The ambition that underpins Nashville’s newest homegrown billion-dollar business revealed itself in an unsuspecting place, at a Green Hills conference table in a three-story office building behind a Dillard’s.
It was there in 2015 when Byron Smith, the first outside investor in solar power company Silicon Ranch Corp., asked co-founder Reagan Farr where he wanted the business to be by the end of the decade. Farr went for it, aiming for 1 gigawatt of solar panels in operation. Smith raised the stakes, declaring the goal of earning a $1 billion valuation.
“A gigawatt was just completely disconnected from the reality of where we sat at that time. ‘We want to be a billion-dollar company’ would almost be like saying, ‘I’m going to live on Mars in five years,’” Farr said. “It just didn’t really seem within the realm of possibility.”
Silicon Ranch reached both milestones with two weeks to spare. In mid-December, the company closed a $225 million equity raise, the second-biggest round of solar investment in the world last year. Silicon Ranch’s investors valued the business at more than $1 billion — officially reaching “unicorn” status, that catchy Silicon Valley lingo describing startups with a ten-digit-plus valuation.
The jolts keep coming: Already this year, Silicon Ranch has added as much power to its project pipeline as what it took the company its first seven years to amass. Silicon Ranch plans to hire about 40 people this year, which would boost headcount by 50%.
The “unicorn” label might be an imprecise term, but that doesn’t dilute its cachet — attracting attention that could further raise the city’s brand and introduce a different type of investor than the health-care-minded financiers Nashville is known for. Silicon Ranch could help hitch the area’s economy to a piece of the tech and energy industries that lack a major local presence today. The company already has bolstered the region’s arsenal when competing for major economic development deals, as shown by its role in drawing Facebook’s $800 million data center to Gallatin. By Farr’s own admission, Silicon Ranch has barely tapped the benefits of its single-largest investor: Royal Dutch Shell, which bought a 44% stake three years ago and views the company as its U.S. solar platform.
“I have felt like we had a tailwind the whole time, but it sort of feels like we have a hurricane at our back now,” said Smith, co-founder and managing director of Mountain Group Partners. “This company has six to 10 years of exponential growth ahead of it.”
It all has Farr pursuing a new billion-dollar target. Annual revenue surpasses $100 million now; Farr anticipates reaching the $1 billion mark “way before” the end of this decade.
“This will be a very large, meaningful company in the Nashville area for a long time,” Farr said. “You have the opportunity to build a new industry cluster in and around Davidson County that can have all kinds of ancillary benefits and bring new talent to the city, in a way like HCA created one.”
As Gov. Phil Bredesen neared the end of his term in 2010, he began exploring a potential business venture with two of his commissioners: Farr, who ran the Department of Revenue, and Matt Kisber, who led the Department of Economic and Community Development. Bredesen pitched solar, an industry he’d sought to bring to the state, including by championing new tax breaks. The trio decided to plunge ahead over dinner at a hotel in Hong Kong while on a state recruiting trip, Bredesen recalled.
“The genesis was not so much with a really clear idea about where the opportunities were, but the sense it was a really rapidly changing field and some smart people could figure out how to operate in it,” Bredesen said. He came up with the company name, designed the logo and put up the initial $500,000 loan.
Farr, an accountant and lawyer by training, left the administration to write the business plan. Much of his timewas spent educating potential lenders and utilities, whose usual contracts needed a new vocabulary to account for solar.
“There was zero solar industry in Tennessee when we started,” Farr said. “You’re a pioneer. The early years were incredibly exciting because there was no template.”
In 2011, Farr thought he’d cemented a crucial early deal to install 1 megawatt of solar panels on 6 acres of land at Smyrna Airport. After installing panels on several commercial rooftops, the airport project would pull Silicon Ranch in the direction it really wanted to go: expansive arrays of solar panels spread across acres of land, like a utility would do.
“Some local company down there in the HVAC business swept in at the last minute, with their relationships, and took it away from us,” Bredesen said. “Of course Reagan was all depressed about that — it was that year’s project. I promised him the day [would] come when what you just missed there isn’t a year’s production, it’s a day’s production.”
He was right.
This year, Silicon Ranch will add an average of 4.5 megawatts per day, including new construction and new contracts the company will sign. That’s enough to power about 855 homes for a year.
Breaking free of gravity
By 2015, Silicon Ranch owned 52 megawatts of panels in operation, including at the Volkswagen factory in Chattanooga. A Canadian investment fund had just bought a minority stake.
Though Silicon Ranch had just eight employees and the industry still wasn’t widely affordable, Farr and Smith sensed it was time to ramp up.
“Management teams always, by their nature, are anchored in last year and anchored in how hard things are. Investors have been able to see enough of these things … that we’ve seen the ones that break free of gravity and really take off,” Smith said.
