Erik Schiemann has raised hundreds of millions of dollars in financing to scale commercial solar across the US via his startup Distributed Solar Development. This company has acquired investment from top-tier investors like Credit Suisse, Morgan Stanley, Fifth Third Bank, and Silicon Valley Bank.
In this episode, you will learn:
- How Distributed Solar works
- The benefits of solar for businesses
- Financing your business
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
The Ultimate Guide To Pitch Decks
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Erik Schiemann:
Erik Schiemann created the business idea to start DSD while serving as a finance manager for GE Renewable Energy. Since that humble beginning from within GE, Erik has led every stage of growth for what is now Distributed Solar Development (DSD). Erik successfully incubated DSD within GE as “GE Solar”, consistently building the business despite an internal struggle within GE to adequately support and capitalize the business at highest levels of the company. In 2019 Erik determined the market was ready for an independent, national distributed energy platform. He successfully executed the simultaneous spin-off and the first equity raise to launch DSD as an independent organization.
In his role as CEO, Erik Schiemann overseas all aspects of DSD and focuses his efforts on successfully scaling a national renewable energy developer and solutions provider. Erik manages his time between day to day operations and longer-term value creation.
Prior to founding DSD, Erik Schiemann served as an Investment Banker focused on M&A and capital raising with various Wall Street institutions. He also served as a US Army Ranger Infantry Officer from 2000-2007 with extensive wartime service overseas.
Erik Schiemann holds a B.S. in Political Economics from Michigan State University and an MBA from the University of North Carolina at Chapel Hill. Erik Schiemann, his wife, and three children live in Saratoga Springs, NY and enjoy spending weekends outside.
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Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have an interesting founder, and I think it’s going to be mind-blowing, his story and his journey and what he’s up to today with his company. But without further ado, let’s welcome our guest today. Erik Schiemann, welcome to the show.
Erik Schiemann: Thanks for having me.
Alejandro: Tell us about your upbringing because you were born in Minnesota in a small town, but quite early on, you knew it was time to spread your wings and fly somewhere else. So tell us about growing up there and what caused you to have in mind, “One day, I’m going to be out of it.”
Erik Schiemann: I grew up in a great small town in Minnesota, a great childhood, good experiences. I was always challenged by my parents to say, “I can do whatever I want to do; go do it.” I always had aspirations to see more that’s out there. I got through my high school years and thought I wanted to see what the bigger world was, and I wanted to do it on my own, and I had an interesting quest to serve my country. I applied and got a four-year scholarship to become an Army ROTC and became a commissioned officer in the United States Army. I could go anywhere I wanted, and I did a bunch of visits. I really liked the feel of Michigan State, so I left my town and went to Michigan State. It wasn’t because I hated my small town; it was just more that I wanted to see what else was out there, and it was a good start to what has become an interesting journey so far.
Alejandro: There’s this phrase that you don’t know what you don’t know, so how did you know that there was something that you didn’t know that was outside of Minnesota?
Erik Schiemann: I had a gut instinct. I kept up on things. I saw what’s on TV. You see what’s going on in politics or music or anything like that. I looked around. In a small town, you’re very sheltered, and it feels good, and it’s safe, and it’s a great place to grow up. I felt like: would I be ready? Could I do it at a different location where I’m on my own, where there isn’t a support network? I wouldn’t say there’s any particular thing that said, “Now it’s time to go do that.” Maybe it was just an inner drive to challenge myself to say, “Go do what you’re doing. Be successful, but do it in a huge school or another state away from your support network. It was just always a piece of who I was.
Alejandro: When you were at Michigan State University, you thought that your plans were around becoming a lawyer, but it seems that senior officers had different plans for you, so what was that?
Erik Schiemann: I went there thinking that I wanted to be a lawyer. Between my junior and senior years in Army ROTC, I had a very normal college experience. I happened to be in ROTC. In the summers, they ship you off to different training events. That summer between my junior and senior years, I went to a training event out in Washington State. While there, the senior military officers who were evaluating me thought that I would make a very good infantry officer instead of a lawyer, so in order to show me that they saw in me that I hadn’t seen in myself yet, they shipped me out after my training to Korea. This was 1998 or 1999 when there was tension among the North and South Koreans. They put me in the Demilitarized Zone with an infantry unit where I was there living with the soldiers, running an infantry unit, and it really did unlock within myself that if I was going to do anything in the military and serve my country, while there’s nothing against doing it as a lawyer, it just wasn’t going to be a good fit for me. I wanted to challenge myself physically, mentally, emotionally, and in all the leadership qualities I wanted to build. Being an infantry officer was going to be the right answer for me, so I decided to switch my focus in my senior year, and that was what I was lucky enough to become.
