BlockPower founder Donnel Baird grew up in the Bedford-Stuyvesant neighborhood of Brooklyn in the 1980s. The area was so poor that houses often lacked a decent heating system. People turned on the stove or used electric heaters to make up for inefficient central heating.
It was unsafe and inefficient, but it was the reality for the many families, most of them blacks, who lived in those unimproved buildings at the time. Baird says that a sense of the injustice and inequality of the situation stuck in him. As he grew up, he realized that the problem persisted in many of the poorer areas, affecting the quality of life of the people living there, as well as harming the environment in general.
There was another element in the game. Many people living in these same areas faced a lack of decent work, exacerbating a vicious cycle of poverty that was difficult to break. Byrd not only wanted to replace inefficient fossil fuel-burning systems, he also wanted to create high-quality, sustainable jobs for people the economy often overlooked.
He launched BlocPower in 2014 with the aim of replacing fossil fuel heating and cooling systems with cleaner and more efficient electric air-to-air heat pumps, water heaters and solar panels. As of January, BlocPower has upgraded over 1,200 buildings in 26 cities and the work continues.
The company has raised over $100 million so far. This includes over $50 million from Goldman Sachs to help support the company’s green building funding, as well as a $30 million investment from Microsoft Climate Innovation Foundation. Despite this, he faced an uphill battle when it came to fundraising, and in 2018 came perilously close to closing the company’s doors.
I spoke with Baird about the challenges he faced in starting a business, especially as a black founder, urging the financial industry and venture capitalists to support his vision and bring it to life.
Creating a Greener Alternative
The roots of the idea for what became BlocPower began when Baird worked on a green jobs program with the Obama-era Energy Department. “My job was to act as an external intermediary between the Department of Energy and a group of unions and pension funds to see if we could jointly invest union pension funds in job creation, greening buildings using stimulus funding,” he explained. .
They hoped to recruit unemployed union members to help renovate buildings, but in 2009 the technology was much more expensive and it proved difficult to make the economy work for everyone.
When Baird was in graduate school in 2014, he began exploring the idea of creating a financial tool that would make it easier for more people to upgrade buildings with clean energy systems, especially in poorer neighborhoods. He felt that the lack of a purpose-built financial vehicle to fund these projects was the missing piece to bring his vision to life, but it required financial institutions to provide outside investment in areas that most banks and financial services companies tried to stay away from. .
“It was then that I realized that if I was going to build green houses in low-income areas, I would have to do it myself. And when I was in business school, I started writing a business plan and halfway through business school, Cheryl Dorseythe president Echo Green Fundgave me $100,000 in seed capital and I was able to launch the company in my sophomore year,” Baird said.
Today, the company makes money in multiple ways, starting with the financial instrument he founded the company on when he came up with the idea in 2014.
“We borrow money from Wall Street. We purchase equipment and find a local contractor who has the right to install it. And then we manage the project while they install this equipment in the building (getting a project management fee as part of the deal). And we rent equipment, like you rent a car, to a building owner for 10, 15, or 20 years. So there is a stream of rental payments coming back to our company from this building owner,” Baird explained. This stream of payments gives the company a predictable, regular income.
In addition, governments and utilities are hiring companies like BlocPower to encourage and help building owners upgrade their heating and cooling systems. “Utilities and local governments have budgets, so they will pay us to green buildings in their area,” he said.
For example, a company has a contract with the city of Ithaca, New York to green every building in the city. “Electrification of buildings is an important part Green New Deal Ithaca, one of the most aggressive decarbonization programs in New York State. The program will benefit the people of Ithaca by creating jobs, reducing energy costs, reducing pollution and greenhouse gas emissions, and improving the energy efficiency of homes and buildings,” the company said in a statement. wrote in a statement announce the deal.
Getting off the ground
When starting the company, he wanted outside investment to help run it, but before that could happen, he needed to come up with a proof of concept, and he was able to do so with the help of some government contracts. The first was a $2 million grant from the Department of Energy. In 2017, he also secured a three-year, $6 million deal with New York, but found that attracting financial institutions proved to be more of a challenge.
