In flush times, the funding of a company is not necessarily indicative of the potential success of that company (witness the last dot-com boom.) One of interesting effects of a severe downturn in capital markets is that market forces have a tendency to mercilessly cull the herd. The money that does flow in times like these tends to be much more discriminating.
That is why I received this morning’s news that Fisker has secured an additional $85 Million in financing with such interest.
I’ve been on record before with some scepticism about Fisker that went beyond the natural competitive sabre rattling that naturally happens when you are CMO of their competitor. My scepticism, which I think is fair and objective, mostly relates to the fact that they have not yet demonstrated a fully working prototype – which needs to be completed for crash tests to start – to journalists. This makes their previously announced schedules questionable, although they have recently slipped the expectation of customer deliveries to next spring.
So that is why the news of a significant round of funding for Fisker in this environment must force me to recalibrate my scepticism (I just IM’d a reporter telling him that I was writing a positive post about Fisker and he said it was a sign of the apocalypse.)
Incidentally, I don’t buy the argument that a company’s business plan is somehow viable just because a top-tier venture capital firm has invested. The nature of Venture Capital is to invest in a portfolio of companies with the expectation that most will fail.
But an $85 Million investment with new outside money is a positive sign, no doubt, that things are progressing. Bringing the car to market still depends on successful development of a working prototype and successful crash testing and production ramp up. These are not minor challenges.
What makes this news all the more interesting is that Fisker’s nearest competitor (and my former employer), Tesla, has struggled to raise significant capital since the capital markets collapsed last September. An internal convertible round was eventually closed, but by the company’s own admission it has been difficult. This is despite the fact that Tesla has over 300 cars delivered to paying customers, who are reporting that the cars are working beautifully for the most part.
So what is going on here? It is difficult to say. An announcement of money raised in a private company rarely mentions an important piece of data – the valuation at which the investment was made. So we don’t know if the $85 Million was made at a higher valuation than the last round or in a down round (that is, until Quantum has to report the dilution of its stake in its next 10Q). Similarly, we don’t know if Tesla has been unable to raise capital or if they are just unwilling to raise capital at the valuations being offered.
In any case, if you follow the money, Fisker’s looking pretty good this morning.
DISCLOSURE: Although I was formerly the CMO of Tesla Motors, I have no continuing relationship with or financial interest in the company. Likewise, I have no relationship with Fisker Automotive or their investors.
This post originally appeared on Darryl Siry’s blog. Darryl is the senior analyst for Cleantech at Peppercom Strategic Communications. He can be reached at [email protected] and blogs regularly on www.darrylsiry.com.
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