Crowdfunding for energy enterprises – yay or nay?

Eskedar Gessesse, Social Media Intern, Embark Energy

Crowdfunding has been a popular means of gathering financial support and expanding the customer base for several projects and initiatives. The number of online crowdfunding platforms shows that it has been the go-to strategy for many projects such as political campaigns, charitable causes and financial campaigns for small businesses. Its popularity has increased rapidly with the growing number of participants in different social media platforms, which has made it much easier to reach a wide range of audiences at low cost. Nonetheless, this method of fundraising presents quite a challenge for small businesses located in remote areas, including small-scale, off-grid energy enterprises.

Crowdfunding for a small business requires a dedicated party that can carry out an intensive campaign to reach a wide audience. The concerned party needs to use social and traditional media outlets such as Facebook, Twitter, local radio stations and the newspapers for a successful outcome. As a result, small local businesses who do not have the resources to be constantly involved might suffer from a modest outcome.

Embark Energy has had a first-hand experience in crowdfunding through its efforts to facilitate financial support for one of its clients (local energy entrepreneurs) during the summer of 2013. Embark took on the responsibility of organizing a three-month-long crowdfunding campaign for Bright Energy Africa (BEA), a biomass briquette start-up. The process required a great deal of collaboration between the diligent Embark team and that of Violet Ayoub, a young and energetic entrepreneur, who launched BEA to provide hands-on experience in the renewable energy business for youth in her local community. Consequently, we were able to raise 71% of our target from BEA’s Rockethub campaign. A recent study conducted by Meeuwsen & Bisschop (2013)on the contribution of crowdfunding to the development of local renewable energy initiatives showed that this approach enables local projects to be realized not only by funders but also by the local government, larger companies and various media outlets*. From our first-hand experience, we recognized that it creates a platform for customers and different actors to communicate their comments and concerns with the project developers. This enables the initiators to improve their products and services and appeal to potential investors.

Even though we were pleased with the final outcome, especially after being listed on the frontpage of RocketHub, the challenges we faced throughout the process made us question whether crowdfunding is an ideal means of gathering financial support for  renewable energy businesses based in developing areas.

Director of the Embark Finance Network Team, Evgenia Sokolova, who worked closely with BEA throughout the crowdfunding process, said that the lack of an effective mechanism to receive donations outside of major payment systems such as credit cards and/or PayPal, made it very difficult to contribute financially to the campaign. As the business is located in an area where such payment methods are fairly unpopular or altogether inaccessible, it was challenging to get Tanzanians or people from neighboring countries to make any financial contribution.  This created a dilemma that needed to be addressed through the effective use of social media. Even though BEA’s fan base was largely Tanzanian,most of the donations came from outside resources. Ms Sokolova noted that the next big step for crowdfunding platforms in similar locations should be to integrate locally supported payment mechanisms.

violet

Violet Ayoub, CEO of Bright Energy Africa. Photo Credit: Eskedar Gessesse

BEA’s CEO, Ms Ayoub added that crowdfunding required a strong network and a lot of online communication with potential contributors. She advised that it would be best to first create the network before starting the crowdfunding campaign.

Another interesting lesson we learned from crowdfunding was the significant role of simple, product-relevant ‘perks’ for the success of a campaign. In media or technology campaigns for instance, artists can pre-sell their records or tech companies can give discounts to future products.

Nonetheless, despite these challenges, Embark has seen that if crowdfunding is administered wisely, it can serve as good marketing to attract more customers and other interested parties. Here is our advice to aspiring crowdfunders in the energy access space – prep your social media in advance, know your fan base, think creatively about perks and give it a try.  Engaging with the audience was one of the most rewarding outcomes of our campaign and who knows, it might even take your project into a new and exciting direction.

 

 


* Meeuwsen, Raymond JMM, and F. Bisschop. “Crowd Funding & Renewable Energy Projects” (2013).

Thumbnail featured image by Simon Cunningham on Flickr Creative Commons