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Q&A: Crosslink Capital's Alain Harrus on Solar Investing in Tough Times

AlainHarrusFour-year-old thin-film solar startup SoloPower has so far kept a low profile, with only four press releases posted on its site since 2007 and none before then. But earlier this month, the San Jose, Calif.-based company said it was applying for a $190 million loan guarantee from the Department of Energy to build a high-volume manufacturing plan — a move that it hopes will accelerate  it “into its next stage of growth.”

SoloPower also announced this month that its founding chief executive, Homayoun Talieh, is leaving and that it has selected Lou DiNardo, a partner with SoloPower investor Crosslink Capital, as its interim CEO. The news came just a few months after the departure of Rommel Noufi, who had been the company’s vice president of research.

At the Intersolar North America conference in San Francisco last week, we sat down with Alain Harrus, a partner at Crosslink Capital and a SoloPower board member, to get an update on what’s happening at SoloPower and hear his thoughts on some of the changes the industry is seeing in solar investing. Here are excerpts from our conversation:

Q: So what really happened with the CEO? Why did SoloPower decide to make the change?

A: [Changing CEOs] happens very often and it’s kind of the natural evolution of these companies, especially when you’re starting from nothing. This started with two people; it really was just an idea. [When a company matures and enters mass production, you often] need a different set of skills. A good analogy is a triathlon or a relay race. You need different people who have different capabilities.

Q: The company put an interim CEO in place, rather than waiting to find a permanent replacement. Why did the CEO leave before you’d found a permanent replacement?

A: We selected an interim CEO just because of timing. Sometimes it takes longer to get a new CEO — it might take 90 days, [especially because] solar is in a downturn. [We decided to change CEOs right away] in order not to lose momentum. We don’t want to miss the market window. It’s a matter of getting the right staff to get to high-volume manufacturing.

Q: Why did Rommel Noufi also leave the company?

A: Rommel was on a leave of absence from NREL and was commuting from Colorado. He had been here for a year, and it was very interesting, but he had been at NREL for 27 years and all his family was there [in Colorado]. His decision was driven more by personal reasons.

Q: Why do you think it makes sense to pursue this market – and a new factory – when supply outweighs demand and SoloPower faces a crowded field of thin-film competitors?

A: Right now, solar is in a downturn, but all the companies in CIGS are just making miniscule amounts of product, in the tens of megawatts. The ramp for product is 2011 or 2012. Then, the demand will be a lot larger because of what I call “the sleeper markets,” the United States and China, will wake up, and we’ll also see strong markets [elsewhere]. By the time we get to the 8-10 MW levels, it will be a pretty good market for CIGS.

Q: How do you expect to be able to compete with First Solar (s fslr) and other competitors?

A: The market is so large, no one person can meet all the demand. The right price point and efficiency, and you have a business. So it’s not about beating First Solar (s FSLR); it’s about being as close to First Solar as possible. As long as you’re in that zone [of cheaper panels], you can sell. And Solopower wants to be a flexible panel, not flat-plate glass [like First Solar]. You’re going to see more product differentiation going forward.

Q: Venture-capital investments in solar have declined. Is the VC appetite for solar becoming saturated?

A: There’s still a lot of interest in the next generation of photo absorbers — not just concentrators, but also multijunction and III-V materials — in better system monitoring and management and in the [energy] storage area. These areas are still very active, with the bar a little higher and a lower level of investment. [Reporter’s note: Multijunction cells have multiple layers of semiconductor materials to boost their efficiencies, while III-V materials, such as gallium arsenide, also have the potential to reach much higher efficiencies than cells commonly used today.]

Q: Valuations for solar companies are down significantly. Do you think they will come back to the levels we were seeing most of last year, or do you think those valuations represented a spike and were too high?

A: Over a long period of time, valuations will go up. As long as companies are creating earnings and value, the markets we’re talking about are really large –- trillion-dollar markets. There are many areas where low-carbon energy could have a transformative impact.

Q: Some VCs have expressed concern that the government has begun acting as a VC, but may not be best-equipped to pick the winners. What do you think?

A: I think the money the government is spending is extremely well-spent money. Some will be conventionally spent -– such as in tax credits -– and some is going to be, frankly, VC money. But if you think about it, in some ways, VC creates enormous value. Even if [a venture-backed company] doesn’t succeed, the industry as a whole learns something and [the investment] creates jobs for people for two to three years, or the life of the company, and then they go on to start other companies. It’s not a return from a financial point of view [if the company fails], but it’s a different return. You could argue it provides a return by training or educating the workforce.

2 Responses to “Q&A: Crosslink Capital's Alain Harrus on Solar Investing in Tough Times”

  1. Rooferguy

    VCs invested billions in companies that had a solution to the “silicon is too expensive” problem that the solar industry experienced from 2004 to 2008.

    When silicon got cheap again, the value propositions of all these thin film and concentrating products disappeared. Now they’re all trying to figure out what to do. Temporarily they may get a DOE loan, but long term, good and cheap Chinese and FirstSolar panels are likely to dominate the market.

    VC investments in energy need to look at areas away from the solar cell itself. Software, installation services, mounting systems, inverters, financing, etc.