Tuesday, December 27, 2011
A startup’s plan to sell solar like cell phones: Simpa networks
By Katie FehrenbacherDec. 27, 2011, 5:00am PT
Cell phones are one of the few products that have found mass success in developing countries; there are 600 million mobile subscribers in India out of the 1.2 billion population. So why not use the model to sell other stuff, like solar power? That’s the idea behind Simpa Networks, a startup based in Bangalore, India.
Simpa Networks is taking advantage of the popularity and standardization of pay-as-you-go cell phone plans and mobile payments in developing countries like India, and the group has launched a home solar system for off-grid customers controlled by a mobile, pay-as-you-go system. Customers pay for only the electricity produced by the solar panel at their home, in addition to a small upfront payment for the system.
The basic solar system size Simpa sells is around 25 watts to 50 watts, which can power a couple of CFL lights, a mobile phone charger and maybe a fan or a TV cable box, Simpa Co-Founder Jacob Winiecki told me in a phone interview. Remember, these are off-grid, often rural homes that don’t have access to the power grid, and the households commonly live on $4 or less a day. These customers often don’t have predictable income and are often farmers who only get paid when they sell their goods at the end of the growing season.
Simpa doesn’t make or install the solar panels, but works with a partner – Selco India – which installs a Simpa-powered solar system for Simpa’s customers. The customer pays a certain amount of their choosing as a down payment for the hardware — say, 10 percent of the total cost of the solar system (the total cost of the system can be between $200 and $300).
The customer then also pays for the solar power as they go, using purchased pay-as-you-go cards (similar to the kinds you’ll find for cell phone minutes in every gas station) commonly in the increments of 50, 100, or 500 rupees. Customers type the code on the cards into the keypad on the Simpa box, which unlocks the system. Over time — usually two or three years — the customer has paid off the system, then owns it outright and can use the solar power for free.
Simpa’s business model
The payment system is attractive to these customers, because many of them don’t have enough savings to buy a solar system outright, or can’t take out a loan to buy a system outright. Getting into debt isn’t something that many of these customers are willing to do, so pay-as-you-go makes sense to them. These customers are also very used to paying for cell phone minutes with cards.
But these customers are really interested in getting a better option for energy. Most of them currently use kerosene for lamps, or diesel or wood burning — all these things are more hazardous to health and more expensive than grid power and off-grid solar. These customers often end up paying a lot more per capita and per their income than someone with grid-connected power.
There are a few things that need to happen for Simpa to actually make money off this philanthropic-sounding business model. Simpa screens potential customers for those who will use a certain amount of electricity — for instance, those who have a few cell phones per household instead of one. That’s because if the customer gets a solar system installed but then doesn’t use the power and pay off the system, Simpa doesn’t make money. Simpa makes money by taking a small cut of the watt hours used per system, as well as the markup on the hardware.
Since Simpa is the payment system as well as the solar business model I could see the company working as the enabler for all sorts of clean power products in the developing world, like rural wind turbines.
Simpa is about a year old and has raised a seed round of $1.3 million from angel investors (which it is calling a Series A round) to launch its product commercially. Winiecki tells me that there are about 50 Simpa systems installed in the Bangalore area so far, and about 8 customers are within months of paying off the systems.
Up next: Simpa is looking to raise a next round of equity funding of $4 million, which the company is looking to close by March, and which Simpa hopes will get them to the break-even point of selling 5,000 solar systems a year. Simpa also needs to borrow money to pay for the solar systems.