Enabling Capital for Distributed Infrastructure Projects
Banyan Infrastructure provides software to enable capital flow to infrastructure projects, minimizing the manual and time-consuming processes that typically exist between developer, borrower, and lender. Leyline Renewable Capital interviewed Amanda Li, Banyan’s chief operating officer and co-founder, about why she started the company, and discussed how the company’s unique technology helps investors and lenders streamline origination and servicing for distributed infrastructure projects.
Lessons Learned from Generate Capital
Amanda worked at Generate Capital before she started Banyan Infrastructure. Both companies have a similar mission: Deploy capital quickly for the needs of sustainable energy infrastructure. The Organisation for Economic Co-operation and Development (OECD) estimates that the U.S. alone needs $6.9 trillion in infrastructure investment through 2030 to meet climate goals. But it is difficult for one fund, such as Generate Capital, to meet the enormous infrastructure needs and do it as efficiently and effectively as possible.
There are clear limitations to solving the infrastructure funding gap simply by hiring more people—as Amanda said, “You can’t just throw smart people at the problem.” Rooms filled with newly minted MBAs churning out Excel spreadsheets, extracting data to understand the loan underwriting process, are just inefficient. And internal rate of return calculations may undervalue a smaller infrastructure project in a rural community when burdened with proportionally high overhead costs, and subsequently also miss out on clear, non-monetary community benefit. So how can these problems be addressed, while still meeting large funding needs for infrastructure?
Enter Banyan Infrastructure
FinTech, a term used to describe financial technology, includes any company using the Internet, software technology, mobile devices, or cloud services to connect with financial services. Unfortunately, FinTech has not reached project finance, presenting a challenge as infrastructure transitions from centralized facilities, like coal or hydro plants, to distributed systems, like small clean energy arrays. Banyan Infrastructure is interested in these types of projects—where one single investment deal is replaced by hundreds of smaller ones. Collectively, these small systems include hundreds of contracts, documents, and data. Without adequate FinTech, managing the data quickly becomes burdensome.
In creating Banyan, Amanda tackled this challenge through a FinTech lens, asking: How can this lending process be made with greater value for the entire lending community? The answer was to build a platform that standardizes all the complex deal structure and lending information and takes away the time-consuming process of dealing with contractual documents and manual data collection for distributed projects. This solution de-risks these assets for lenders by making data available and auditable, decreases time and motion overhead costs, and creates financial liquidity, while lowering the cost of capital.
But Amanda notes that once she went down the technology path, she quickly realized that it wasn’t feasible to standardize every deal. Instead, she started modularizing parts of the contracts, such as technology risk, warranties, offtake agreements, pricing, and legal work that is similar across different deals. In other words, a lender may still pick/choose how to structure a deal, but then rely on modular standardized components to service the contract. This gives people more freedom to think about the larger business questions, because they are not knee deep in spreadsheets and other necessary, but time-intensive and repetitive tasks associated with each individual loan.
When asked why the company chose the name Banyan, Amanda says that they are akin to a Banyan tree. Banyan trees put out shoots that grow down into the soil and then sprout to form into additional trunks. They essentially form “forests” that are all a singular, interconnected organism. The tree is also symbolic in traditional communities, forming a central place where people come together and trade goods.
The name Banyan evokes what Amanda says she wants to achieve overall: a life cycle of project finance investment, where data is brought in, deals are made, and then sold in the secondary market. Looking five years in the future, Amanda sees Banyan Infrastructure as an entire ecosystem for financing sustainable infrastructure. Developers, asset owners, everyone should all be on the Banyan platform and deals can be done across technologies, in all geographies. Why not take on the world?
Leyline Renewable Capital is exploring how to use technology to streamline and digitize its processes. Our interview with Amanda and Banyan Infrastructure was an enlightening first investigation for how we may begin to do so. While operationalizing these digital processes seems daunting, Amanda notes that it all comes down to starting with the workflow. The things that might be “nice to have” may not always be the easiest thing to digitize, and so it’s important to prioritize what data are needed to make lending decisions. We can then tackle that lowest hanging fruit and begin that journey to technological standardization.