 markets. These preorders could make investors more bullish about the potential of the company’s market. And hopefully, the company might be ready just in time for a new wave of smaller and more distributed climate investments.

In short, investing in Sirocco Energy is not about looking at the current state of the small distributed wind turbine market. It is about believing that climate change concerns, the rising cost of natural gas and electricity, and the low cost of renewables will all make the company’s wind turbine attractive to residential customers and business owners.

Sirocco Energy’s founding story is a love story. Chief Technology Officer Olexandr Pryimak launched the company with his college friend and company CEO Taras Vodyanyy with the mission to develop the ideal wind turbine. The pair incubated at the DIY Lab in Kiev, where they met Anna Pryimak. They onboarded her as the chief operating officer and the company's third co-founder. Soon after that, she and Olexandr got married. 

When we talked with Anna (you can read her Founder Profile here to learn more about her), she was in Lisbon to meet a potential customer. And we could see her, Taras, and Olexandr's passion for their mission. That, combined with their engineering and business skills, makes them a good team to bring the company to the next level.

In its last Wefunder raise earlier this year, Sirocco Energy had preorders for 1,200 turbines worth around $80 million. Most preorders were for 4-kW turbines sold for $16,000 each. In the future, the company expects that most of its sales will come from bigger models, such as 12-kW turbines sold for $48,000 each. None of the prices include installation costs and batteries. Seeing this much traction in a small market with dozens of competitors is impressive. Let’s see how Sirocco compares to similar companies.

13 manufacturers supplied the 1,742 small distributed wind turbines sold in the U.S. in 2021. Bergey Windpower is one of the market leaders. It sells a 10-kW wind turbine at $35,000 (which doesn’t include a $20,000 tower or installation costs) that can produce 8,000 to 18,000 kWh per year, depending on wind conditions. If the installation costs are similar to Sirocco Energy’s, Bergey is a more expensive solution than Sirocco Energy because of the cost of its tower.

Flower Turbines is another competitor. This startup will soon sell 5-kW wind turbines for $14,000 each, which should be able to produce 6,000 to 12,000 kWh per year, depending on wind conditions. For $2,800 per kW capacity compared to $4,000 for Sirocco Energy, Flower Turbines’ smaller and (to us) more beautiful turbines can present serious competition.

But Sirocco Energy has a technical advantage. According to Anna, the company’s turbines harness low-speed and turbulent winds better than its competition. Therefore, they can produce more energy (in kWh) than wind turbines in the same areas and with the same capacity (in kW).

Sirocco Energy can also compete on its business model. It offers both sales and leasing options, allowing easier financing options for its clients and making its solution attractive. By leasing turbines, its clients can use their electricity bill savings to pay for their turbines.

Their manufacturing capacities limit all of these companies. None of them seem capable of fulfilling global demand on their own. It is a capital-intensive business and a fragmented market. So we are confident that Sirocco Energy can grow despite its competition. Its unique system and design can be an asset to convince clients in lower wind areas.

 

Sirocco Energy has made significant progress since its last funding round. The company has achieved several key milestones, demonstrating its potential for success in the energy industry.

Firstly, Sirocco Energy fulfilled its first order, indicating demand for its low-noise, affordable, and customizable wind turbine. This initial success is a positive sign for the company's future growth and market acceptance.

Additionally, Sirocco Energy has applied for and received confirmation of a US patent for its linear wind generator. This patent provides the company with intellectual property protection and a competitive advantage in the market.

The company has also secured pre-orders, indicating that there is interest from potential customers in adopting Sirocco Energy's wind turbine technology. This early traction is a promising sign for future revenue generation. However, while Sirocco announced $80 million worth of preorders earlier this year, the company isn't sharing the value of its preorders anymore. Investors can wonder whether the company changed its communication strategy or if some customers canceled their preorders.

Sirocco Energy has conducted numerous tests in severe weather conditions, including hurricane wind, snowing, and icing. These tests demonstrate the durability and reliability of the wind turbine, further enhancing its market appeal.

