016 No Ordinary Business with Empower Energy

The Highlights

  • Empower Energy is a UK based start-up dedicated to improving access to reliable energy through a unique microfranchise model throughout the last mile of India.

  • The three key challenges to energy access are affordability, availability, and maintenance. To address these challenges, Empower Energy has adopted the following approaches:

    • Through their micro-franchising model, Empower Energy is engaging local shopkeepers to supply rural communities. These shopkeepers are equipped with solar-powered charging stations along with lamps and battery chargers that are affordably rented to community members at a cost that is cheaper (and healthier) than kerosene.

    • Long-term strategy including product warranties and maintenance services.

  • There is a gap in terms of pre-seed or seed funding for social enterprises, in particular, and it’s very difficult for a social enterprise to raise initial funding to do the proof of concept and the initial elements which allow it to approach conventional investors for larger funding of about a million or two million.   A bit more of injection of money into this area would allow so many more social enterprises to complete their proof of concept, which can then allow them to start approaching more conventional or larger institutions for investment.  This is the perfect opportunity for philanthropic capital.

  • In addition to financing, in order to succeed, each social enterprise needs to have a goal of social impact that they want to achieve.  Also, communities of social enterprises that congregate in a space create synergies and support that include sharing best experiences, key learnings, and stop duplicating wasted efforts.  More support from current incumbents to help give startups a head start is critical.

  • The way that every company has to go into the future is towards becoming a social enterprise because if they don’t, we’re really going to not have a planet to live on. It’s as simple as that; all businesses will eventually become social enterprises for two reasons. One reason is that consumers, especially the younger generations, will align themselves with companies that are known to be socially impactful. If you want to continue having customers, you have to be seen as being a good company. But secondly, just so that we still survive and have this earth as we’ve known it to exist. We need to move in this direction otherwise we’re going rid ourselves of all our resources. 

    ***

Gina:  Millions in the developing world are living without electricity forcing people to rely on unhealthy, unreliable and informal energy sources such as kerosene. Today’s guest on No Ordinary Business is Ronit Kanwar, the co-founder and CEO of Empower Energy, a UK based start-up that is dedicated to improving access to reliable energy through a unique microfranchise model that is offered throughout the last mile of India. Welcome Ronit, thanks so much for taking the time to speak with me today.

Ronit: Hi, thank you so much for inviting me. I’m looking forward to this interview.

Gina: Would you share a little bit about your own personal story?

Ronit: Absolutely. I’m Indian my birth since both of my parents are Indian and then they moved over to Germany, which is where I was born. When I was very young, we moved to the UK. Today, I’m studying economics and management at Oxford University. As I was growing up, my parents would take me to visit India. We would visit different villages and I started to develop an understanding of the reality of the lives in these communities. My parents would always show me differences in living standards and those teachings made me passionate about bringing about change in India. 

Empower Energy started because of a competition called the Hult Prize, which is the largest social enterprise competition for students. Every year, they set a challenge for students to solve using a for-profit model. This year’s challenge was to harness the power of renewable energies to transform the lives of 10 million individuals. We came up with the idea by digging into the problem and understanding what was wrong with energy access.

Gina: For the benefit of our readers, would you describe the scope of the Hult business accelerator programme and the Hult Prize?

Ronit: Hult Prize is a partnership that involves the Clinton Global Initiative, the UN Foundation, and Hult International Business School. There were more than 100,000 applications this year alone for the challenge.  It starts on a university level with campus rounds, after which there are 15 regional competitions. The top 42 teams attend an accelerator in the UK for six weeks where they work with business experts and leaders to refine and knuckle down their business models and pitches. Six grand finalists are chosen to present at the United Nations’ Headquarters in NY for one million dollars in seed funding.  Empower Energy was selected to go to the UN and it was a remarkable experience. For instance, the CEOs of Unilever and Verizon were two of the judges.  It’s an amazing programme that’s trying to bring students into the social impact space, which is very important.

Gina: I want to congratulate you on being selected not only for the accelerator programme but also being one of six selected to present your work at the UN. That’s quite an accomplishment! 

Switching gears to Empower Energy, would you share a little bit about your vision and mission?

Ronit:  As a team, we dug deep and tried to think about the key difference between our living conditions in the developed world, for example, having washing machines, phones, electricity versus the developing world, especially remote communities in India where they’re using kerosene for lighting. The key difference that we saw in these living standards was energy.  The biggest area that we want to tackle is access to energy because we really believe that it’s an enabler, which can allow individuals to transform their own lives.  