Alejandro: That gave you the opportunity of serving in Iraq and serving in Afghanistan, very dangerous places and very dangerous times and, obviously, very uncertain times. I’m sure that for you, as well, as a leader, that has shaped those leadership skills to a whole other degree, and perhaps also being at ease with uncertainty because uncertainty is real when you’re building and scaling a company. How would you serve in places like Iraq or Afghanistan, where death is right there with you? You’re always with death. How do you think that experienced the leadership for you?
Erik Schiemann: It’s a good question. I think when you go overseas, and you deploy, you have first and foremost the responsibility of the people that serve under you, and that’s got to be the most important thing that you care about. It doesn’t mean that your job is not to put their lives at risk because, unfortunately, sometimes it is exactly your job to put both yourself and others’ lives at risk. It’s to do it in ways that eliminate the obvious risk so you can only react to the things that you don’t see, to that uncertainty that you mentioned. Being in those environments, what they did for me is they made every decision in my life after coming out of those environments a little bit easier to analyze and reflect on, and make decisions on, even with that data, even with uncertainty because the consequence of every decision after those deployments, in the business world, isn’t as dire and as serious as the consequence of making bad decisions on the battlefield, and those being loss of life, loss of civilians, whatever may happen. I took that experience of the military and those deployments overseas, and it shaped my ability to now be comfortable making the big decisions with minimal data in taking that leap. Basically, because at such an early point in your professional career, when you have to make decisions that have such dire consequences, the perspective you get after that is like, “It will never be as bad as this, so let’s try this. I know 15% of what I need to know, but I’m comfortable with that. If this next variable pivots, and I have to adjust it, what’s the worst that can happen. We have to adjust; we have to figure this out; we have to do this.” It helped shape that comfort in the chaos of running and leading a business.
Alejandro: In your case, after these unbelievable experiences in serving in the Army, you came back home; you came back to the U.S. Eventually, you decided to go back to school, and this was business school. So why business school?
Erik Schiemann: Good question. I knew I didn’t want to be a lawyer anymore. I’d figured that much out. I didn’t know exactly where in business I wanted to go, but I knew that to accelerate the leadership experience that I had while I was in the military, I needed to train myself in new ways. So I wanted to dig a little bit into business, economics, statistics, finance, and all that stuff. I just didn’t have a deep workbench of tools, so that’s why I went to get a business degree, not thinking I would pursue any particular avenue of study or profession, just knowing that it was broad enough that it would expose me to things that I would figure it out. That was the decision.
Alejandro: While that was going on, you got a glance for the financial sector, and what a time, as well. It was probably like going into war, as well, to a certain degree because that was Lehman Brothers, and you had a first line of exposure to what ended up unfolding in front of your eyes. How was that experience, and having access, and more than anything, learning from that, as well, for you?
Erik Schiemann: That’s the key, I think, was learning from it. I did my first year of business school. Anyone who’s got an NBA knows that your first year is about getting your summer internship. I got heavily recruited, mostly based on my military background. All the big Wall Street banks are so veteran; they’re so great at making you feel comfortable, so they recruited me in, and I chose Lehman Brothers for that summer. I think this was the summer of 2008. Here I was at this big bank learning. As a summer associate, the M&A worth, debt, equity, etc., I was just drinking from the fire hose. Every Monday, there was a meeting where the company itself was telling all of the employees that were in the investment banking area, “Here’s the status of the business. Don’t pay attention to these headlines. We’re fine.” It was a really interesting dynamic, and of course, as a summer intern, I believed it. I went back to business school that fall, and I was sitting in class with one of my friends, and he shows me on his phone the sinking price of Lehman Brothers until it eventually just went to zero. That is the magic moment where the financial crisis of 2008 started. I went from having a full-time job offer to a zero job at all. It taught me that transparency to employees is important, with some limits. I think there’s no way that the then leadership of Lehman Brothers could have come out to all of their employees and be like, “Look. We can’t figure this out. These things are spinning out of control, and the amount of debt is not even fathomable to what we have in equity.” However, it does say something about leadership when they know that and can still sit in front of employees and say, “Things are fine.” So there’s a balance there. I’m not saying that it should have been one or the other, but it definitely opened up my eyes to what is the appropriate amount of things that employees need to know in order to make good decisions for your business, but also to be that good employer and to give them the trust that they deserve and to make sure that they have the information they need to make decisions. I learned that very early at what happened to be a big macroeconomic U.S. event. I ended up finding a full-time job at the end of that year with Barclays and did about two years of investment banking with them.
