SolarSquare, a Mumbai-based startup, has raised $40 million in what is the largest venture round in India's solar sector, marking a significant milestone in the country's renewable energy landscape.

The startup, which bootstrapped and remained profitable for five years by selling to corporate customers, shifted its focus to residential solar in 2021. Since then, it has scaled to power over 20,000 homes and 200 housing societies across India, making it the largest operator of distributed solar assets in the country.

SolarSquare's unique selling proposition lies in its guarantee of returns on solar investments, compensating customers if systems don't deliver as promised. This full-stack service, which includes selling systems, installing them on rooftops, and offering after-sales services, has proven compelling to customers, with the overall cost averaging around $1,500.

"This is the opportunity of a lifetime," said Shreya Mishra, co-founder and CEO of SolarSquare, in an interview with TechCrunch. "It's not just an industry that's growing superfast — it's where profit and purpose align."

The Indian government's recent incentives have contributed to the surge in solar interest, with only about 1% of Indian homes currently adopting solar power. In contrast, countries like Australia and Brazil have seen significant adoption rates of 35% and 5%, respectively.

To accelerate solar adoption, the Modi government has introduced several incentives, including a production-linked incentive scheme worth $3 billion to boost domestic solar manufacturing, 40% basic customs duty on solar modules to protect local industry, and viability gap funding for utilities to build solar infrastructure in remote areas.

SolarSquare helps its customers identify and avail the benefits of these government subsidies, which include accelerated depreciation benefits, income tax holidays for solar projects, and capital subsidies ranging from 20% to 70% for rooftop solar installations.

India has set an ambitious target of achieving 500 gigawatts of renewable energy capacity by 2030, with solar power expected to contribute about 280 gigawatts to this goal. The government's efforts to make net-metering a consumer right and reduce permit processing time from months to days have also created a favorable environment for solar adoption.

SolarSquare plans to deploy the fresh funds to expand its operations from 20 to 50 cities, taking a careful approach to ensure quality control. The startup will work with local partners in smaller cities to achieve this goal.

The investment, a Series B financing round, was led by Lightspeed, with Lightrock joining, alongside existing investors Elevation Capital, Chris Sacca's Lowercarbon, and Nithin Kamath's Rainmatter. The startup, which had raised $19.5 million previously, will also invest in technology to build better systems for monitoring and managing residential solar installations remotely.

With this significant funding round, SolarSquare is poised to play a crucial role in India's renewable energy journey, helping to bridge the gap between the country's solar ambitions and the current adoption rates.