Donnel Baird grew up in the Brooklyn neighborhood of Bedford-Stuyvesant. The area was poor and many buildings lacked decent heating systems. People would turn on the stove to warm up.
It wasn't safe or efficient, but it was reality for many families, most of whom were Black, living in these deficient buildings at the time. The sense of inequity and inequality stuck with him. Quality of life for the people living in poorer neighborhoods was impacted when he was a child because of the problem.
There was more than one element at play. A lack of decent jobs in these neighborhoods led to a cycle of poverty that was hard to break. He wanted to create stable jobs for people who were left behind by the economy and replace inefficient systems that burned fossil fuels.
In order to replace fossil fuel-burning heating and cooling systems with cleaner, more efficient electric air source heat pumps, water heaters and solar panels, he launched BlocPower. More than 1,200 buildings in 26 cities have been updated by BlocPower.
The company has raised over 100 million dollars. The company received over $50 million from Goldman Sachs to help back its green building financing, as well as a $30 million investment from Microsoft's Climate Innovation Fund. He faced an uphill battle when it came to raising money, and came perilously close to shutting the company down.
I spoke to Baird about the challenges he faced launching the business, especially as a Black founder, convincing the financial sector and venture capitalists to back his vision and get his idea off the ground.
The idea of a green jobs program in conjunction with the Department of Energy was the root of the idea.
Donnel is the founder and CEO of BlocPower. The image is from BlocPower.
It was difficult to make the economics work for everyone because the technology was more expensive in this time frame.
The idea of creating a financial instrument to make it easier for more people to update buildings with green energy systems came to him when he was in graduate school. He felt that the lack of a purpose-built financial instrument to finance these projects was the missing piece in bringing his vision to life, but it required financial institutions to provide external investments in neighborhoods that most banks and financial services companies tended to steer clear of.
If I was going to do green buildings in low-income communities, I would have to do it myself. I was able to launch my company after receiving $100,000 of seed capital from the president of Echoing Green Foundation, who gave me a business plan while I was in business school.
The financial instrument he based the company on when he came up with the idea was one of the ways the company makes money today.
We borrow money from Wall Street. We identify the local contractor who is qualified to install the equipment. As part of the deal, we manage the project as they install the equipment in the building. We lease the equipment to the building owner for 10, 15, or 20 years. There is a stream of lease payments that come back to our company from the building owner. The company gets predictable, recurring revenue from the flow of payments.
Utility companies and local governments pay for greening buildings by hiring companies like BlocPower.
The company has a contract with the city of Ithaca to make every building in town green. The program will benefit Ithaca residents through job creation, lower energy costs, reduced pollution and greenhouse gas emissions, and more energy-efficient homes and buildings.
He had to come up with a proof of concept with some government contracts before he could get the external investment he wanted. The first grant was from the Department of Energy. He would close a $6 million, three-year deal with New York City, but it was more difficult to get financial institutions involved.
The company was able to take the grant money from NYC and the Department of Energy and show that it could begin to have a real impact greening buildings.
My startup won a $2 million contract with the Department of Energy in a competitive process. We used that money to build a real-world portfolio of clean energy projects by greening like 40 buildings, and then we submitted the data we generated to Goldman to see that our financial models were tracking what we were seeing in the real world.
In the report on the NYC project, the company wrote that it was focused on poor areas in Brooklyn and Queens where the startup could work with the utility companies to help identify buildings that needed updating.
BlocPower’s strategy was to engage community stakeholders who completed projects to refer building owners to the Community Retrofit NYC with a focus in areas with the most robust Con Edison incentives. The second step was to use data to build a targeting score to identify buildings in need of upgrades. Targeting, in partnership with leveraging existing relationships, allowed us to connect to building owners in need of upgrades. It also allowed us to build a persona of who our average building owner looks like.
The original plan called for BlocPower to work with 554 properties, but it was actually able to complete projects on 629 buildings over the course of three years. It made progress in a number of ways.
Once it got some building owners involved, there was a big word of mouth effect and that helped get more owners on board. The team was able to identify buildings most in need of updating using the company's proprietary software. The startup created a more streamlined approach to project management using a digital model.
A digital model of the building allows us to create a single web page, where we have the digital model of the building and all of its data, and we could integrate all of the disparate pieces of electrical engineering, mechanical engineering, construction and financial. It allows us to figure out what the financial returns would be from investing in green energy in that building.
He raised money from Kapor Capital. He started the company for $1 million. A $2 million bridge round might have saved the company at a time when he was struggling. He said that the two firms helped the company get started and stay in business.
It wasn't easy to get some big investors to invest in his projects, but it took years for it to come together.
More than $50 million was given to the company by Goldman Sachs Asset Management Urban Investment Group. He hasn't been able to get other banks and financial institutions to go along with him.
He says the company has almost 800 workers who have been trained to install green energy solutions. We project manage them and pay them. We have decarbonized some churches and synagogues. Rikers Island is the jail in New York City.
Some of the people he hired had been in and out of Rikers Island, so it was gratifying.
He met people along the way who invested in his vision, and he described it as horrible.
I have had people get up and walk out of meetings. I have had people check their phones in the middle of my presentation. I've had people tell me that BlocPower isn't capitalist and that we're never going to make any money.
The only way to fix the financing problem is for people from underrepresented groups to invest in one another. He said that their job was to create a whole new cohort of people who could deliver the social impact change that we need and the change on climate that we need.
In spite of the obstacles, BlocPower has come up with a way to make buildings more efficient while creating good jobs and making life better in neighborhoods that are often left behind.
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