Addressing financial barriers that exist in scaling community services
Most decentralised energy access organisations and private water service and sanitation providers are small, less than 5 years old, and with relatively low capitalisation. The “valley of death” is often known as the gap in financing that these organisations face between grant funding and commercialisation.
Significant challenges exist in closing this funding gap and these challenges will affect an organisation’s ability to benefit from the scale and technologies presented by the mobile industry. With risk-averse investment behaviour driving most venture funds, only a small minority of investors are willing to provide high risk capital to early stage businesses.
The “valley of death” is considered particularly precarious for these service providers since:
- They maintain high variable costs even after proof of concept, either in the form of building products (i.e. carrying inventory) or developing physical plants;
- They take a long time to scale: in comparison to IT companies, development of clean tech product and installations takes much longer;
- Energy, water and sanitation development must navigate a series of political, financial and regulatory issues specific to the region they operate in.
The Role of Mobile for Development Utilities
A core aim of the programme is to support the industry in overcoming funding barriers. We do this through three activities:
1. Innovation Fund: The GSMA launched the Mobile for Development Utilities Innovation Fund in June 2013 in partnership with the UK Government to catalyse and support the creation and trial of mobile enabled energy and water services
2. Sharing best practices and evidence from past business cases for deploying services and better articulating the opportunity and risks to inform investors and support their due diligence. We do this through our own dedicated research team and with Mobile for Development Intelligence
3. Working Groups and other GSMA events allow for networking between investors, start-ups and the mobile industry, whilst creating a forum for discussion and debate on key topics
- “Financing is still a struggle” by Mary Roach, from Service over Technology: Defining the Role for Mobile in Energy Access, GSMA, January 2013.
- From Gap to Opportunity: Business Models for Scaling Up Energy Access, IFC, 2012
- From Blueprint to Scale, The Case for Philanthropy in Impact Investing by Harvey Koh, Ashish Karamchandani & Robert Katz, Monitor Group, April 2012
- How to Light Africa Within a Decade, Forbes Magazine, December 2012
- ReadySet Solar Kit for iPad, iPhone, Android & more, Kickstarter, August 2013
- EarthSpark expands access to high-quality energy solutions in off-grid areas of Haiti by Allison Archambault, Global Giving, 12 August 2013
- PAYGO for Nairobi Slums, Sun Funder, 21 March 2013
- GE and USADF Announce $2 Million Challenge in Support of Off-Grid Energy to Power Africa, The African Development Foundation, 2 July 2013
Websites & Other Online Resources
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