Energy 4 Impact launched the second paper in a series of reports from its Crowd Power program on energy access related crowdfunding in Sub-Saharan Africa and Asia. Entitled, “Crowd Power: Can the Crowd Close the Financing Gap?,” the report examines the role and use of crowdfunding by start-ups and non-profits raising capital.
The report looks at the energy access related crowdfunding across donation, reward, debt and equity platforms, and showcases examples of successful campaigns by WakaWaka, BuffaloGrid, and Okra Solar, among others. The paper also highlights key trends and statistics on energy access related crowdfunding, which grew from $3.4 million in 2015 to $8.7 million in 2016.
The strongest growth has been identified in debt and equity crowdfunding, which combined account for 93% of all energy access related crowdfunding. Debt crowdfunding by enterprises, mostly those selling PAYG solar home systems, looking to raise working capital, grew strongly in 2016 and raised more than $2 million across 26 loans, representing a 10-fold increase on those made in 2015. The report suggests that debt crowdfunding is the most scalable of all crowdfunding types for the off-grid energy space; and suggests funders can play an important role in this area by providing investment guarantees to the crowd and developing other interventions such as foreign exchange protection buffers to accommodate local currency loans.
“Crowdfunding has an important role to play for energy access businesses wanting to raise capital – from early stage seed capital, to working capital loans, and potentially equity too. The dynamics of debt crowdfunding, in particular, are interesting for companies looking for debt to finance their growth. There are now a number of platforms actively lending including Bettervest, Lendahand, and Trine. Even Kiva, which dominates the microloan crowdfunding market, has begun a pilot lending directly to small businesses in emerging markets,” says Davinia Cogan, Crowd Power Manager.
Energy access related equity crowdfunding has demonstrated substantial growth capacity, raising over $3.3 million across three campaigns in 2016 (a total of $80,000 was raised in 2015). The report acknowledges this important development, however cautions overreaction due to the infrequency of deals and variability of deal sizes. This growth however, exemplifies an opportunity for funders and practitioners to assist in the development of strong candidates. It will also likely bring more attention to equity crowdfunding as an option for energy access start-ups with a refined business model and good profile.
The report finds reward and donation platforms are a good option for early stage start-ups raising seed capital (<$50,000) from their networks, however successful campaigns depend greatly on the outreach strategy, the campaign quality and the start-up’s network. Energy access related donation campaigns are largely focused on charitable initiatives in less developed energy markets, and often focus on marginalized communities. While there are few Africa-based platforms involved in energy access crowdfunding, the M-Changa platform in Kenya is providing a platform for local start-ups to raise funds from their networks.
The Crowd Power program, which the report shares learnings from, contributed a total of $250,000 across 16 energy access related campaigns in 2016, which in turn raised $1.5 million for projects expected to provide 62,500 people with energy access.
Crowd Power is funded by UK Aid. For further information on the program