Our vision is to create a distribution network throughout the last mile of India, throughout rural India. We see lighting and mobile phone charging as basic fundamental energy needs for these communities. But we also see it as a fantastic access point to start building up trust and a local presence in thousands of villages across India. As we set up this distribution network, we didn’t want to only provide lighting and charging, we want to serve and giving agency to our customers to demand what they need and require in order to transform their lives.

Gina:  What are the current solutions to energy access and why are they falling short?

Ronit: The three key challenges that we found to energy access are: affordability, availability, and maintenance. Common solutions, for example, include solar home systems, which is a simple idea of putting a solar panel onto each individual house and a system, giving access to lighting, fans, etcetera, but the issue with this is that it costs around 200 dollars and for a rural community, that is living below three dollars a day, they are not affordable. 

The second issue is availability. A lot of products and services don’t reach the communities that really need them; this is an issue of distribution. 

Finally, the third issue in these communities is one of trust, reliability, and maintenance. For example, in one of the villages we went to, individuals have been sold these very cheap imported solar lights, which cost around five dollars each. They were expensive for our villagers and broke after a few weeks. Even if villagers manage to save up for more expensive solar lights, the issue becomes one of the maintenance. Currently, solar lights distributors don’t produce parts for their products. 

Gina: How are you addressing these gaps?

Ronit: Something that’s quite unique about our model is that we’re making sure that we have a local presence in each of these villages and implement a micro-franchising model. We’re empowering local shopkeepers to join our franchise and equip them with a solar power charging station that we coined a ‘solar ATM’ because it’s a very well-known concept in India for example, with water ATMs.

This shopkeeper has the ability to rent out LED lamps and battery chargers; this breaks down the cost barrier. By breaking it down into a rental model, our customers are only paying per use and per charge. It breaks the costs into smaller chunks that they can afford and it allows our users to be completely flexible when they use our service. That’s how we’re tackling the affordability and the availability elements.

In terms of maintenance, there are two elements. We have a two-year warranty with our products.  We’re making sure that we’re providing very high-end products. Secondly, we take care of the maintenance, so our customers never have to worry about maintaining the products. They now have access to affordable energy that’s cleaner, reliable, and is also cheaper than kerosene as well.

Gina: Would share a little bit about your partners are, who makes up Empower Energy and how did you come together?

Ronit: There are three co-founders: James Dickson, who’s just graduated from the University of Oxford with an MBA after also doing a masters in Evidence-Based Social Intervention and Policy Evaluation. He’s an incredible person who’s focusing on our data and impact. Impact is a central part of our business model. Prior to completing his masters and MBA at Oxford, James spent six years working at the United Nations. He’s got a huge amount of experience on the ground. 

In addition to James, we also have Gideon Laux who is equally as fantastic. He has just completed a Masters degree in Economics for Development. He spent the last four years working with social enterprises focusing on scalability and making sure that systems are aligned between profits and impact. Gideon is heading up our operations, making sure that everything’s working on the ground and really building up capabilities so that we’re in the right place to scale up quickly and rapidly.

Gina: Describe for us your business model and how you are planning to scale as a business?

Ronit:  I will split it down into the revenue model and the operating model. 

In terms of the revenue model, each franchisee pays us a flat fee for the lights or lamps that they have in their system. There’s a revenue source from the flat fee elements but secondly, we also receive a commission on each transaction that’s made through shopkeeper. With this revenue sharing model, we’re able to increase our franchisee’s income by up to 25%, which is fantastic for them because we’re providing them with another product to sell in their shops. As we grow, our big vision is to create distribution networks. We’d be looking to supply additional products and to get involved in the carbon credits markets because the use of only one of our ATMs five years should stop 43 tons of carbon emissions release, which is just fantastic in terms of impact but also enhances the financial sustainability of the company.

With regard to the operating model, we broke it down into simple steps. We have a list of criteria for our villages and we send agents to go and find suitable villages. They identify suitable franchisees in those communities and we just train and equip our franchisee with one of the systems to start serving the needs of their community. 

We designed ourselves to be radically scalable for a key number of reasons. One is the fact that our solar ATM is easy to distribute. We can package into a box, put it on a motorbike, and ship it to any existing shop in any village. It’s plug and play, very simple and intuitive to use. We have designed an app that tracks sales and inventory.  Also, the fact that we’re using existing shopkeepers we don’t have to train anyone in marketing or selling. 

