In an effort to lower the barrier of entry for energy investing, EnergyFunders launched as an investment platform to simplify raising capital and offer direct investment opportunities into Oil & Gas projects, developing companies and emerging technologies.
The Houston-based company developed its platform to easily connect buyers and sellers with energy investment opportunities. Energy companies looking to raise their seed fund or Series A funding round can have their project posted on EnergyFunders and shared among those with vested interests in energy projects. And with recent upgrades, the platform will support opportunities for alternative energy projects and products.
EnergyFunders Chief Operating Officer Derrick Hale said the company has been growing organically since he started as COO a year and a half ago. Within the next 18-24 months, Hale estimates $100 million could “easily” be on the EnergyFunders platform.
“We are at a scalability stage right now,” Hale says. “And Dwolla has been instrumental in our growth. We have a good project flow and we are about to put a bunch of gas on the fire.”
Manual processes were stunting growth
Prior to opening an investment opportunity on the company’s platform, EnergyFunders fully evaluates each potential project and company. Accredited investors in all 50 states are able to invest in an oil or gas project, with a minimum investment of $5,000 and the average investment size being $275,000.
For the EnergyFunders marketplace, any U.S. citizen over 18 years old can invest. These projects are usually energy tech or service companies looking for growth capital.
“It’s a very manual process in oil and gas,” Hale says. “There’s accounting technologies and platforms that help with these kinds of things, but we’re not your traditional oil and gas company and don’t need the complexity of the oil and gas calculation. We needed an easy, simple, deployable payment solution to help us streamline these manual processes in order to grow our business.”
EnergyFunders Chief Technology Officer Aalok Shah said in the past, paying investors or funding projects was done by sending paper checks.
“So then they would mail checks in and we would mail checks out, it was a very manual process,” Shah said. “So as a platform, one of the things we wanted to do is automate a lot of these manual processes. It didn’t really make sense to do things one by one.”
Finding a solution to scale a business
After a lengthy search for a more effective payments solution—and even considering building its own—EnergyFunders partnered with Dwolla.
“We did consider building our own payments solution, but a few big factors were some of the things Dwolla resolved for us,” Shah explained. “Being able to access the ACH Network to send funds to a bank account was key. In addition, Dwolla took care of the KYC and AML check. Those things alone would be resource-intensive to build in-house.”
Shah said he believed Dwolla’s mass payment feature and easy to use API would allow EnergyFunders to pay its investors in a more efficient, reliable manner.
“We could issue a mass payment, tell it the breakdown for each individual user based on their investment percentage and then it pays them all out in one go,” Shah explained. “It’s much easier to keep track of, manage and simpler overall.”
By automating these processes, Hale estimated a 50 percent cut in the amount of time mailing paper checks and a cost savings of about 20 percent after considering the cost of the Dwolla Platform.
Integrating with a payments platform
EnergyFunders was able to easily build Dwolla’s API integration directly into its new platform. Besides leveraging the developer documentation, Shah and his team worked closely with Dwolla’s developer advocates to integrate Dwolla’s API.
Shah said he utilizes the dedicated Slack channel that was provided to him during the onboarding process, which made working their Dwolla support much easier.
“In terms of getting the API integrated, that was fairly straightforward,” Shah said. “The cross-functional teams that were needed for us to be fully onboarded were added to our particular Slack channel, which was extremely helpful when needing answers to questions. Since we have gone live, I haven’t had much need to contact support over the last month or more.”
Hale described more about their application and how the oil and gas investments are placed into an escrow account until being pushed to an operator for investment. When revenue comes back from a project EnergyFunders uses the Dwolla Platform to proportionately initiate those payments.
“Dwolla is a very simple solution for us,” Hale explains. “It really does support how we solve our money distribution problems.”