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Powering the Crowd Into the Future POWERING THE CROWD INTO THE FUTURE KEY LEARNINGS & RECOMMENDATIONS Davinia Cogan, Peter Weston POWERING THE CROWD INTO THE FUTURE KEY LEARNINGS & RECOMMENDATIONS FOR ENERGY ACCESS CROWDFUNDING AND P2P LENDING CONTENTS BIOS 3 EXECUTIVE SUMMARY 4 INTRODUCTION 6 1 STATE OF THE MARKET 8 2 THE 6 CAMPAIGN ARCHETYPES 12 1. PARTNERSHIP MODELS 15 CASE STUDY: TAHUDE FOUNDATION 16 2. ONE-OFF FUNDRAISERS 17 CASE STUDY: RAFODE 19 CASE STUDY: SOLARIS OFFGRID 20 3. MEGA-CAMPAIGNS 22 4. P2P MICROLENDING 23 CASE STUDY: EMERGING COOKING SOLUTIONS 24 5. ONLINE DEBT-BASED SECURITIES 26 CASE STUDY: SIMUSOLAR 27 CASE STUDY: AZURI TECHNOLOGIES 29 5.EQUITY CROWDFUNDING 31 CASE STUDY: TRINE 32 3 INTERVENTIONS TO CATALYSE FUNDING 34 4 CROWD POWER UPDATE 37 CONCLUSION 39 REFERENCES 41 This material has been funded by UK aid from the UK government; however the views expressed do not necessarily reflect the UK government’s official policies. Published December 2018 Design: www.dougdawson.co.uk Front cover by C.Schubert BIOS Davinia Cogan Peter Weston Davinia Cogan is the Programme Peter Weston is the Director of Manager of Crowd Power at Energy Advisory Services at Energy 4 Impact. 4 Impact. She runs the UK aid He manages a team of consultants funded programme, which explores that advises off-grid SMEs in Sub the role of incentives to stimulate Saharan Africa and helps them to donation, reward, debt and equity implement new business models crowdfunding in the off-grid energy and technologies. He is an expert sector in Sub- Saharan Africa and in power, renewables and off- South Asia. Davinia is also a Research grid energy, with over 20 years of Affiliate of the Cambridge Centre for experience as an investor, lender Alternative Finance at Cambridge and strategic adviser, much of it Judge Business School. Davinia in developing countries. He is a joined E4I in 2013 to help launch non-executive director of Thrive their business advisory team in East Renewables, one of the first crowd- Africa, and managed the rollout of a funded investors in small-sized USAID funded programme bringing renewable projects in the UK, and a pay-as-you-go solar to Rwanda. Prior Board Member of Renewable World, to joining E4I, Davinia completed a an NGO which alleviates poverty in Microfinance fellowship in Tajikistan, developing countries through Micro with Kiva, and worked as a consultant renewable projects. Prior to Energy to non-profits and social enterprises 4 Impact, Peter was global head of including the Social Stock Exchange finance and investment for two power in London. She held positions in equipment suppliers: Siemens Wind investment management at ING Power and MAN. He led the European Australia before moving out of the energy lending team at GE Capital mainstream finance sector. She holds and was an executive director at a MA in International Studies from the Westdeutsche Landesbank. Peter has University of Sydney and a Bachelor a BA in Economics and Politics from of Business (Finance, International the University of Warwick. Business) from the University of Technology Sydney. 3 EXECUTIVE SUMMARY Powering the Crowd into the Future is the fifth and final report in the Crowd Power series and captures the key learnings from three years of research into crowd-sourced financing for energy access businesses and projects. The report captures three years of data, from 2015 to 2017, on relevant campaigns. We provide recommendations for future research and interventions focused on crowd-sourced financing for energy access related businesses and projects. Data demonstrates that crowd-sourced financing for energy access businesses and projects has grown substantially – from $3.4 million in 2015 to $13.7 million in 2017. We anticipate similar growth trends reflected in 2018 data. Over the course of the three- to receive a financial return,1 provide an explanation of year research period under as well as debt and equity the most orthodox version Crowd Power we have identified based models, where funders of each archetype and that six archetypes relevant to can reasonably expect a in reality models may differ businesses and projects financial return. In general from platform to platform. The crowd-sourcing finance. The terms, crowdfunding models archetypes we identify may six archetypes include non- are considered higher risk or may not reflect their legal investment based models, than debt based models. It definition as per the platform’s where funders do not expect is important to note that we resident financial regulator. Over the course of the three-year research period under Crowd Power we have identified six archetypes relevant to businesses and projects crowd-sourcing finance. 