ACUMEN 2018

ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN WOULD LIKE TO ACKNOWLEDGE OUR PARTNERS THAT GENEROUSLY SUPPORT THE PIONEER ENERGY INVESTMENT INITIATIVE

STEVE ROSS & THE BERNARD & ANNE SPITZER SHELLEY SCHERER CHARITABLE TRUST

GLOBAL OFFICES SPECIAL THANKS

ACCRA, GHANA Special thanks to our peer reviewers Saad Ahmad, David Aitken, Magdalena Banasiak, Morgan DeFoort, Fabio De Pascale, BOGOTÁ, COLOMBIA Christine Eibs-Singer, Peter George, Steven Hunt, Neha Juneja, KARACHI, PAKISTAN Jill Macari, Damian Miller, Jesse Moore, Willem Nolens, Steve Ross, LONDON, ENGLAND Peter Scott, Ajaita Shah, Manoj Sinha, Ned Tozun, Nico Tyabji, MUMBAI, INDIA Hugh Whalan, and David Woolnough

NAIROBI, KENYA Special thanks to Carlyle Singer for her strategic guidance and NEW YORK, U.S.A. Harsha Mishra for his analytical research. Additional thanks SAN FRANCISCO, U.S.A. to the Acumen team: Sasha Dichter, Kat Harrison, Kate Montgomery, Jacqueline Novogratz, Sachindra Rudra, and Yasmina Zaidman

Lead Authors: Leslie Labruto and Esha Mufti Table of Contents

FOREWORD 02

EXECUTIVE SUMMARY 04

INTRODUCTION 06

1. ENERGY SNAPSHOT: 08 ACUMEN’S TRACK RECORD FOR INVESTING IN ENERGY ACCESS

2. THE PIONEER GAP: 12 HOW HAS THE INFLUX OF CAPITAL AFFECTED ENTREPRENEURS?

3. NEED FOR CAPITAL: 16 FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY

4. THE BIG PICTURE: 26 WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES?

5. REACHING THE POOR: 38 USING PATIENT CAPITAL TO ACCELERATE IMPACT

6. BEYOND CAPITAL: 46 WHAT DO ENERGY ACCESS STARTUPS NEED?

7. FACILITATING EXITS: 48 SENDING THE RIGHT MARKET SIGNALS

8. CONCLUSION: 56 WORKING TOGETHER TO CATALYZE ENERGY ACCESS

APPENDIX 58 CASEFOREWORD STUDY

Jacqueline Novogratz FOUNDER & CEO

Dear Reader,

I am pleased to share Acumen’s Accelerating Energy Access: The Role of Patient Capital report with you. Over the last decade, Acumen and a handful of other investors have helped startups bring energy access to 360 million people. That’s almost half the total number of people who have gained access during that time. Today, there are more entrepreneurs working on this challenge than ever before, and they are attracting growing amounts of capital. In 2017 alone, energy companies raised $300 million when compared to $50 million in 2012. However, as we will demonstrate in this report, this influx of capital has not closed the funding gap, especially for companies in critical early stages of development.

If we want to solve the energy access challenge in the next 15 to 20 years, we need to build innovative ways to reach people still living in the dark, most of whom are low-income. Despite proven successes in off-grid energy in recent years, investors are unwilling to fund early-stage companies that are addressing the needs of these communities. These companies operate in fragile or underdeveloped markets, and require patience to develop sustainable business models that can operate in challenging places. So, when we think about Acumen’s work today, and whether there is still a need for early-stage, patient capital in off-grid energy, the answer is clear: a resounding yes.

Entrepreneurs who use the market as a listening device to serve and transform the lives of low-income customers play a critical role in closing the energy access gap. These companies need investors who are risk tolerant and patient to stay true to their mission. Patient capital allows companies to understand demand, ensure affordability, and grow thoughtfully, recognizing the challenges every company faces.

2 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Our intent with this report is to share what Acumen has learned about capital – the needs, the optimal mix, and the role that patient capital plays in off-grid energy.

For the first time in history, bringing affordable electricity to every human on earth is within our reach. However, the energy access ecosystem still requires more building, more coordination, and more capital if we are to achieve United Nations Sustainable Development Goal Seven of achieving universal energy access by 2030.

We hope to inspire people and organizations to recognize that only if we work together and step up to this challenge, will we be able to bring modern lighting, power, and clean cooking to all people across the world.

Thanks to all of you who have supported Acumen’s work and the off-grid energy sector to date. We wouldn’t be here without you.

Jacqueline Novogratz Founder and CEO, Acumen

FOREWORD 3 EXECUTIVE SUMMARY

We will not realize the United Nations Sustainable Patient investors who saw tremendous potential Development Goal of access to clean, affordable early on have backed these pioneering energy energy for all by 2030 at the current rate of progress, companies, and they are proving that they can help according to the latest data. The stakes are high: solve the challenges of energy access for those living more than one billion people live without access to off the grid. In 2017, over $300 million was invested electricity, and three billion people cook in ways that into the off-grid sector compared to $50 million in harm their health and the environment, and drain 2012, and total sales in the sector are nearly their household savings. $4 billion today.

There is, however, ample cause to hope: of the Acumen has been investing in this market for the more than 800 million people who have gained last 10 years. Given the increased capital flows, we access to energy over the last decade, 360 million— believed the time was right to ask if entrepreneurs or 45 percent—have gained access because of now have access to the right types, amount, and path-breaking startups.1 These companies have mix of capital to grow their businesses. To answer harnessed the potential of off-grid energy to bring this question, we interviewed 15 energy access clean, affordable electricity to people who previously CEOs from Acumen’s portfolio, worked with relied on dirty fuels like kerosene for their lighting external advisors, and reviewed peer research. We needs. Clean cooking companies have developed focused on the “pioneer gap,” where companies products that burn biomass and charcoal more have experienced the greatest challenge attracting cleanly and efficiently, leading to reduced household financing. These companies are too big for seed emissions and deforestation, and improved capital and too small for commercial capital, a household savings. conclusion that came out of From Blueprint to Scale: The Case for Philanthropy in Impact Investing by Monitor Group and Acumen in 2012. Figure 1: Stages of Growth from Blueprint to Scale

Blueprint Validate Prepare Scale PIONEER GAP

4 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Our research indicates $210 million in early-stage equity is required annually to close the energy access gap, while less than $16.5 million has been deployed annually, on average, over the last five years.

We found that, despite a six-fold While grants can also help cooking—need different types, increase in capital invested over companies in the pioneer gap amounts, and mixes of capital the last five years, the pioneer develop, validate, and establish because they are at different stages gap still exists in the energy new business models, patient of maturity and have different access market. A majority of the capital plays an important role business model challenges.4 capital invested has been debt in attracting and unlocking the or concentrated in a select few additional investment capital— With the right infusion of capital companies with proven business equity and debt—needed to scale and support, off-grid solutions models. Meanwhile, 93 percent of off-grid energy companies. For could bring lighting and power to our energy access CEOs operating example, because of the $22.1 an additional 620 million people by in the pioneer gap stated that million of patient capital we 2030—that’s 60 percent of the total they continue to face significant invested in our 20 early-stage number of people living without challenges in accessing investment energy access companies, these access to energy today. Our hope capital. With more than 200 other companies have raised more is that this report will serve as companies in the off-grid sector than $219.5 million in investment a public resource for investors, operating in the pioneer gap, the capital in subsequent fundraising entrepreneurs, policymakers, market is clearly falling short. rounds, or 10x the capital we and other stakeholders to work initially invested. together to increase the availability Next, we evaluated the important of capital across the sector, with a role patient capital can play in Lastly, we found that the sub- focus on the patient capital needed filling the pioneer gap.2 Patient sectors we invest in—solar home to close the pioneer gap. capital is early-stage equity or debt systems, mini-grids, and clean focused on generating social and financial returns. Alongside grant capital, patient capital can support new business models to build markets and scale impact. For this report, we focused on equity because Acumen has primarily invested equity in early-stage energy startups. Our research Acumen's portfolio companies have raised indicates $210 million in early- more than $219.5 million in investment capital stage equity is required annually to close the energy access gap, in subsequent fundraising rounds, or 10x the while less than $16.5 million capital we initially invested. has been deployed annually, on average, over the last five years.3

EXECUTIVE SUMMARY 5 INTRODUCTION

More startups than ever before are pioneering new To analyze the pioneer gap and the role of patient technologies and business models to provide energy capital, we interviewed 15 CEOs in Acumen’s energy access to the more than one billion people living portfolio, asking a standard set of questions on without electricity and three billion cooking with their fundraising history, the availability and use of dirty fuels. These social enterprises are operating various forms of capital in the sector, the challenges in some of the most difficult and fragile markets in they’ve faced as their companies have grown the world and, despite these challenges, the off-grid and evolved, and the overall support they need to sector has seen a dramatic increase in investment maximize their impact and build commercially over the last five years, reaching over $300 million viable businesses. In addition, we analyzed more in 2017.5 than 1,000 data points from our companies’ financial and operational performance to identify Reflecting on this exciting growth, we wanted to what it takes to create a scalable business model take a step back and analyze how this influx of in the off-grid energy sector. Lastly, we reviewed capital has impacted the off-grid energy market. research by peer organizations to better understand In particular, we wanted to evaluate whether the the overall need for capital in the off-grid energy “pioneer gap” that we introduced with the Monitor sector and the optimal mix of capital for solar home Group in 2012’s From Blueprint to Scale: The Case for system, mini-grid, and clean cooking companies. Philanthropy in Impact Investing is finally beginning to close.6 This gap is where social enterprises struggle to access the right kind of capital to validate their business models and prepare for scale. In addition, we wanted to evaluate whether there is still a need These social enterprises are for patient capital in the form of early-stage equity operating in some of the most to fill the pioneer gap. difficult and fragile markets in We define patient capital as investment capital with the world and, despite these a long-term investment horizon of seven to 12 years, a high tolerance for risk, and a goal of maximizing challenges, the off-grid sector both social and financial returns. Patient capital can has seen a dramatic increase be debt or equity but, in this report, we focus on equity because Acumen has mostly invested equity in investment over the last five in off-grid energy. Although grants are the most years, reaching over $300 million patient type of capital, they are simply referred to as grants in this report. in 2017.

