What to know about Investing in Flower Turbines, the Innovative Vertical Wind Turbine Startup?

Here’s everything you need to know about investing in Flower Turbines

This innovative renewable energy vertical wind turbine startup has been turning heads. Flower Turbines possesses a vast array of patents in Asia, Europe, and the United States for their innovative tulip turbines and currently looking to raise funds to expand the operation. They are currently primarily based in Europe, but actively expanding into the United States and several other global markets. The company initially went on StartEngine in 2019 with a mere 8 million dollar valuation. The company finished up a raise in late 2021 and raised nearly $9 million at a $61 million valuation. Now, the company is gearing up for another raise beginning in late 2022 at a $124 million valuation. The new raise is already off to a quick start with hundreds of thousands already reserved, and likely for good reason. The appeal of a green energy company, already expanding into international markets, with substantial sales, all protected by a vast patent portfolio in a world where people are eager to help the environment, is definitely attractive to investors and activists alike.

What is Flower Turbines?

As we discussed earlier and shown above, they make vertical wind turbines in various sizes. The smaller one shown above can go on houses or be used to power lights or charging stations. They have varying sizes, but they pretty much all resemble the same thing, a tulip!

The main issue with wind energy is the fact that it takes up a pretty substantial amount of space. Having a massive spinning blade is dangerous in urban areas, aesthetically unappealing, and needs a ton of space to operate. Flower Turbines solve these issues with their patented vertical wind turbines. They are designed in a way where they can be placed right next to each other and still be efficient and safely placed all over someone’s house and most public places. This introduces a plethora of new opportunities to introduce wind-based power production into various types of existing infrastructure. As you’ll see in some of their demonstrations, they also complement solar, which means these aren’t necessarily a direct competitor either.

One interesting thing I like is that, since they are shaped like tulips, they can be painted in various colors and can be more visually appealing than the traditional windmills. They see their product as a potential form of “eco-art.”

Financials

There’s no doubt they have a great product, but financials are an important part of any startup investment. All around, it’s not bad, given how successful they have been at raising funds, but there are some concerns to consider.

Revenue

Currently, the only data available is their 2020 and 2021 numbers, but there is also some indication on their campaign page. Right now, they are sitting at $338,000 in revenue for 2021 and $147,000 for 2020. The good thing is they are currently sitting at over 110% YoY growth which is a really great sign. They are currently expanding into the U.S. market too, which means there is plenty of upwards potential, and they have had several successful raises to help fuel growth.

Based on their campaign page, they are sitting at about $320,000 in revenue for the first 3 quarters of 2022, which means the last quarter will be all growth. However, this means it would have to be a massive quarter to hit the same +100% growth YoY, but there is still growth. It’s important to note that 2020 was their first year of revenue so this is currently in the very early stages of ramp-up though. Nonetheless, that still means you’re sitting at roughly 150x revenue if you are wanting to invest.

The investment decision here comes down to a few things:

• They have raised several successful rounds, which means they can keep using the money for growth

• Each time they raise, they are growing

• It’s likely to get more expensive in the future

So, if it’s a product you believe in, and you think this is something that can become a unicorn, then there’s plenty of upwards potential still. Paying a premium for a sought-after startup isn’t anything new, so you would definitely invest here based on future value. They have a strong cash position at $2.5 million or so (and $2.5 million more in escrow) and are already off to a strong start on the new raise, so I am not particularly worried about a potential bankruptcy.

Bull Case

One of the biggest positives for this company is that it is an international brand. They are doing well ramping up, and if they can keep up the traction and momentum going, it’s a pretty clear path to an IPO. These turbines can be thousands of dollars per turbine, and they just launched US manufacturing and sales in Lubbock, Texas. There are tons of incentives around the world for green energy, and to get to $100 million in yearly sales, you’re looking at 20,000 turbines a year at $5000 per turbine. Obviously, that’s a ways away, but they also have several products worth as much as $50,000, and selling just a handful of those can quickly turn that into a massive growth year.

Bear Case

Currently, the valuation is worrying. Sure, it’s a great company, but if they don’t keep their January pace, or they just grow stagnant, then this could very well eventually fail, or never realize their valuation, and heavily stall an exit. If the political landscape doesn’t improve, and there isn’t further funding to propel green businesses, then that catalyst is gone, and the potential exit will be significantly longer.

Further, they are expanding rapidly, and while equity crowdfunding provides a lot of opportunities for these companies for flexible funding and advertising, a decline in sales and lack of hype could make it harder to raise funds in the future, and they eventually die. Given how well this round is already going, I don’t see them struggling to get funding. I think this company is likely still several years off from realizing its valuation, but I think it can quickly realize it once they find their stride.

Conclusion

Personally, I ended up investing in their previous round at the $60 million valuation because I think it’s a solid product and a lot of momentum. It’s a bit concerning that they aren’t hitting the 100% YoY growth metrics in 2022 based on current trends, but I am not worried they will fail anytime soon. They have $2.5 million+ in cash and going strong into another raise. I think it’s a great product, and even though there’s limited growth, there’s still solid growth nonetheless, which means they will likely keep raising the valuation. I also think they will eventually find the right balance and fill out the valuation, so I am not worried as an investor.

As far as investing in the current raise, that is definitely a personal decision. I think it’s definitely a bit expensive, but it seems like they could pretty easily fill out the valuation down the line.