Mercatus, a web-based platform for assessing solar projects, today announced it has closed US$2 million in series-A funding to expand its platform for investors.
The funds will allow the company to continue to develop its scoring system, called the Single Point of Truth, a software system focused on the commercial sector to enable investors to select the most bankable solar projects without overspending on due diligence costs.
Haresh Patel, the chief executive, told PV Tech: “We think the [commercial] sector is really the growth segment – the commercial and industrial segments have significant deal friction where we thought we could add value.
“In order for this segment to take off the costs of diligence needs to come down and we dramatically reduce the cost of diligence because we've found a way to do things in 48 hours that banks take 30-60 days to do.”
Reuben Munger, managing partner at Vision Ridge Partners, said: “Today’s distributed energy industry is facing a significant challenge: how to rapidly deploy capital to projects. By applying best practices and standardisation to this critical piece of the value chain, Mercatus is accelerating fund decisions and enabling the creation of effective pooled investment vehicles.”
The software company estimates that developers are failing to attract capital at a closure rate of 3%-5% annually.
“Diligence costs are a big issue – at project sizes of 50MW – 100MW you can apply diligence costs,” said Patel. “But with a medium sized project $3m with a $1 million diligence fee makes it unfinanceable – the business methodology was crushing their own ability to enter this segment.”
Based on four years of due diligence and transactions with 40 of the top US financial organisations, the Mercatus platform translates investment and underwriting criteria into consistent information for developers and investors to assess, appraise and ultimately syndicate project portfolios.
Developers can load project information onto the Mercatus platform and 48 hours later, the project receives a score, which is visible to developers and investors alike.
Mercatus's “single point of truth” would also enable Wall Street to take solar as an asset class more seriously and assist with the potential to turn projects into securitised products.
“We're a major building block,” said Patel. “Sec means you're trying to create liquidity in the market and you're trying to create large pools of tradable assets and if you're going to be able to do that you'll pool lots of projects together and then they start to look similar to a bank like how I'm buying a swap in the mortgage industry.
“We bring two critical enablers: lower costs to make the market segment more accessible and the ability to pool and aggregate like projects. They are two precursors to being able to securitise.”
Led by Vision Ridge Partners, the round includes investment from Augment Ventures and Shah Capital. Since its 2009 inception, Mercatus, formerly SCS Renewables, has assessed more than 3.2GW of solar projects while enabling $250 million in investments and transactions.