August 5, 2015
Steve Vassallo
Over the course of Foundation Capital’s 20-year history, two-thirds of the investments we have led are the first institutional investments our portfolio companies have received.
A few fund cycles back – as we began to get more proactive about portfolio construction – we started to categorize these investments as “We Believe” projects. These are investments where we can’t rely on historical data or dozens of customer reference calls, because the company is pioneering a new model in a new space.
Sunrun was one of those companies. It’s especially gratifying to see Sunrun launching its initial public offering today because while we were among the first believers, we knew that once Sunrun got rolling, we undoubtedly wouldn’t be the only believers.
Making a “We Believe” investment requires a lot more than blind faith.
It requires having confidence that a market for a new product or service can be unlocked by a unique insight or business model combined with a mission-driven team that simply refuses to fail.
It also requires a deep understanding of the market opportunity.
From the outset, the stars (including the one our planet orbits) aligned to make Sunrun the perfect “We Believe” investment.
In the 15 months before I met Sunrun co-founders Lynn Jurich and Ed Fenster, I’d immersed myself in the residential solar industry, gathering data, talking with customers and countless entrepreneurs, and liking what I heard.
At the same time, several of my partners at Foundation Capital and I had also been looking at companies that were using new models to disrupt the financial services industry.
So when I first met Lynn and Ed on a Friday afternoon in 2008, I excitedly told my partners they had to meet this duo – which we did the next Monday morning. And we came ready to invest.
It was clear that Lynn and Ed had managed to do something no one else had. By offering solar-as-a-service, they were pioneering both a new solar business model and a new financing model – combining the best of what my colleagues and I were seeing in digital energy (à la EnerNoc and Silver Spring Networks) and financial services (à la Financial Engines and LendingClub).
With solar-as-a-service, customers pay for power, not panels, and they leave all the hassle of maintaining the system to Sunrun. Homeowners don’t need to be engineers to maintain their solar systems, and they don’t need to have the tens of thousands of dollars to underwrite their own solar system.
While the innovative business model is what makes Sunrun so attractive, it also makes it complex to architect and somewhat difficult to explain – which is certainly something Lynn learned while pitching solar-as-a-service to homeowners at farmers markets.
From our standpoint, this required giving Sunrun the time it needed to find that essential product-market fit. It also required finding a way to abstract away the complexity in its business model. Just as you can zoom and navigate the touchscreen of your smartphone without thinking about the complexity involved in depositing micron-scale transparent conductors onto chemically reinforced glass, Sunrun allows you to access clean, affordable, energy from the solar panels on your roof without thinking about the complexity of financing, the tax code, or maintenance. The service just works.
Over the years I’ve spent developing and launching new products and services, I’ve found that the ones that are fortunate enough to create new categories and industries are the ones that subsume all of that complexity, so that all the customer sees is simplicity and value.
That’s just what Sunrun is offering.
This is not to say that Sunrun’s journey has been easy. During the darkest hours of the 2008 financial crisis, Sunrun had only slightly more customers than employees, and financing almost dried up. Lynn actually described her “white knuckle moment”.
Still, Sunrun was able to close a $40 million project finance transaction on the same day in November 2008 that the S&P 500 hit an 11-year low. Sunrun came through the recession, and has only been gaining strength since. Today, more than 75,000 homeowners in 15 states draw power from the Sunrun panels on their roofs.
I’m proud that my colleagues and I were among the first believers in Sunrun. Now, in going public, Sunrun has a whole lot more believers. That’s good for Sunrun, certainly. But it’s also good for the world, because Sunrun’s success has the potential to be all of our success. So congrats to Lynn, Ed, and team. Here’s to a very bright future for Sunrun.