Darragh Cotter, Communications and Marketing Manager
In our latest investor Q&A, GOGLA speaks with Michael Gera of Energy Access Ventures Africa. With a team that has substantial investment and operating experience, EAV bring a hands-on approach with their portfolio companies. Michael brings EAV’s portfolio companies several years of venture investing along with operating experience – most of it on the ground in Africa. Michael’s career started in academia in the UK and then in software engineering in Germany. He then moved to Merril Lynch’s Investment Banking Division before moving to Pond Venture Partners – an early-stage Silicon Valley and Europe-based venture firm. He then became interim CEO of two companies in Africa – one in Mozambique, the other in Uganda – before moving to Nairobi to become CEO of Africa Legal Network before returning to venture investing with EAV.
Question 1: Thank you Michael for taking part in our investment Q&A series. Would you mind briefly explaining the background to EAV Africa and expanding on your operational model?
EAV is a venture fund investing in high-impact entrepreneurial companies which facilitate access to reliable energy or its benefits in sub-Saharan Africa. EAV leans towards early stage investments (seed and series A investments) but plans to invest in a limited number of later stage companies as well. Our investment universe includes companies throughout the energy access value chain, such as those involved in:
Solar lights & home systems
Commercial rooftop solar
Mini-grids (technology agnostic)
Water & sanitation
Distribution of electricity access products
Novel financing techniques
EAV is based in Nairobi. Being on the ground in Africa maximises our ability to spend time with entrepreneurial businesses in our sector and provide operational assistance to investee companies. Our team has significant venture and industry experience, much of it in Africa. We use this experience to act as hands-on investors and close partners to our selected entrepreneurs with the aim of building a portfolio of young but rapidly growing businesses in to industry leaders.
Q2: EAV has, in the past 12 months, invested in both Off Grid Electric and PEG. What would you say were the main reasons that made investment in both companies attractive?
OGE has amply proven itself via its achievements on the ground. The company has a first-class management team, a highly credible investor base and a superb track record in terms of delivering social impact and growth. PEG, although at an earlier stage, has highly experienced, motivated and dynamic founders who are swiftly building a talented team around them. PEG is well poised to become a significant player in West Africa. I should mention that we have also just invested in Dlight. We decided to partner with them as they are the pioneers and the global market leader in the solar lantern business selling their offering in 62 different countries. The company is now transitioning into PAYG and is well positioned to leverage their existing infrastructure for this side of the business.
Q3: How “hands on” are EAV with the companies it invests in? How important is practical support and advice to the businesses you invest in?
The answer to both is very. We are company builders. We invest where both we and portfolio companies feel that we can add substantial value by helping drive investee companies’ strategy, grow their teams and operations, raise further funding and work towards exits all in a way that is impactful and which complies with the highest environmental and social standards. Furthermore, we have an extensive network in the energy access market which we open up to our companies as they seek customers and partners. Finally, our portfolio companies also have access to a substantial technical assistance programme which is generously provided by several of our investors (Schneider Electric, the UK CDC and the French AFD).
Q4: There have been a number of other recent high profile investments in the off-grid energy sector in Sub-Saharan Africa. Do you think this trend is likely to continue in the coming years? What do you think have been the main drivers of increased investment? Does the application of certain business models and technologies lead to increased investment?
We believe that capital will continue to flow in to the off-grid sector given the potential for off-grid solutions to deliver sustainable energy access to a significant number of the 600 million individuals in Sub-Saharan Africa still living without it.
The application of new technologies has certainly had an effect on investment flows. While there has always been a large addressable market in the off-grid space, key recent developments that are driving increased investment have been improved mobile technology, lower costs for energy production and storage (particularly in solar PV) and the development of innovative financing models such as Pay As You Go. The realisation within the development community that the way to deliver energy access to all is through the promotion of sustainable, market-based solutions has also had a very positive effect.
Q5: Unlocking Solar Capital Africa, taking place from 1-2 November in Nairobi, will bring together investors and businesses from the off-grid solar energy sector. There will also be focused discussions on the keys to unlocking investment for the industry. How important are events like this for the sector and for investors such as EAV Africa?
The Unlocking Solar Capital event will play a part in bridging the gap between the on-grid and off-grid investment universes in Africa. This I feel is essential and mini-grid players, solar home system players and any company that works to enable the benefits of electricity to reach more people should strongly consider attending. Ultimately, industry events organised by quality organisations such as GOGLA and SolarPlaza are crucial platforms for the sector to continue to build its profile, attract capital as well as discuss regulation and industry challenges. Similarly for EAV it is important to attend events as a source of new deals and to make sure we are up to speed with all the latest trends in the sector.
Q6: What are the three pieces of practical advice you would offer to off-grid energy businesses currently looking for investment? How can they turn the heads of the investment community?
Look for smart money – There is a lot of capital flooding in to the off-grid space but it can be flighty and doesn’t necessary come with a lot of value add. Advice and capital from financiers who know the space carry a significant amount of value, particularly when unexpected challenges arise. It is important to look beyond the valuation and the amount that is being raised.
Understand the competition and differentiate yourself – The off grid market is beginning to get commoditised. It is important to differentiate your company from your competitors in more ways than just product differentiation or pricing. In Africa, execution is often a more important factor than the product itself.
Build a local team and get into the field as often as possible – Sub-Saharan Africa is a very different market compared to the rest of the World, including other developing countries. It is important to build a team that understands the local customer. This also tends to reduce cash burn heavily as well as sales grows faster, both key factors when attracting investment.
Q7: Social impact is clearly a big factor when EAV invests but how high is the impact reporting burden on businesses?
The tremendous positive effect on the ground from solid impact investment is often matched by a high reporting burden. There is a very clear need for transparent and meaningful reporting but it may be time to seek ways to streamline the process. This could include creating global standards in terms of metrics as well as the use of common tools that all companies in the space have access to. Impact is maximised when businesses execute well so managing reporting and administrative burdens is critical.
Q8: EAV Africa has been a GOGLA member since the beginning of the year. So far, what have been the main benefits of membership for you?
Deal sourcing, market intelligence and networking opportunities. Our portfolio companies also have a good chance to market themselves to potential partners and suppliers.