6 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 INTRODUCTION Figure 2:StageofCompanyGrowthandRespectiveCapitalNeeds CAPITAL OPTIMAL KEY NEEDS KEY ACTIVITIES PROVIDERS AMOUNT ANNUAL REVENUE ($) Seed funding business planning development and Strategy talent networks capacity and Innovation and/or product core technology business plan, proposition, customer Develop initial customer needs Understand blueprint for the blueprint forthe treasury governments, R&D funding, Grant providers, $10,000 -$1M future business Developing the Developing the Blueprint Blueprint 1

3 2 and/or product model technology Refine business model assumptions Test business market trials Conduct early-stage debt early-stage debt early-stage equity, Grant providers, and refinement market trials Funds tofacilitate Innovation capacity and pricing on cost,value model andfocus Operationalize as required business model $250,000 -$5M Validate Testing and Testing and refining the refining the

YEARS OFOPERATION

7 6 5 4 conditions required conditions required early-stage debt early-stage equity, Grant providers, and inventory fixed assets, Capital formarketing, and talent system implementation, Supply chaindesign, and execution Marketing strategy processes, etc. systems, talent, capacity toscale; Build operational Develop supplychain and demand customer awareness Stimulate Enhancing the Enhancing the rpr Scale Prepare for scaling $3M -$10M

reach large numbers reach largenumbers business model to business modelto commercial debt Private equity, Competitive strategy expansion support Funds to risk management Stakeholder and Realize scaleefficiencies Respond tocompetitors and processes Enhance systems Invest inassetsandtalent and segments new geographies Move into and/or suppliers Rolling out the Rolling outthe of customers of customers $10M+

8

9 10 7 1 ENERGY SNAPSHOT: ACUMEN’S TRACK RECORD FOR INVESTING IN ENERGY ACCESS

Customers of Frontier Markets, India.

8 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 ACUMEN’S ENERGY ACCESS PORTFOLIO AT A GLANCE

Figure 3: Geographic Distribution of Acumen's Energy Access Portfolio

ARS

NIA ENERGY SREY SRE SLTINS ILITE RNTIER ARETS

AANI AIT S ER SYSTES EG GREENAY GRAEEN R ENERGY GREEN ENERGY IELS LING CRRENTS

SLARN RI RN ANACTRING ILITE R ENERGY S ER SYSTES EERGY A LIGT

Lighting and power company

Cookstove company

Chinese line *Indicates exited investment **d.light currently distributes its products in more than 60 countries Indian line

Map Source: United Nations Map Source: United Nations Geospatial Information Section

ENERGY SNAPSHOT: ACUMEN’S TRACK RECORD FOR INVESTING IN ENERGY ACCESS 9 ACUMEN’S $ ENERGY ACCESS 22.1 PORTFOLIO MILLION STATISTICS INVESTED

Acumen’s ability to research and understand the role of capital in off-grid energy is possible because of our partners who have provided 1.3X us with philanthropic and AVERAGE grant capital to invest in the RETURN MULTIPLE sector, peer investors, off-grid energy stakeholders, and, of SINCE 2006 course, the entrepreneurs. As of January 2018, Acumen and its companies have made the following progress providing 8 off-grid energy access: COUNTRIES 36% INDIA, GHANA, AVERAGE COMPOUNDED KENYA, NIGERIA, ANNUAL GROWTH RATE PAKISTAN, SIERRA LEONE, (CAGR) IN REVENUE TANZANIA, AND UGANDA FOR OUR PORTFOLIO COMPANIES SINCE 2014

20 $219.5 COMPANIES MILLION 16 CURRENT, 4 EXITED IN FOLLOW-ON CAPITAL LEVERAGED

10 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 86 MILLION LIVES IMPACTED BY OUR PORTFOLIO COMPANIES

35% OF ENERGY CUSTOMERS LIVE BELOW THE 2017 815K WORLD BANK COOKSTOVES INTERNATIONAL RELATIVE POVERTY LINE OF SOLD BY OUR LESS THAN $3.10/DAY PORTFOLIO COMPANIES

78K 72% 474K MINI-GRID OF CUSTOMERS LIVE ON LESS THAN $6 A DAY SOLAR HOME SYSTEMS CONNECTIONS SOLD BY OUR ESTABLISHED BY OUR PORTFOLIO COMPANIES PORTFOLIO COMPANIES

MILLION 19.4M 58 PEOPLE SOLAR LANTERNS HAVE ACCESS TO MODERN SOLD BY OUR PORTFOLIO COMPANIES ENERGY FOR THE FIRST TIME

ENERGY SNAPSHOT: WHAT IS ACUMEN’S TRACK RECORD FOR INVESTING IN ENERGY ACCESS? 11 2 THE PIONEER GAP: HOW HAS THE INFLUX OF CAPITAL AFFECTED ENTREPRENEURS?

Employees of Orb Energy, India.

12 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 When we interviewed the CEOs across our portfolio, 93 percent of whom are operating in the pioneer gap, they unanimously agreed that access to finance is the paramount challenge facing their businesses.

Although there is more capital in annually to get existing and future the off-grid energy space today companies through the pioneer than five or 10 years ago, off- gap. Yet, less than $16.5 million grid companies at all stages of has been deployed annually on growth are still undercapitalized. average over the last five years.8 When we interviewed the CEOs This lack of early-stage equity across our portfolio, 93 percent leaves the sector at risk for missing of whom are operating in the SDG Seven by an even greater pioneer gap, they unanimously margin than anticipated.9 If new, agreed that access to finance pioneering companies cannot is the paramount challenge raise enough capital to prove their facing their businesses. This is business models, they will not reinforced when looking at the scale and we will lose one of the current trends in capital flows. most powerful opportunities to provide energy to the millions of To calculate the total amount of people living off the grid. early-stage equity needed to get companies through the pioneer gap, we evaluated research from the solar home system, mini- grid, and clean cooking sub- sectors. We found that we need Assuming early-stage equity is to invest $11.4 billion annually, five percent of the sector’s total of which $4.2 billion is equity, to help achieve universal energy equity needs of $4.2 billion, it means access by 2030, United Nations $210 million in early-stage equity is Sustainable Development Goal (SDG) Seven.7 required annually to get existing and future companies through the pioneer Assuming early-stage equity is five percent of the sector’s gap. Yet, less than $16.5 million has total equity needs of $4.2 been deployed annually on average billion, it means $210 million in early-stage equity is required over the last five years.

THE PIONEER GAP: HOW HAS THE INFLUX OF CAPITAL AFFECTED ENTREPRENEURS? 13 Figure 4: Total Early-Stage Equity Gap in Off-Grid Energy Access Market

CAPITAL (USD)

$250M

$200M $210M

$150M

$100M

$50M

$16.5M $- ANNUAL REQUIRED AVERAGE ANNUAL EARLY-STAGE EQUITY EARLY-STAGE EQUITY DEPLOYED

There are more than 200 off-grid they struggle to access the capital equity required for solar home energy companies across Africa they need to grow. The total equity system companies to over $1.5 and Southeast Asia in the Validate needs, including early-stage and to $2 billion needed for the and Prepare stages of growth, later-stage equity, by sub-sector mini-grid and clean cooking operating in the pioneer gap where range from $800 million additional companies, respectively.

Figure 5: Annual Required vs. Current Mix (2017) of Equity by Sub-Sector

CAPITAL (USD)

$2,500M

$2,020M $2,000M

$1,500M $1,500M

$1,000M $809M

$500M

$102M $37M $2M $- SOLAR HOME SYSTEMS MINI-GRIDS CLEAN COOKSTOVES

Current Capital (2017) Required Capital

14 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 For example, 67 percent of equity investments—or $518 million of $733 million total equity invested in the solar home system sub-sector since 2012—has been invested in just four companies.