Investing in Sirocco Energy carries several risks that potential investors should know. Firstly, the company is in the early stages of development and barely generates any revenue. There is uncertainty about the market acceptance and demand for Sirocco Energy's wind turbine technology. The product's success will depend on attracting customers and establishing a strong market presence. Unfortunately, the rising cost of materials and the overall inflation could slow the demand for wind turbines.

Sirocco Energy also faces competition in the wind turbine industry. Direct competitors such as Bergey Windpower and Flower Turbines already exist in the market and offer similar products. The competitive landscape can pose challenges for Sirocco Energy regarding market share and differentiation.

Financially, Sirocco Energy had a negative net income in 2022 of $1,019,648. This indicates a reliance on external funding to sustain its operations. The company will need to secure additional funding to support research and development, marketing efforts, legal fees, and general administrative expenses.

Furthermore, Sirocco Energy operates in a highly regulated industry. There may be high market approval or license regulations that the company needs to navigate to bring its wind turbine technology to market. Delays or failures in obtaining necessary approvals could impact the company's ability to generate revenue and achieve its business objectives.

Overall, investing in Sirocco Energy carries risks associated with its early-stage development, competition, reliance on partnerships, financial sustainability, and regulatory challenges. Potential investors should carefully consider these risks before making an investment decision.

Two elements distinguish Sirocco Energy from other small wind turbine startup investment opportunities. First, it secured 1,200 wind turbine preorders, mostly by word of mouth, in early 2023. This demonstrates a demand for the company’s unique product and that the small distributed wind turbine market might grow quickly. It also shows that the team has great execution skills, as they could get these preorders even without a finished product. Sirocco also sells wind turbines with superior performances and higher energy output than competitors. This gives it a strong competitive advantage.

Sirocco Energy’s second advantage is its business model. The company offers both sales and leasing options for customers. It removes the financial barrier that could slow the adoption of wind turbines and helps customers balance the turbine’s cost with the savings they would make on their electricity bills.

Finally, investing in wind turbine companies can be a big win for investors. In 2021, the value of merger and acquisition transactions in the wind energy space reached $210 billion. Companies in the renewable energy industry and the fossil fuel industry are acquiring wind turbine companies. While the space is fragmented and doesn’t ensure that Sirocco Energy will successfully exit, it demonstrates potentially lucrative opportunities in the wind turbine space. 

Small distributed wind turbine installations in 2021 have been limited. Even if Sirocco Energy’s early 2023 pre-sales indicate an upcoming market growth, the company still faces adoption risk. Businesses and individual residents are not as ready as utilities to deploy wind turbines. Turbines are rare in urban areas, and communities may not want them in their spaces.

Sirocco Energy also faces manufacturing and technology risks. The company hasn’t started full-scale production and has to complete testing this year to deliver its product and start recognizing revenue.

Finally, Sirocco Energy’s growth strategy beyond its preorders is unclear. At some point, Sirocco Energy’s capacity to market its turbines and win contracts from new customers will be critical to its success.

Sirocco Energy is a renewable energy company specializing in developing low-noise, affordable, and customizable wind turbines for urban energy production. The company's patented linear wind generator is designed to be 50% more aerodynamically efficient than conventional wind turbines. It boasts a low noise level and is bird-safe, addressing some common criticisms of wind power. The company's wind turbines can produce up to 30% more energy output than competitors.

Despite being in the pre-revenue stage, Sirocco Energy has made significant progress in its research and development. The company has successfully applied for a US patent and tested its technology in severe weather conditions. It has also fulfilled its first order and secured pre-orders, indicating a market interest in its product.

With a valuation of $8.9 million, Sirocco Energy is raising funds on NetCapital. The funds raised will be used for further research and development, marketing, legal fees, and general and administrative expenses. The company has investors backing such as Climate Innovation Voucher and the European Bank for Reconstruction and Development.

The global market for wind power is expected to grow significantly in the coming years, offering a high market potential for Sirocco Energy. However, the company operates in a moderately competitive landscape and must differentiate itself to gain a significant market share.