For a country with some very sunny regions, Mexico generates surprisingly little solar power. Its solar power generation capacity is just over 10 gigawatts, one-eighth the size of Germany, which has less sunlight and a 40% smaller population.
The German government's incentives helped, but that's not all. In Mexico, the solar power market is still in its infancy, so customers are not very familiar with the technology and the market remains highly fragmented.
For the two entrepreneurs, it was an opportunity.
A few years ago, Edoardo Delepiane and Raffaele Sertolio were looking to start a new business. The Italians were on a kind of world tour, arriving in Colombia just after the government and the FARC signed a peace deal. So they founded a ghost kitchen startup, Cocinas Ocultas, which they quickly sold to Travis Kalanick's CloudKitchens. They then went to South Korea to revamp his CloudKitchens operation, then moved to Mexico for another of his CloudKitchens projects.
In March 2022, the two left CloudKitchens for a short break before starting something new. Dellepiane always wanted to get into climate change technology, and he and Sertolio eventually focused on solar power in Mexico, where they live.
Mexico's intense sun certainly helped their thinking, but so did the country's high electricity costs. “Tariffs here are higher than in California for at least a portion of the population,” Sertolio said. Additionally, permitting is now easier and installation costs are lower. Solar power seemed like a no-brainer.
However, solar power adoption has been slow, especially among residential and small commercial customers.
Dellepiane and Sertorio found that small installers were handling the majority of jobs, producing uneven results. Some companies had little experience with solar power, and some of the equipment they installed barely worked. Others were skilled but overwhelmed with work during estimation and installation. They just gave us a quote and did little follow up. In other words, there was a lot of room for improvement.
So they founded Niko, a solar power installation company based in Mexico City. The startup has been operating in secrecy until now, with TechCrunch exclusively learning that the company has raised a $3.3 million seed round at a post-money valuation of $16 million. Picus Capital and 468 Capital led the round, with participation from many other VCs and angel investors.
Niko will initially focus on selling and installing solar panels for residential and small commercial businesses. Their proposals and processes seek to allay customer concerns. People don't have to pay, they're guaranteed savings on their utility bills, and if they're not happy with their panels, Niko will remove them for free.
If a Mexican solar installer seems like an unrealistic base for a venture-backed startup, Nico's investors point to German solar installer Empal, according to Pitchbook. The company has raised $957 million and has a market capitalization of $2.6 billion. In fact, Pix was an early supporter of Empal.
Still, life hasn't always been smooth sailing for Nico. Derepian said solar sales cycles tend to be longer in Mexico. Once you receive a quote, you often spend the next several weeks thinking about it and discussing it with friends and family. To maintain the relationship, Niko follows up with email, SMS and WhatsApp, “nurturing clients throughout the decision-making process,” Derepian said. “We found that once we were ready, we were there the whole time and that led to higher conversion rates.”
When it comes time to sign the paperwork, Niko now handles all financing in-house. Sertolio said there are only a few banks in Mexico that finance small-scale solar installations. Approval takes longer and interest rates are higher.
Niko says residential customers can save 20 to 40 percent on their monthly utility bills, and small commercial customers can save up to 20 percent. The startup makes money by keeping a portion of the savings on utility bills, similar to how power purchase agreements work in countries such as the United States. Sertorio said the system will pay for itself in about two years, and customers will own the panels after seven years.
Once the company gains a foothold in the solar power market, it plans to win more home appliance projects, including batteries, EV chargers, and water heaters.
To find customers, Niko works with large corporations that offer the service as an employee benefit, as well as banks that want to improve the environmental sustainability of their mortgage portfolios. It is also approaching property managers who oversee gated communities.
Ultimately, Nico seeks to address the challenges facing solar power in Mexico, from overwhelming installation numbers to uncertain customers and high financing costs. This is not something that one startup company has to overcome, but if the company can work on them, there is plenty of room for management.