The capital being invested is equity. For the mini-grid sector, concentrated and skewed toward a equity investments are slowly select few companies with proven increasing but are still 40x less business models. For example, 67 than we need for these companies percent of equity investments—or to scale. In the clean cooking $518 million of $733 million total sector, we find the bleakest equity invested in the solar home prospects for companies trying to system sub-sector since 2012— raise capital: less than $2 million has been invested in just four in total equity was invested in companies. This leaves all other clean cookstoves companies in solar home system companies 2017. Entrepreneurs are left to find competing for the remaining small amounts of capital from scattered amounts of early-stage fragmented capital markets.

A mini-grid system of Husk Power Systems, East Africa.

THE PIONEER GAP: HOW HAS THE INFLUX OF CAPITAL AFFECTED ENTREPRENEURS? 15 3 NEED FOR CAPITAL: FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY

A customer of Easy Solar, West Africa. Courtesy of Easy Solar.

16 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Over the last 11 years, Acumen revenue growth of greater than isn’t the only type of equity in has led the first equity rounds 25 percent prior to considering the market, it often serves as a on 15 out of our 20 energy access an investment. This is logical but catalyst, taking on the risk and investments. Over 90 percent of puts energy access entrepreneurs creating the time needed to the 15 CEOs indicated that other in a difficult place: investors want prove business models for investors required earlier risk to see revenue growth to make later-stage investors. capital—such as a patient capital— an investment, but entrepreneurs before being willing to make an need capital and time to find the Table 1 identifies the different investment. Additionally, these optimal business model that meets types and profiles of equity CEOs indicated that other investors customer needs to generate that providers in the off-grid energy wanted to see robust annual growth. Although patient capital access market:

Table 1: Types and Profile of Equity Providers in the Off-Grid Energy Access Market

Seed Equity Early-Stage Equity Private Equity

Patient capital investors (seeking impact return and Financial return-focused, Family and friends, financial return in service of later-stage investors Description creating sustainable models) seed investors Strategic Venture capital investors corporate investors (seeking financial returns)

Average $1,000 - $1M $250K - $5M $5M - $100M Ticket Size

Risk Profile High Medium to high Medium

Stage Blueprint, Validate Validate, Prepare Scale

Acumen, Omidyar Networks, High net worth Helios, Investec, Bamboo Capital Partners, individuals, Apis Partners, Shell New Examples Energy Access Ventures, angel funds Energy Ventures Investisseurs & Partenaires (I&P)

NEED FOR CAPITAL: FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY 17 Over the last 11 years, Acumen has led access to finance. For example, the Founder and Director the first equity rounds on 15 out of our 20 of the Ashden Awards, energy access investments. Over 90 percent Sarah Butler-Sloss, said:

of the 15 CEOs indicated that other investors "Whether it is a cookstove company required earlier risk capital—such as a in India or a pay-as-you-go company in Tanzania, the need for more patient patient capital—before being willing to capital and concessionary finance, as make an investment. well as straightforward finance at the right size, is crucial but very hard to find. Our winners are generally at an early growth stage. The sector is too nascent for the local banks to Why is patient capital needed? and financing options to serve understand, so a local loan is very Like all early-stage startups, customers. Whereas debt requires unlikely. And the large investors such off-grid energy companies need structured repayments that can as the development agencies and time to understand customer constrain a company’s cash, development banks don’t know how behavior and preferences. equity provides capital with no to deal with the smaller ticket size. However, unlike most startups fixed repayment schedule thereby It is easier to raise over $100 million that target middle- or high- providing the company with than to raise under $2 million. For income customer segments, the flexibility to make the necessary this sector to survive, to grow and majority of people living without investments for growth. to scale up it needs soft, patient or electricity and cooking with dirty concessionary capital at the right size fuels today are poor. As a result, Unlike in developed capital and plenty of it." these companies face additional markets, off-grid energy startups obstacles. They need to find the in emerging markets are often right price points and financing funded with grant capital. Grant solutions to ensure their energy capital is the least expensive type "Whether it is a products and services are truly of capital for an entrepreneur cookstove company affordable and not pushing as it charges no interest and customers into debt. They funders do not take a position as in India or a pay-as- operate in underdeveloped or shareholders in the company. In you-go company in unstable markets with few, if any, general, grants are provided by investors. And, in the case of clean funders who want to maximize Tanzania, the need for cooking companies and mini-grid social returns, which means they more patient capital companies in rural areas, they also are focused on reaching the confront the challenge of changing poor and underserved. Grants can and concessionary long-held cultural behaviors. also be used to fund operations, finance, as well therefore playing a similar role to Patient capital provides off-grid equity. That being said, grants do as straightforward energy startups with the key not have the signaling effect of finance at the right benefits of equity well understood patient capital, meaning that they in developed capital markets: often do not position companies size, is crucial but very equity is used to fund core for subsequent equity raises. hard to find." operations, hire talented staff, and put systems and processes in We increasingly hear from grant —SARAH BUTLER-SLOSS place as companies find the right makers that the biggest obstacle FOUNDER AND DIRECTOR business models, price points, their grantees face to scale is OF THE ASHDEN AWARDS

18 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Grants can also be used to fund operations, therefore playing a similar role to equity. That being said, grants do not have the signaling effect of patient capital, meaning that they often do not position companies for subsequent equity raises.

Figure 6: Distinguishing Factors of Patient Captial

Provides investment capital to help unlock additional sources of funding and de-risk debt capital (debt-to-equity ratios)

Patient Commercial Grants Capital Capital

Encourages mission-alignment and provides support to achieve impact objectives

Patient debt lenders also play able to offer long-term payment the repayment of its loans. In fact, an important role in funding plans for products on credit. 87 percent of CEOs say Acumen’s companies, as debt can finance Lenders take on less risk than investment capital directly helped the cost of carrying inventory equity investors and need to see unlock both debt and equity in and cover money owed to the a certain amount of equity in a their companies. companies by customers. Off-grid company to ensure a strong capital energy companies need debt to be base to support the company and

NEED FOR CAPITAL: FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY 19 PEER CASE STUDY SunFunder: The Role of Debt in Figure 7: SunFunder Off-Grid Energy Companies Portfolio Overview

In traditional markets, local banks often provide FULL TRACK RECORD debt for working capital, construction, and loans. $ However, many local banks in countries where off- 45M 107 grid companies operate are unfamiliar with their CUMULATIVE SOLAR LOANS business models and uncertain about or unable to LOANS CLOSED DEPLOYED offer lines of credit. 38 100% SunFunder provides debt financing for solar BORROWERS ON-TIME DEBT SERVICE companies and projects in emerging and frontier SERVICED TO OUR INVESTORS markets. It is one of the few debt providers serving energy access enterprises and has built a robust track record, having worked with nearly 40 solar companies since starting in 2012. 2017 INVESTMENT ACTIVITY $ $ For SunFunder’s solar company borrowers, this early- 20M 1.3M stage debt financing is key for them to reach scale. SOLAR LOANS AVERAGE TICKET Working through its due diligence requirements can CLOSED IN 2017 SIZE CLOSED IN 2017 support the financial controls that entrepreneurs need in place for the long term, which are often +107% 9 the lender’s conditions for disbursement. YOY GROWTH NEW IN OUTSTANDING BORROWERS For early-stage companies, raising debt and equity PORTFOLIO can be closely linked to their ability to stay healthy and thrive. SunFunder and other debt providers play a critical role in financing working capital and ACTIVE PORTFOLIO complement equity providers to ensure companies AS OF DECEMBER 31, 2017 have the investment capital they need to scale. AS % OF TOTAL PRINCIPAL AMOUNT

1% 19% PACIFIC STRUCTURED FINANCE $ 56% 44% 19% 45% 28.3M RESIDENTIAL C&I INDIA EAST AFRICA SOLAR LOAN PORTFOLIO 11% PACIFIC OUTSTANDING 81% 25% WORKING WEST AFRICA CAPITAL

2020 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 When companies seek out debt In total, Acumen’s energy companies capital, lenders need to see anywhere from 1:1 to 5:1 debt to have raised $219.5 million in subsequent equity ratios to consider lending. fundraising rounds—or 10x Acumen’s initial Of course, lenders will also assess the size, maturity, profitability, investment capital—demonstrating the track record, quality of power of early-stage equity, or patient management, business model, and the structure of the debt facility capital, to catalyze the capital market. itself. They will always look at a company’s ability to service debt and, where cash flows are tight, more equity is typically required. capital: $180.9 million in the solar $219.5 million in subsequent Lenders also assess the quality of home system sector, $24.7 million fundraising rounds—or 10x equity investors to see from whom in mini-grids, and $14.4 million in Acumen’s initial investment the company has been able to raise clean cookstoves. capital—demonstrating the capital. As we see below, Acumen power of early-stage equity, or has been part of a consortium of In total, Acumen’s energy patient capital, to catalyze the investors that has helped unlock companies have raised capital market.

