The Business Finance Guide interviewed Mikko Summala, UK Managing Director of Parking Energy, a company helping to pave the way for UK entrepreneurs in the highly innovative electric vehicle market.
Sitting in the SPACES open plan area of his Reading office, Mr Summala explains the opportunity to The Business Finance Guide: “These are exciting times for the EV (electric vehicle) market in the UK. Vehicles are becoming more affordable, and the UK government is offering grants to individuals to allow them to install charging points in their home.”
As the barriers to entry are broken down, opportunities for innovative UK businesses are emerging. Mikko continues: “If you go back to 2009, the biggest barrier to electric vehicle ownership was the cost of the batteries, and the fact that they couldn’t easily be fitted into existing cars. But all that has changed. Today, there are only two real barriers remaining: peoples’ lack of understanding of the potential benefits, and the lack of a unified, open- source infrastructure to allow people to charge their cars in a convenient, hassle-free way.”
UK business opportunity
For Parking Energy UK, the focus is on large residential and commercial developments and sites, parking operators and shopping centres, each with between 50 and 3,000 parking spaces. The goal is for all parking to be ‘electric vehicle ready’ by 2020. This doesn’t mean every parking bay needs to have a charging point enabled, but that the infrastructure is in place to allow that to happen quickly, in line with driver demand.
When EV infrastructure is part of the building, multiple vendors have the opportunity to supply the actual charging point boxes, rented monthly by tenants for a fixed cost (plus their energy tariff). This will open up the charging point market to other innovative businesses in the sector. The closest analogy is that of broadband networks, which allow anyone to plug in a compatible device, and benefit from the broadband infrastructure.
Finnish company Parking Energy was founded four years ago by long-term electric vehicle enthusiasts Heikki Suonsivu and Jukka Järvinen. With approximately five million people in Finland driving two million cars, there was a significant opportunity for the two Finnish entrepreneurs. Finland is a cold country, covered in snow for half of the year. Since the 1980s, the country has had an infrastructure in place to allow people to plug in and warm their cars so that they start in sub-zero conditions.
Virtually every one of the 1.5 million parking bays currently in Finland has an electrical power point. The technical problem, however, is that an engine heater takes between 650 watts and 2 kW of electricity. To charge an electric car requires a higher power capacity, for faster charging.
In the early days, Parking Energy focused on finding a way to use the existing infrastructure, but to make the necessary changes that would allow it to charge electrical cars, with a much higher flow of electricity, without overloading the electrical infrastructure.
More recently, the company has evolved their technology, thanks to an injection of equity finance, simultaneously shifting its focus to real estate beyond Finland.
Parking Energy – the business finance journey
At the time of launch, Heikki and Jukka, Parking Energy’s founders, were already successful entrepreneurs with a proven track record, able to invest their own money as seed funding. This was used to develop a product concept, supported by government grants.
In early 2017, development was ramped up. As the business came close to offering operational products, the business was able to benefit from three phases of funding from the Finnish government. Similarly, innovative UK businesses can benefit from funding from R&D tax credits and innovation grants, for example from InnovateUK, and the Industrial Strategy Challenge Funds.
To date, Parking Energy has received funding of €2.5 million to develop the charging infrastructure, charging points, and software. This has consisted of successive funding rounds, with angel finance and venture capital both invested, as well as a convertible loan. With a growing, international team, and annual costs of approximately €2 million, this funding was vital.
Parking Energy is currently embarking on an additional funding round, looking to spread the risk and fund their next stage of growth. With every funding round, share ownership is diluted – but current investors have all been given the option of a 20% premium in the next investment round – and most will probably take up this offer.
Parking Energy’s aim is to be profitable by 2020. This will only come with scale, as Parking Energy moves to a more automated manufacturing model. Currently, most components and electronic parts are manufactured in China, and assembled in Finland. Based on this production model, and a monthly subscription model, a single charging point will pay for itself within 20 months. That figure is likely to be reduced to 12-15 months as the cost of production reduces.
Innovate and grow
Parking Energy’s UK Managing Director Mikko Summala offers his top tips for innovative businesses:
Tip 1 – Think big and beyond. Most disruptive technologies have multiple applications. Think creatively about how to maximise the return on your investment, and if possible, find ways to generate early cash.
Tip 2 – Build a network of influential contacts in related industries. Use LinkedIn, attend trade shows, and go out of your way to really build strong relationships. As well as offering advice and support, these influencers can have a massive impact on your ability to promote your company, and attract investors.
Tip 3 – It will take longer than you think. However long you imagine it will take to become a profitable enterprise, double that number. Disrupting industries is a hard task, and success will not come overnight.
Tip 4 – Ask for more funding than you think you need. When you are oversubscribed, you can pick and choose the investors who you value most highly. Having additional funds in reserve will also help you fund inevitable delays and setbacks.
Tip 5 – Under-promise and over-deliver on what’s set out in your business plan. Your aim should be to surprise and delight investors at every stage, so they will become enthused, and support you at every turn.
Tip 6 – Your biggest challenge is people, not technology. Typically, disruptive companies are set up by subject matter experts. Understanding the gaps in your own expertise, and hiring the right people – for example in finance, marketing or HR – is vital as you grow.
Finance at every stage
Business financing is not a one-off decision, but an ongoing and evolving situation. No decision can be made in isolation to the businesses journey. Find out more about what options are suitable now and what might work at another stage.