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Borrego Solar Raises $14M in First VC Round

Solar installer Borrego Solar Systems Inc. said Wednesday it has raised $14 million in venture capital financing. It’s the first round of venture capital for the El Cajon, Calif.-based installer, which didn’t disclose its investor except to say that it’s a large corporation.

The news could be evidence that, in a tight economy, venture capitalists may be shifting away from riskier technology investments. Borrego installs conventional solar panels mainly on commercial, industrial and government projects, and already earned $60 million in revenue and sold $90 million in contracts last year.

That’s not to say that innovation isn’t going on there. The company is developing a better racking system, among other improvements, to reduce the materials and roof modifications that installations require in order to make commercial flat-rooftop solar projects quicker and cheaper, President Mike Hall says. But that hardly matches the level of technology risk in, say, a thin-film solar company. And Borrego, founded as a family operation in 2001 with $40,000 in seed funding, doesn’t qualify as early-stage.

Several venture capitalists have said lately that they’re looking for quicker returns. “A lot of venture capital and growth investors are looking at the technology landscape and it’s challenging,” Hall says. “I think now that they’ve seen a real drop in PV prices for the first time in three to four years, growth investors are becoming a little shy of placing technology bets unless there’s very obvious differentiation. We’re seeing [value and margins] move down the supply chain…and that has renewed interest from the growth investment community.”

Aside from developing ways to make its commercial installations cheaper, Borrego plans to use its new-found capital to move into the Mid-Atlantic region and to increase its project-development resources, including sales, marketing and financing. The company is working with partners to finance projects and plans to get expert help in navigating some of the new and “constantly changing” government policies, Hall says. “We’re just having to invest more resources and become more creative given the current financial environment,” he says. “Things are getting more complicated on the finance side.”

Fewer project-financing deals are closing — leading to first-quarter sales that will likely drop from the same quarter last year — even though customer demand for solar power hasn’t slowed, he says. “We have seen less deals closing, but we haven’t seen less initiation — the pipeline is still very large and the amount of interest…is really high,” he says.

But Hall says that while the next quarter will be rough, the mid-term looks really good for Borrego. For one thing, customers are waiting to see what might come out of the stimulus package that Congress is considering, in case it could save them money. “It’s hard to push for the finish line when there’s an elephant in the room that everyone’s looking at,” Hall says. “But I think [the package is] going to get resolved very soon and I think we’re going to see a flurry of activity.”