Where are they now: Parking Energy
A few months ago we interviewed Mikko Summala, the Managing Director of Parking Energy UK, to find out about the opportunities in the UK electric vehicle market.
When we met with Mikko previously Parking Energy was in the middle of its first crowdfunding campaign. We caught up with Mikko recently for an update.
Mikko Summala is the Managing Director of Parking Energy Ltd in the UK arm of the Finnish company.
The environmentally-friendly business provides electric vehicle charging infrastructure for office blocks, commercial units and residential properties.
Read Parking Energy’s first article for Mikko’s top tips for innovative businesses.
What response did you get after the first article about Parking Energy was published in July 2018?
Well, we had a lot of great feedback from the article. People commented that the practical business insight we shared was very helpful. We talked about our experiences and it resonated with like-minded businesses.
Having our company mentioned in the Business Finance Guide whilst we were fundraising really helped. It increased our visibility and gave us an opportunity to share more about the business itself rather than just the financial angle.
At the same time, we had an article in the Financial Times and we were on BBC Radio 3, so we received some good media coverage.
What’s been happening at Parking Energy in the last 6 months?
We’ve raised a significant amount of finance to support the business.
But aside from that, the company has been recognised by the Global Climate Action Summit in San Francisco for being one of the top 25 global companies fighting climate change. We’re only a small company with just 20 people, but the impact that our solutions have on air quality – both in localised environments and for the planet overall – is really big.
You’ve recently completed a large equity crowdfunding campaign. How much did you raise?
We raised £1 million over the course of 12 weeks. There were over 100 individual investors and the investments ranged from small amounts to up to £200,000 per investment.
It was our first run at major equity crowdfunding and the campaign worked out really well in the end and we got the funding that we wanted. But it wasn’t without challenges.
We needed to get 40% of the total minimum raise for it to open. So, we needed investors lined up who we knew were committed to investing a considerable amount before we went public.
The funding we received gives us one year’s facility, but we’re already planning an A-round investment in the first half of 2019 which will be aimed select industry investors and institutional investors.
After launching, how did the rest of the campaign go?
Once we went public there was early interest and some people invested right away, but interest then started to die down.
We learnt quite a lot in terms of how to run an equity crowdfunding campaign.
With equity crowdfunding if there isn’t any significant news to bolster the interest, very little happens until the last week of the campaign. Once you achieve the minimum – which guarantees that the investment is going to go through – a lot more investors get involved. It means you can suddenly double the investment within a few days.
For us it was too close to be comfortable. Our team worked really hard and used the contacts they had to secure the initial investment amount. Once that was in place other people saw us as a viable investment.
What surprised you the most during the crowdfunding campaign?
I was surprised at how time consuming it was to plan and run the campaign!
For anyone looking at fundraising – whether through institutional investors, private funding or on an equity crowdfunding platform – there’s a lot of work to do. Businesses shouldn’t underestimate the amount of time and effort they’ll need to invest.
Different investors will often have different priorities, so the preparation needed to cater to different preferences can be quite taxing.
My advice would be to start early and prepare. Doing so will help to clarify your position to yourself, make you more focused on your plans and help justify what you need the money for.
What one piece of advice would you give to another business that’s considering equity crowdfunding?
Think about it carefully as it’s a lot of work.
You should weigh up the cost-benefit of taking the time to prepare and run an equity crowdfunding campaign. Determine whether it’s best to focus on a public campaign like we did, or whether to use that time to pinpoint suitable investors and create a more tailored proposal.
What can happen with equity crowdfunding is you can end up with a large number of small investors which, going forward in the next financing rounds, might prove to be difficult.
Your ownership will fragment and you may need to deal with a couple of hundred small investors. It does depend on the proportion on your total share ownership, but numerous investors with voting rights can make shareholder meetings more challenging.
For us having a number of small investors was a positive thing. We actually attracted smaller investors from over 20 countries which worked for us as we plan to go move into a number of other markets. It means we have people strategically placed in different markets who can connect us with their local networks.
Why do you think your investors chose to invest in Parking Energy?
I think that given the nature of our business – from its environmental focus to the huge growth of the sector – people just want to be involved. There’s a lot of interest in the electric vehicle boom because the market looks like it’s just going to explode.
It’s relatively early days for the sector, but we regularly see major announcements from all the big car manufacturers with firms like Mercedes, Audi, Jaguar and Volkswagen all bringing out electric vehicles. The market is growing really rapidly, and I think people really want to put their money where they believe the growth is.
What does the future hold for Parking Energy?
We’re currently a team of 20 people and want to grow to be 30 or 40 people this year. This kind of growth is a challenge in itself. It’s nothing to do with the product but it’s about managing the company, managing the growth and attracting the right people.
We’re also planning to expand internationally so we’ll need to have a strong marketing and communications plan in place in order to do that.
That’s a challenge for any company, let alone such a small company operating in about half a dozen different markets, each with their own language. English is only spoken natively in England, not in any of our other six markets so we need to localise our service offering and localise some of the applications too.
Considering international expansion? UK Export Finance is the government department that supports UK businesses to sell internationally.
How will you finance the next stage of growth?
Parking Energy Ltd is an offset of a Finnish parent company and we could just grow organically, but that would take time. For us to grow quickly in the rapidly expanding electric vehicle market we need to focus on raising funds again so we can invest in growing the team and securing our place within the market.
We’re looking to do a Series A funding round which is usually an investment of up to £10 million. That’ll allow us to invest in longer term projects.
Are there challenges to funding electric vehicle charging infrastructure projects?
Yes, absolutely. A lot of capital is needed for vehicle charging equipment and the projects themselves, so expanding into different markets and delivering the products can be quite capital intensive.
We’re looking into different funding options. The idea is to reduce any capital expenditure on charging cabling and equipment by offsetting it with either loan agreements or lease and buy-back agreements.
Alternatively, we could find an investor interested in investing in electric vehicle charging infrastructure and we could just provide the back-end services.
Are there any other types of funding that you would recommend?
We’ve won two Innovate UK feasibility studies. The first bid is for wireless charging for electric taxis, and the second is for large scale battery buffered charging hubs.
As an SME we receive 70% grant funding at both feasibility and demonstrator level which we can draw down every three months.
There’s such a fantastic opportunity for small tech companies to speed up their development and create opportunities for market entry through Innovate UK, so I’d really recommend other businesses look into them.
Following success in the 3-month feasibility studies, we can bid for demonstrator projects and could receive between £3 million to £9 million to cover project costs. This would be major for us as a company and would immediately lift our profile and boost our credibility. That’d then help us raise significantly more funding at a better valuation at a later date.
Even if we hadn’t been successful, the Innovate UK competitions have opened the doors for conversation with large businesses. They’ve helped us to partner with some major companies like a large Japanese manufacturer, Cenex (the Centre of Excellence for Low Carbon and Fuel Cell technologies), Nissan, the City of Nottingham and Transport for London (TfL).
Learn how you could fund innovation projects through Innovate UK.