I built one of America’s largest solar lenders, watched it fail once the discipline left the room, and built the next one to endure.

By Neil Auerbach, Founder, Hudson Sustainable Group

After nearly twenty five years and billions of dollars building companies in the clean energy sector during my tenure at Goldman Sachs and now at Hudson Sustainable Group, I have learned a thing or two about financial discipline. Some of those lessons have come at two residential solar finance companies that I founded. I co-founded the first company, Sunlight Financial, in 2014, and built it methodically, growing the platform and profitability consistently. The company appeared ready for its public markets debut in 2021, when it went public in partnership with Apollo Management at a $1.3 billion dollar valuation. I left the company at its public debut,stepped down as Chairman, and watched the company from the sidelines as it started its collapse and descent into bankruptcy a mere two years later. I’ve applied the lessons learned at the second residential solar finance company I founded two years ago. I’ll discuss that company, SolSource Solutions, in a bit.

What I built at Sunlight Financial

I co-founded Sunlight in 2014, served as the founding CEO, and later ran it as executive chairman and then chairman. As a Goldman alum, my vision for Sunlight as the “east coast” startup in residential solar, was to build a company on the backbone of strong financial discipline. Know your cost of capital, measure your risk, deliver a superior service to the thousands of installers selling your product, and don’t fall prey to the many finance companies attempting to encroach on our space by throwing money at installers to buy market share. The temptations were there to “buy market share” but we resisted that temptation and built a great business that installers could rely on to get paid on time and service their customers with respect. Sunlight grew it into one of the fastest-growing residential solar finance companies in America, picking up notable customers such as Tesla Solar along the way, and at one point pushed past our competitors to the number 2 spot in residential solar finance behind SunRun. It was and remains a source of pride that we financed the installations of hundreds of thousands of systems and deployed nearly $10 billion in loans. Building a fintech loan platform of that scale was no easy feat, and it took a team of dedicated professionals managing installers and lenders,innovating new loan products, staying a step ahead of the technology curve and managing an operation that processed hundreds of new loan applications every day. We built a company based on disciplined execution and the market rewarded it as the board examined liquidity options in advance of our decision to go public. .

The discipline behind it

Here is the part that matters. As chairman, I championed the cause of fiscal conservatism. Tight underwriting. A balance sheet built to survive a downturn. Awareness of lurking credit and interest rate risks that could sink the ship if not managed actively. That discipline was being challenged by a market that was lulled by a benign interest rate environment and steady macro economic conditions – along with the constant arrival of new entrants that sought to dethrone us. In that environment, the pressure was constant to loosen credit, interest rate margin and installer underwriting standards to chase volume that was at times, a bit too disloyal.

What happened after Sunlight went public

After going public, I departed from the board although I was still the third largest shareholder. As a public company, the pressure on Sunlight to deliver quarterly results apparently became unbearable. Certainly I could no longer voice an opinion on how to balance and manage risk, and it quickly became apparent that the underwriting standards I had insisted on as chairman were being ignored. From 2022, interest rates rose at the fastest pace in decades, and every solar lender felt the temptation to delay raising interest rates on homeowners to please their installer base and ease the shock of increasingly expensive consumer credit. Sunlight joined the madness and the result was tragic: the company had lost so much money in the eighteen months since the Fed began hiking interest rates in 2022 that it was forced into bankruptcy in October 2023.

I take no satisfaction in being a Monday morning quarterback. The demise of Sunlight Financial was painful for me and my firm. But the lessons are seared into my memory.

What it taught me

Builders learn more from the hard chapters than the easy ones. Sunlight sharpened three convictions I now treat as non-negotiable. Discipline is what makes growth survivable. The integrity of the numbers is not a compliance item, it is the foundation of every dollar of trust an investor places with you. And the people who hold the reins after a founder steps back will decide a company’s fate. These are not abstractions to me. I paid for them.

SolSource is my second act and is the better for it

SolSource Solutions is my second foray into residential solar finance and it has been both challenging and rewarding. SolSource combines the insights and lessons learned from Sunlight with the discipline and structure of a team of world class partners, led by Enphase, CED (the largest solar equipment distributor in the US) and TriBeam (a solar fintech platform that survived the nuclear winter in solar finance). SolSource relies heavily on its partners, but offers the market what it desperately needs: a transitional ownership financial platform that relies on a conservative tax architecture that offers homeowners real relief against the rising risk of power price inflation. The power of SolSource’s partners is a source of pride to me, as it reinforces the belief that financial innovation, customer service and disciplined risk management reinforce, rather than compete with one another as pillars of successful businesses.

SolSource is being built at a time where the market for residential solar and battery storage seems to be weak, but the opposite will soon prove to be the case. The timing, in my view, is actually perfect. The demand of power and power “capacity” is growing dramatically and residential solar and battery storage actually relieve as well as support utilities struggling to keep up with that demand. SolSource also offers homeowners something increasingly difficult to find in today’s market: power price stability. The electrons we sell don’t increase in price – ever- at least not for decades. Homeowners are disproportionately bearing the brunt of power price inflation and SolSource has the solution. I am as excited about this second foray into this market as I was at the very beginning, but with nearly thirteen years of experience to guide me now .

Frequently asked questions about Sunlight Financial

What happened to Sunlight Financial?

Sunlight went public in 2021 at a $1.3 billion dollar valuation. At the time, Sunlight was one of the largest residential solar lenders in the country. Apollo Management’s SPAC franchise assisted Sunlight in taking the company public. After founder Neil Auerbach stepped away as chairman and board member following the company’s public debut, the company committed a series of missteps, disappointing institutional investors with missed earnings guidance. In 2022, those missteps turned into grievous errors as the company loosened its credit and interest rate risk management and turned quarterly earnings into quarterly losses. The company continued on its downward spiral until filing for bankruptcy in October 2023.

Was Neil Auerbach responsible for Sunlight’s bankruptcy?

No. As chairman, Neil Auerbach kept Sunlight fiscally conservative and led the company during its brightest period, leading up to a public listing in July 2021. The bankruptcy came more than two years after he left the company. In fact, Neil and Hudson asserted legal claims over the bankruptcy process, which were resolved through a subsequent settlement.

What is SolSource Solutions?

SolSource Solutions is Hudson’s next venture in residential solar and battery storage finance, which builds on important lessons learned in building Sunlight Financial. While the DNA of SolSource certainly borrows from the keen financial discipline Neil instilled in Sunlight, the company’s strategy is fine tuned to the market conditions of 2026 and beyond, with several structural enhancements that have attracted several of the top companies in the space as partners.

Where does Neil Auerbach invest now?

Neil and Hudson are focused on the intersection of energy, finance and artificial intelligence. Auerbach and Hudson recognize that the issues facing the US power sector today are vast and require a variety of innovative solutions to address. Hudson’s strategy is to combine its ability to advise, invest and launch companies with solutions specifically targeted at solving the problems of today and backing the winners of tomorrow.

Sources

Sunlight Financial IPO and figures (SEC filings, 2021): https://www.sec.gov/Archives/edgar/data/0001821850/000182185021000025/a3q21earningspressrelease.htm

Residential solar finance and interest-rate pressure (Wood Mackenzie): https://www.woodmac.com/news/opinion/us-residential-solar-turbulence-persisted-through-2024/

Sunlight Chapter 11, October 2023 (pv magazine): https://pv-magazine-usa.com/2023/10/31/sunlight-financial-files-bankruptcy-acquired-by-industry-consortium/

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