CROWD POWER Success & Failure: The Key to a Winning Campaign Davinia Cogan and Simon Collings 1 CONTENTS 1.0 Executive Summary ...................................................................................................................................3 2.0 Introduction ....................................................................................................................................................5 3.0 The Layers of Success ..............................................................................................................................7 3.1 Donation .........................................................................................................................................................11 3.1.1 Choosing the Right Platform....................................................................................................................................................................11 3.1.2 The Campaign Period ..................................................................................................................................................................................13 3.1.3 Implementing Campaign Goals & Success into the Future .......................................................................................16 3.1.4 Q&A – Kenya Green Supply ..............................................................................................................................................18 3.2 Reward ........................................................................................................................................................... 19 3.2.1 Choosing the Right Platform ..................................................................................................................................................................19 3.2.2 The Campaign Period ..................................................................................................................................................................................22 3.2.3 Implementing Campaign Goals & Success into the Future ......................................................................................24 3.2.4 Q&A – Okra Solar ................................................................................................................................................................... 28 3.3 Debt .................................................................................................................................................................30 3.3.1 Choosing the Right Platform .................................................................................................................................................................30 3.3.2 The Campaign Period ..................................................................................................................................................................................33 3.3.3 Implementing the Campaign Goals & Success into the Future.............................................................................37 3.3.4 Q&A – Zonful Energy ........................................................................................................................................................... 38 3.4 Equity ..............................................................................................................................................................40 3.4.1 Choosing the Right Platform ..................................................................................................................................................................43 3.4.2 The Campaign Period .................................................................................................................................................................................46 3.4.3 Implementing the Campaign Goals & Success into the Future.............................................................................47 3.4.4 Q&A – Renovagen ................................................................................................................................................................. 49 4.0 When Crowdfunding ‘Fails’ ................................................................................................................. 51 5.0 Crowd Power Update .............................................................................................................................57 6.0 Conclusion ...................................................................................................................................................62 Notes on Data Sources .................................................................................................................................63 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 February 2018 Design: www.dougdawson.co.uk 2 EXECUTIVE 1.0 SUMMARY This report is intended to offer campaign-makers and potential campaign-makers, working in the off-grid energy space, with the tools and knowledge to develop a successful crowdfunding campaign. We identify trends common to successful energy access related campaigns (measured as reaching the campaign target) across donation, reward, debt and equity crowdfunding. The report explores success across three broad stages; choosing the right platform and passing platform due diligence, managing a successful campaign period and implementing campaign goals, as well as long run success of the entity raising funds from the crowd. Our research has found that successful campaign makers explore and plan across all three areas, and do not simply focus on the ‘campaign-live’ period. While the report is intended for campaign-makers, those working with early-stage companies via incubators or other facilities will likely find this informative, as well as those wanting to learn about energy access related crowdfunding in general. Our analysis of energy access campaigns identified a number of archetypes across donation, reward, debt and equity campaigns. Donation crowdfunding campaigns generally fall within one of three categories: • the partnership model, for recurring fundraisers, where the platform helps bring the crowd, • a one-off fundraiser, which tends to be a larger campaign for a specific purpose, or • a personal or community fundraiser, where individuals or communities raise funds for a particular cause. The partnership model is the most commonly used to raise donations from the crowd for energy access related projects for non-profits via platforms such as GlobalGiving. We have seen the one-off fundraiser model utilized successfully by social enterprises in Kenya via the M-Changa platform. One-off fundraisers are often used to raise ‘donation seed capital’ or ‘quasi-equity’ from the founders’ network – this is donation capital, however it is utilized in much the same way as seed capital. Successful energy access reward campaigns tend to fit one of two models and either: • bring together network contributions, from family and friends, and the founders’ broader network, or • raise funds through a high profile ‘mega-campaign’ targeting a broader audience. 3 Evidence indicates that the aggregation of contributions from the founders’ network is a successful way of raising small amounts of seed capital (of up to around $50,000) for start-ups with a well- developed international network. Successful mega-campaigns are much more difficult to emulate and few examples exist. These campaigns are generally high profile and well promoted, and have led founders and other industry stakeholders to mistakenly believe the success can be replicated with ease. In reality, few companies have a novel enough product that appeals to Western backers, as well as high-profile international social and/or donor networks, to garner success. Debt campaigns have the highest success rates, in terms of percentage of loans posted that are funded, of all campaign types. Microloan debt, via the Kiva platform, has traditionally dominated energy access debt crowdfunding, although SME loans are now a quickly growing component of energy access crowdfunding. The four debt platforms we surveyed, offering SME loans, funded 100% of the energy access loans that were posted on the platform.1 However, it is important to consider the rigorous and onerous due diligence process completed by these platforms, which likely weeds out potentially unsuccessful campaigns. Most microloan platforms operate on a partnership basis, and while partners (such as micro-finance institutions) are responsible for vetting all loans posted to the platform, platforms are responsible for conducting due diligence on their partners. There have been seven energy access related equity crowdfunding campaigns from 2012 to 2017, which makes it difficult to identify trends across the space. All campaigns we identified have successfully reached their targets, although we expect the number of companies that were rejected by platforms upon application is high. The leading equity crowdfunding platform globally, Crowdcube, accepts around 10% of entrepreneurs onto their platform.2 Bespoke regulatory frameworks which address equity crowdfunding are only just emerging in many advanced economies, and there is currently no bespoke regulation of equity crowdfunding in Africa, hampering growth. Debt campaigns have the highest success rates, in terms of percentage