In the 10 years since its founding, Persistent has built a venture building model that has invested in businesses providing PAYGO solar home systems as well as commercial and industrial solar, ecosystem enablers and e-mobility players, delivering financial returns and significant impact, improving more than four million lives across sub-Saharan Africa.
Shell Foundation has supported Persistent since 2016, with co-funding from USAID and UK aid from the UK government.
In June they published an honest and reflective study that assessed five assumptions they made in 2014 around the energy access sector, and reflected on whether those assumptions had proved true or false:
- Assumption 1: Strong unit economics, with gross margins of 55%+, are critical
- Assumption 2: To reach operating breakeven requires a PAYGO solar company to connect >25-50,000 households, raise >$10m and operate for >2 years. To reach complete breakeven (covering overhead) requires a PAYGO company to connect >50-75,000 households and raise >$20m
- Assumption 3: Keeping costs of operation low is critical. Operating costs at scale should range from 25-35% of revenues as companies are able to spread fixed costs over a larger revenue base
- Assumption 4: Focus on building robust distribution networks and incentivising sales agents is key
- Assumption 5: The business model has the potential to generate substantial impact by lifting millions of households out of energy poverty, providing more sustainable electricity-based energy services (e.g., lighting, phone charging) and creating thousands of jobs
The report concludes that whilst the pace of growth is slower and more costly than expected, there is a lot to be positive about. It highlights the positive growth environment that companies built on solid foundations are reporting: an increased supply of debt funding, grantors looking for partners willing and able to execute energy access projects that reach the bottom of the pyramid, strong customer and business demand for additional appliances, solar and appliance prices continuing to fall and the products’ performance improving.
The report is grounded in Persistent’s experience working with entrepreneurs and social enterprises for a decade. Shell Foundation believes that achieving a just and inclusive energy transition, one that alleviates energy poverty and mitigates against climate change, requires understanding the true needs of social entrepreneurs who will drive the transition and delivering blended finance solutions that are tailored to their needs.
Done right, social enterprises will be able to deliver products and services that reach low-income consumers in a way that is affordable, sustainable and scalable, catalysing entire markets into addressing the UN Sustainable Development Goals.