Sungevity Founder Danny Kennedy on Making a Difference With Solar
Yesterday we published Part 1 of a Q&A with Danny Kennedy, the former Greenpeace activist and administrator who founded Oakland, CA-based Sungevity in 2007. The company’s mission is to make it easier and more affordable for homeowners to reduce their monthly utility bills by installing rooftop photovoltaic panels. The main strategy: computerize as much of the solar installation process as possible. For example, Sungevity has developed Google Earth-like tools that allow it to generate accurate cost estimates without having to send technicians to customers’ homes. Homeowners can apply for low-cost leases online, and the company manages the local permitting and other red tape involved in solar installation behind the scenes.
Sungevity thinks of itself as the “Amazon of solar electricity,” Kennedy says. By that he means the company has designed its systems to accommodate millions of customers while keeping the company’s own overhead low and profits high.
The focus on profits may be new for Kennedy, the former Greenpeace activist, who once led a campaign that helped to bring key solar installation rebates to the state of California. But to him, it’s all just another form of social entrepreneurship. While he’s working hard to make the 90-employee company succeed, he says his bigger goal is to help more homeowners bypass the fossil-fuel-powered electrical grid, make a real dent in carbon emissions, and blunt the impact of global climate change.
“Sometime in the next century or two we will make [the] transition from this dumb experiment from digging up sunlight and burning it to using fresh sunlight,” Kennedy says. “I am trying to usher in that transition faster than the current economy would have it happen.”
In the second part of our conversation, transcribed below, Kennedy and I talked about his history at Greenpeace, his transition to the startup world, how Sungevity stands apart from its competitors, and (for a bit of dessert) what he thinks about Bill McKibben’s latest book Earrth and President Obama’s record so far on energy.
Xconomy: What motivated you to leave Greenpeace and become an energy entrepreneur?
Danny Kennedy: I have been passionate about global warming and climate change for 20 years or more. I felt like we had turned the corner in 2005, where we had finally convinced the majority that there was a problem, and then there was Gore’s Nobel Prize and all these other things. Suddenly we were no longer arguing that there was a problem, but what are the solutions. In my theory of social change, it is actually incumbent on social movements to start demonstrating that there are solutions. Groups like Greenpeace are great at knowing what they are against, but not as good at knowing what they are for.
I had done a bunch of renewable energy campaigning, for Gray Davis’s Renewable Power Authority, and solar bonds in San Francisco, and other things in Europe and Australia and China. But I wanted to get more involved and roll up my sleeves and build a business that was leading by example. Deeds, not words. Then I partnered with these two great entrepreneurs, Andrew Birch [Sungevity's CEO] and Alec Guettel [senior vice president of corporate development]. Andrew is a serial entrepreneur and Alec was an old friend from 20 years ago when he was a student activist.
In 2006 and 2007, as we were coalescing around the plan, our common sense was that the industry was too fixated on the hardware. There were a bunch of geeks engrossed in their gadgets, but the gadgets were commoditizing before the market had matured. The customer is what matters. So we decided to build a business not on the hardware side but downstream, focusing on the residential customer. For residential, you do have a certain amount of red tape, but the real estate is free, and it’s at the point of use, with the highest-rate electricity you can get.
X: How do you decide where to do business? Is it driven by the climate and how much sunlight people get?
DK: Solar resource isn’t really the issue. Fifty percent of the world’s solar is in Germany, which isn’t exactly a sunny country. The issue is the background economics, and the way the utility rate structures and rebates and other incentives are set up. The right policy settings are available in California, Arizona, and Colorado, so we are growing our business to address those markets where it works. We will be going into new markets next year as far away as the East Coast, and maybe internationally. We are ramping the business as fast as we can.
X: How fast are you growing?
DK: The limitation is our own internal growth capacity. We are getting to the point where we are the lowest-cost electricity provider, which puts you in head-to-head competition with grid electricity, so you grow as quick as you can fill those niches. This year we are going through a 10x growth. We did just under $3 million in revenue last year and we will do $25 million this year. We grew from less than 30 people last year to around 90 people now. We moved into this space in order to have a new home in February. We went from having a few crews to having 45 crews and a field force to manage them. We brought on board a bunch of VCs to pay for the expansion in late October, November of last year, and we launched the solar lease on March 1 of this year, and have been going gangbusters since then. Since March 1 we have done twice as much business as in the previous two years.
X: How are you capitalized right now, and who are your investors?
