How to get investors onboard your project
To increase your odds of getting the green light from investors when you need funding for you, we unveil how to get investors onboard your project by avoiding the most common pitfalls.
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Investors are flocking into renewable projects
Renewable energy witnessed a substantial influx of global investments in 2023, reaching approximately USD 2.8 trillion. Notably, over USD 1.7 trillion was allocated to clean energy projects, surpassing the combined value of the entire global entertainment and media market, including everything from newspapers to video games, television, and movies. Projections indicate that this trend will persist, presenting a promising future for developers. However, the challenge lies in securing the final investment from precisely the right investor.
With over a decade of experience connecting developers and investors, we dive into the trenches, revealing the most common mistakes developers make that sink renewable energy projects before they even see the light of day.
"Ready to build" means business!
The phrase “ready to build” shouldn’t be a convenient mantra. Be honest about the project’s stage. Investors appreciate transparency and upfront assessments. Don’t paint a rosy picture just to secure funding; manage expectations to build trust and lay the groundwork for a smooth collaboration. For example, a land option agreement does not mean the same as a notarized land lease and a grid connection offer does not mean the same as a secured grid connection. A tip is to provide a clear timeline of project development and key milestones achieved.
Secrecy breeds suspicion
Imagine pitching your dream project while clutching a “secret sauce” recipe close to your chest. Investors, seeking long-term partnerships, value transparency. Withholding key information – be it technical details or supplier contacts – raises red flags. Be upfront about potential risks and showcase your mitigation plan. Remember, trust is the foundation of any successful investment. Investors are looking for assertive CEOs who take reasonable action to reduce their potential downside. A tip is to always have NDA and NCA in place.
No track record to show
If you were to invest millions in a project, would you not want to know if the people responsible for the development of the project had experience doing what you pay them to do? Of course, you do. Whether it’s on the personal or company level, investors value track records that ensure that the person in charge of the company behind the development knows the ropes and has done it before.
Ignoring the social and environmental impact
Today’s investors increasingly focus on projects that contribute positively to their communities and the environment, but also to limit ESG risk. So, besides showcasing your project’s financial viability, be prepared to showcase your project’s social impact and how you plan to engage with local stakeholders.
Sloppy emails, sloppy business
Imagine receiving a proposal riddled with typos and grammatical errors. Does it inspire confidence in your professionalism and attention to detail? Absolutely not. Why many developers fail when talking to investors is because they do not treat communications with the same meticulousness you dedicate to your project. Remember, they’re evaluating you as much as your venture.
Ignoring deadlines and timelines
Promising to send the project teaser by Thursday? You better! One crucial element of building trust is adhering to deadlines. When a developer promises a deliverable or milestone to a potential investor, meeting that deadline demonstrates professionalism, reliability, and respect for their time.’
Promising to send the project teaser by Thursday? You better! One crucial element of building trust is adhering to deadlines. When a developer promises a deliverable or milestone to a potential investor, meeting that deadline demonstrates professionalism, reliability, and respect for their time.
Missed deadlines can have a domino effect. Delays in one area can ripple through the project timeline, raising red flags for investors. This can erode confidence and potentially derail funding discussions. Conversely, consistently hitting deadlines showcases your efficiency and ability to manage a project effectively. It reassures the investor that the project is progressing according to plan and reduces concerns about potential roadblocks. Timeliness fosters a sense of dependability, a critical quality for any long-term partnership between developer and investor.
Neglecting the legal and regulatory landscape
This offtake arrangement (often a form of net metering) is enjoying popularity at the moment. “Community solar” is used to designate a wide variety of project configurations in the development community. If often means a structure whereby the system owner sells electricity to the utility, provided that the system owner is able to amass a certain amount of subscribers within the utility’s territory. Compliance with the precise statutory authority and the utility’s guidance is critical here.
Early diligence should reveal the number of subscriptions and the total megawatts subscribed, as well as the number of subscriptions and total megawatts required to be subscribed to commence construction and to achieve commercial operation. Additionally, there may be quota limitations about certain classes of subscribers.
The endless money pit
Constantly needing “just a little more” to clear the next hurdle? This constant cash-grabbing paints a worrying picture of your budget management skills. Investors aren’t ATMs. Provide realistic funding needs and proactively manage risks for the project’s lifetime. Transparency breeds confidence, not suspicion.
Guarantees are for mattresses, not investments
Promising unrealistic returns might seem like a quick win, but it backfires spectacularly. Investors are savvy and can see through manipulated financial models. Instead, offer detailed financials, identify potential roadblocks, and demonstrate your willingness to navigate them as a true partner. Remember, long-term success requires honesty and shared risk management.
Neglecting due diligence
Don’t just focus on securing funding; perform your due diligence on potential investors. Understand their track record, investment philosophy, and alignment with your project’s values. We understand that this can be a time-consuming, tiresome, and at times difficult task, especially if you are dealing or want to deal with international investors.
Taking the next steps
Navigating the renewable energy investment landscape can be daunting, especially for new developers, but experienced ones can still face challenges, now you know the basics behind why developers fail when talking to investors, and how to avoid falling into the same traps.
Remember, a well-honed pitch, supported by data, transparency, timeliness, and a deep understanding of investor priorities, is your golden ticket.
But don’t go it alone.
Consider partnering with experienced advisors who can help you navigate the complexities of due diligence, identify the right investors, and fine-tune your pitch to perfection. By focusing on your core strengths and leveraging the expertise of trusted partners, you can transform your green dream into a bankable reality, paving the way for a brighter, more sustainable future.
Get more insight on our approach that helps you find the right investor.