Along all of these processes, we’re making sure that we’re driven by data and have digital processes, which are going to help us to scale quickly and efficiently. For example, before we presented at the UN, we only had three ATMs. We were able to increase our ATMs on the ground by over 200% in just under a week. In addition, we were able to identify our next 40 franchisees in just one or two days by asking our sales agents to go to the neighbouring villages.  We’re very happy with our growth opportunity. We’re making sure that we’re radically scalable because that’s something that’s we would really want to be central in our business model.

Gina: Are your franchisees leasing the solar ATM or purchasing it?

Ronit: It’s a leasing model.  There is a flat fee element, which is what they expect to pay each month. As mentioned, it really depends on the number of lights and lamps that they have in their systems on how much they’re paying per month. In addition, we ask them to pay a small upfront cost when they sign up just so that there’s a bit of ‘skin in the game’ to make sure that they’re using the solar ATMs. The commission model means that our incentives align with the franchisee because the more money that they make, the more money we make, and the more impact we’re having in these communities.

Gina: What are some of the challenges that you’ve faced so far as barriers to entry?

Ronit: One barrier is trust. The best way to enter these communities is with a long-term vision.  Sometimes you see NGOs or charities that approach a village, provide them with solar lights and then they disappear so that inevitably when the lights break no one comes to maintain or repair them. We have been building trust in a few ways. One is to come with a long-term plan and second, we make sure that we bring the village leader on board. We always speak to them first, let them know what we’re doing, and getting them on our side.  This helps to build up trust in the communities. 

Gina: The challenge that you describe with the traditional NGO model is pervasive and very often you see situations where there is a lack of continued support, an absence of maintenance.  I think much of it stems from the fact that a lot of these charities and NGOs are donation-dependent and it is easier for them to attract funding for new solutions rather than maintaining existing ones. It’s hard to achieve sustainability with this model. 

Ronit: I think that’s a huge area where we provide value. What sets us apart [from the NGO model] is our long-term vision and our long-term approach. By establishing the local presence in one of these villages, our franchisees then become eyes and ears on the ground, informing us of other needs that these communities might have, which can be resolved through our network. For example, one of our franchisees loved the rental so much that he said he wanted to start to rent fans. We think that’s a huge long-term value helping our customers as they progress in terms of living standards and being able to support them throughout their economic development. 

Gina: Social enterprises that are working in emerging markets confront unique risks such as political turmoil that may not be as prevalent in developed economies.  What risks have you identified that might affect your organisation’s success?

Ronit: While there isn’t much political upheaval as such in India, I think the government’s role is something that we always have to be aware of. Something that’s been stated a few times when we share our model is India’s government’s promise to electrify all of the villages and households in the next few years. There is the risk to us of the government electrifying these villages very rapidly. However, when we look at the reality, despite what’s being shared online and in the media, the fact is a different story.  For instance, the definition of an electrified village is that only 10% of households needs to be electrified.  We visited some of these ‘electrified villages’ thinking that our offering might not work there, but the reality is that only a few of the households in that village had access to electricity and further, that was really only for three or four hours a day. 

Despite this, some of the government policies are supporting us. For example, they’re reducing kerosene subsidies over the next few years, which shall only make energy access through kerosene more costly. 

Gina: What’s your price point for users to rent your equipment?

Ronit: This depends on the environment, but the price point that we’re working with is five rupees, which is the same price as a small package of crisps in India or about 8 cents in America. What’s very important about this price point is that per hour of lighting, we are actually 32% cheaper than kerosene. This does a few things for us. It’s really incentivising end users to swap over from kerosene because of the economic benefits. Unfortunately, sometimes people not aware of how severe the health consequences of kerosene are. In the long-term, it would be amazing to have educational programmes geared to villagers to teach them about the health and environmental issues of kerosene. For example, from one litre of kerosene, you release 2.5 kilograms of CO2, which is awful, but it’s sometimes easier to incentivise customers through economic benefits because money does really matter when you’re living on such tight budget. 

Gina:  What is your vision for Empower Energy in five years?

Ronit:  When we started with the Hult prize, we aligned ourselves with their challenge of transforming the lives of 10 million individuals by 2025. However, our vision is far greater, for example,  to reach 100 million individuals by 2025 after a significant funding round.  With our model, especially since that we’ve made it very scalable, the more funding we manage to secure, the more of an impact we will have. With a very conservative approach and limited funding, we believe we can reach 16 million individuals by 2025 through 16,000 ATMs. 

