Investment in off-grid mobile enabled utility services

This blog post draws from the GSMA Mobile for Development Utilities Annual Report and from the investment session which recently took place at the Africa Working Group in Dar es Salaam. It is the second in a series of blogs, highlighting the main findings from the Annual Report.

Since 2008, 60 per cent of investment in off-grid solar has been in PAYG energy companies. The majority of this amount was only invested in the last two years.

The rapid growth of investment in Pay-as-you-go (PAYG) solar companies is symbolic of the potential that the mobile enabled utilities sector holds for investors. The Mobile for Development (M4D) Utilities team has tracked and published investment trends and is also actively working with the investment community to create opportunities for open dialogue with entrepreneurs.

Capture

Our inaugural Investor Roundtable Webinar Series, kicking off in September (register here) aims to help bridge the communication and geographical gap that currently exists between entrepreneurs and investors.

Tracking trends

The M4D Utilities Annual Report provides an overview of investments in mobile-enabled energy, water and sanitation sectors, as well as the role of grant funding in expanding this market. The report identifies three investment trends:

1. Exponential growth in investment in PAYG energy but limited in scope: PAYG solar is fast emerging as a separate asset class. However, investments have been geographically limited and the top three players make up the majority of investment in the sector.

2. Emergence of crowdfunding: Entrepreneurs across the sector are embracing crowdfunding which presents a non-traditional avenue to raise funds. Given the range of platforms and the ability to raise different types of capital, crowdfunding is especially attractive to less mature businesses.

3. Data-driven investment: Mobile technology provides a reliable and convenient way to collect data. For example, repayment data, through mobile money accounts, is being used to securitise PAYG solar home systems.

Opportunity for dialogue

To understand the investors’ perspectives and to get their views on what is required to grow the sector further, a panel discussion was organised at the GSMA M4D Utilities Africa Working Group in Dar es Salaam on 24 and 25 July 2016. The session on ‘Investment in the mobile-enabled utility space’ was moderated by Mary Roach (Ceniarth) and panellists included Lauren Cochran (Blue Haven Initiative), Lais Lona (SunFunder) and Brian Odhiambo (Novastar Ventures).

When asked about what is lacking in early stage companies, the four panellists (who represented a range of investors – equity, debt, and hybrid) mentioned the following:

  • A vision for scale: Africa is the next frontier; entrepreneurs need to dream big and think about reaching millions of people.
  • Knowing your cost per customer: Young businesses need to ascertain unit economics and manage KPIs so that the cost of customer acquisition, breaking even and life time value are defined.
  • Understanding the human element: Technology alone will not solve the problem. What matters is recognising where the human component is, how it works and how to make that a key part of a company’s value proposition.
  • Understanding unique issues: One size does not fit all. Companies need to think about what it is they want to solve and how the business model works. Moving from one problem to the next will not create impact.
  • Patience: While one needs to dream big and have plans for scaling companies, one also needs to realise that this is not going to happen overnight. Entrepreneurs need to learn along the way, iterate and grow.

 

For continued growth, it is important that there is healthy communication between investors and entrepreneurs. The Investor Roundtable Webinar Series will give entrepreneurs the chance to hear investors’ opinions and considerations. For investors the webinar series presents the opportunity to grow their deal pipeline. We hope you can join us and look forward to the stimulating discussion. Please register to attend the first webinar in our Investor Roundtable series.

For further information on investment trends in mobile enabled utility services see pages 60-67 of our Annual Report.

Download the Report

The previous blog in the series focuses on how mobile is unlocking growth of PAYG utility services. The next blog will look in more detail at the key role that MNOs can play in the utilities access space.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.