4 Platform Application to the energy Archetype Model Amount raised type access sector Non-profits raise funds to Non-investment Partnership Model Donation supplement fundraising, through $5,000 – $30,000 1 based recurring campaigns Non-profits & businesses raise funds Non-investment Donation, One-off Fundraiser for a specific goal or milestone from $5,000 – $50,000 2 based Reward family and friends A business raises funds, often in Non-investment the form of pre-sales, to support Mega-campaign Reward $100,000 – $500,000 3 based a specific milestone, from a wide, engaged network Micro-entrepreneurs or consumers Non-investment raise funds for working capital or an P2P Microlending Debt $20 – $2,000 4 based asset purchase. Often facilitated by a MFI or other financial intermediary. A business raises a working capital P2P Business Lending loan (often in tranches). The $10,000 – $1 million, and Online Debt- Debt based Debt 5 platform conducts due diligence on per campaign based Securities the borrower. Business raises investment capital 6 Equity Crowdfunding Equity based Equity from equity platform members, $500,000 – $1 million which receive shares. We find that each archetype Reward Crowdfunding platforms Transforming Energy Access is unique and that growth contracted by an average of (TEA) programme. TEA is a £65 trends are mixed across the 58% from 2015 to 2017. There million ($83 million) five-year six archetypes. P2P Business were no energy access Equity project designed to support Lending and Online Debt-based Crowdfunding campaigns in early stage testing and scale Securities is the fastest growing 2017, reflecting the lumpy and up of innovative technologies archetype, blooming from inconsistent nature of equity and business models that will less than $100,000 in 2015 to crowdfunding for energy access accelerate access to affordable, almost $10 million in 2017. P2P businesses. clean energy services for poor Microlending also grew steadily households and enterprises, over the period, with around Note especially in Africa. UK 47% year-on-year (YoY) growth. While this is the final report from aid continues to support The Partnership Model, a type the Crowd Power programme, the Energise Africa impact of Donation Crowdfunding, grew the programme will be moving investment platform in the UK, at similar rates over the period. into a second phase – Crowd which facilitates loans to energy The Mega-Campaign and One- Power 2 (CP2) – in the coming access businesses operating in off Fundraiser, common to months under the UK aid funded Sub-Saharan Africa. 5 INTRODUCTION This report is the final in a series of five reports on crowd-sourced funding for energy-access businesses and projects. Powering the Crowd into the Future refines the key takeaways from the Crowd Power programme. Part 1 highlights market growth trends, Part 2 considers the key crowd-sourcing models relevant to off-grid energy businesses and projects, Part 3 explores the role and impact of interventions by philanthropic funders in the space, and Part 4 gives an overview of Crowd Power and learnings from the programme. Since 2015, Crowd Power has supported over 250 campaigns to raise $4.6 million in funding for energy access businesses and projects. Part 1 examines trends in including non-investment, data aggregation platform, TAB. crowd-sourced financing debt and equity platforms We also utilise our own data over the three years from the – GlobalGiving, M-Changa, compiled over three years of beginning of 2015 to the end Pozible, Kiva, bettervest, research. of 2017. We use data compiled Energise Africa, Lendahand, from a range of sources TRINE and Crowdcube – and a Crowd Power has supported over 250 campaigns to raise $4.6 million in funding for energy access businesses and projects. 6 Archetype Model Platform type Case Study Country Partnership Model Non-investment based Donation TAHUDE Foundation Tanzania Rafode Kenya One-off Fundraiser Non-investment based Donation, Reward Solaris Offgrid Tanzania Mega-campaign Non-investment based Reward n/a n/a P2P Microlending Non-investment based Debt Emerging Cooking Solutions Zambia P2P Business Lending Simusolar Uganda and Online Debt-based Debt based Debt Azuri Technologies DRC, Kenya, Rwanda Securities Equity Crowdfunding Equity based Equity TRINE Kenya, Sweden Part 2 of the report is dedicated is still much to be discovered energy access crowdfunding as to understanding the six in the area of interventions and we announce the second phase of campaign archetypes relevant their impact; Crowd Power really the programme – Crowd Power 2 to energy access businesses just scratched the surface of (CP2). and projects. These archetypes our understanding. This section represent the common features examines the four incentive It is worth noting, for the purposes we observed among successful types we deployed during Crowd of this report we capture data energy access campaigns over Power and shows their different on crowd-sourced finance for the past four years and include: applications across the six energy access businesses and The second section of the archetypes: projects, which occurred on report explores each of these 1. Match funding relevant non-investment, debt archetypes by asking what are 2. Lump-sum contributions and equity platforms.
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