Gina: What’s your experience been so far in getting access to the right support both the financial and otherwise? As mentioned, you’ve been through a high profile accelerator programme and received some funding.  How do you feel as a young organisation, how accessible are resources?

Ronit: In terms of our business modelling, we receive support from the accelerator links, which has been fantastic because of the Hult Prize and as well as other programmes running throughout the UK and universities. But when it comes to funding, I think this is very interesting especially for social enterprises. I do think there is a gap in terms of pre-seed or seed funding for social enterprises, in particular, and I think it’s very difficult for a social enterprise to raise initial funding to do the proof of concept and the initial elements which allow it to approach conventional investors for larger funding of about a million or two million. For us, it hasn’t been easy but we were able to bootstrap our pilot phases by winning competitions.   We’ve also started raising investment ourselves through some angel investors, but there definitely is a shortfall in this area for social enterprises. I think a bit more of injection of money into this area would allow so many more social enterprises to really complete their proof of concept, which can then allow them to start approaching more conventional or larger institutions for investment.

Gina:  I think you raise a critical issue. There is an opportunity for philanthropic capital to help fill that gap in funding for seed and early-stage social enterprises.  Philanthropic capital is the ideal risk capital that can help a young enterprise get to a stage where you meet the criteria that the traditional commercial investors are looking for before they get involved.

Ronit: Absolutely. Right now, we’re in this very awkward position of having completed our proof of concept and knowing that our model works, but we are not fully ready for our first funding round just yet, a series-A. I agree that this is the perfect opportunity for philanthropic capital and that would be incredible for Empower Energy to enable us to grow to a size where we can pursue larger sources of funding and scale to make use of that huge market opportunity in India.

Gina: Some of the feedback that I hear from the philanthropic sector is that there isn’t enough deal flow or investment ready impact ventures available? I wonder if you have any thoughts about that observation? Is it a reflection of reality or are these types of investors just not connecting with investment-ready enterprises?

Ronit: I think it’s an issue on two fronts. Certainly, there is an element of truth in making the right connections between the enterprises and the social impact investors. But I think the biggest issue, again, is that a lot of the social enterprises just don’t have access to that initial bit of funding. They are without the basic capital that would allow them to approach and become market ready. Consider the Hult Prize: 100,000 teams applied to be a part of the accelerator programme, and as I mentioned, only 42 teams are chosen. With access to more funding, those 42 teams could all complete pilots and fully demonstrate the viability of their ideas and models. So many of them are very close to being market ready and a lot of them are ready for market, it’s just about connecting the dots and making sure that they don’t fall off the radar just because of the lack of funding in early days.

Gina: How would you define a social enterprise?

Ronit: I’ve had a lot of conversations about this especially during the accelerator programme. I know that my co-founder Gideon has delved very deeply into this question. For me, I see a social enterprise as a for-profit company with a net positive social impact. I do think that the positive social impact should be intrinsically aligned with the revenue model. It’s can be a grey area when you talk about companies more broadly and consider which ones are having more of an impact. 

Gina: Do you see measurement is a critical part of that?

Ronit: Oh, absolutely. This is something that, again, Gideon and James are very passionate about. I definitely see that we need to be checking that we are having a positive impact in terms of providing the right solutions for our users but also just looking at the other consequences, negative consequences, that might arise from our offering.  We don’t want to repeat the situation that you saw with the merry go round water pumps.

Gina: Would you elaborate on that example?

Ronit: It’s an example of something that seemed to be a fantastic idea but wasn’t sufficiently thought through and led to a negative impact instead of a positive one. The idea was to install these water pumps in communities where they already had hand pumps to release water. The idea was to set up merry-go-rounds instead of the hand pumps. They thought that children would play with the merry-go-round pumps and by spinning around on them they would fill up a water tank. However, in reality, the children did not reliably play on the merry-go-rounds after they were installed, which then forced mostly the women of the village to have to push these very large and heavy merry go rounds by themselves. There was a net negative social impact in these communities. 

Gina: What advice would you have for social enterprise startups?

Ronit: Something that I’m a very strong advocate of is just going out there and doing it or doing something. I really believe in just getting something to market as quickly as possible. It’s a matter of breaking your business model down into key assumptions and then trying them out and testing them. It doesn’t always have to be the perfect scenario. I’m a very action-driven individual so I think that that’s the piece of advice I would give: just go out there and do it.

