Enphase Energy Inc. occupies a unique and likely lucrative position in the large but struggling U.S. solar power industry.
The Petaluma-based company makes microinverters, which are needed to convert the direct current produced by solar panels into the alternate current that can be used in the power grid.
The traditional central inverters are typically connected to about a dozen solar panels, whereas microinverters are connected to one, or two at the most, making them able to more efficiently convert the power from the panels into usable electricity.
The company’s revenues, up 45 percent to $216.7 million in 2012, are increasing at a rapid clip, but so are its losses, which grew more than 18 percent. The company is not subject to the steep drop in solar panel prices which has affected panelmakers around the world, most notably Solyndra. However, for its customers, the solar panel installers, the upfront costs of putting an inverter on every panel, as opposed to every 12, are significantly higher.
Furthermore, though it was the first company to produce microinverters at scale, competition, both from other startups and established central inverter manufacturers, is increasing.
Last March the company was able to pull off an initial public offering — the first U.S. market debut for a solar company in over a year and a half — but it raised just half of what it had first planned to, and at a lower price than its private, venture funding rounds, which forced its investors to buy additional shares in the IPO.
THE QUICK BIO
Enphase general counsel J. Taylor Browning, its first and only in-house attorney, has been with the company for two years, split evenly before and after the IPO, which he said doubled his workload.
It was his first in-house job, and Browning was asked to jump in even before his start date, going up to Petaluma for lunch with a room full of investment bankers and auditors. “Every legal issue has been funneled through me from before day one,” he said.
“Most of the people at the company didn’t fully realize just how time consuming the IPO would be. This is the first public company experience for most of the management team,” Browning added.
After getting a degree in history at the University of California, Berkeley in 1993, Browning went to UC-Berkeley School of Law, inspired in part by his father, John Browning, a corporate transactions attorney who has spent nearly his entire career at the California firm Musick, Peeler & Garrett.
After law school, Browning was an associate in the L.A. office of O’Melveny & Myers, doing general commercial litigation for three years before moving up to Silicon Valley and working at Brobeck, Phleger & Harrison from 2000 until that firm’s infamous demise in 2003. “That was character building for all of us,” Browning said. “There was a belief that the Valley was indestructible.”
Still, he said his time there, which included a stint on the outside M&A team for Cisco Systems Inc., was immensely valuable, and helped to teach him what works, and doesn’t, in managing a firm.
He then spent the next nine years at Morgan, Lewis & Bockius before a cold call from a recruiter brought him to Enphase. “It was a great opportunity to get in before an IPO.”
While at Morgan Lewis he worked predominantly with company clients and the notion of going in house began to take hold. “You’re either a deal junkie or want to learn more about companies holistically,” he said. “I really liked it when we would get calls from private companies without in-house counsel about business-type questions.”
INSIDE AND OUTSIDE COUNSEL
Browning will eventually need to expand the legal team, but for now it is just himself and one paralegal who was brought on immediately after the IPO.
Though the company is growing very fast, “profitability is still a big bogey out there for us and cost-consciousness is important,” Browning said. Every department has been asked to cut costs when possible, including hiring, he added.
To that end, he has sought out fixed fees and volume discounts from outside counsel. “We’ve asked our outside counsel to share in some of our pain and have been lucky to continue the relationship on fantastic terms, while reducing costs.”
Most all of the commercial contract work is done in house by the paralegal, which takes up most of her time, and “will just get worse,” he said.
For its general corporate work Enphase typically looks to Cooley partner John Sellers in the emerging companies group as well as special counsel Marina Remennik and associate Donald Haynes.
For its patent and other intellectual property work, the company turns to Ray Moser Jr. at Moser Taboada in San Jose and New Jersey. Moser comes to the office once a month for a patent review board that evaluates potential IP and manages the existing patent portfolio, Browning said.
In the United States, Enphase currently has 23 issued patents and another 73 pending and more than 100 issued patents worldwide, Browning said. To date, there has been no patent litigation and the company has continued to fly under the radar of patent aggregators, he said.
As the company continues a push into overseas markets, its most pressing legal challenge is navigating the different regulations of each locale. These generally center around voltage requirements and restrictions involving the power grid and vary from country to country. Changes recently made in Canada for example, necessitated changes to the microinverters before they could be sold in that country.
For issues in Australia and New Zealand he turns to Minter Ellison and for European Union work he uses Bird & Bird. For China, he uses the firm Zhong Lun.
“We sell a complicated piece of powered electronics and one [jurisdiction] isn’t more complicated than another, but they are all different,” Browning said.
Browning’s two small children — a daughter, 1 1/2, and son, 2 1/2 —take up most of his spare time. When he can, he’ll play a round of golf, but jokingly declined to comment on his average score. He’s also a rabid Cal football fan and is undeterred by their most recent season.
Correction: An earlier version of this article misstated the function of microinverters. We regret the error.