South African off-grid energy startup Yellow has raised $725 000 from local and international investors to be able to bring renewable energy to Ugandan and Malawi homes and businesses. However, Yellow, which sells pay-as-you-go solar-power devices to African households, almost shut its doors until a tech platform the founders designed helped save the business.
“We gained almost no traction at all and after a year of leaving our jobs came close to shutting the business down,” co-founder Michael Heyink said, following the conclusion of the round which involved a local private equity company and a syndicate of local and US angel investors.
Here Is The Deal
- This round of funding saw a South African private equity firm and angel investors from South Africa and New York, who both declined to be named, investing in the two-year-old company.
- Although the deal was signed in May, proper paperwork only concluded earlier this month.
- This follows a €2-million loan the startup raised from Swedish crowdfunding platform Trine and a $1-million grant from USAID, both of which were concluded earlier this year.
- To be eligible for the full $1-million, the startup must sell 67 000 devices. So far, since July when the grant kicked in, the startup has sold 4000 devices.
A Look At The Startup Yellow
Yellow co-founder Michael Heyinksaw the opportunity to start a business providing pay-as-you-go solar power to African households while working at a Johannesburg based private equity firm Metier, which finances a number of energy deals on the continent.
After leaving the private equity firm he set off to Zimbabwe and Malawi (where he met fellow co-founder Maya Khonje-Stewart). But in the beginning things didn’t go as planned.
“We learnt the hard lessons of trying to operate a business in Africa. We sat for hours under trees with chiefs and drove through hundreds of places that aren’t on the maps,” he recalls.
Recruiting agents to sell the devices soon proved a slow and expensive process. “We’d ask who wanted to be an agent and 500 people would put up their hand,” he says.
‘Web platform changed everything’
Back in Cape Town, and partly as a way to try run the business remotely, Heyink began building a web platform, dubbed Ofeefee.
“The platform changed everything. The business developed huge traction.
“We substituted meetings under trees for automated recruitment workflows and soon the business was thriving and attracting heavyweight investors and funders,” he says.
So far the startup has installed 7500 such devices in Malawi (against a serviceable market that he estimates to be two million) and aims to begin operating in Uganda (which he reckons has a serviceable market of about seven million customers) by January next year.
The team has also grown. Heyink and Khonje-Stewart were joined by Ross Thompson, a former Rand Merchant Bank financier last year, while Ben Walwyn, a former actuary from Discovery Bank joined earlier this year. Both Thompson and Walwyn can also code.
While the devices only allow users to power lights, recharge smartphones and power a radio, Heyink says startup Yellow will on Thursday ship the first 150 of its expansion packs, from Tanzania. These will allow users to power televisions sets, by plugging into the initial Yellow devices they’ve purchased.
First entitled to these expansions packs will be customers who are regularly honouring repayments.
The devices cost $150 and a customer has 24 months to pay it off in. Repayments are charged at 2.5% to 3% a month, which Heyink points out is less than the 5% to 6% a month charged by micro financiers on the continent.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world