Exclusive: Fintech Evergrow nets $7M for clean energy tax credits
Evergrow, a San Francisco-based fintech for tax financing, raised $7 million, the startup exclusively tells Axios.
Why it matters: A cottage industry of financial services startups is growing in the wake of the Inflation Reduction Act's passage as clean energy groups try to take advantage of the bill's incentives.
Details: First Round Capital led the all-equity financing, which included existing Evergrow investors XYZ Venture Capital, Congruent Ventures and Garuda Ventures.
- The round was a follow-on to a $7 million seed round, which closed in 2021.
How it works: Evergrow operates an online market where investors can purchase tax credits from qualifying clean energy projects that can use the newly liquid funds to finance construction.
- The company vets and underwrites the projects in-house, and has plans to hire heads of compliance and legal as it continues to build out that function with the new tranche of funding.
- Evergrow takes a portion of tax credit sales as revenue, Evergrow CEO James Richards says. Over time, the startup plans to offer other types of financing with its software.
State of play: Tax incentives are nothing new for the clean energy sector, but the IRA's passage has put them back in the spotlight.
- The difference this time around, Richards says, is the sheer amount of dollars available thanks to the IRA's incentives, which don't have a hard cap.
- The bill also created a new market for the tax credits themselves because it made it possible for developers to sell them to investors. Previously, only developers could take advantage of the credits.
Yes, but: A lot of investors still point fingers at tax incentives for the Cleantech 1.0 bust for artificially propping up projects that were not bankable otherwise.
- "It's important that we learn lessons from that era and don't screw it up this time," Richards says.
The bottom line: The IRA has upended the market for clean energy project tax credits due to the sheer size of the incentives, and a new generation of fintech startups are eager to step into the space and play a role.