The company was able to secure a grant from New York City and the Department of Energy and really demonstrate that, with the right financial support, it can start to make a real impact on green buildings.
“So we had a $2 million contract with the Department of Energy, which my startup won in a competition. We used that money to build a real portfolio of real clean energy projects, greening about 40 buildings, and then we were able to send the data back to Goldman Sachs to make sure our financial models matched what we saw. in the real world,” he said.
As the company wrote in a report on the NYC project, which is called New York Community Modernizationit was centered in the underprivileged areas of Brooklyn and Queens, where the startup could work with utilities to help identify buildings in need of an update in these areas:
BlocPower’s strategy was to engage community stakeholders who have completed projects to refer building owners to Community Retrofit NYC, focusing on areas with the strongest Con Edison incentives. The second step was to use the data to construct a target estimate to identify buildings in need of modernization. Targeting combined with the use of existing relationships allowed us to connect with the owners of buildings in need of modernization. It also allowed us to create an image of our average building owner.
The original plan called for BlocPower to work on 554 properties where it would initiate or ideally complete a project, but it was actually able to complete projects on 629 buildings over a three-year contract period from 2017 to 2019, according to the company. He was able to make progress in several key areas.
First, as soon as several building owners joined the project, a word of mouth effect developed and this helped to attract more owners. Second, using the company’s own software, the team was able to identify the buildings most in need of renovation. Finally, the startup has also created a much smarter approach to project management using a digital model.
“Creating a digital building model allows us to create one web page where we have a digital building model and all its data, and we could integrate all the disparate elements of electrical engineering, mechanical engineering. , construction and financial data into one digital profile for that building. This allows us to understand what the financial return on investment in green energy in this building will be,” he said.
In the meantime, he has raised a couple of tranches of money from Andreessen Horowitz and Kapor Capital. The first was for $1 million in 2015, right after he started the company. Next was the $2 million bridge round, which Baird said could have saved the company at a time when he was struggling. The two firms were instrumental in helping the company get started and then stay in business, he says.
With a portfolio of projects from the DoE and NYC programs under his belt, he began to open some doors for some big investors, but it wasn’t easy and it took years for things to come together.
But last year, Goldman Sachs Asset Management Urban Investment Group provided the company with more than 50 million dollars to finance more green building projects. But he failed to convince other banks and financial institutions to go along, and the frustration over the fundraiser never faded.
He says the company has 860 employees, including nearly 800 employees trained by his company to install clean energy solutions. “They are our employees. We pay them, we control them, we design them. We are doing interesting projects, like decarbonizing some churches and synagogues. We installed solar panels on Rikers Island, in a prison in New York.”
He says the latest project was especially enjoyable because some of the people he hired were incarcerated there at one time or another or knew people who were there. “It was interesting because a lot of our workers were locked up on Rikers Island, or their family members were locked up on Rikers Island, but they were able to go there and do something positive and get paid to work on Rikers Island. ,” he said.
Although he met people along the way who invested in his vision, he described the fundraising as a whole as “terrifying.”
“I had people get up and leave meetings. I’ve had people pull out their phones in the middle of my presentation and start checking them. I’ve had people lecture me about capitalism and how BlocPower is not capitalist and because we’re trying to help people we’ll never make money.” The climate technology investors were no better, he said, and one in particular accused Byrd of outright lying when he presented the investor with data on his completed projects.
He believes the only way to solve the funding problem is for people from underrepresented groups to get capital and invest in each other. “We can’t wait with bated breath and say, ‘Oh, George Floyd happened,’ so the venture capital category will evolve and change… They will do what they do. Our job is to create a whole new group of people who can really deliver the social impact change we need and bring about the climate change we need,” he said.
Despite the obstacles, BlocPower has come up with a way to make buildings more efficient while creating good jobs and improving lives in areas that are too often left behind, while making money and taking care of the planet.
Credit: techcrunch.com /