Buildings generate 80% of New York City’s greenhouse gas emissions. Improving energy efficiency isn’t only important to the environment but it also reduces costs, making housing more affordable in the long run. BlocPower is an energy technology startup that combines technology with structured finance solutions to encourage business owners to abandon their existing, obsolete heating and cooling solutions and replace them with sustainable alternatives. The company leverages machine learning to identify the buildings that will benefit the most from energy savings. For building owners, there is no upfront cost and repayment comes directly from energy savings. The company has already retrofitted 1000+ buildings in NYC and is expanding its efforts nationwide with projects in progress in 24 cities.
AlleyWatch caught up with CEO and cofounder Donnel Baird to learn more about the company, how his work with the Obama administration sparked the idea for the business, the company’s future plans, recent round of funding, which brings the total equity funding raised to $13M, and much, much more.
Who were your investors and how much did you raise?
We just announced a Series A round for $63 million, which included $55 million in debt and $8 million in equity. The round was led by American Family Insurance Institute for Corporate and Social Impact (AmFam), AccelR8, and The Goldman Sachs Urban Investment Group, with participation from Kapor Capital, Elemental Excelerator, CityRock Venture Partners, The Schmidt Family Foundation, and Salesforce Ventures. To date, the company has raised $68 million from early anchor investors, including Kapor Capital, Andreessen Horowitz, MaC Venture Capital, Exelon, New York Ventures of the Empire State Development Corporation, Echoing Green, and The Schmidt Family Foundation. The funding will enable us to expand and scale our inner-city energy sustainability projects across the U.S., create green jobs, improve quality of life for urban residents and help save the planet.
Tell us about the product or service that Blocpower offers.
BlocPower is a Brooklyn-based climate tech startup that is focused on providing affordable sustainability upgrades to millions of buildings in underserved communities, to help turn buildings into Teslas. Through a combination of advanced technology and structured finance, we enable building owners in low- to moderate-income neighborhoods to upgrade their aging, inefficient heating and cooling systems with more modern, efficient “green” technologies, which improves property values, lowers or eliminates fossil fuel use, reduces energy consumption, helps the environment, improves the quality of life for tenants and lowers their utility bills.
What inspired the start of Blocpower?
When I was a child growing up in Brooklyn, our building had no functioning heating system and my family was forced to heat the apartment using our gas stove and vent the carbon monoxide out the open windows. During college, I was a community activist and also became much more aware of the close relationship between climate change and other social justice issues, such as health, education, and unemployment. After college, I worked on the Obama campaign, and after he won, I was offered a position as a consultant with the Department of Energy on the Green Jobs initiative – part of the American Recovery and Reinvestment Act — which was designed to spend more than $7 billion in federal subsidies and potentially $90 billion in pension fund investments to train union workers to green American buildings. While this was initially successful, it ultimately failed when the subsidies ran out because the projects were incredibly expensive, not scalable, and not profitable for investors. I went to Columbia Business School to figure out if and how we could achieve success in the model and met with top execs in banking and finance, technology, utilities, and other industries. Through these interactions, I realized that through the right combination of technologies and structured finance we could succeed where the Obama initiative failed. While still pursuing my MBA, I applied for and won a $2 million contract from the federal government. The caveat was that I had to raise an equal amount of money from the private sector, so I went out to Silicon Valley. That’s how BlocPower was born.
How is Blocpower different?
There are many great sustainability companies doing great things to help save the environment. However, green energy upgrades in buildings are extraordinarily complex and expensive, which puts them out of reach of most building owners in low- to moderate-income neighborhoods who don’t have access to capital or technical expertise to make improvements. BlocPower focuses specifically on these neighborhoods and market segments–because there are 35 million buildings across American that are a part of this segment. We use machine learning to partner with utilities, government agencies, and community organizations to identify neighborhoods and buildings to retrofit. We leverage advanced hardware and software technologies to determine which retrofits will produce the most energy savings at scale, and to dramatically lower the project costs. We use structured finance to make these projects affordable for building owners – with zero up-front investment and repayment coming entirely from the building’s energy savings. And finally, we only partner with contractors who hire and train workers from within their local communities. In short, BlocPower turns aging, inefficient buildings into Teslas, making them smarter, healthier, and more profitable by getting them off of fossil fuels, and creating highly-skilled, well-paying jobs in the process.
What market does Blocpower target and how big is it?
To give you a sense, aging, inefficient buildings produce 30% of America’s greenhouse gasses – that’s more than the entire US transportation sector. There are over 50 million aging, inefficient buildings in cities across America and 120 million buildings need upgrades. So far, we have greened more than 1,000 in New York City, with projects underway in 24 cities including Philadelphia, Oakland, Milwaukee, and others.
To give you a sense, aging, inefficient buildings produce 30% of America’s greenhouse gasses – that’s more than the entire US transportation sector. There are over 50 million aging, inefficient buildings in cities across America and 120 million buildings need upgrades. So far, we have greened more than 1,000 in New York City, with projects underway in 24 cities including Philadelphia, Oakland, Milwaukee, and others.
What’s your business model?
We partner with governments, utility companies, and building owners, and lenders.
How has COVID-19 impacted the business?
Naturally, COVID has slowed some projects down, as we have to be sensitive to the health and safety of our workers and the building tenants. That said, other projects have ramped up, such as our work to install free WiFi networks in underserved communities. We do this to address social justice issues, such as enabling families who cannot afford high-speed access to work or educate their children from home, but it also improves our ability to monitor energy use from buildings within those communities.
What was the funding process like?
Terrible.
What are the biggest challenges that you faced while raising capital?
Venture Capital historically invests less than 3% of its deployed capital into companies led by women and founders of color.
What factors about your business led your investors to write the check?
We are going to build a huge business, and we have the best investors in the world involved. There were several factors. The fact that BlocPower solved the challenges that caused Obama’s green initiative to fail – scalability, affordability and profitability – through the use of technology and structured finance. Also, because we are a technology and financing company, and not focused on the actual equipment, which makes us much more stable and attractive to our investors. Another factor is the market potential and our target market, which is woefully underserved. And finally, because we had proven that greening buildings can be done in 1,000 urban buildings, and that the process was replicable across the country.
What are the milestones you plan to achieve in the next six months?
Expanding to ten new cities.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Focus on meeting your customers’ needs during this difficult time.
Where do you see the company going now over the near term?
IPO then save the planet.
What’s your favorite outdoor dining restaurant in NYC
Farm at Adderly on Cortelyou in Ditmas, near our home in Brooklyn.
