Why We Invested: Amped Innovation
Few sectors in the global development space have experienced the kind of growth that off-grid solar energy has over the past decade. More than 130 million products have been sold, generating nearly $4 billion in revenue and reaching some 73 million households, or 360 million people. Off-grid solar is achieving for energy inclusion what mobile money is doing for financial inclusion in the developing world — enabling unprecedented and cost-effective access by low-income people to essential service products. The convergence of these two sectors — off-grid solar and financial services — enables families to pay for electricity access in utility-like installments over their mobile phones through pay-as-you-go (PAYGo) financing, and promises to transform energy access in the world’s emerging markets. Add greater efficiencies in production and distribution into the mix and it is easy to see why investors are bullish; in the last couple of years alone, the off-grid solar energy market has raised over $500 million.
If these numbers speak to the health of the sector, they also highlight a grim truth about the current state of energy inclusion. More than a billion people — most of whom live at the base of the economic pyramid (BoP) — still have no electricity. Instead, they must burn kerosene, wood and charcoal to meet their lighting and energy needs. Living in the shadows of the electrical grid has well-documented negative impacts on health, safety, education and income generation.
The global development community has committed to achieving universal and sustainable energy access by 2030 through the Sustainable Development Goals (SDGs). But, despite current gains, it is hard to imagine achieving SDG 7 without continued innovation that pushes the boundaries of accessibility and productivity even further. That is why we at FINCA Ventures invested in Amped Innovation, an early-stage social enterprise that designs and produces high-quality solar energy appliances that help people living under $4 per day expand their incomes.
Unbundling is Rewriting Off-Grid Solar
When the off-grid solar market began to unfold, vertical integration — aligning product development, manufacturing, sales, financing, customer support, etc. — all under one roof was the norm. Even those that desired to partner struggled to find quality counterparts to outsource pieces of the business model. Distributed energy companies were suddenly taking on end-user financing and product engineering, but this was outside their core competency and scaling required substantial resources. Likewise, financial service providers entered the market attempting sales and distribution of energy products for the first time, only to be stymied by after-sales support. Vertical integration, while critical in the early days of off-grid solar’s market growth, also creates inefficiencies which can inhibit growth and scale in off-grid energy by increasing the costs of energy access.
Recognizing the need to focus, PAYGo-enabled off-grid distribution solar companies are beginning to specialize on sales, post-sales service and financing, while partnering with other players whose adjacent skills and services complement their own. Companies like Amped Innovation, founded by product engineers, are focusing on what they do best — design and manufacture excellent products — while letting PAYGo-enabled distributors focus on product sales and financing — not engineering. Through specialization, the off-grid energy sector is continuing to evolve and making electricity access more widely available and affordable.
Optimized for the Base of the Economic Pyramid
Amped Innovation offers high-powered products, thanks to an unrelenting focus on smart, lean design. The Amped team seeks to design each product using the fewest but the highest quality components, which allows savings in circuitry, cabling and plastics, without sacrificing quality. The result is that Amped’s solar home systems offer six times the power handling capacity of competing lighting systems at just one-third the cost. Imagine what this means for a Ugandan BoP family that has long languished off-grid. Overnight, with an Amped solar product, this family moves from the fringes to the vanguard of electricity access. The family is not only better off now than it was before, but it is also enjoying the best product in the market. And with the option to pay over time through PAYGo, the pressure on this family’s limited wallet is considerably eased, allowing it to continue to meet other priorities, such as school tuition for children, medical expenses, and food. What’s more, the scalable, modular design — a home lighting system that expands into a large power center — will enable this family to progressively climb the energy ladder without having to buy a whole new system. That is the definition of BoP-friendly.
Amped recognizes that electricity is not an end in itself; it powers the things that augment productivity and quality of life. Amped’s product line will soon include affordable productive use appliances, such as solar-powered ice-makers, water pumps and maize grinders, which will allow clients to generate income. These assets will not only offset product costs within the first year, but also help low-income customers grow their wallets. Demand for these appliances drives demand for electricity and by growing their wallets, makes energy access even more affordable to the world’s poor.
Impressive Human Capital Driving Results
The world-class team at Amped Innovation brings together leading product designers and electrical and mechatronics engineers. Between them, they clock over half a century of experience developing innovative and affordable products in energy, health care and clean water. Their extensive experience in sub-Saharan Africa and South Asia gives them the credibility, insights and BoP-orientation necessary to create meaningful impact.
Synergies in Sustainable Development
Our collaboration demonstrates how financial services are crucial to unlocking energy access. FINCA International is not only an investor in Amped through FINCA Ventures, but also its distributor and end-user financing provider in Uganda through BrightLife, leveraging PAYGo to make solar energy products more accessible. As a B2B enterprise, Amped Innovation collaborates with other players in distribution, sales and customer care to bring its world-class products to market faster and more efficiently than a vertically integrated player could. We are confident that Amped Innovation’s products and business model can dramatically improve the health, productivity and overall quality of life for the world’s poor. Pardon our pun, but we really do believe the world is brighter with Amped.