For a country with some very sunny areas, Mexico has remarkably little solar power. With just over 10 gigawatts of solar capacity, it has one-eighth the size of Germany, a country with less sunlight and 40% fewer people.
German government incentives helped, but there is more to the story than that. In Mexico, the solar market is still nascent, meaning customers are not very familiar with the technology and the market remains highly fragmented.
For two entrepreneurs, this opportunity.
A few years ago, Edoardo Dellepiane and Raffaele Sertorio were looking to start a new business. The Italians had been on something of a world tour, landing in Colombia shortly after the signing of the peace agreement between the government and the FARC. There, they founded a startup ghost kitchen, Cocinas Ocultas and quickly sold on Travis Kalanick’s CloudKitchens. They then went to South Korea to renew CloudKitchens operations there before moving to Mexico for another CloudKitchens project.
In March 2022, the two left CloudKitchens for a short hiatus before embarking on something new. Dellepiane always wanted to get involved in climate technology, and he and Sertorio eventually went solar where they lived, in Mexico.
The intense Mexican sun certainly helped their thinking, but so did the country’s high electricity prices. “Tariffs here, for at least a portion of the population, are higher than California,” Sertorio said. Additionally, licensing was easier and setup costs were lower. Solar power seemed like a no-brainer.
And yet solar adoption has lagged, especially among residential and small commercial customers.
Dellepiane and Sertorio found that small installers handled much of the work, creating uneven results. Some had little experience with solar power and some of their installations were barely functional. Others were experienced, but between the supply and the facilities, they were overwhelmed with work. They would provide an offer and then do little to follow up. In other words, there was a lot of room for improvement.
Thus, the two were founded Nico, a solar installation company based in Mexico City. The startup has operated in secret until now, and TechCrunch has exclusively learned that the company has raised a $3.3 million seed round at a $16 million post-money valuation. Picus Capital and 468 Capital led the round with participation from several other VC and angel investors.
Niko initially focuses on sales and installation of solar panels for homes and small commercial companies. They’re trying to assuage customer concerns: People don’t have to spend money, they’re guaranteed savings on their utility bills, and if they’re not happy with the panels, Niko will remove them for free.
If being a solar PV installer in Mexico seems like an unrealistic foundation on which to build a venture-backed startup, Niko’s investors point to Enpal, a German solar facility that has raised $957 million and is worth 2, $6 billion, according to PitchBook. Indeed, Picus was an early proponent of Enpal.
However, Nikos is not guaranteed smooth sailing. Solar sales cycles tend to be long in Mexico, Dellepiane said. Once people receive an offer, they often spend the next few weeks reviewing it and talking to friends and family. To maintain the relationship, Niko follows up via email, SMS or WhatsApp, “giving customers feedback throughout the decision-making process,” Dellepiane said. “When they’re ready, we’ve been there for the whole time and that, we’ve realized, improves the conversion rate.”
When it comes time to sign the papers, Nico currently does all the financing in-house. Only a few banks in Mexico will lend money for small-scale solar installations, Sertorio said. Approval times are long and interest rates are high.
Niko says its residential customers will save between 20-40% on their monthly utility bills, while small commercial customers will save up to 20%. The startup makes money by keeping a portion of the savings on utility bills, similar to how power purchase agreements work in the US and elsewhere. The systems will pay for themselves in about two years, Sertorio said, and after seven years, customers will own the panels.
Once the company has a foothold in the solar market, it envisions rolling out more home electrification projects, including batteries, EV chargers and water heaters.
To find clients, Niko is courting large corporations to offer their services as an employee benefit and banks that may want to improve the environmental sustainability of their mortgage portfolios. It also approaches property managers who oversee gated communities.
Ultimately, Niko is trying to address the challenges that solar power has faced in Mexico, from substandard facilities to uncertain customers to high financing costs. That’s a lot for a startup to overcome, but if the company can handle them, it has plenty of room to run.