Alejandro: That was the segue, as well, into what ended up being your baby today, Distributed Solar. One event that, as they say, ideas are dormant and in the back of your head, and they take time to incubate. But I think that, for you, coming back from the army, you took on sailing, and I think that was, to a certain degree, your exposure into your love for solar. Can you tell us about that and walk us through that?
Erik Schiemann: That’s a good point. When I was overseas, I was, obviously, in land-locked countries. When I came home, I was like, “I need to learn how to sail.” For some reason, it felt therapeutic. I enrolled with my dad in a sailing course in Indianapolis, Maryland, and got certified. I’m not a great skipper of boats or anything like that, but I wanted to learn how to do it, and I wanted to learn from the bottom up: how do you do this? How do you do that? What does this mean? What I realized was that whether it was that, in particular, whether it was becoming an infantry officer in the army, to be a good infantry officer, you have to first learn how to dig your own foxhole. You have to learn how to clean your own weapon. You have to learn how to do these things. What I didn’t realize at the time, but when I look back on it in reflection, whether it’s sailing, whether it’s being an infantry officer, etc., you have to first know how to do what your core is in your business and in your profession before you can then properly lead it. I don’t mean that there are people out there who can do things 1,000 times better than I can do them because there are, and I need to hire those people to bring that benefit to the business. What I mean is that when I first started the solar piece of the business that we were doing at GE, I spent my time on a local community college online course learning about solar, learning about the technical aspects of it so I could speak the lingo, so I could understand how energy is converted into energy, or solar energy is converted into energy. I had to have that so that I could speak intelligently to engineers and so I could talk about financing. The first business financial model that I had; I built. The first contract that we went out and sold, I helped write. Now, fast-forward where we are, when I had my commercial team or my structured finance team or my engineering team, they are light years ahead of that moment in my timeline. But I have a basic understanding, I have the depth, and I understand how they all fit together because I’ve been in their shoes, not at this scale, but at a scale that was in the past. I feel like that’s a really important thing that I learned from both of my own experiences, but I think it’s a real key to being good at building companies. You’ve got to learn how to build the foundation, and then you add onto it as you go.
Alejandro: You landed at GE, which was the next step in your journey. When you were at GE, the idea for Distributed Solar comes about, and you literally developed this within the organization of GE, but then all of a sudden, this ends up becoming a spinoff, and here you are, now with great people like BlackRock supporting it. That probably was not an easy thing, so how did you come across this idea, this opportunity, and then what was that process of building it under such a big umbrella where there’s so much red tape in order to execute. Obviously, when you are building something, you need speed; you need to execute very quickly. So how was that for you? I’m sure it was probably frustrating for you as well.
Erik Schiemann: It was moments of frustration and also just moments like, “What’s the worst that can happen?” Again, going back to my military days, it’s like, “Okay. If I get fired, I’m confident that I’m going to figure something out.” I came into GE after my time at Wall Street and joined the renewables business, and gravitated into the financial decision of whether or not to build a large solar factory or to not build it. A long story short, some of the analyses that I helped contribute to said, “Do not build it.” The historical view for GE was, “Let’s be an OEM. Let’s build solar modules. Let’s build solar inverters, and let’s sell those as products and then do the services on them.” In solar, that’s not the most profitable business model and definitely wasn’t a good fit for GE at the time. So GE decided to exit that. Because I was somewhat a part of that analysis, I stayed on, and it was this gaping hole of “What do we do in the solar space?” So I dove deep into residential solar thinking from an end-user perspective, a home. I did the analysis on my house, and then I dove deep into commercial industrial solar and utility-scale solar thinking from whether I own solar modules or not, who is using the electricity, whether it’s the utility, whether it’s Home Depot, and factoring to those models from a customer perspective and build out all these financial models and analysis, just put it all together. It came to me that for GE, the best place to play is not residential. It’s definitely not utility because we may compete with GE’s existing customers, so it’s got to be this sweet spot of C&I, and no one is doing it. There are a couple of big companies that are out there that are failing. There are regional people out there, but they don’t have the national scale. I’m doing this kind of with a mandate to take a look at it, but also, I didn’t know who my boss was. I wasn’t sure what to do. Instead of making a pitch internally to GE to say, “This is what we should do, I decided to take it a step further. I actually went with my wife, and I think we had two kids at the time—maybe just one kid. We drove to Boston during a week and literally went into car dealerships. I