BlocPower, a rising star in the climate tech landscape, is possibly a sleeping giant in the energy sector. They have a compelling and defensible business model sitting at the intersection of high growth and revenue generation while prioritizing social justice.

<aside> 📌 One-liner: BlocPower is the leading OS to electrify, modernize, and decarbonize buildings through a community-centric approach.

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At its core, the company helps with residential and public buildings’ energy efficiency upgrades and renewable energy transition through an all-in-one solution from cost estimating and financing options to installation and beyond. BlocPower builds the software layer to replace manual work and handle preliminary assessment, paperwork, and financial processes at scale. In the background, BlocPower works with related parties, including government entities, lenders and investors, hardware providers, and contractors, to streamline the whole process for building owners. Its platform is desired by both supply and demand sides and is well-positioned to create value for the ecosystem’s participants. On one hand, BlocPower enables brands like electric heaters or smart home sensors to reach end-users faster while other middlemen can be plugged in seamlessly. On the other hand, customers save time and resources managing the whole project through a consolidated view with the most suitable options available.

📉 Market

In order to meet the goal of limiting global warming to 1.5 °C, countries must significantly reduce their greenhouse gas emissions economy-wide. Energy Innovation expects that would translate into dropping to net zero by or before 2050 and at least a 50 percent reduction in GHG emissions in 2030 relative to 2005 levels for the US. As buildings are a significant contributor to carbon emissions, a disruption in this sector is one of the key strategies to fight against climate change. Forbes reported that there are over a hundred million fossil fuel-powered buildings, contributing 13% of U.S. emissions, plus emissions of new construction. This represents a huge market for BlocPower’s retrofitting services. The company might capture 0.1-0.5% of the market share to become a billion-dollar company.

💵 Monetization & Financials

Even though BlocPower operates in a hardware-related industry providing project-based service involving fragmented activities throughout time, the company has found a way to reduce financial risks for both customers and investors. Through flexible lease financing, customers can choose to pay monthly, establishing a predictable revenue stream that can be attractive as a SaaS subscription model. Also, instead of producing or selling their own devices, BlocPower works with existing distributors and brands so they have an asset-light approach with potentially big value processed on their platform like a fintech or e-commerce’s GMV. Accordingly, the company’s Form C-Annual Report disclosed that as of 2022, they have signed a total potential project value of about $150 million for installing a total of $70 million of asset value, resulting in annual recurring revenue of $5.5 million. BlocPower might have a chance to achieve EBITDA profitability by the end of 2022, showing how capital efficient the company is, especially in capital-intensive industries with medium to long payback period like real estate and energy.

Using the information in their SEC filings, I guesstimate that BlocPower would be able to reach their target of $5.5 million in ARR by 2025 with $70 million of assets installed/under management for 510 projects. My calculation only reflects its core services of building electrification and does not count other potential revenue streams like workforce training, revenue sharing, transaction fee, etc. (some of which are discussed below).

In terms of valuation, I expect BlocPower to reach 🦄 unicorn status by 2033-2034 (at the latest), representing a core revenue multiple of ~20x. Even though this multiple might be higher than industry incumbents like Comfort Systems (NYSE: FIX) or EMCOR Group (NYSE: EME) whose EV is at ~12x EBITDA, BlocPower is worth the premium due to its growth potential and market expansion as well as much higher profit margin (profit margin of Comfort Systems and EMCOR Group are 5.93% and 3.59% respectively while BlocPower has a lucrative profit margin of 57.25% in 2021).

At the moment, BlocPower is an effective closed network but it has the potential to become the leading open platform in the field due to both macro and micro factors.

🚀 Growth