The South African solar startup, Hohm Energy, is currently suspending operations due to financial challenges, including cash flow shortages and debt repayment difficulties. This comes just months after the company secured $8 million in seed funding in February.
Hohm Energy has laid off an undisclosed number of employees and initiated a “business rescue” process to address its financial distress.
According to South African law, this “business rescue process”, lasts three months, and involves a business rescue practitioner who investigates the company’s operational affairs, meets with the creditors, and provides insights into the company’s future outlook.
We are working with legal counsel to get a better understanding of a way forward, but Hohm is currently not trading.
Franc Gray, CEO of Spark Energy Services (Hohm Energy’s parent company).
As a result of the current situation at Hohm Energy, Tim Ohlsen resigned as CEO, handing over leadership to Ryan Steytler who initiated the business rescue process. According to Gray, Steytler made the decision independently and against the shareholder’s advice.
In February, Hohm Energy announced that it was on track to be profitable in 2024 stating that it has generated over 17,000 custom client solar rooftop designs estimated to be worth $190 million, boasting $90 million in financing applications to implement them.
Adjusting to the anticipation of demand, the company rapidly increased its workforce. However, the South African grid electricity was greatly improved following the announcement from Hohms, leading to the first hint of a disaster waiting to happen.
Hohm had a lot of sticky costs and could not act quickly enough to restructure that cost base as revenue tapered off because of slowing demand for solar.
Franc Gray, CEO of Spark Energy Services (Hohm Energy’s parent company)
According to an anonymous investor, Hohm Energy also suffered from a negligent governance structure since its early days, which directly impacted the efficiency of its operating model. It was so bad that the company only formed a board a month before the $8 million seed funding.
Spark Energy CEO, Gray remarked that Hohm Energy’s management should have reported more transparently about the company’s status, aiding the parent company in providing proper assistance.
After the business rescue process, Spark Energy Services plans to rebuild the startup under a different management and model.
