SunRun Gears Up For National Expansion With Funding

Solar panel installation and servicing is a good business to be in right now, especially if you’ve got a head start. SunRun has that start in California, and is looking to secure it in other states with a new $18 million investment led by Accel Partners, a prominent venture firm.

SunRun is trying to corner the market on power purchase agreements for consumer solar, meaning that homeowners don’t actually buy or own the panels on their roof, but instead pay a fixed rate for electricity from them. It’s a model that has turned out to be popular, since plenty of people are hesitant to shell out upwards of $10,000 (sometimes several times that much) for solar panels.

The interesting thing about SunRun is that its expertise isn’t in the nuts and bolts of solar installation. The company leaves that to partners, who actually go out and install the systems. Nor does SunRun end up owning the panels. Those go to an investor, who essentially makes interest on them over a period of years; US Bancorp has a $105 million credit facility with SunRun for installations.

What SunRun is really good at is navigating the mix of interest rates, down payments, and long term maintenance that makes installing solar profitable (or not). The other component is government rebates, and SunRun also does well there, in part because corporations can secure larger rebates than individuals — a setup that the government seems to prefer, according to SunRun’s president, Lynn Jurich.

So far, SunRun is operating in California, Massachusetts and Arizona, with the first of those by far the largest market. But Jurich says there are quite a few other states that could provide attractive targets. The company simply needs to scale up, which is the point of the funding.

The interesting question is how large it has gotten so far, and how much bigger it can get. It doesn’t release many useful numbers, like revenue or number of employees. Jurich says the funding was an “up” round, meaning the company’s investor valuation grew from whatever it was during the the $12 million first round. But that detail only suggests that the company is probably worth somewhere between $100 and $500 million.

Perhaps more significantly, Jurich told me that SunRun “did not need to raise this round, at all,” meaning the money is only to speed expansion. Not needing more venture capital usually indicates that a startup is in the black, or close to it, which is something of a rarity.

Now it just needs to take the business model nationwide, gathering enough customers to become a truly sizable company. The best thing that could happen to spur more customer adoption, of course, would be higher retail energy prices — a scenario that looks almost certain, if the cap-and-trade bill passes.