“Early on, it’s important to invest in the company that you are,” Smith said. “But there comes a tipping point to make the decision to invest for the company we’re going to be. There’s that moment where you realize, ‘Now’s the time.’”
Silicon Ranch attracted Switzerland-based Partners Group to pay $100 million for a 44% stake in the business. Not long after, Farr began getting calls from a persistent investment banker in New York City. Farr politely declined, having just closed an investment round. By the third call, the banker had permission to reveal his client: Royal Dutch Shell. The oil and gas giant wanted a piece of the solar business, and it was either going to invest in Silicon Ranch or build a company itself.
“Shell has certainly helped as a ‘Good Housekeeping’ seal of approval,” Bredesen said. “When we’re talking to companies like Facebook, they believe Shell is a company that does its homework.”
In early 2018, Shell bought Partners Group’s 44% stake. By year’s end, Silicon Ranch announced the first of several solar farms that would power Facebook data centers. Silicon Ranch is building solar farms in Jackson, Tennessee, and in Southern Kentucky to support Facebook’s Gallatin data center and General Motors’ Corvette factory in Bowling Green, Kentucky.
“That’s why I say the future is so bright: We haven’t even leveraged the synergies of Shell yet, but we will,” Farr said.
‘Still a big blank whiteboard’
Industry analysts can list several companies that do what Silicon Ranch does: find land near the grid, acquire and install solar panels, and sign long-term contracts with utilities or individual companies.
Just about every factor lines up in their favor. The price of solar panels has fallen more than 80% in the past decade, and batteries have enabled solar companies to supply even more to the grid. Both have helped lower the cost of solar for customers. Companies from Apple, Google and Facebook to industrial giants Caterpillar and General Motors are insisting on renewable energy for their operations. Many utilities are racing to erase their carbon emissions. Solar accounts for almost half of the new power coming online in the U.S. Interest rates remain low, helping spur construction.
“It’s not a fringe technology anymore,” said Ben Kallo, senior research analyst for sustainable energy at Robert W. Baird & Co. “It seems like everything is peaking right now, [but] I still think we’re in the early innings. It’s still a big blank whiteboard, I think, for development in solar.”
Another sign of that is Shoals Technologies Group Inc., headquartered in Portland, Tennessee. Shoals makes products for solar panel installations, such asfuses and cable assemblies. The company raised $1.9 billion by going public in January, with investors driving its opening stock price 20% higher than the mark set by the company. It’s now valued at nearly $6 billion.
“There’s a lot of capital looking for a home in this space, and it’s still so young — it’s a young industry without a lot of quality opportunities. That’s why you saw Shoals take off after its IPO,” Farr said.
Farr didn’t rule out Silicon Ranch becoming another Nashville-based public company.
“We need to continue to execute on our game plan, but this company lends itself to it. It would be a good public company because the revenues are predictable, stable and it’s a growth story in an ESG industry,” Farr said, using a term for companies that have positive environmental and societal impact.
Farr can’t say when he might really entertain going public.
“One of the things you have to do in this space is reset your goals like every six months, or you’re underselling what you can accomplish,” Farr said.
Bredesen, the chairman emeritus who has now loaned or invested $33 million to Silicon Ranch, echoes that priority.
“They have a management challenge, really making sure they stay ahead of the wave of growth that’s happening, with the staffing and expertise to stay on top of it,” he said.
Amid the frenzy, Silicon Ranch still made time to mark the occasion of its latest equity raise, the one that earned the company a billion-dollar valuation. In January, Bredesen dropped off a framed gift for Farr and Kisber. Bredesen, who’s an oil painter, had refreshed the company logo with an addition — a unicorn, perched atop the highest mountain peak.
How Silicon Ranch powered up
Think big: The founders made HCA Healthcare, Nashville’s $52 billion hospital goliath, their model. “They certainly didn’t invent the private hospital business. What they did is say, rather than this being a mom-and-pop operation with one-offs, if you had a company that had expertise and standing and a track record and access to capital to take this business to a different scale, you could make a successful company out of it,” Phil Bredesen said. “Sophisticated companies don’t want to deal with mom-and-pop shops.”
Act big: From the outset, Silicon Ranch used the Bradley law firm and hired EY to audit its financial results. Both lent credibility. “You had a Big Four accounting firm basically auditing a checking account, which was about all that we had that first year,” Reagan Farr said. “But we built the company saying we’re going to build this like it’s going to be a big public company. As a young entrepreneur, that’s not intuitive.”
Be different: Most solar companies lease land; Silicon Ranch buys it. Many solar companies sell their projects; Silicon Ranch wants to own them for decades. “We knew it would be a lot slower to grow that way, but we wanted to figure out how to raise the capital and own it for the long-run and differentiate ourselves from a lot of development companies,” Bredesen said.