Why are you participating in SOCAP/Europe?
SOCAP offers a unique opportunity to interact with potential partners, investors and fellow entrepreneurs who may have confronted similar challenges of scaling, capital raising, customer acquisition and retention and talent management as EGG-energy. I am looking forward to being inspired and uplifted by the remarkable line-up of attendees, to receiving feedback at the Entrepreneur Fast Track pitch session and to sharing EGG-energy’s experiences and lessons learned on a panel titled “Power Shift: Making Modern Energy Affordable, Accessible and Investible at the BoP.”
My goals, in addition to learning as much as possible from the talented people convening at the event, include making important connections that might help EGG-energy acquire the last $200k of our $500k seed capital raise and forge new product sourcing and distribution relationships. I am also eager to meet distribution/logistics experts and energy access practitioners who might be interested in joining EGG-energy’s advisory board.
What problem are you addressing? Why should people care?
Sub-Saharan Africa and too many other communities worldwide lack the benefits that come from widespread, convenient and affordable access to a clean and safe power source. This reality not only limits productivity and adversely impacts community health, it also prevents an otherwise connected world from benefitting from the wisdom and creativity of 1.6 billion people. With a vision of becoming a leading provider of affordable and clean energy services in the developing world, EGG-energy is contributing to solving this challenge.
The lack of reliable access to electricity is both a profound global challenge and an unprecedented opportunity. Today, 1.6 billion people live without electricity, with 38 million residing in Tanzania. The national utility in Tanzania, like its peers in other countries with limited access to electricity, is unable to make modern energy services accessible and affordable to all rural homes and businesses. The end consumer ultimately has to bear the cost of a grid extension and connection, which are prohibitively expensive for the majority in need. As a result, families rely on expensive, unsafe and polluting alternatives such as kerosene and disposable batteries. EGG-energy aims to shrink the gap between the cost and the quality of energy services customers receive.
The link between electricity consumption and economic prosperity is proven and clear. For more affluent populations, additional energy use and economic growth are largely decoupled, but for the poorest communities, small increases in energy consumption are often associated with dramatic improvements in the quality of life. Access to power means opportunity: the ability to study at night, keep shops open after sunset, charge mobile phones to stay in touch with relatives or to access information such as crop prices, not to mention the many productive economic services made possible by reliance on electric tools (pumping, refrigeration, machinery, computing, etc).
While governments worldwide are working hard to bring power plants and other infrastructure investment to their regions, a considerable opportunity exists for small scale, for-profit enterprises to complement their efforts. EGG-energy is among many peers looking to bring innovation and resources to the space in a sustainable way. What makes us unique is our commitment to immediately improving our customers’ quality of life while building the foundation for lasting infrastructure. We first bridge the distribution gap between existing power production and the end-customer. We then grow our generation capacity by leveraging both the physical distribution network and the relationships developed with our customers to ensure that power reaches the intended beneficiaries.
What are the main roadblocks keeping you from your goals?
Capital: EGG-energy’s expansion efforts as well as pricing scheme and delivery model experiments have been restricted due to capital constraints. With additional capital, we could test various incremental business-model improvements at several new sites simultaneously.
Affordability: While upfront cost for EGG-energy’s service is lower than that of other available off-grid power alternatives, it nonetheless remains a challenge for some of our customers. EGG-energy is experimenting with various pricing structures and forging partnerships with MFIs and other organizations that can provide consumer finance.
Poor infrastructure: From inadequate roads and poor financial infrastructure that hampers our ability to offer financing, to unreliable electricity from the local utility at our charging sites, inferior infrastructure poses an ever present set of obstacles. At the same time, these shortcomings offer tremendous opportunities for companies that can build systems to overcome them.
Solar generation, the creation of a storage platform and use of robust charging equipment are ways through which EGG is mitigating frequent blackouts and limited grid availability throughout the country. Our foray into franchising is designed to reduce reliance on poor roads through local service delivery. Finally, we are developing financing options through partnerships with MFIs to help customers cover the up-front cost of our service.
Talent management: Deficient legal and educational systems make recruiting talent difficult and expensive. The intense competition for the management talent pool available in Tanzania has resulted in high compensation rates, which are unaffordable for our company at this stage. Finding the right balance between building trust and enforcement of company protocols has also been a challenge for our venture. We are continuously working to strike the right balance between prudent oversight of major decisions at our charging sites and the optimal level of autonomy and ownership of decision-making afforded to our employees.
What’s your biggest success of the last six weeks?
We recently launched our first solar-based charging station in rural Tanzania. The debut of EGG-energy’s first solar franchise is significant for two reasons. First, we have added solar generation capacity to our distribution offering. While our customers experience the same service as customers serviced by our on-grid stations, the ability to generate our own electricity for charging batteries allows us to reach remote rural areas far from the grid – areas where our service is needed most due to lack of alternatives.
Secondly, this new station is managed as a franchise and operated by a local entrepreneur. The franchise model allows us to anchor our services into the community and ensures, through local ownership, that incentives are aligned when securing solar assets and acquiring new customers. Franchising will enable faster scaling while sharing successes and financial returns with the local owner.
