Darragh Cotter, Communications and Marketing Manager
In the run-up to the Solarplaza/GOGLA conference Unlocking Solar Capital: Africa, we asked investors how and why they invest in off-grid solar. But how do companies working in the off-grid solar sector actually attract interest of investors? GOGLA spoke to Lesley Marincola, CEO of Angaza, to find out and to learn more about the future of PAYGO services in the off-grid solar sector.
Question 1: Many thanks for joining GOGLA for this Q&A. Can you tell us a little a bit about how Angaza came to be and the main products/services that Angaza brings to the off-grid solar market?
Angaza enables manufacturers and distributors in emerging markets to make solar energy products affordable to the world’s 1 billion off-grid consumers. We believe that the biggest barrier to global energy access is the lack of end-user financing for high-quality solar products and the lack of robust, flexible technology to manage this kind of asset financing at scale. Angaza is working to solve this!
Angaza’s technology platform removes this barrier to adoption by allowing solar devices to be sold on a Pay-As-You-Go basis, where consumers pay for products in small amounts over time. We license our Pay-As-You-Go platform to manufacturers and distributors, so they can continue to focus on their core business: manufacturing or distribution. Manufacturers leverage Angaza’s embedded metering and monitoring technology to mitigate repayment risk. Distributors use our web portal, the Energy Hub, and our mobile app, the Activator, to administer solar micro-loans and manage agent networks.
By dropping the upfront price of solar devices and collecting payments over time, our partners have been able to access a vast, untapped market of consumers. We work with partners across Sub-Saharan Africa, India, Asia, and Latin America with Pay-As-You-Go products that range in size from small solar study lights to large solar home systems that can power DC appliances.
Q2: How important do you think it is for off-grid solar businesses to provide PAYGO services, particularly in areas where customers might not have the upfront capital costs for a solar product?
Pay-As-You-Go (PAYG) is transforming the energy access industry. Manufacturers are able to increase their product sales. Distributors are able to invest in more robust sales channels with lower agent turnover and generate more recurring revenue from their existing customer base. End users benefit from better after-sales support, and they can access additional products and services as they demonstrate consistent repayment. It’s a win-win-win model!
Q3: Do you expect the PAYGO trend to continue growing? From an investment perspective, how important is the data generated by PAYGO systems?
I believe the adoption of Pay-As-You-Go is just getting started, and it will continue to grow exponentially if product manufacturers, technology providers, debt capital lenders, and distributors increase their collaboration to reach scale.
Data collected from Pay-As-You-Go products and operations will fuel this growth by increasing the success of existing players and attracting interest from multinationals outside the immediate energy access industry. At Angaza, we are focused on increasing the success of our partners through data analytics and data visualizations.
By leveraging these data, we help businesses make informed sales and pricing decisions and save costs. We also help debt financiers effectively assess borrower risk through our analysis of payment trends and loan portfolio health. And, because of their Pay-As-You-Go solar track record, consumers are building personal credit histories which can unlock their access to additional financial services.
Q4: With Unlocking Solar Capital taking place this November (1-2) in Nairobi, how important are events like this for those seeking investment? What do you see as the main benefits of investor conferences like this?
I started and strengthened relationships with most of Angaza’s investors and partners by attending various off-grid energy industry conferences and workshops. Similarly, I know that Unlocking Solar Capital will catalyse additional investment into both early- and growth-stage energy access companies. Both investors and practitioners alike are having critical conversations about best practices in the industry, appropriate capital types, and market trends. Gatherings like Unlocking Solar Capital cultivate a shared industry understanding and form the basis for the relationships that make up game-changing collaborations. From an external perspective, this conference will also play a big role in continuing to drive attention to the industry which will attract additional commercial capital and foster cross-industry partnerships.
Q5:Is it difficult to explain your business model to investors? What type of investment does Angaza tend to look for, or is the answer to this quite fluid?
To date, Angaza has focused only on raising equity capital to grow our business, as we are a technology development company and do not directly manufacture or finance solar products. We do, however, work closely with our distribution partners to help them secure debt capital so they can scale their Pay-As-You-Go businesses; currently, the lack of appropriate types of capital adapted to each business’s stage of growth remains a barrier.
We raised all our equity capital from U.S. and European technology investors. We have not had trouble explaining our B2B (business-to-business) business model to them because enterprise software and SaaS (software as a service) are very familiar concepts to them. They were also attracted to the fact that we are taking a different business model approach from other major Pay-As-You-Go companies in the industry. In the beginning, however, it was difficult to find technology investors who were familiar with international off-grid markets and willing to take the capital risk to seed a young industry. Given the growth of the industry over the past 3 years, however, we are now starting to see even traditional venture capitalists look towards opportunities in emerging markets.
Q6: Late in 2015, Angaza announced that it had raised US$4 million series A financing led by a US-based family office; with The Social Entrepreneurs’ Fund as well as others. What were the key lessons that you learned from your fundraising efforts?
Over the years, we have learned that the investor you work with is even more important than the capital you raise. Any company raising outside capital needs to make sure their vision for growth is fully aligned with that of their investors’. You need to make sure your investors will stand by you during the good times and work alongside you through the tough times. We are fortunate to work with investors that are all of the above, and we have become a stronger company because of that alignment.
Q7: Much of Angaza’s activity to date has been in East Africa. Do you have plans to expand into West Africa in the future? How important is external financing to help you expand?
We work with partners in over 15 countries around the world, across East Africa, West Africa, India, Southeast Asia, and Latin America. And that list continues to grow… While East Africa remains our biggest market by volume, we are seeing increasing demand for Pay-As-You-Go technology all across the globe. Angaza’s global focus has led us to create a technology platform that can be fully customized for different distribution channels, product prices, and operational models. We’ve also built out full functionality to support both mobile money payments, by integrating with major telecoms across Sub-Saharan Africa, and cash payments, for markets without high mobile money familiarity.
The funding we’ve raised has been critical to enabling Angaza to work with a wide range of partners. Also, because we scale through partnerships, we’ve been able to grow our footprint quickly by leveraging the local market expertise of our distribution partners.
Q8: Does Angaza intend to diversify or expand into other clean tech areas, for example, appliances or clean water?
Absolutely. Our mission is to create the technology that allows businesses to offer life-changing products to anyone, anywhere. While solar lighting and solar charging products have been our initial focus, we’ve already expanded our technology platform to support end-user financing for appliances, agricultural tools like solar water pumps, and other transformational products like cookstoves and water filters. All these products, if purchased outright, remain too expensive for the users that need them the most, and Pay-As-You-Go pricing eliminates this barrier.
Q9: How important is joining GOGLA, the association of the off-grid solar sector, for connecting with investors, distributors and manufacturers within the industry? What would you say to those thinking of joining GOGLA?
GOGLA is the premiere energy access industry association that has convened all the major practitioners, funders, and thought leaders in the sector. I believe that no single solution or company is going to solve the global energy access crisis alone; cross-conversations and collaborations between all players will be the only way to deliver clean, reliable energy to all. Every distributor, manufacturer, technology provider, and investor in the industry will become more successful by contributing to the growth of the collective, and, for Angaza, joining GOGLA has been a valuable step in pursuing this belief.
Unlocking Solar Capital: Africa will take place from 1 - 2 November 2016 in Nairobi, Kenya. Register here.