For a country with some sunny areas, Mexico has surprisingly few solar resources. Its solar capacity is just over 10 gigawatts, just one-eighth that of Germany, a country with less sunshine and 40% fewer people.
German government inducements helped, but there’s more to the story than that. In Mexico, the solar market is still in its infancy, which means customers are less familiar with the technology and the market remains highly fragmented.
For the two entrepreneurs, that meant opportunity.
A few years ago, Edoardo Dellepaine and Raffaele Sertorio were looking for new business. The Italian is on a world tour and arrived in Colombia shortly after the government signed a peace agreement with the FARC. There, they founded a ghost kitchen startup, Cocinas Ocultas, which they quickly sold to Travis Kalanick’s CloudKitchens. They then traveled to South Korea to improve CloudKitchens operations, and then to Mexico to work on another CloudKitchens project.
In March 2022, the two took a short break from CloudKitchens before starting to try new things. Dellepaine had always wanted to get into climate technology, and he and Sertorio eventually set their sights on solar energy in Mexico, where they live.
Mexico’s intense sunshine certainly helps their thinking, but so does the country’s high electricity prices. “The tariffs here, for at least some of the population, are higher than in California,” Sertorio said. Best of all, licensing is easier and installation costs less. Solar power seems like a no-brainer.
Yet solar adoption lags, especially among residential and small commercial customers.
Dellepaine and Sertorio found that small installers handled the majority of the work, resulting in mixed results. Some people are inexperienced with solar and some of their installations barely work. Everyone else was skilled, but between quote and installation, they were overwhelmed with work. They’ll make an offer and then rarely follow up. In other words, there’s plenty of room for improvement.
So the two founded Niko, a solar installation company based in Mexico City. The startup, which has so far been operating under wraps, has raised $3.3 million in seed funding at a post-money valuation of $16 million, TechCrunch has learned exclusively. This round of financing was led by Picus Capital and 468 Capital, with participation from a number of other venture capital firms and angel investors.
Niko initially focused on selling and installing solar panels for residential and small commercial businesses. Their pitch and process try to assuage customers’ concerns: People don’t have to pay anything, they’re guaranteed to save money on utility bills, and if they’re not happy with the panels, Niko will remove them for free.
If being a solar installer in Mexico seems like an unrealistic basis for a venture-backed startup, Niko’s investors have set their sights on German solar installer Enpal, which has Raised US$957 million in funding at a valuation of US$2.6 billion. In fact, Picus was an early supporter of Empal.
Still, Nico isn’t guaranteed smooth sailing. Solar sales cycles in Mexico tend to be longer, Dellepaine said. After people receive an offer, they typically spend the next few weeks mulling it over and talking to friends and family. To maintain the relationship, Niko follows up via email, text message or WhatsApp, “nurturing the customer throughout the decision-making process,” says Dellepaine. “We’re always there when they’re ready, and we’ve realized that improves conversion rates.”
When it comes time to sign documents, Niko currently does all financing in-house. Sertorio said there are only a few banks in Mexico willing to provide loans for small solar installations. Approval times are long and interest rates are high.
Niko said its residential customers will save 20-40% on their monthly utility bills, while small commercial customers will save up to 20%. The startup makes money by keeping a portion of the savings on utility bills, similar to how power purchase agreements work in the United States and elsewhere. Sertorio said the systems will pay for themselves in about two years, and after seven years, customers will own the panels.
Once the company establishes a foothold in the solar market, it expects to secure more home electrification projects, including batteries, electric vehicle chargers and water heaters.
To find clients, Niko is courting large companies that offer its services as employee benefits, as well as banks that might want to improve the environmental sustainability of their mortgage portfolios. It is also engaging with property managers who manage gated communities.
Ultimately, Niko seeks to address the challenges facing solar in Mexico, from lackluster installations to uncertain customers to high financing costs. This is a tough nut to crack for a new startup, but if the company can solve these problems, it has plenty of room to operate.