What could you do with 100k? 500k? with 50k?
$100k would allow EGG-energy to expand to two more sites, accelerate the development of our franchise model to facilitate rapid scaling, and to complete our mobile-based IT system, which will enable effective customer management and sales team coordination.
$500k would allow EGG-energy perfect and prove our model through the establishment of five more charging stations, bringing our total to eight within a year. $500k would also enable us to bring in additional executives to our team in Tanzania and to achieve better pricing on bulk orders. Most importantly, the capital would allow us to fully design our scalable model and position us for rapid expansion, thereby helping us realize the potential to provide energy services to 350,000 people within five years.
With $50k, EGG-energy will be able to open up one more site and hire a sales manager. Each station is designed to support 500 subscriptions, or serve approximately 2000 people.
What are the 3 most important tools that support your work?
1) Our back-end data management system allows us to measure financial performance of the company, keep track of batteries and other inventory and to monitor customer behavior. Access to such data enables us to improve the quality of our offering and to come up with offers to increase customer retention. We are currently implementing a mobile phone based point of sale device to enable effective performance tracking of our stations in real time.
2) We developed a comprehensive operations manual to ensure a replicable and scalable model for our charging stations. The “power station in a box” concept has already befitted our businesses with an expedient and successful launch of our charging station in Mbagala.
3) Finally, skype and freeconferencecall.com have been instrumental in keeping our global team connected to resolve challenges and to celebrate our triumphs.
Who else is addressing your problem? What are they doing well?
There are a number of peer organizations focused on access to power in poor communities of the developing world. Barefoot Power, BBOXX, d.Light Design, and Burro are several examples of companies refining products that serve the same target market as EGG-energy. We consider these companies to be more complementary than competitive, since they are mostly focused on product design (i.e. solar home systems, solar lanterns, battery boxes, etc) while we focus on distribution systems, technical support and building customer relationships through our local presence. They are doing an excellent job of standardizing manufacturing processes, reducing costs and perfecting their products to best meet customer needs. Always eager to bring new products to bring to our customers, EGG-energy is currently exploring partnerships with and testing product offerings from some of these firms through our local distribution infrastructure.
Laos based Sunlabob is another firm addressing rural electrification. Sunlabob stands out for its diverse set of service offerings that range from hybrid micro-grids and solar lanterns to solar community solutions.
What experience was influential in getting you to this place?
For me personally, it was the year I spent working with TechnoServe in sub-Saharan Africa that first inspired my interest in private sector solutions to difficult social challenges. Working with local entrepreneurs in Kenya and in Swaziland taught me that small and medium sized enterprises are pivotal to economic growth and job creation. The impact of that period made me pause when I opened an email four years later from a group of MIT PhDs looking to round out their business team with MBAs to create an energy company in Sub-Saharan Africa. It touched on the intersection of my three interests: energy, East Africa and international development. Three years later, the adventure of building a company from the ground up has been one of my most thrilling professional experiences.
What should people who want to enter the social capital markets know?
The social capital markets concept and structure continue to evolve. Right now is a particularly exciting time to not only enter the space but also help shape it.
They should know that BoP market companies make money a trickle at a time and therefore can only be profitable if they promptly reach scale, which requires important initial capital investments. Shy money won’t achieve much in this field!
Further, they should realize that, since each customer only brings a few dollars in and since business-supporting infrastructure is in such poor shape, proportionally high transaction costs are associated with securing revenues (through developing and maintaining both community and customer relationships over time). This leads many social ventures to address BoP problems by designing products they rely on others-such as governmental and large NGO partners- to distribute to the end consumer. We nonetheless believe that sustainable growth in BoP communities can only be achieved through the development of a well innerved local entrepreneurial tissue, with important field presence, development and training of local talent pools (e.g. local sales & product development teams, IT developers, managers) as well as robust in-country supply chains (including contractual arrangements with several members of the real economy). Successfully establishing such systems comes at a higher cost.
One of the biggest criticisms of social enterprises is the limited track record of reaching scale. We believe that a network of social enterprises, backed by a community of impact investors willing to make a long-term commitment, can both achieve scale and significant social impact. EGG-energy is currently exploring sourcing relationships with peer companies focused on access to energy in the developing world and is thus contributing to the development of a robust supply chain required for achieving aggressive expansion targets. Social enterprise networks can also leverage their clout to encourage policy makers to establish a social-enterprise friendly business environment in various markets, distinct from legislation designed to support traditional for profit companies.
Finally, an important and still outstanding issue is funding “R&D” for social enterprises. Governments often step in to encourage R&D spend in the private sector (think tax incentives, subsidies, DARPA-E, ARPA-E, etc). For social enterprises, a limited pool of angel investors finances early stage research and development, although increasingly foundations and international institutions are experimenting with models to support for profit enterprises financially. While small amounts of money are available for startups to demonstrate the ability to scale, these amounts usually underestimate the time and money needed to overcome the infrastructure deficiencies in these markets. The social capital markets will need to address this gap.