Over the past 10 years, off-grid solar startups in Africa have attracted over $2.3 billion in funding. However, the largest share of funding went to just seven Africa-based pay-as-you-go scale-ups, leaving hundreds more in the early stages struggling to raise funds, according to the biennial. Gogla recently published. -World Bank report.
The seven most funded solar startups are Sun King, Zola Electric, M-Kopa, Bboxx, light d., Engie Energy Access and Lumos which, according to the Gogla Investment database, attracted 72% of the sector’s equity, loan and grant funding, while more than 150 seed and early-stage startups accounted for the rest of the amount.
In terms of equity funding, scale-ups received investments worth $600 million between 2015 and last year, with early-stage startups attracting $255 million in venture capital funding over the past year. of the same period.
Overall, access to debt has not been easy for most early-stage startups in Africa, especially since the COVID pandemic hit, but scale-ups continue to unlock more funding through borrowing in a similar operating environment.
The aforementioned scale-ups operate fee-based models that offer asset-based (pay-to-own) financing for solar kits and lanterns, products that are hugely popular in sub-Saharan Africa where millions of people are off-grid, as National power grids remain underdeveloped. .
Lack of capital means early-stage startups are unable to acquire assets such as solar kits and lanterns, which are needed to help them scale and capture more consumers and markets. Kenya, Uganda, Nigeria, Rwanda and Ghana, DRC are some of their major markets in Africa.
“Startups report that access to equity has been difficult, leading to over-indebtedness for some and business difficulties for others. Lack of early-stage equity has resulted in stifled growth for many companies,” Gogla, a global association for the off-grid solar industry, said in the report released a fortnight ago.
“This is a barrier to expanding off-grid solar into new markets; as equity, grants, or performance-based incentives, such as performance-based financing, are generally the best-placed instruments for market expansion,” the report states.
The trend is expected to continue as disclosed transaction data Big Deal Database shows that so far this year, several of the seven scale-ups have accounted for the bulk of funding raised by off-grid pay solar companies.
A review of the data shows nearly half a billion dollars in debt funding was raised by nearly 30 startups and scale-ups this year. Of this amount, $367 million is equity raised by 11 companies, including SunKing, M-Kopa and d.light, which claimed 93% of the total amount of equity. If we add the $50 million from d.light and the $35.5 million in debt funding from Bboxx, the four scale-ups so far represent 86% of the total equity funding raised by startups in the world. pay-as-you-go solar sector in Africa.
The ability of these companies to attract funding is attributable to their ability to capture huge markets across Africa and tap into syndicated loans. These companies, some of which provide financing for other assets, have also quickly added new revenue streams by tapping and further growing their customer base.