Figure 8: Capital Raised by Acumen Portfolio Before, During, and After Acumen's Investment

SOLAR HOME Debt Equity SYSTEMS Grants

MINI- Debt Equity GRIDS Grants

CLEAN COOKING Equity Grants Debt

$50M $- $50M $100M $150M $200M $250M CAPITAL RAISED (USD)

Capital Pre-Acumen Acumen Investment Capital with Acumen Capital Post-Acumen

In Figure 8, we see that nearly 90 and our co-investors’ investment. the form of grants percent of follow-on capital raised In contrast, only 64 percent of needed to support continued by solar home system and mini- follow-on capital for clean cooking market development. grid companies was in the form of companies was in the form of debt debt and equity following Acumen and equity, and 36 percent was in

NEED FOR CAPITAL: FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY 21 CASE STUDY

A customer of BURN Manufacturing, East Africa.

BURN Manufacturing: Demonstrating the Importance of Patient Capital Equity

BURN Manufacturing produces fuel-efficient rather than debt, to fund core operations. charcoal cookstoves for the East African However, he did not have any interest from market. The company’s business model equity investors to support his vision of reducing encompasses the design, manufacturing, poverty and protecting the environment by and sale of cookstoves that burn charcoal as delivering locally manufactured, fuel-efficient well as wood. In 2014, BURN raised debt from cookstoves. The company therefore accepted General Electric and the Overseas Private what was available. “Almost all the money we Investment Corporation (OPIC). BURN’s CEO raised was the only money that was available,” Peter Scott knew that he needed equity, said Scott.

2222 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 The debt investment from General Electric company’s potential for success. Had BURN and OPIC was used to fund core operations, simply raised grants, the company may not product research and new design, all functions have received the support it needed to better covered by equity and grants. BURN restructure its debt. also received a $500,000 Spark Fund grant from the Global Alliance for Clean Cookstoves for An improved mix of capital—including equity, the construction of its manufacturing plant. debt, and grants—has given the management team a greater degree of flexibility to fund A few years later, Acumen invested $1.5 million core operations, iterate its business model, of patient capital in the form of equity in and stay focused on serving the poor, while partnership with Unilever in a series of tranched attracting follow-on investment capital investments. Acumen also joined the board needed to scale. BURN recently launched the and provided strategic finance advice to wood-burning Kuniokoa, which incorporates help the company undertake a painful but learnings from its initial product, the Jikokoa necessary debt restructuring process. Had charcoal stove, and is actively raising capital BURN been unable to restructure this debt, in the market. BURN’s experience highlights it would have been obligated to divert a the role patient capital equity can play during significant portion of its operating income critical early stages of growth as well as the to meet debt service, severely impairing the danger of using debt to fund core operations.

FIGURE 9: Capital Raised and Impact Profile BURN Manufacturing

CAPITAL LIVES RAISED (USD) IMPACTED

$5M 2,000,000

$4M 1,500,000 $3M 1,000,000 $2M

$1M 500,000 $- - 2014 2015 2016 2017 Debt Equity Grants Lives Impacted

NEED FOR CAPITAL: FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY 23 CASE STUDY

Margaret Gbedema, customer of PEG Africa, West Africa. Credit: Martin Wright

PEG Africa: Patient Capital Equity Unlocking Debt PEG Africa was the first company in the retail locations in Ghana and Cote d’Ivoire. pay-as-you-go (PAYG) solar market to have a In 2017, Acumen invested $1 million in equity strategy to license the hardware and software as part of the company’s Series B round to from more established players in the sector, raise equity to support: as well as focus on distribution and financing. Since its inception, PEG Africa has emerged ++Inventory (i.e., solar home system) purchases as one of the leading players in the off-grid to support expansion in Ghana solar market in West Africa. It currently has ++Expansion into new West African markets a network of approximately 350 direct sales ++Core operations (e.g., staff salaries) representatives and 55 service centers and

2424 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 PEG Africa is a great example of how a balance sheet. Debt financing is now used to company can use various forms of capital support product purchases, freeing up other to support its growth through the pioneer sources of capital for expansion and customer phase and how early-stage equity can de-risk acquisition. In 2017, PEG needed to raise at future debt investments. PEG relied on a mix least $1 million in new equity to be considered of grants from donors and early-stage equity, for additional debt financing, as their existing provided by patient and venture capital debt to equity ratio was considered too high to providers, to build its distribution network and take on more debt. Acumen stepped in at this begin validating its business model for solar critical juncture to lead the Series B, unlocking home systems in a new geography, Ghana, PEG’s access to debt. In 2018, PEG Africa, with between 2014 and 2015. The company then support from SunFunder, ResponsAbility and raised debt capital in 2016 from SunFunder as Oikocredit, completed an $8 million multi- lenders became more comfortable with the currency debt round—the first such offering in business model and were further reassured the off-grid sector, underscoring the value of by the presence of equity on the company’s equity as a tool to secure additional capital.

FIGURE 10: Capital Raised and Impact Profile PEG Africa

CAPITAL LIVES RAISED (USD) IMPACTED

$15M 100,000 80,000 $10M 60,000 40,000 $5M 20,000 $- - 2014 2015 2016 2017 Debt Equity Grants Lives Impacted

NEED FOR CAPITAL: FILLING GAPS IN OFF-GRID ENERGY MARKETS TODAY 25 4 THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES?

A customer of d.light, India.

26 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Overall, our CEO interviews support the research that shows the current capital mix available does not provide enterprises with access to the right types of capital to validate or prepare their business models for scale.

To deepen our analysis, we evaluated the capital gaps in the off-grid energy sub-sectors we invest in: solar home systems, mini-grids, and clean cooking. We found that each of these sub-sectors are at different stages of maturity and face distinct business model challenges. Each require different combinations of grant, equity, and debt, proving the urgent need for patient capital. We leveraged research from Sustainable Energy for All’s 2017 Energizing Finance report to determine the optimal mix of capital and compared it to the current mix deployed, which we derived from data from the Global Alliance for Clean Cookstoves, Dalberg, and the International Energy Agency.10 Overall, our CEO interviews support the research that shows the current capital mix available does not provide enterprises with access to the right types of capital to validate or prepare their business models for scale.

An employee of BURN Manufacturing, East Africa.

THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES? 27 Figure 11: Current and Required Mix of Capital $196 M Grants $8.5 M Grants

$173 M $102 M $1,450M $809 M Debt Equity Debt Equity Solar Home Systems

Current Required $284M $2.46B

$41M $1,910M Grants Grants $125 M Debt $37M Equity $1,140M $1,500 M Debt Equity Mini-Grids

Current Required $203M $4.55B

$836 M Grants $8.4 M Grants $10.8 M $2,020M Debt $1,540 M Equity Clean Debt

$2 M Cookstoves Equity

Current Required $21.20M $4.40B

28 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 A home of a SRE Solutions customer, Pakistan.

With billions in additional effectively and efficiently and investment needed to achieve capital providers identify where universal energy access, the their capital can be most catalytic problem may seem daunting. in scaling each of the off-grid sub- However, if entrepreneurs use sectors, we believe that is a step in the limited capital available more the right direction.

THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES? 29 CASE STUDY

Employees of Husk Power Systems, India.

Husk Power Systems: Using the Right Mix of Capital In 2007, two ambitious entrepreneurs in other words, their blueprint idea—the succeeded in producing gas from rice entrepreneurs founded Husk Power husks, a readily available product of Systems with the goal of delivering clean, agricultural waste. From this gas, they biomass-based electricity to Indian generated electricity, bringing power and villages without access to the grid. light to a remote village in northeastern India for the first time. Based on their Acumen led the pre-Series A investment initial success in developing the core round with $375,000 in 2010 and invested technology of rice husk gasification— an additional $1 million in equity in a $5

30 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 million Series A round in 2012. The purpose the unit economics of purely rice husk- of the Series A was to experiment with based gasification plants became Husk’s gasification solution in Bihar’s uncompetitive with other forms of low-income communities and test electricity generation. As a result, Husk alternative lines of business that were Power Systems pivoted to a biomass-solar expected to add new revenue streams hybrid generation model. for the company.11 The CEO of Husk stated, “[Acumen’s] Patient capital equity, alongside grants risk capital was key for the company from entities like Shell Foundation, gave to evolve. As a pioneer in the industry, the entrepreneurs freedom to find a a company needs capital to robust business model with the right survive the downturns and attract source of power to best serve low-income additional capital.” communities. These types of capital also provided the company time to pivot Husk used equity and grants to learn and and evolve its business model based find the right business model to scale. The on shifting market dynamics. With solar company recently closed a $20 million prices in India rapidly declining while equity round in 2018 and is in the process the price of rice husks was increasing, of closing a debt round.

FIGURE 12: Capital Raised and Impact Profile Husk Power Systems

CAPITAL UNITS RAISED (USD) INSTALLED

$25M 100

$20M 80

$15M 60

$10M 40

$5M 20

$- - Pre-2012 2012 2013 2014 2015 2016 2017

Debt Equity Grants Units Installed

THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR ENERGY ACCESS COMPANIES TO SCALE? 31 Over 30 solar home system companies are The solar home system sub-sector has seen incredible growth in in the Validate and Prepare stages of growth. the last decade and proven that They are facing the pioneer gap where companies can be profitable while serving the poor. As we see in they struggle to raise the capital needed to the pie chart on page 13, solar accelerate the growth of affordable, clean home system companies have the right mix of capital, just not solar energy across multiple geographies. enough overall.