cold-called and just walked in and started pitching them solar at their sites. There was not a business. We had nothing, but I went in and said, “Hey, my name is Erik Schiemann. I’m from GE Solar. What would you need to think about in order to put solar on your site? How do you think about electricity? A couple of them I got kicked out of. Other ones, I got good insights. It definitely was uncomfortable, but it started to resonate with me that this is an underserved market that needs scale; it needs something national. Then, I started to go out and really amp up what I could do from a sales perspective. We got our first deal, which is a two-megawatt system. I went back into my leadership at the time and said, “I just sold a system. Now we need a business around it.” So I won the customer, forcing GE’s hand. Thankfully, I had supported leadership, and they said, “Yeah. Let’s see what we can do here. Let’s build it out.” I got a couple of engineers, a couple of project managers, built that system for profit, and then it snowballed from there. It was always this balance of what we’re doing versus what is GE’s core. Then what we’re doing as far as like: could this disrupt the future of GE. And it could, so I played that inside GE of that internal disruptor like, “You don’t know how much it could disrupt your business, but I will learn. We’ll learn together. I’ll show you these deals. We’ll sell a couple here; we’ll sell a couple there. Through that process, I think it helped a lot of leaders at GE figure out the future of electricity. We kept winning more deals, and we kept bringing in financing, then origination, then development. Then we had a supply chain need. I think GE and I, at the time, both thought that this was an experiment to disrupt, and it became a business. I’d have to navigate whether I was part of renewables, or eventually, I became a part of Current, and I helped start Current, which was this enterprise within GE that was designed for that end customer commercial with lighting, efficiency, and software. That came and went, and we remained. We got to a point where we were gaining market share. I got a chance to pitch to one of the CEOs at GE at the time, and I said, “I think it’s time where we make a decision as a company to either go all in 100% of something that is going to be amazing, or you’re going to let it die on the vine, and you’re going to own 100% of something, and you’re going to let it die. Or why don’t you own 10-15% of something but let it grow. It’s going to be more valuable to you anyway.” I think the timing was right. I got permission to do that. Then I took the business on a roadshow. We picked investors. We had 20 investors that showed initial interest in helping us spin the company out of GE. I narrowed it down to six, and then narrowed it down to three, and then two, and eventually went with BlackRock, and then became an independent company in 2019, distributed solar development, and then midway through 2020, I realized that it was probably time to fully buy out the rest of GE share, which is nominal at the moment anyway. Then, in 2020, I bought out the rest of GE’s minority share in the company, and here we are today.
Alejandro: For the people that are listening, what is the business model of Distributed Solar?
Erik Schiemann: We seek to provide sustainable energy for our customers, and we tend to do it with onsite generation. So, what does that mean? It means we go into your facility. We have AKIE, Home Depot, etc., where we’ll analyze currently how you buy and use electricity. Then we’ll propose to you to build a large parking structure, covered parking, with solar on the top, maybe storage on the side. We do all that. We charge the end customer nothing for it. Instead, we’ll sell them the electricity through what’s called a PPA, Power Purchase Agreement. We own the asset long-term. I own the solar assets, and I generate a return from selling the electricity from those assets. For the end customer, they get an OPEX saving because we sell the energy to them at a lower rate than what their utilities can provide non-renewable energy for, and they have no upfront CAPEX, so they get an esthetically-pleasing, a lot of time, covered parking lot, rooftop or ground-mound system and 20 years of a locked-in fixed energy rate in most cases, so that’s a good benefit. In DSD, we own the assets. We get a return from the sale of electricity. We manage them, and our business has everything from origination development of the asset, engineering, project management, structured financing, and asset management, which is not across all of America.
Alejandro: In terms of capital, you guys probably have required quite a bit of money to execute on this. So how much capital have you guys raised to date?
Erik Schiemann: Most of our money that we need comes from, not at the corporate level, but at the project level because every one of those projects that we build needs some form of structured finance through tax equity and then debt. We provide the equity piece of it. To date, I think we’ve raised almost $750 million in project-level capital. We don’t disclose how much we’ve actually raised with BlackRock, but it’s an order of magnitude to help us grow our SGNA, our budget, and they also, with us, are the sponsor equity on all of our deals, so that’s where the ownership piece comes in for all the projects that we’ve built.
Alejandro: Today, is there anything that you can share in terms of the number of employees or anything else to really understand the scope of the operation of Distributed Solar?
Erik Schiemann: Yeah. When we spun-off from GE, I think we were at 50 full-time employees, and I think today we’re closer to about 120.
