UAE solar start-up secures $500,000 in debt finance via crowdfunding campaign
The company says the alternative funding route offers it more flexibility and lower interest rates
UAE off-grid solar start-up Pawame has raised more than $500,000 in debt finance from Swedish fintech firm Trine just two months after it secured $2 million in seed funding.
The social enterprise, which supplies affordable solar kits to off-grid households in sub-Saharan Africa on a micro-finance basis, plans to use the $543,000 crowdfunded loan to accelerate its growth across the continent and pay for equipment and inventory.
“We are in a business where new capital is always required to fuel our growth and finance our inventory, since we lease kits over a period exceeding one year that we purchase upfront," said Alexandre Allegue, Pawame chairman and co-rounder.
"Pawame initially mainly raised capital through equity since we do not have the required track record for lenders [usually three years of financial statements and other relevant documents], but thankfully our credibility in the market is robust, we have delivered on our targets, and we are progressively shifting more and more toward debt inventory financing to avoid further dilution."
This is the second crowdfunded loan from Trine; Pawame said it also raised €150,000 (Dh741,965) through the company more than six months ago.
The Abu Dhabi-based venture, which is pronounced “power me”, first launched in 2015 when Mr Allegue realised that electricity was still out of reach for over 700 million people in Africa.
Since then the company has connected more than 4,000 homes to solar power in Kenya, helping 20,000 people, and secured $2m through a traditional funding round, primarily from GCC investors. The biggest shareholder was a group of senior executives from one of the largest power companies of the Middle East, including Paddy Padmanathan, the chief executive of Acwa Power, who made a personal investment.
Philip Bahoshy chief executive of the start-up online community platform Magnitt, said Pawame's decision to turn to debt financing is "an emerging alternative to traditional equity financing here in the region".
"Companies like Beehive have pioneered this model for companies in the region," he said. "A key attribute, however, is that the company has strong financials to be able to justify paying debt. Many early stage start-ups that are not revenue generating are therefore not eligible. However, at later stage, start-ups with strong cash-flow payments can use debt financing to spur on international market expansion and develop their product proposition."
Mr Allegue said using this alternative funding from Trine - which helps investors support solar energy projects while also delivering a return - offered the company "more flexibility, lower interest rates and more options to secure resources when compared to a traditional bank loan”.
“It is a great way to access financial support and resources outside traditional lending forms with like-minded investors aligned to our vision,” said Mr Allegue.
The company's aim is to provide low-cost clean energy to 150 million low-income residents in remote areas. Its first solar home system was sold in 2016.
Customers using Pawame’s services in Africa pay an upfront fee of $30 to activate the solar kit, followed by rent-to-own instalments on a daily, weekly or monthly basis for as little as 45 cents.
The company said it is on target to break even by the end of 2018, in the second full year since its launch, and will enter a new funding round soon with strategic investors to further accelerate its growth.
Updated: May 20, 2018 01:49 PM