Sunrun: Raising the Series A Round

By Ilya Strebulaev, Sara Rosenthal
2013 | Case No. E462 | Length 34 pgs.

The Sunrun case profiles the evolution of this residential solar financing startup, focusing on the company’s milestones leading up to the Series A financing round. Founded by two GSB graduates, Ed Fenster and Lynn Jurich, together with one of Fenster’s high school classmates, Sunrun applied an innovative model from the commercial sector to residential solar, whereby homeowners could lease the solar panels that Sunrun owned and installed on rooftops. The case goes on to describe the co-founders’ journey seeking Series A funding after they have invested their own money and raised outside capital from angel investors. It also provides the perspective of one of the leading VC firms in the Valley with regard to the strengths and weaknesses of the deal. Ultimately, the co-founders faced a decision: Should they accept more favorable terms with lower valuation from VC #1, more onerous terms but a higher valuation from VC #2, or could they afford to wait a bit longer until they closed a partnership to create a tax equity fund (used to fund the solar installations), which would potentially increase their valuation and the overall attractiveness of the investment?

Learning Objective

The learning objective of the case is to help students understand the process and intricate dynamics associated with the Series A financing round, as seen through the eyes of the Sunrun co-founders. Students are also asked to engage in tactical exercises such as comparing the two term sheets Sunrun received, as well as to build a financial model that values Sunrun based on variables provided in the case, including sales growth projections, the timing of the closing of a tax equity fund to fund the solar installations, and operating expenses.

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