T.J. Rodgers, founder of Cypress Semiconductor, and John Doerr, chairman of Kleiner Perkins, have emerged as white knight saviors for troubled solar microinverter firm Enphase.
The Silicon Valley icons are investing $10 million in the firm, and Rodgers is joining the board of directors. It’s a bit of an unusual move for this odd couple. Kleiner was an investor in Enphase under the usual order of things, back when it was a startup.
Doerr has invested in some of venture capital’s most famous successes (Google, Amazon, Sun, Intuit), as well as in some less than successful efforts (GO Corporation, MyCFO, Segway). He spearheaded KPCB’s investment efforts in greentech, including funding Silver Spring Networks, Fisker Automotive, Bloom Energy, Opower and Proterra. He has been an adviser to the Obama administration.
T.J. Rodgers is the founder of Cypress Semiconductor, a force in Silicon Valley, an early equity investor in SunPower, and a vintner.
Rodgers knew SunPower’s CEO Dick Swanson in the 1970s — they were in the same doctoral program at Stanford University. Rodgers recognized the value of Dick Swanson’s high-efficiency solar cells early on. But the Cypress board of directors was not interested in funding Swanson’s struggling SunPower, so Rodgers wrote a personal check — the “best check he’s ever written,” for $750,000.
We covered Rodgers’ views on climate change back in 2011. He does not accept human-induced global warming as reality, nor does he accept as factual the data presented by supporters of the widely accepted notion of climate change. We checked in with him recently, and he continues to stick by those views.
Rodgers acknowledged that he has a conflict of interest when it comes to discouraging dependence on subsidies — solar subsidies have allowed SunPower to provide a 22.4-to-1 ROI for Cypress’ investors. More subsidies mean more money for SunPower and its investors. That said, he once provided this advice to an uncomfortable green-leaning audience:
- Do not rely (for long) on government funding or subsidies.
- Be a global-warming skeptic (Rodgers most certainly is).
- “Run like hell” when you hear the terms “green jobs, green economy, double bottom line or carbon tax.”
- Believe in the free market and freedom of the individual.
- Believe in the First Amendment, the Fourth Amendment and the Tenth Amendment.
- “Al Gore’s movie An Inconvenient Truth was politics, not science.”
- He railed against environmentalists converging on the climate talks in private jets and limousines, calling environmentalism “a secular religion, a non-god-based religion.” He also chastised the press, saying, “The press is uncritically on their side.”
Rodgers and Doerr are also on fuel-cell vendor Bloom Energy’s board.
How far will $10 million go?
Enphase’s GAAP net loss for the third quarter of 2016 was $18.8 million — so $10 million from John and Thurman will only go so far if Enphase’s loss-making ways continue.
Here are the takeaways from Enphase’s most recent quarterly financial results.
- Enphase reported total quarterly revenue of $88.7 million, up 12 percent compared to the previous quarter
- Gross margins held relatively steady at 18 percent, as did revenue-per-watt at $0.43 per watt (AC) — although both are down year-over-year
- Q4 guidance implies modest growth by revenue and megawatts
- GAAP net loss for the third quarter of 2016 was $18.8 million
- The company announced a “restructuring,” along with an 11 percent reduction in its 500-employee workforce in the hopes of saving $20 million in annual operating expenses
- Earlier this year, Enphase entered into a $25 million loan agreement with a lender specializing in “rescue financing”
And the ugly
- GAAP gross margin for the third quarter of 2016 was 17.9 percent
- The company exited the third quarter with a total cash balance of $24.1 million
- Enphase is confronted by a cooling residential solar market
Enphase just sold the recently acquired O&M business of Next Phase Solar for an undisclosed amount. Enphase is also putting an enormous amount of faith in the rapid growth of the Australian energy storage market.
Recently, Enphase “entered into an At Market Issuance Sales Agreement with FBR Capital Markets & Co.” as sales agent to sell shares of common stock “having an aggregate offering price of up to $17,000,000.” An Enphase representative notes, “The 8K only enables Enphase to raise capital in the future, and only if and when the company chooses to do so.” The ATM is there to define the terms under which any future stock issuances might be made, signaling that if or when Enphase issues shares against the Shelf, the shares will be issued “at the money.”
As we’ve reported, Enphase is faced with a ticking clock that requires the company to hit profitability while ramping two new product lines (its AC battery and sixth-generation microinverter) and keeping its inventory down while managing its working capital.
It’s a precarious position for one of solar’s early success stories. Enphase was a well-managed VC-funded startup that created a new market, grew exceedingly fast and made it through the IPO window.
But these are strange times in the clean energy world, when the nation’s biggest solar installers are performing poorly in the stock market. In the words of GTM’s Julian Spector, “Unprecedented deployments coincide with a slowdown in the growth of residential solar even as prices continue to fall, and the big players in the industry are scrambling to cut their costs in order to keep up.”
The release describing the investment contains this somewhat vague explanation: “Enphase anticipates using a portion of this investment for consulting services to optimize operating performance while supporting the growing global demand for its energy management systems.”
Perhaps Rodgers and Doerr know how to turn Enphase around. It won’t take long to find out.