Of the $1.6 billion invested in off-grid energy since 2012, 85 percent went to solar home system companies.12 The number TABLE 2: Financing Status of of annual transactions increased Solar Home System Companies from 15 to 79 between 2012 and 2016, but the average transaction size has also increased, reflecting WHERE WE ARE NOW WHERE WE NEED TO BE investors’ preferences to write larger checks in later-stage New companies and companies. In fact, the top 10 Lack of grant capital products funded companies received 87 percent of to seed companies in to deliver market investment capital since 2012.13 Grants new markets and pilot solutions to underserved Early-stage companies expanding new products populations proven business models in highly risky, fragile markets Cash flow cycles for remain underserved. Inventory financing company to manage Debt challenges, yielding lack and scale sales Over 30 solar home system of product for customers of product to companies are in the Validate and new customers Prepare stages of growth. They are facing the pioneer gap where they struggle to raise the capital Constrained funding Well-funded core needed to accelerate the growth Equity for core operations operations to scale of affordable, clean solar energy and inability to attract and reach additional across multiple geographies. additional investors customers More mature companies that have successfully overcome the pioneer gap also lack adequate access to capital. They have the track record to attract commercial equity and debt, yet the demand for capital far exceeds the supply. This later- stage capital is needed to fund the cohort of first movers who are now scaling their businesses across geographies, introducing new product lines, and providing credit to their customers.

32 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Figure 13: Optimal Mix of Capital Solar Home System Companies

REVENUE (USD) $100M COMMERCIAL EQUITY AND DEBT FOR GROWTH $80M

$60M COMMERCIAL DEBT FOR VENTURE CAPITAL $40M WORKING CAPITAL AND RECEIVABLES FINANCING $20M PATIENT CAPITAL, EARLY-STAGE DEBT $10M RETURNABLE EQUITY

<$10M GRANTS, 5K 50K 100K 5M 5M+ SEED FUNDING HOUSEHOLDS SERVED

GRANTS, MISSION- COMMERCIAL CAPITAL GOVERNMENTS VENTURE CAPITAL ALIGNED DEBT AND PRIVATE TYPES AND ANGEL AND RISKY DEBT INVESTORS EQUITY INVESTORS

AMOUNT $25K - $3M $250K - $2M $2M - $10M $10M +

RETURN Concessional 0 - 10% 10 - 15% 15 - 20% + PROFILE

Formalized customer journey implemented, Pilots completed, systems for staff early customer Customer base Expansion to new recruitment and base of 200 above 1,000, territories, systems retention in place, KEY established, key key supplier and processes credit and financial OUTCOMES hires identified, relationships formalized, departments customer formalized, key additional hires formalized, expansion management hires completed completed to new countries, process outlined scaling product offerings to customers

Acumen, EXAMPLE USAID, Energy Access Helios, Persistent Energy PROVIDERS Shell Foundation Ventures, ElectriFi Apis Capital Partners Capital

THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES? 33 Companies in the mini-grid than $120 million in subsidies are in the mini-grid sub-sector totals sub-sector require large capital available globally for mini-grid less than one fifth of the debt investments to build the companies compared to the $50 available. Venture capitalists have infrastructure that delivers billion in subsidies provided to been dissuaded by mini-grids electricity to specific, and often traditional utilities in emerging given the uncertain return profiles remote, areas. Revenues must markets.15 Until subsidies are and risks, including construction cover the costs to operate, and made widely available to mini- and permitting costs, follow-on there typically isn’t enough grid companies, early-stage capital requirements, and need revenue available to pay back equity in the form of patient to increase revenue per user. high initial capital costs. Off-Grid capital is the only capital enabling Companies that have shown Catalyst Advisors estimates that mini-grid companies to learn early market traction need early- a mini-grid company needs about about customer usage behavior, stage equity to hire staff, fund $30 million in capital in the form navigate unclear regulations, operational costs related to grid of grants, debt, and equity to lower costs through volume and installation and customer service, reach 40,000 customers, which experience, and deliver energy and unlock debt. most companies struggle to in some of the hardest-to-reach access. As the sub-sector stands markets. CEOs in our mini-grid Once the company understands today, there is not enough capital portfolio reported a need for customer usage and gains traction nor the right mix available. resources and time to address key with its customer base to cover challenges, like understanding some expenditures, there will be Subsidies have shaped grid their customers’ usage patterns compelling evidence to drive the infrastructure in markets around and building the capacity to case not only for subsidies and the world by reducing connection service them, in these models. regulatory change, but also for costs for customers, especially debt that provides the leverage to for rural customers. Subsidies The amount of equity to support make the investment viable for can cover 30-50 percent of project operations for companies commercially oriented investors. costs.14 Yet, we found that less showing viable business models Interestingly, we see commercial loans in emerging markets appearing with more frequency. TABLE 3: Financing Status of Over the last five years, loan Mini-Grid Companies facilities to support project finance for mini-grid companies in WHERE WE ARE NOW WHERE WE NEED TO BE emerging markets have surpassed $500 million. However, these Subsidy for connection loans tend to have high interest and operating costs rates, short repayment periods, Financially unviable for companies providing foreign currency denominations, Grants unit economics electricity in rural and high collateral requirements, communities and may not be suitable for the stage of growth for most mini-grid Adequate capital to companies. Governments, donors, Bottleneck in access to cover plant construction banks and private investors have Debt cash to construct projects and other project costs an opportunity to create new financing products, especially in Available cash for local currencies with longer-than- Limited ability to fund distribution, sales, and usual timelines for repayment critical operating costs, Equity marketing costs and to fund mini-grid models to such as staff costs expansion to new regions reach remote areas with electricity access.

34 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Figure 14: Optimal Mix of Capital Mini-Grid Companies

REVENUE (USD) SUBSIDIES, COMMERCIAL EQUITY AND $100M DEBT FOR FINANCING

$80M

$60M

$40M SUBSIDIES, COMMERCIAL DEBT FOR VENTURE CAPITAL $20M WORKING CAPITAL AND RECEIVABLES FINANCING $10M PATIENT CAPITAL, RETURNABLE EQUITY EARLY-STAGE DEBT <$10M $- GRANTS, 5K 30K 100K 500K 1M+ SEED FUNDING CONNECTIONS

GRANTS, MISSION- COMMERCIAL CAPITAL GOVERNMENTS VENTURE CAPITAL ALIGNED DEBT AND PRIVATE TYPES AND ANGEL AND RISKY DEBT INVESTORS EQUITY INVESTORS

AMOUNT $500K - $10M $2M - $10M $5M - $25M $10M - $500M

RETURN Concessional 0 - 10% 10 - 15% 15 - 20% + PROFILE

Standardized product Prove Understand Lower customer with customer base KEY technology, customer ability acquisition established, replicate OUTCOMES secure permits, and willingness costs, streamline projects at additional show demand to pay, prove operations sites, reputable for electricity unit economics and costs relationship with financing institutions

Engie DOEN Rassembleurs EXAMPLE Acumen, Stanbic, Foundation, d'Energies, PROVIDERS FACTOR[e] LGT Capital Partners UK-DFID Total Energy Ventures

THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES? 35 The clean cooking sub-sector has 12 to 15 proposition but essential to shift cooking customs. At the same companies that have designed clean time, these companies cannot cookstoves and proven an initial product- scale the market alone. We are seeingThe clean the emergence cooking of new market fit. These pioneers need early-stage sub-sectorbut unproven business has 12 models equity in the form of patient capital to grow gaining initial market traction, includingto 15 companies payment-enabled as they build distribution networks to sell and thattechnologies have and designed innovative service a remote, dispersed customer base. after-sales models that encourage behaviorclean change.cookstoves and proven an initial The sector also faces an The clean cooking sub-sector of patient capital to grow as immediateproduct-market need for grants fit. has 12 to 15 companies that they build distribution networks Theseto support pioneers research and need have designed clean cookstoves to sell and service a remote, development (R&D) into and proven an initial product- dispersed customer base. additionalearly-stage products, equity customer market fit. These pioneers need Training customers also requires inneeds, the preferences, form of andpatient behaviors early-stage equity in the form patient capital since it is a costly when switching to a higher-tier cleancapital cookstove. to grow For example, as theycookstove build companies distribution need TABLE 4: Financing Status of to run over 1,000 cycles of Clean Cookstove Companies heatingnetworks and cooling to sell tests and just serviceto ensure product a remote, quality and safety. Grant capital can support WHERE WE ARE NOW WHERE WE NEED TO BE thesedispersed R&D activities customer as well as base.piloting products in new markets Well-funded R&D to and strengthening consumer Lack of R&D funds to develop quality products education about the benefits of Grants design products, test meeting customer clean cookstoves. product-market, and demand, enabling pilot in new markets high-risk business Established and growing model innovation companies with a demonstrated product-market fit also lack access to debt. In 2017, clean Adequate capital to cookstove companies accessed Limited funding finance inventory, $10.8 million in debt capital for inventory, manufacturing costs where $1.5 billion is required. Debt long-term assets, over long cash cycles, More risk-tolerant debt with and product orders and long-term assets longer repayment terms is such as fuel cylinders required to fund the purchase of gas cylinders, manufacturing Available cash to equipment, or processed fuels fund high-quality such as wood pellets or ethanol. Inability to fund core staff and activate These purchases have relatively Equity operations new markets through extended payback periods of sales, distribution, and 12-24 months and require marketing efforts flexible capital.16