DK: We raised a $6.5 million Series B round from Greener Capital last fall. We had been funded up to then by a $2.5 million Series A angel round with a group of about 22 angels who were involved right from the start. Some of them re-upped in the Series B, and a few other superangels got involved, including Skip Battle, the chairman of Netflix and Fair, Isaac and the founding CEO of Ask Jeeves, who joined our board. He’s your archetypal Internet commerce guy. He had gone through a solar purchase for his place, and had gone through the hell of the cottage industry—sitting at home waiting, the guys don’t turn up. He said “What is this?” and then he hears about us from Greener Capital, and he’s like, “Wow, I want to be involved in that.”
X: You’ve got some serious competition in the form of companies like SunRun and SolarCity. How do you stand apart?
DK: We are all doing very well. We stand out with a much-simplified process that’s built for that, whereas they are migrating to the online service model. We came up with it. We have a lower-cost business structure. If you look at the amount of capital raised by those companies and the service territory, you get a sense of why our overhead and scalability is much better. I think there is a bit of brand differentiation as well. We have a focus on the residential customer that they don’t.
X: What has the transition from the non-profit, NGO world into the business world been like for you?
DK: Great, actually. I’m having a lot of fun. It requires a lot of the same skill sets. In a non-profit you’re trying to do high-impact things with minimal resources, by any means necessary. I had to be everything from the investment relations guy to the market guy to the software spec creator to the salesman. In my last incarnation at Greenpeace I was running five offices and 100 staff and a $14 million budget. It’s about assembling a team around a common purpose and running them with good energy.
X: When you were starting Sungevity and meeting with investors, did you ever run into any skepticism about whether a guy from Greenpeace could turn into a capitalist entrepreneur?
DK: Nobody ever said that to my face. They might have said it after I left the room. I did have one person say to me that Australians don’t make good managers. I think the proof is in the pudding. We have changed the way the industry sells solar, with a fairly small capital infusion compared to some of our competitors, and certainly compared to the hundreds of millions being spent upstream on what are fairly frivolous technology ventures. In my life at Greenpeace, we also brought about a hell of a lot of change in the world with relatively small resources. So it’s a good bet to go for someone who has a clear track record of making successful change in the world. Why not expect them to be successful in the entrepreneurial world?
X: I’ve been reading Bill McKibben’s latest book, Earrth, which is frankly very pessimistic about the chances for arresting climate change; he says we’re at the point now where all we can do is gird ourselves for the huge social and economic dislocations that are going to come from rising sea levels and disrupted climate. Do you ever suffer from the sense that what you’re doing may be completely futile—that even if we put solar on every roof in the U.S. it would be just a tiny part of what we would need to do to bring down atmospheric carbon levels?
DK: I love Bill and his writing. The End of Nature was one of the catalytic books in my youth, and in Earrth, he returns to that form. Sadly, Bill is right. The lag in the climate means that we have already condemned hundreds of millions to a squalid future, and that we will leave our children a vastly diminished Earth. But it will only get worse if we do nothing. What is the right thing to be doing with your life? I could sit back, be fully apprised of the problem, and just ignore it and feel terrible about myself and my children. Or I could pursue a solution. If you think that there will be civilization around a millennium from now, you can ask “Will it be fossil-fuel-powered?”, and the answer is no. Then you can work back and ask “When did the transition happen?” Sometime in the next century or two we will make this transition, from this dumb experiment of digging up sunlight and burning it to using fresh sunlight. I am trying to usher in that transition faster than the current economy would have it happen.
X: What’s your feeling about the Obama Administration’s record so far on climate change and energy legislation?
DK: I’m very frustrated. I understand and respect the decision to pursue healthcare reform, but I think he blew his political capital on that in the first year, and he had the opportunity to do clean energy and didn’t. Now, with midterms coming up, he can’t. The U.S. Senate has been playing cat-and-mouse for a decade with cap-and-trade, and has decided to do nothing, and Obama is sitting back and letting them do it. The history books will look back on the 21st century and say that the world’s largest economy abrogated responsibility, while the Chinese decided to embrace it and go for it. The same day the U.S. Senate rejected any kind of meaningful energy bill, the Chinese put $750 billion on the table for clean energy. That’s where it’s happening, not in D.C. The least [Obama] can do is put solar back on the White House, and we have a campaign calling on him to do that, and I have spoken to him personally about that, and he says he wants to, but that his bureaucrats are balking. As a political animal, I think he has really mis-hit. I think he has misjudged, and has missed a moment which Thomas Friedman and others were calling on him to grasp. Our children’s children will look back and wonder what the hell we were doing with this decade.