Gina: Apart from financing, what are the necessary things that new social enterprises need in order to succeed? 

Ronit: I think each social enterprise really does need to have a goal of social impact that they want to achieve or that one big problem that they want to solve i.e. a clear mission and vision.  I also think communities of social enterprises that congregate together in a space can create so many synergies. Support from existing incumbents can be so powerful and can lead to success. The support could include sharing best experiences, key learnings and this will allow us to help one another to achieve a common goal but stops people from duplicating wasted efforts. More support from current incumbents to help give startups a head start is critical.

Gina: What are your views on the interplay between ‘doing well’ financially and ‘doing good’ for society?

Ronit: On the company level, I think that the interplay works especially if you’re defining a social enterprise as I have. On that basis, the more revenue intrinsically generates more positive impacts. I think that having two incentives alone is a good thing and also I believe that the social enterprise model is fantastic because it’s a very sustainable way of dealing with challenges that exist in the world. We’ve seen in India with the charities operating there that they almost always rely on third-party donors, and not all of them have a long-term view, which could mean that their solutions really aren’t sustainable. One thing I love about the social enterprise model is that you don’t see users as beneficiaries but rather as customers who are able to demand the goods and services that they want and they’re happy to pay for them. I’m a strong advocate for that interplay between financial gain and positive impact.

Gina: Do you think that business that is not designed as a social enterprise has a responsibility to have a positive impact on the world?

Ronit: I’d like to think that everyone’s becoming more aware. I think the way that every company has to go into the future is towards becoming a social enterprise because if they don’t, we’re really going to not have a planet to live on. It’s as simple as that; all businesses will eventually become social enterprises for two reasons. One reason is that the consumers, especially the younger generations, will align themselves with companies that are known to be socially impactful. If you want to continue having customers, you have to be seen as being a good company. But secondly, just so that we still survive and have this earth as we’ve known it to exist. We need to move in this direction otherwise we’re going to be getting rid of all our resources. In terms of the responsibility of existing companies who do not have impact as a key driver, it’s their responsibility to make sure they are not being unethical so this includes paying their employees’ fair wages, that there’s no exploitation of labour and supply chains, etcetera. I think it’s very important.

Gina: What do you think is required in order for that shift to take place? 

Ronit: I love the Hult Prize as an example of something really pushing on bringing social entrepreneurship to the forefront. It’s a matter of getting the younger students and the younger generations to join the space from an early age but also you’re seeing it as the larger companies as well who are real trendsetters. For example, Tesla is trying to deal with the huge issue of unsustainable automobiles. It’s an example of companies to start shifting their efforts towards social entrepreneurship themselves.

Gina: Would you consider Tesla as a social enterprise?

Ronit: This is, again, very interesting. I sometimes debate about this myself. You could frame it as a social enterprise. I do think that it can be a spectrum for entrepreneurship. But if you see it as a company that’s really working on solving climate change for example through electric cars then one could align them with the goal to get rid of diesel and petrol burning cars and so they’re a social enterprise as such. I think it depends on the frame with which you view a company. I believe that larger companies can be social enterprises without realising it.

Gina: The vision for me is that we don’t need the label of a social enterprise, it’s just about having a double or triple bottom line that becomes intrinsic in the way that we do business.

Ronit: Absolutely. That’s definitely where we should be heading. It’s interesting just from fundamental thinking in terms of economics. For instance, how we use GDP as a measure of the prosperity of countries, which in itself is quite intrinsically flawed because of the fact that it doesn’t take into account, for example, the natural resources that have been used up and the environmental impact. It’s something that we as a generation, are going to try newer ways of measuring prosperity and success.

Gina: One last question. If readers want to follow up with you, how can they find you?

Ronit: Send me an email to ronit@empower-energy.co.uk. Our website is www.empower-energy.co.uk.  We also have a Twitter, Facebook, LinkedIn page as well, under Empower Energy. https://www.facebook.com/EmpowerNRG/https://twitter.com/EmpowerNRG

Gina:  I want to thank you Ronit, for taking the time to speak with me today, I’m really excited about what you’re doing and I wish you and your team all the best.

Ronit: Thank you so much for having me, I really did enjoy the discussion. I’m looking forward to the future of Empower and social entrepreneurship to see where it goes.