36 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Figure 15: Optimal Mix of Capital Clean Cookstove Companies

REVENUE (USD) $2M COMMERCIAL EQUITY AND DEBT FOR GROWTH $1M

$800K COMMERCIAL DEBT FOR WORKING CAPITAL AND $600K RECEIVABLES FINANCING VENTURE CAPITAL $400K EARLY-STAGE DEBT $200K PATIENT CAPITAL

<$200K

GRANTS, 5K 50K 500K 1M 2M+ SEED FUNDING LIVES REACHED

GRANTS, MISSION- COMMERCIAL CAPITAL GOVERNMENTS VENTURE CAPITAL ALIGNED DEBT AND PRIVATE TYPES AND ANGEL AND RISKY DEBT INVESTORS EQUITY INVESTORS

AMOUNT $100K - $1M $250K - $2M $1M - $3M $3M +

RETURN Concessional 0 - 10% $5M - $100M 15 - 20% + PROFILE

Scaling manufacturing Refinement of Prototyping of Key distribution capabilities, additional product-market KEY products, early relationships in distribution channels fit, customer OUTCOMES pilots funded, place, customer identified, product insights pathway of feedback expansion into new generated, product offerings system, key hires markets (pilots funded customer base identified completed by grants), product above 500 offered expanded

Government EXAMPLE foreign aid, Acumen, GE Ventures, Deutsche Bank PROVIDERS Osprey AHL Lundeen OPIC Foundation

THE BIG PICTURE: WHAT IS THE OPTIMAL MIX FOR SCALING ENERGY ACCESS COMPANIES? 37 5 REACHING THE POOR: USING PATIENT CAPITAL TO ACCELERATE IMPACT

Devergy employees setting up a micro-grid, Tanzania.

38 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Off-grid energy entrepreneurs need to stay focused on low-income customers and their needs. Patient capital gives these entrepreneurs the capital, time, and support to find the right business models to serve those customers.

Most of the people living without the capital we provided were our access to lighting, power, and greatest value-adds. Lean Data is clean cooking are living below used by energy companies both the poverty line. Off-grid energy to understand the social impact entrepreneurs need to stay focused of their products and services, as on low-income customers and well as to get real-time feedback their needs. Patient capital gives from customers to refine those these entrepreneurs the capital, products and their business time, and support to find the models. Using aggregated results right business models to serve from Lean Data surveys across our those customers. They need to be portfolio, we released our Energy able to pivot these models when Impact Report in January 2018 to necessary without the pressure share insights on the impact of to scale too quickly or realize our energy portfolio with a first- profitability too soon; pressures of-its-kind benchmark for impact that might come from other types performance in the energy sector. of investors.

In addition, an essential element of success for these entrepreneurs is creating a cost-effective way to understand their companies’ impact on the target customer. Acumen uses Lean DataSM, our In addition, an essential element platform to capture the customer voice and measure and manage of success for these entrepreneurs customer impact. Through is creating a cost-effective way Lean Data, we work with our entrepreneurs to gather data and to understand their companies’ create insights into customer impact on the target customer. preferences and behaviors and SM assess whether our capital is truly Acumen uses Lean Data , our catalyzing markets for the poor. platform to capture the customer Ninety-three percent of our CEOs said Acumen’s commitment to voice and measure and manage customers through Lean Data and customer impact.

REACHING THE POOR: USING PATIENT CAPITAL TO ACCELERATE IMPACT 39

The Social The Financial Performance Index Performance Index

is based on our three impact dimensions is based on two financial performance (each based on one or more social performance indicators, equally weighted, for indicators), equally weighted, for each company: each company:

Breadth of Impact Compounded Annual measured by number of lives Growth Rate (CAGR) impacted/people reached 2016 Absolute Revenue Depth based on three specific indicators, equally weighted:

+ Quality of life improvements

+ Change in energy spending

+ Access to alternative products/services the company is providing

Poverty Focus measured by % of customers living below $3.10 per day

Customers of Avani Bio Energy, India.

40 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 To better understand the These indices are based on the companies ranked, not the relationship between impact key underlying indicators. extent of progress or detail of and financial returns, we built We ranked and mapped our performance on either scale. on the Energy Impact Report by companies in order of financial developing financial performance and social impact performance. and social performance indices Companies performing the best and looking at each company in both are in the upper right in our portfolio. quadrant. Note, this chart shows

Figure 16: Financial and Impact Performance of Acumen's Portfolio

LOW INCREASING FINANCIAL PERFORMANCE HIGH INCREASING IMPACT PERFORMANCE INCREASING IMPACT

LOW

Validate Prepare Scale

REACHING THE POOR: USING PATIENT CAPITAL TO ACCELERATE IMPACT 41 While there have been questions about whether there are trade-offs between impact and financial performance, we have long suspected that with respect to individual investments the answer is, it varies.

In Figure 16, we find that some If we start to look at trends with invest in later-stage companies companies do very well on both respect to companies’ stages of reaching scale, but those investing axes, some better on one than development, there might be in earlier stage companies at another, while others seemingly emerging frontiers of social and the Validate stage are taking struggle to create either impact financial performance. This can on more financial and social risk. or strong returns relative to other set our expectations with regards Later-stage growth comes with companies in our portfolio. While to what kind of social and financial an increase in revenue, a there have been questions about returns are feasible at different growing customer base, and whether there are trade-offs stages of company development. It ideally profitability. between impact and financial can also help guide decisions about performance, we have long additionality and risk tolerance Using the same data set, we are suspected that with respect to for social and financial returns seeing interesting trends by sub- individual investments the answer between investors. For example, it sector, many of which reinforce is, it varies. What that variation may be relatively easier to be near what we hear anecdotally when may mean is that it will be hard to the top-right of the chart if you talking to our entrepreneurs about build a whole portfolio without their experiences. any trade-offs.17

Employees of Easy Solar with a customer, West Africa.

42 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Figure 17: Financial and Impact Perfomance by Sub-Sector

LOW INCREASING FINANCIAL PERFORMANCE HIGH INCREASING IMPACT PERFORMANCE INCREASING IMPACT

LOW

Solar Home System Mini-Grid Clean Cooking Companies Companies Companies

For instance, our two mini-grid high potential to reach the poor We will continue to analyze the investments are near the bottom and provide income-generating relationship between social and left of our chart, suggesting they opportunities. We’re therefore financial performance over time are facing greater challenges in confident that there is long-term and, as we collect more data points achieving financial success and potential for these companies and conduct more robust analysis, social impact in comparison to to move toward the top right use what we learn to inform our the rest of our portfolio. However, if they can reach greater investing strategy and how we the data beneath the overarching breadth of impact and improved construct our portfolio, as well as indices shows that mini-grids have financial performance. help inform our peers.

REACHING THE POOR: USING PATIENT CAPITAL TO ACCELERATE IMPACT 43 CASE STUDY

Employee of SolarNow, East Africa.

SolarNow: Using the Right Mix of Capital When SolarNow, a solar home system at the time: “This data was a real company in Uganda, reviewed the eye-opener. I was shocked by results from Lean Data, the company some of the nightmares we made saw a dissatisfied set of customers our clients go through.” In response facing some real challenges to the results, the SolarNow team with their systems. Willem Nolens, spent the last two years building a SolarNow’s CEO and Founder said comprehensive process for training

44 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 sales staff, equipping them to work shown its customers it cares about more effectively, providing a great their experience and built a system installation service at their customers’ to deliver on that. SolarNow, which homes, and conducting regular Acumen invested equity in in 2014, check-in calls from its customer has since outperformed our portfolio service center. SolarNow also offers average in ease of use, customer a free customer care line that clients satisfaction, and customer effort and are told about at installation and on recently closed an eight-figure debt check-in calls and reminded of with a and equity fundraising round to scale. sticker on their system. SolarNow has

FIGURE 18: Capital Raised and Impact Profile SolarNow

CAPITAL LIVES RAISED (USD) IMPACTED

$25M 70,000

60,000 $20M 50,000

$15M 40,000

$10M 30,000

20,000 $5M 10,000

Pre-2014 2015 2016 2017

Debt Equity Grants Lives Impacted

REACHING THE POOR: USING PATIENT CAPITAL TO ACCELERATE IMPACT 45 6 BEYOND CAPITAL: WHAT DO ENERGY ACCESS STARTUPS NEED?

