Start First, Plan Later
Starting a company is a big step, so it’s understandable that you would want to make sure you have the perfect business plan in place before you start. But that’s wasting time: Just get out in the field and refine the plan as you learn more about the problem you’re trying to solve.
In our case, we saw that the cost to manufacture solar panels was coming down fast enough to make it a viable alternative to power from a utility. Yet everyone was investing upstream in the hardware. No one was thinking about deployment, which seemed to us like the bigger and less risky market.
We didn't think it made sense for businesses to invest their own capital to purchase a system, so we decided to sell solar as a service. Sunrun would pay to install the system on the rooftop and then enter into a long-term contract with the user to recoup our costs and earn a profit.
That was as much of a thesis as we had when we launched.
At the time, there was one company using the as-a-service model for big commercial solar-power systems. We were working out of a business-school dorm room. Nonetheless, we bid on a couple of multimillion-dollar projects.
We didn’t get any of them, but we got close and learned a lot about how the solar business works in the process.
What we realized was that the future was really in residential rooftop solar. At the time it was easier to sell large systems to commercial and agricultural customers, but our early experiences convinced us that it would be hard to build a defensible business that way.
Plus there were a ton of companies getting funded to attack that market. Everyone told us it would be impossible to scale the residential market – the costs per system were too high and the organizations that provided financing for solar installations were used to underwriting large projects. When the industry experts insisted it would be impossible we knew we were on to something.
For a residential business, nailing distribution and building a powerful brand can create big barriers to entry. So those two things became the focus of our business plan.
By focusing on residential customers we believed nailing distribution, building a powerful brand, and investing in a technology platform to streamline costs would create big barriers to entry. We knew once you got the machine up and running it would scale faster than one-off bidding on large solar projects. So that became the focus of our business plan.
It took us the whole first year to figure this all out, though, and I don’t think we would have been able to if we weren’t already an active solar business.
That’s why I don’t think you get any points for spending a lot of time trying to come up with all the answers upfront.