Startup bags $2.6 million in pre-seed funding for ‘green’ Bitcoin mining

Aussie startup Arkon Energy has raised $2.6 million in pre-seed funding, for its tech helping renewable energy suppliers make better returns — through Bitcoin mining.

The raise is thought to be the biggest Aussie pre-seed funding round ever, topping one-click checkout startup Instant’s $2.2 million round earlier this month.

Arkon Energy is headed up by Joshua Payne, who is also co-founder and chief operating officer of NYSE-listed special purpose acquisition vehicle (SPAC) Battery Future Acquisition Corp, and Nathan Townsend, former partner at project finance advisory PT Capital.

The founders were initially running the business as a consultancy, working with renewable energy asset owners — wind and solar farms, for example — producing excess energy they weren’t able to supply to the grid.

Those energy providers could get more from their portfolios using Bitcoin mining, Payne tells SmartCompany.

For one partner, a portfolio optimisation study found that of 75 megawatts of energy deployed each day, diverting 8 megawatts to Bitcoin mining could double their entire portfolio returns, he says.

In September last year, Payne and Townsend pivoted the business to also offer operations and maintenance of the Bitcoin mining setup.

While it’s still early days for the business, the founders now have commitments to work with renewable energy suppliers to divert some 44 megawatts to Bitcoin mining.

The round was led by blockchain specialist investment firm Kestrel 0x1, as well as Linked Group Services and a handful of strategic angel investors.

A business case for renewables

For renewable energy companies, the tech is designed to tackle the challenge of grid oversupply. Wind and solar farms can often only sell 50% of the energy they’re producing to the grid, Payne explains.

That doubles the timeline of their return on investment, and means that outside of peak times, many are losing money.

Bitcoin mining also brings in another source of income for renewable energy asset holders, particularly during off-peak times, making them more viable as profitable businesses.

That goes some way to countering the narrative that a transition to green energy would mean a hike in prices, Payne says.

A greener approach to Web3

While cryptocurrencies including Bitcoin are creeping into the mainstream, a prevailing criticism has been the environmental impact of the computer power required to sustain the system.

At the same time, Web3 and decentralisation are becoming more topical.

Just last month, Aussie VC firm Airtree launched a $50 million dedicated Web3 fund, and King River Capital is also raising for a $150 million Digital Asset Fund, having secured commitments of $50 million already.

Solutions like Arkon’s go some way to addressing these concerns, as demand ramps up, Payne says.

“We fully recognise that it takes a lot of energy to process and support the network and we want to be a part of the transition to green energy for that.”

While Bitcoin gets a bit of a bad wrap in some circles, he suggests that it’s analogous to the dot-com era in 2001.

There are currently about 125 million crypto wallets in use today, he says. In 2001 there were about 100 million web addresses.

“I do believe the hype curve is going to be analogous,” Payne adds.

“More activity on blockchain means more transactions required, which means greater opportunity for the miners.”

An IPO on the horizon

According to Payne, this funding will allow Arkon Energy to scale “on a par with our peers”.

Those peers include Mawson Infrastructure Group and Iris Energy, both of which listed on the NASDAQ last year with reported valuations of $1 billion and $2 billion, respectively.

An IPO is “certainly” the end goal for the Aussie startup, Payne says.

“The valuations of our competitors are astronomical and that just gives credence to the interest in these kinds of listed products.”