Investing in Harvest Power Pre-IPO

In the not so recent past, a number of firms have begun offering shares of private companies to qualified investors. Investors can purchase shares in popular startup companies such as Airbnb, Dropbox, Lending Club, and Bloom Energy pre-IPO. Because of low liquidity, shares are subject to availability and prices can be volatile. There is no guarantee of an IPO as the company could be acquired, remain private for an indefinite period of time, or even go bankrupt. As a qualified investor, certain net worth requirements need to be met and a minimum purchase is required of $50,000 USD. While this may not appeal to all investors, there are many promising and innovative companies on offer such as Harvest Power.

About Harvest Power

Founded in 2008, Harvest Power produces renewable energy and high-value soil, mulch and organic fertilizer products from organic materials. Over the past 3 years, Harvest Power has taken in $224 million from notable investors including DAG Ventures, Waste Management (NYSE:WM), and Kleiner Perkins Caufield & Byers. Kleiner gave an additional vote of confidence to the Company by announcing at the beginning of this year that Kathleen Ligocki, an Operating Partner at Kleiner, would assume the role of CEO at Harvest Power.

About Anaerobic Digestion

Anaerobic digestion is not new by any means with the first practical use seen in a Bombay leper colony in 1859. Anaerobic digestion is a process that uses naturally occurring microorganisms to break down organic materials and produce biogas and biofertilizers as seen below:

Anaerobic_Digestion
Source: Green Investment Bank

The biogas can be combusted to produce renewable electricity, cleaned to pipeline natural gas standards, or further processed into compressed natural gas (CNG) fuel. The process uses organic feedstocks such as manure, wastewater, pulped food scraps, and yard debris. With 600 employees and 40 sites across the U.S, Harvest uses anaerobic digestion to process over 2 million tons of organic wastes per year; sell 33 million bags of soil and mulches distributed through 1200 locations across North America (Lowe’s); and produce and market millions of cubic yards of compost-based soil, mulches and natural fertilizers.

Harvest sees tremendous growth potential for anaerobic digestion in North America where 500 million tons of organic materials are produced each year with food alone creating 35 million tons of waste that reach landfills each year, only 5% of which is currently diverted for uses such as this. In the meantime, other countries have successfully adopted and scaled this technology. Germany, a country where 66 percent of municipal waste is already recycled, has 6,800 large-scale anaerobic digesters in operation. China has over 8 million small-scale anaerobic digesters that meet the heating and cooking needs of individual rural communities.

In an interview with The Guardian, CEO Ligocki described the business model as having three revenue streams:

One set of customers pays Harvest Power to take waste. Another, typically the local utility, buys its electricity. And its fertilizers are used in agriculture, horticulture, professional turf, and retail lawn and garden applications; the company’s biggest retail distributor is Lowe’s.

While Harvest Power has yet to reach profitability, it expects to generate $150 million in revenues this year. One of their successful implementations is at Walt Disney Land in Florida. According to an article in The Guardian, the Florida operation which is profitable, processes about 120,000 tons of organic material per year. The output of this facility is 5.4 megawatts of combined heat and electricity, enough to fuel 2,000 Florida homes and just a fraction of the energy needs of Disney World which has more than 30,000 hotel rooms.

According to an email notification we received today, shares of Harvest Power are currently available on SharesPost, a leading specialist in the private securities market. Shares of Harvest Power are being offered to accredited investors with a minimum purchase of $50,000 and a 5% commission subject to availability. Since 2011, SharesPost has completed over 2,000 private company equity transactions totaling $1 billion.

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