Alejandro: Very cool. I know that, for you, definitely taking care of your employees is like taking care of your soldiers to a certain degree, so can you walk us through how it’s similar in that sense of ultimately taking care of your people. How do you go about that?
Erik Schiemann: It’s really important. The beauty of renewable energy space is that you have a lot of very motivated, not just financially motivated, but really passionate creative people in the marketplace that want to do better for their families and do better also for the environment. But they require a certain level of things in return for employment. I think today’s employees are, to me, very similar to my soldiers when I was in the military in that if you arm them with transparent information and the tools that they need to get the job done and candor; you treat them with respect regardless of whether they’re very high ranking or very whether they’re a new person in the organization. Then you look after them, and you make sure that they know that “Mistakes are going to happen, and we have each other’s backs. The biggest thing we can do is learn from those mistakes.” It’s the same thing that I tried to do when I was in the military. You lead from the front, but you take good care of everyone that’s coming with you. It has spilled over into my business career. With our employees at DSD, I still have 120 people. We have bi-weekly meetings where we go over the financials of the company with every employee so they can see exactly where we are versus where we’re trying to be at a goal level. They can click on our CRM and see those stats anytime they want to with all the real-time data in the business so they can make their own informed decisions. The best employees are those that can make real-time excellent decisions in the moment so that you can keep projects moving. I find that you have to trust, and as part of that trust, you have to take good care of them, and you have to educate them, so they understand your business model, your goals, where you’re trying to take the business, how we make money, and how we create value. In return, because we’re renewables, employees, as a whole in a market, are so topnotch and are so excellent, they respond. Not every company, I guess, leads like that, and I think there are a lot of people who are dying for that opportunity. It makes them feel a little entrepreneurial. They get to take some ownership of their process, their decisions, whatever because they have the macro picture. They understand what the left and right limits are to make those types of decisions, and I think that has helped us grow the business in a good way.
Alejandro: You were alluding to goals and then understanding where things are heading, so imagine you go to sleep tonight, Erik, and you wake up in a world where the vision of Distributive Solar is fully realized. What does that world look like?
Erik Schiemann: It would help me sleep if we were at that vision. [Laughter]. What does it look like? I think it’s a vision where every major parking lot in the United States that has no other use besides parking cars, and it’s just blacktop is covered with solar, is connected to storage, and that electricity is going into buildings that no longer need to buy coal power or no longer need to buy natural gas and that DSD had something to do with that full transformation and created value along the way, both for our end customers, and obviously, for ourselves. That would be a remarkable day. I think we’re in the very early endings of what is the path to get there. I think people are seeing that is a clearly open opportunity and a good opportunity in the next five to ten years to get just there, and we’re seeing a lot of movement in the industry to get there. I think that’s what I’d like to see.
Alejandro: Now, imagine that I give you the opportunity, Erik, of transporting you back in time, and you’re able to get a chance to meet the younger Erik. We always know that our younger selves never listen, but imagine that younger Erik actually puts his ear closer to the older Erik where you have that chance of giving your younger self one piece of business advice before launching a business. What would that be and why, given what you know now?
Erik Schiemann: That’s a good question. I think it would be the advice—while I always believed in it, I could have had a couple more people telling me, so I’d try to tell myself, “Hang in there. It will all work out. Just because you have a plan doesn’t mean it’s the plan that’s actually going to be the way it goes.” I was always comfortable with this that we talked about managing through uncertainty and all of that, but I think it would have been helpful to go back and have my future self tell my past self, “It’s going to be okay” because there are a lot of moments along this career where it felt like, whether it was going into the military, or whether it was going overseas, or coming back, or being at Lehman, or even going to GE and not knowing if that was the right call where it didn’t always feel like the right decision. I look back on it now, and I have all this confidence, “Oh, it all worked out. It was totally the right decision. It all fits together.” But, at the time, it didn’t feel like that. It felt uncertain. It felt scary. It felt anxiety-causing. So I would go back and tell the younger version of me, “Hey, there’s a plan here, and it’s all going to work out. Have faith in it. Stay humble. work hard, and learn, and nothing bad will happen.” That’s probably what I would say.
Alejandro: I love it, Erik. So for the folks that are listening, what is the best way for them to reach out and say hi?
Erik Schiemann: Probably through my email. It’s [email protected]. That’s the best way to get directly ahold of me.
Alejandro: Fantastic. Erik, thank you so much for being on the DealMakers show today.
Erik Schiemann: Thank you for having me. I really appreciate it.
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