Interview: behind Jigar Shah’s new venture

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What’s your thinking behind founding Generate Capital?

There is a tremendous number of technologies out there that are not scaling on their own because they cost more upfront than save in money over time, and CFOs just don’t like to pay more upfront. And when you have a situation like that, having a financing solution can be helpful. Financing [solutions] have been really helpful in the solar industry, but it’s not really been replicated to many of the other industries like boilers, solar hot water, fuels cells or other types of technologies.

Why did you chose this bracket for investments, between $2 million and $20 million?

Well the top is not really $20 million, we’re happy to do larger deals, but what you find is that below $20 million, there is not a lot of competition, but above that there are 20 or 30 other folks that are interested in providing funding.

So that funding bracket is more Generate Capital’s sweet spot.

Exactly, we certainly can do larger deals but we’re not interested in competing in a crowded space.

So you’re focusing very much on deployment. Does that mean you think that we have the technologies already at hand that are deployment ready?

I think that there are many technologies that I would consider “commodity tech”: That means they’ve been around for 10 to 15 years, people have purchased them, so people know that they work and the quality of the product is good. But at the same time that there’s never really been a financing solution [for these technologies] to greatly increase the deployment of the solution.

Do you see Generate Capital working with solar deployment, perhaps solar thermal?

We’ve already funded a number of hot water projects in the U.S. We plan on doing a lot more in the future. Solar hot water is a great example of something that we’ve had for 40 years and it is still not something that is well supported by the banking sector.

What about PV applications?

There could be. I think in general we find the PV space is pretty well banked, so even in these smaller projects. But if there is an area that is under banked then we have a strong play. But I think that there is a sufficient amount of capital chasing deals then it’s probably not going to be right for us.

And what kind of impact do you feel you can have on the deployment of some of these technologies?

I think that in general almost all of these technologies, whether its solar hot water or battery storage or combined heat and power, are technologies that the marketplace desperately wants to fund, they just don’t want to fund it until the market has been figured out by somebody else first. And I think if we are able to figure out the market first and put the first capital in, I think there are a lot of people that would follow us and provide even more capital for that market. It’s just that a lot of these other folks in the marketplace don’t want to be the first.

Why is it then that PV is further along this road, was it the Investment Tax Credit?

No, PV was in exactly the same place. If it wasn’t for SunEdison figuring this stuff out for the marketplace, nobody would’ve financed PV in that way. We figured this out in 2003, and then SolarCity and others copied what we were doing, and successfully, which is great.

Generate Capital itself, where will the funding come from?

Generally it will come from family offices. There are a lot of family offices that view these assets as low risk and provide good risk adjusted terms.

Is there a social and environmental angle behind the investments also for the investors?

Right now our investors are really investing because we can provide the highest rate of return on a risk-adjusted basis. But the social returns are also good.