Employees of Kopatech, West Africa.

46 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 When we asked our 15 Acumen CEOs to rank challenges, 80 percent ranked access to consumer finance as the their top three challenges, 80 percent ranked biggest challenge, and 60 percent access to consumer finance as the biggest ranked improving sales and distribution and hiring personnel challenge, and 60 percent ranked improving as other key challenges. We see sales and distribution and hiring personnel as sub-sector trends emerge in the responses as well. For example, other key challenges. all clean cooking CEOs ranked research and development (R&D) as a major factor inhibiting growth. Additionally, 75 percent Energy startups need more than and systems to scale their business of mini-grid CEOs ranked hiring just capital. As companies work to models, other forms of support are personnel as a top challenge, understand their customers, create required to achieve scale. expressing difficulty especially the best product to fit the market, When we asked our 15 Acumen in remote locations where mini- and build the right infrastructure CEOs to rank their top three grids operate.

FIGURE 19: CEO Survey of Greatest Business Challenges Inhibiting Growth

ACCESS TO CONSUMER FINANCE

SALES AND DISTRIBUTION

PERSONNEL

R&D (PRODUCT DESIGN)

IMPROVING MARGINS

MANAGING OPERATIONS

0 2 4 6 8 10 12 14 CEO RESPONSES

Solar Home System Mini-Grid Clean Cooking Companies Companies Companies

Using this data from CEOs and along with technical assistance to the areas where entrepreneurs senior management, Acumen providers, can provide support stress the greatest need. and other hands-on investors,

BEYOND CAPITAL: WHAT DO ENERGY ACCESS STARTUPS NEED? 47 7 FACILITATING EXITS: SENDING THE RIGHT MARKET SIGNALS

A customer of d.Light, East Africa. Credit: Martin Schoeller

48 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Acumen has exited four energy companies, in which we had invested $2.3 million. The exits returned $2.9 million, showing a 1.3x return.

Unlike well-developed markets, There are several options for how there is no playbook for exits in an equity exit may take form in off-grid energy: the cash cycles are the energy access sector. long and sometimes uncertain, and there is a limited capital market for secondary buyers. There is, however, an increased pressure for equity investors to exit their investments. More exits present an opportunity to build the full scope of the capital market. Exits mobilize larger pools of untapped capital and provide a signal to untapped investors that the market can generate returns.

Three factors that complicate exits for investors include (1) the length of time pioneer companies take to validate their business models and prepare for scale to attract the next stage of investors, (2) the relatively small number of follow- on investors currently in the space, and (3) the large and continual need for capital for these business models as they scale. From an investor’s perspective, equity investments are more challenging to exit than debt investments, which are “exited” once the investee repays the agreed upon principle and interest on a pre- agreed schedule.

A Devergy customer in her shop, Tanzania. Courtesy of Devergy.

FACILITATING EXITS: SENDING THE RIGHT MARKET SIGNALS 49 Table 5: Methods for Exiting an Equity Investment

PRIVATE TRANSACTIONS Method Buyer Description

FINANCIAL TRANSACTION Limited partnership funds Company sells an equity stake to a new or Special purpose existing shareholder acquisition company Existing equity holders are compensated for Corporate their shares at a price negotiated between STRATEGIC TRANSACTION investee management acquisition Competing firms Transaction may be initiated by either the Suppliers or buyers looking for buyer or the seller supply chain integration Companies seeking geographic/ product diversification

Investor’s shareholding stake is sold via a private transaction May occur between two existing investors Secondary Financial or or between an existing investor and an strategic investors equity sale incoming investor Often initiated by seller, and is subject to varying internal corporate approval procedures

Company or management buys back the shares of the company Can be triggered by pre-agreed terms such Share Management or founders as redemption rights, repurchase schedules, buyback or put options, negotiated by the investors and the investee at the time of investment

PUBLIC TRANSACTIONS Method Buyer Description

Company lists its shares on a stock exchange, providing existing shareholders Initial Public Institutional and retail public with the ability to realize their investments market investors Offering (IPO) via the public market

50 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Initial public offerings (IPOs) may Acquisitions and equity trades M-KOPA, respectively. In addition, not be a viable method for most have a higher likelihood of large energy conglomerates such companies in the energy access succeeding. Later-stage growth as Total and ENGIE have been sector at this point because the funds have an opportunity to increasingly active in deploying typical size of companies seeking complete equity trades or share their own impact-oriented them are larger than where buyouts of early-stage investors. venture funds. These strategic even late-stage energy access These boost market confidence investors have started to play a companies are today. In addition, that exits are possible, encourage larger role in the sector, leading microfinance is the only sector more early-stage investors to to consolidation. For example, in which impact investor-backed come in, and prove that capital ENGIE recently acquired Fenix, IPOs have been successful to date. in this sector can be cyclical, rather a pioneering company in East Exit strategies that target sales than linear. Africa’s home solar market, and to existing management are less Mobisol, a Berlin-based off-grid likely to succeed given companies Commercial investors with energy company, recently need to preserve capital for more than $100 million in assets acquired Lumeter, a leading pay- growth. It is challenging and often under management such as as-you-go software provider in unsuitable to the company for DBL Partners and Generation sub-Saharan Africa. management to buy back existing Investment Management have shares while additional funds also demonstrated interest in are required to finance growth energy access companies and initiatives, such as new market recently led large investment entry or product launches. rounds in Off Grid Electric and

A demonstration to customers of Greenway Grameen, India.

FACILITATING EXITS: SENDING THE RIGHT MARKET SIGNALS 51 MAPPING EXITS: WHAT HAS AND HAS NOT WORKED IN ACUMEN’S EXITS

Acumen has exited four energy more than 600,000 homes to impact with their capital, not companies, in which we had affordable solar power. buy existing shares. Later-stage invested $2.3 million. The exits investors, especially those who are returned $2.9 million, showing M-KOPA’s experience is the mission-aligned, must recognize a 1.3x return.18 One of these exception, however, not the rule. the necessity of supporting exits in companies is M-KOPA, a Kenya To highlight a divergent case, the sector to show new investors it solar home system company that we’ve faced challenges exiting a is possible to monetize returns in offers pay-as-you-go financing. company and selling our shares this market. Acumen invested in 2012 to impact-oriented later-stage providing both equity and debt investors. In 2011, Acumen We initially envisioned that off- financing. The $75,000 equity invested $1.15 million in Orb grid energy companies would investment comprised a portion Energy, a provider of solar home require approximately seven years of the company’s Series A round, systems in India and Kenya. of patient capital and support to and the debt investment was used Acumen had been with Orb validate their business models to support the company’s working Energy through the fast-changing and prepare for scale. We are capital needs. The $1 million Indian regulatory environment increasingly extending these debt investment was repaid the and its expansion from India into investment horizons given the lack following year. M-KOPA went on East Africa. In 2017, Orb started of later-stage capital available, to successfully raise a $10 million conversations with large financing able, or willing to purchase debt round, led by Commercial institutions to initiate a bigger secondary shares. This negatively Bank of Africa and the Bill & fundraise. Orb was looking to use impacts the whole sector as there Melinda Gates Foundation, and the capital to grow its in-house are limited exits to highlight the attracted approximately $5 million financing offerings for small Indian returns this sector can generate. in follow-on equity. Acumen was enterprises and expand its Kenya approached by another impact operations. Acumen and Orb’s investor who wanted to buy our CEO saw an opportunity to sell shares in M-KOPA as a strategic Acumen’s 7 percent stake, given investment. The company felt the company had been profitable it was a good opportunity for for multiple quarters. Together, Acumen’s shares to be bought Orb’s CEO and Acumen discussed as part of a larger round, so the the option with two large financing sale was completed. Since then, institutions, but they were M-KOPA has raised over $120 resistant to buy Acumen’s shares million in debt and equity and, as on a secondary sale basis because of January 2018, has connected they desired to create direct

52 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 We initially envisioned that off-grid energy companies would require approximately seven years of patient capital and support to validate their business models and prepare for scale. We are increasingly extending these investment horizons given the lack of later-stage capital available, able, or willing to purchase secondary shares.

An M-KOPA unit, East Africa.

FACILITATING EXITS: SENDING THE RIGHT MARKET SIGNALS 53 FACILITATING EXITS: HOW INVESTORS CAN WORK WITH COMPANIES FROM THE START

For the off-grid energy market sector forward by allowing it for secondary sales. While this to reach its full potential, a to develop deeper, more liquid remains a sector-wide challenge one-way flow of funds from equity markets. However, many requiring further analysis, we investors to companies is not later-stage investors have have identified some ways to sustainable. A measured push impact requirements, restricting facilitate more exit transactions. for more exits would propel the their capital from being used

Customers of Frontier Markets, India.

