Leyline Renewable Capital is currently working with Bahaa Samy ("Samy"), founder of eDGe Renewable Partners. The company is based in Toronto, Canada, and partners with developers and engineering, procurement, and construction (EPC) companies to scale their businesses. We recently spoke with Samy to discuss how his company works to help small businesses successfully access capital and achieve their goals.
Why did you decide to start your business and what were you hoping to achieve?
I started eDGe Renewable Partners ("eDGe") to provide small businesses (those with less than 10 employees) access to the financial strategies, know-how, and human capital that is typically only available for large corporations. Currently, we are working with entrepreneurs across North America, Europe, and Africa. We form joint ventures where our clients and partners bring the experiences, skills, and relationships needed to develop renewable energy projects, and eDGe brings the capital and financial expertise to fund the business for the next two to three years. We envision a market where small businesses can compete - and win - against much larger companies by decentralizing the access to cheap capital and experienced talent.
What is the main hurdle limiting the growth of small renewable energy businesses, and in turn, their ability to compete and win against larger companies?
Small renewable energy companies lack access to cheap and flexible capital, which is the main driver for value creation. Because of their small capital needs, small businesses cannot access cheap capital that is provided by large institutional investors, such as pension plans, large infrastructure funds, and insurance companies. For that reason, small renewable energy businesses resort to selling projects, essentially becoming a service provider to a larger renewables business, who can then aggregate projects and raise capital from those large institutional sources. Those large businesses use the capital to expand their balance sheet, which in turn provides access for larger and cheaper capital sources. The "balance sheet light" business model that small businesses use is unsustainable and unscalable, has unreliable cash flows, and does not create a balance sheet nor enterprise value, making it impossible to access cheaper capital.
How does eDGe help small renewable businesses build a balance sheet and access capital?
To build a balance sheet, businesses will need access to multiple types of capital including debt, equity, and quasi-equity funding (see a complete list of funding options). Our role at eDGe is to help our clients and partners set the capitalization and funding strategy for the next two or three years, then identify, optimize, and raise the right types of capital that allows them to create a balance sheet of their own and achieve their profitability and valuation goals. We use this balance sheet to scale the business, create enterprise value, and become a more sustainable venture over time. In the interim, we support our clients and partners with growth through mergers and acquisition and refinancing.
What are your recommendations for clients who want to pursue the ownership of projects or want to build a platform, but don't know where to start with financing?
The first step is to create a two-to-three-year strategy showing what the business wants to achieve in the near future. This is just a simple spreadsheet outlining the capital requirements for the business' immediate goals. Then, the entrepreneur needs to work on securing a pipeline of potential projects that would be developed and built in the next 12 months. The pipeline can be a mix of early-stage or late-stage projects. The entrepreneur will also need to create the budget and financial models and some preliminary technical and economic viability analysis for the business/platform. eDGe will work with the small business each step of the way. Using a pipeline of potential projects, the client can then display to investors clear sources and uses for the funds.