New Investment Opportunity: Dandelion Energy
Disrupting the home energy market with accessible geothermal systems
- Geothermal energy providing end-to-end alternative heating/cooling system for homes; operations currently focused in Connecticut, Massachusetts and New York State
- Forecasting strong tailwinds from US federal legislation granting homeowners 30% tax credit on geothermal installations
- Projecting 64% YOY growth in bookings in 2022; revenue in H1 2022 surpassed all of 2021, on track for 170% YOY growth in 2022
- Targeting significant increase in market share, nearly tripling small drill rigs fleet in 2022 to meet customer demand
- Up to $50M B-1 round led by Lennar with $15M, 3X its pro-rata, with participation from Breakthrough Energy Ventures (Bill Gates, Jeff Bezos et al.) and New Enterprise Associates both 2X pro-rata; existing investors include Google Ventures
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Dear Josb,
The August 2022 US Inflation Reduction Act grants 30% tax credits for domestic geothermal installations to incentivize homeowners to reduce carbon emissions. However, even with generous tax breaks, installing a residential geothermal system is complicated, time consuming and expensive.
OurCrowd is reinvesting in Dandelion Energy, which offers a one-stop shop for residential geothermal temperature control systems with affordable heat pumps and a streamlined installation process. The details in this email are based on information received from, and verified solely by, the company.
The Problem
Geothermal, or ground-sourced, heat pumps can achieve energy savings of up to 70% compared to other heating, ventilation, and air conditioning (HVAC) systems. Geothermal systems offer significant reductions in emissions: ~80% from fuel oil, ~65% from propane, and ~60% from natural gas. However, installing a geothermal system has been difficult for homeowners, typically requiring coordination with multiple service providers, undergoing a site assessment visit, obtaining the drilling permit, purchasing the heat pump, scheduling the drilling and installation work, and potentially seeking external financing solutions to cover the expense.
The Solution
Dandelion Energy has developed a one-stop-shop for homeowners who want an affordable geothermal system with a streamlined installation process. Dandelion's technology and vertical integration of the geothermal installation chain facilitate a customer-centric approach by reducing installation prices by up to 30% and providing a seamless customer experience.
Traction
Dandelion Energy has already installed its system in some one thousand homes in the northeast US and is poised to grow significantly over the next five years. The firm's order book has grown strongly since Dandelion began operations in 2019. Bookings grew 129% YOY in 2021 and are expected to grow a further 64% YOY in 2022.
Backlog
Dandelion's employment of qualified technicians and its drilling capabilities were impacted by the Covid-19 pandemic. Revenue dropped slightly in 2021 due to Covid-related limitations. Demand remained strong, leading to an extended backlog time up to 12 months. While the backlog still ranges from 9-12 months, the company is working to reduce it to an average of six months in 2023 by increasing the number of drill rigs and the skilled workers required to operate them, as well as qualified technicians to install the systems.
Revenue Rebound
Revenue bounced back in H1 2022 as the company began to increase its workforce and rigs. Revenue in H1 2022 surpassed the total for 2021 and is on track for 170% YOY growth in 2022.
The Market
There are 58M homes in the US heated with natural gas and 4.8M heated with fuel, representing a TAM of almost 63 million homes. Dandelion's serviceable addressable market consists of both retrofits to existing homes and installation in new homes, representing a total of $1.25T.
Tax Credits
In August 2022, the US Congress passed the Inflation Reduction Act which included climate legislation that raised the federal tax credit for installing geothermal energy systems to 30% with effect from 2023 until at least 2032. In addition to federal funding, individual states are introducing rebates to help ensure the quick adoption of geothermal energy into homes and businesses.
The Team
The firm's executive team brings expertise and leadership experience from Alphabet's X innovation lab, SolarCity and other startups. CEO Michael Sachse has led Dandelion Energy since January 2020 and has overseen its explosive growth. Prior to Dandelion, Michael was Entrepreneur in Residence for New Enterprise Associates and was CEO of Stardog Union. Kathy Hannun founded Dandelion Energy in conjunction with X and led the firm from 2017 to 2020, when she became its president.
The Round
This Series B-1 round is led by strategic existing investor Lennar, one of America's largest residential construction companies, with participation from Breakthrough Energy Ventures ‒ a VC fund founded by Bill Gates and other global investors concerned about the impacts of accelerating climate change ‒ New Energy Associates, and Google Ventures. Lennar invested three times its pro-rata in the first close of $35M held in July 2022, while BEV and NEA also invested more than double their pro-rata. Funds will be used for product R&D, increasing the workforce, and regional expansion beyond the northeast US.
Meet the CEO
We're hosting a webinar/conference call on Tuesday, August 30th, at 7PM Israel / 12 Noon New York / 9AM San Francisco for investors to meet CEO Michael Sachse and learn more about Dandelion Energy.
Can't make the webinar? Register and we will send you a recording of the call.
The Dandelion Energy Solution
Dandelion Energy has developed software and hardware for more efficient geothermal systems, and they offer a one-stop-shop for homeowners who want an affordable geothermal system with a streamlined installation, including the permitting and licensing process, drilling, and installation work on-site.
Dandelion uses its own proprietary software to tailor the size and number of ground loops to fit someone's home. They do so remotely, without having to visit the customer's home, decreasing installation costs by up to 30%. The heat pump which Dandelion developed and validated is specially designed for the cold climate in retrofit homes and is more efficient than the other pumps in the market and will be commercialized as early as 2023.
During the installation process, Dandelion uses smaller tracked rigs that it owns and operates, and it subcontracts drillers who use wheeled rigs. Tracked rigs, and the equipment that supports them, are critical to expanding the installation market as they allow for smaller, more suburban homes to receive geothermal heating. To date, the firm estimates that over half of the jobs it has done required tracked rigs. As a result of their unique equipment, the firm believes it can cut customers' geothermal installation costs significantly.
Dandelion also offers competitive financing solutions through loans to overcome the expensive upfront investment barrier that many homeowners face with geothermal heat pump installation. Next steps:
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