06 7 / 2011
SolarCity Inc. has raised a $20 million insider Series F financing round, half of which came from Chairman Elon Musk, who increased his pro-rata stake in the company, according to its chief executive.
The company, which installs and leases solar systems, has been growing quickly and expects to double revenue this year, said CEO Lyndon Rive in an interview. The company is cash-flow positive, he said, though he declined to provide specifics. The company now employs more than 1,300.
San Mateo, Calif.-based SolarCity first considered raising an outside round of between $75 million and $100 million, and received terms from an investor, Rive said.
"We got terms back for that, discussed with the board, and [Musk] was the main guy who said that we don’t need to raise this money, let’s not go through this dilution. He said he will put a similar term sheet on the table" but with only raising $20 million, Rive said.
Efforts to reach Musk weren’t successful.
The CEO said that in order to raise funding from a new investor, the company would have had to give that investor a large enough share, and at the current valuation that would require issuing at least $75 million worth of stock and a significant percentage of equity. “The board decided we are not in a situation where we need to give up that amount,” Rive said.
"Doing a small round of $20 million is actually very hard," the CEO added.
Musk, a cousin of Rive, is also chairman and CEO of electric car company Tesla Motors Inc. and space travel company Space Exploration Technologies Corp., or SpaceX. Tesla’s chief technical officer, JB Straubel, is also a minority shareholder in SolarCity, and Stephen Jurvetson, a managing director of SolarCity investor Draper Fisher Jurvetson, is on the board of Tesla. Tesla and SolarCity are working on several technical collaborations around battery technology, but there is no corporate equity relationship, Rive said.
The Federal Trade Commission gave early antitrust clearance on Friday to a transaction whereby Musk is buying some equity in SolarCity. Typically the FTC approves deals that are large, that raise anti-trust issues and that are acquisitions. But there are exceptions, said Mitch Katz, a spokesman for the FTC. For example, when a person acquires new shares and the person’s total holdings in a company exceed $66 million, the person has to file with the FTC.
"I don’t know if that’s what happened in this case, but that’s a possibility," Katz said.
Rive said Musk is a minority investor and that he isn’t planning to buy the company. Rive said the reason that Musk may have had to file with the FTC was that he increased his pro-rata share.
All previous venture investors reinvested in the Series F, according to Rive. The company previously raised $101 million from DBL Investors, Draper Fisher Jurvetson, Generation Investment Management LLP, First Solar Inc. and Mayfield Fund.
It last raised a round in 2010. The new Series F is “a healthy up round,” said Rive, but he declined to comment further on valuation.
Rive said the company doesn’t really need even the amount it raised, but the $20 million will serve as a buffer and strengthen its balance sheet to help with negotiations with vendors.
The round is now closed, Rive said. Last week the company submitted a regulatory filing with the Securities and Exchange Commission that it was raising financing of $42 million, including equity and debt. But Rive said there is no new debt that SolarCity has issued or is seeking, and that the total amount is $20 million equity.
Overall, Rive said, SolarCity isn’t looking for an exit now. “An IPO is something we might consider at some point in the future [but] at this point no one is focused on it,” he said.
The solar-system leasing company had considered raising a much bigger Series F round before Tesla Motors’ CEO Musk, who is also SolarCity’s chairman, urged a smaller insider round that would not dilute existing shareholders. Other company investors include DFJ and Mayfield Fund.
(c) 2011 Dow Jones & Company, Inc.