54 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Investors Can The Sector More Work Together By: Broadly Can Support Exits By: ++Communicating pathways for exits ++Mapping average return multiples Conversations about exits As more exits occur, there is should start at the due diligence an opportunity for investors, phase, with the company and companies, researchers, and investors identifying potential academics to work together exit opportunities together. to better track return multiples, Once an opportunity is so potential future investors identified, adequate lead time have a better understanding of of approximately 24 months expected returns. should be planned to structure the exit and 12 months to ++Creating a secondary sales market execute the exit. Development finance institutions and other investors ++Identifying potential with significant capital have exit opportunities during an opportunity to create each fundraise a secondary sales market Management teams and for early-stage investors by boards can join networks to creating funds structured to proactively identify investors help prove the full viability of who may want to purchase the market. secondary shares. At each board meeting, continual As more opportunities for exits updates on exit opportunities arise, we will continue to analyze should be discussed especially our own exits and work with when a company is bringing other investors across the capital in new capital, which spectrum to build a more robust may be willing to purchase market for energy enterprises. secondary shares.

FACILITATING EXITS: SENDING THE RIGHT MARKET SIGNALS 55 8 CONCLUSION: WORKING TOGETHER TO CATALYZE ENERGY ACCESS

A customer of Biolite, India.

56 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 With many success stories and failures from which to learn, it is our chance to accelerate this momentum with the capital available. Investors, as well as grant providers, have an opportunity to reflect on the type of capital invested thus far and work together to deploy it in even more effective and catalytic ways.

We can’t imagine a more We hope that it’s clear from this exciting time to be working in report that the pioneer gap still off-grid energy. A wide variety looms large for off-grid energy of funders, policymakers, and startups and patient capital entrepreneurs are working to continues to have an important bring lighting, power and clean role to play in accelerating energy cooking to millions through access and building markets for energy startups. With many the poor. success stories and failures from which to learn, it is our chance to accelerate this momentum with the capital available. Investors, as well as grant providers, have an opportunity to reflect on the type of capital invested thus far and work together to deploy it in even more effective and catalytic ways. To encourage untapped investors to enter the market, we can start to show that returns are possible if we have more exits to celebrate in the sector.

This report is part of a growing body of work within the sector to identify the different forms of capital and the optimal mix of financing needed for solar home system, mini-grid, and clean cooking companies to reach scale. We’ve found that the right type of capital is important and the wrong Customers of Nizam Energy, Pakistan. mix can set a company back.

CONCLUSION: WORKING TOGETHER TO CATALYZE ENERGY ACCESS 57 APPENDIX

AT A GLANCE Acumen’s Energy Access Investing History

Husk Power Systems products, East Africa. 2006 2007 2008 Acumen explores energy Acumen makes its first Acumen makes its first as a sector for investing major equity investment major equity investment in India, East Africa, and in the energy access in the mini-grid Pakistan by evaluating sector in d.light, a solar sub-sector in Shrey, a potential deals but not lantern company based in micro-hydro company making any investments. East Africa. based in India.

2010 2011 2012 Acumen makes its first Acumen makes its second Acumen opens its major debt investment in major equity investment West Africa office in Accra. the mini-grid sub-sector in the off-grid products in Husk Power Systems, sub-sector in Orb Energy, Acumen invests in M-KOPA, a biomass company a company selling solar a solar home system company based in India. home systems in India. with mobile pay-as-you-go financing options for customers.

58 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 Investing Strategy Over Time

Acumen’s investing history has a yielded new insights informing markets; (2) mini-grid and mini- lot of “firsts” as we experimented our investing strategy over the grid enabling companies; and (3) with new business models, last decade. In 2017, we launched energy innovations in productive technologies, and sub-sectors the Pioneer Energy Investment use, enablers like financing, and in new geographies through Initiative (PEII) and are focused innovations in clean cooking.19 calculated bets. Each milestone, on investing in: (1) solar home including select investments, has system companies in new 2013 2014 2015 Acumen learns Acumen launches its Acumen makes its first micro-hydro was not the route Lean Data work to understand clean cooking investment forward to serve the poor given customers’ needs and impact (BURN Manufacturing), first solar high capital expenditure (capex) of portfolio companies on mini-grid (Devergy), first off-grid and regulatory barriers. their customers. solar company in Pakistan (Nizam), and first last-mile distribution Husk Power Systems decides Acumen invests in SolarNow, company serving the rural poor in to pivot to a solar hybrid model its first solar power investment India (Frontier Markets). based on changing solar power in Uganda, to support dynamics in India. the launch of a new Acumen exits its equity stake in low-cost product. M-KOPA through a secondary sale to a for-profit, impact investing firm. 2016 2017 2018 Acumen sponsors a new Acumen launches the Pioneer Acumen launches its first growth-stage fund in East Energy Investment Initiative Energy Impact Report using Africa, which has to date (PEII) – a $20 million expansion Lean Data. raised over $50 million. of our pioneer energy investing, with a clear strategy Acumen explores innovations built from our experience. in new clean cooking solutions.

Acumen makes its first Acumen continues to seek investments in off-grid solar pipeline for our PEII investing. power companies in West Africa in PEG Africa (Ghana) and Easy Solar (Sierra Leone).

59 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 APPENDIX

Capital Required to Reach SDG Seven by 2030 Compared to Capital Deployed 2012-2017

Required Annually to Achieve SDG Seven by 2030

Solar Home Clean Mini-Grids Systems Cookstoves

Grants $196M $1.91B $836M

Equity $809M $1.50B $2.02B

Debt $1.45B $1.14B $1.54B

Required: $11.40B

Capital Deployed (2012-2017) in Total

Solar Home Clean Mini-Grids Systems Cookstoves

Grants $46M $126M $63M

Equity $461M $55M $60M

Debt $415M $287M $66M

Deployed: $1.58B

60 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 1. International Energy Agency, World Energy Outlook Current Mix. Cookstoves: Global Alliance for Clean 2017; 2018 Global Off-Grid Solar Market Trends Cookstoves, Cookstove Investment, Capital by Report, Dalberg and Lighting Global, 2012-2017. Year, 2007-2017; Mini-Grids (various sources): Energy4Impact, ClimateScope, International Finance 2. Patient capital includes grants, patient equity, and Committee, Off-Grid Catalyst Advisors. Solar Home patient debt. For the purposes of this report, Systems: 2018 Global Off-Grid Solar Market Trends patient capital refers to patient equity. Report, Dalberg and Lighting Global, 2012-2017.

3. Aggregated research from Global Alliance for 11. Husk Power Systems had a close relationship Clean Cookstoves, Energy4Impact, ClimateScope, with the Shell Foundation, which provided grant International Finance Corporation, Off-Grid Catalyst capital and technical expertise to further refine the Advisors, Dalberg, and Lighting Global. blueprint idea from 2008 onwards. Shell Foundation continues to have a close working relationship with 4. Solar home system companies include companies the company. selling pico-lantern and lanterns. 12. Total in grants, equity, and debt. 5. 2018 Global Off-Grid Solar Market Trends Report, Dalberg and Lighting Global, 2012-2017. 13. 2018 Global Off-Grid Solar Market Trends Report, Dalberg and Lighting Global, 2012-2017. 6. Sample data. 14. Green Mini-Grids Market Development Program, 7. 2018 Global Off-Grid Solar Market Trends Report, GMG MDP Document Series: n°1. African Dalberg and Lighting Global; SEforAll Finance Development Bank, Sustainable Energy for All, and Committee Report, Sustainable Energy for All, 2014. Sustainable Energy Fund Africa. December 2016. Note: Including on-grid investments, which are also needed to achieve universal energy access, 15. World Bank, ESMAP, Financial Viability of Electricity the total capital needed is $45 billion per year, and Sectors in Sub-Saharan Africa, 2017; International currently,off-grid energy represents a quarter of the Institute for Sustainable Development, India’s total projected need. Energy Transition: Mapping subsidies to fossil fuels and clean energy in India, 2017. 8. Annual average early-stage equity investments in seed and Series A equity rounds from 2012-2017 in 16. Global Alliance for Clean Cookstoves estimates three the energy access sector across solar home system, billion in the world use polluting, inefficient stoves to mini-grid, and clean cooking sub-sectors. cook their food each day.

9. This calculation is based on a top-down approach. 17. This analysis applies to Acumen’s portfolio only. By using a bottom-up approach, assuming one-fifth The more other investors and enterprises examine of the 200 companies operating in the Validate and their double bottom lines with increasing rigor, the Prepare phases are viable candidates for early-stage more we will be able to collectively understand equity and each company requires approximately about trade-offs over time. $5 million in seed and Series A equity, the result is $200 million needed for early-stage equity. 18. Companies completely exited to date include Flowing Currents, M-KOPA, SHREY, and AKRSP. 10. Optimal Mix: SEforAll research suggests that In addition, we have partially unwound our debt enterprises delivering energy access solutions, by position with KMRI. This exit transaction is not sub-sector, would require future financing shares of included in the figures above. specific debt:equity:grant ratios to scale operations and meet 2030 targets. 19. Productive use is defined as an energy product or service used to generate income.

61 ACCELERATING ENERGY ACCESS: THE ROLE OF PATIENT CAPITAL ACUMEN 2018 ACUMENFUND @ACUMEN @ACUMENORG ACUMEN.ORG