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SunCulture wants to turn Africa into the world’s next bread basket, one solar water pump at a time

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The world’s food supply must double by the year 2050 to meet the demands from a growing population, according to a report from the United Nations. And as pressure mounts to find new crop land to support the growth, the world’s eyes are increasingly turning to the African continent as the next potential global breadbasket.

While Africa has 65% of the world’s remaining uncultivated arable land, according to the African Development Bank, the countries on the continent face significant obstacles as they look to boost the productivity of their agricultural industries.

On the continent, 80% of families depend on agriculture for their livelihoods, but only 4% use irrigation. Many families also lack access to reliable and affordable electricity. It’s these twin problems that Samir Ibrahim and his co-founder at SunCulture, Charlie Nichols, have spent the last eight years trying to solve.

Armed with a new financing model and purpose-built small solar power generators and water pumps, Nichols and Ibrahim, have already built a network of customers using their equipment to increase incomes by anywhere from five to ten times their previous levels by growing higher-value cash crops, cultivating more land and raising more livestock.

The company also has just closed on $14 million in funding to expand its business across Africa.

“We have to double the amount of food we have to create by 2050, and if you look at where there are enough resources to grow food and a lot of point — all signs point to Africa. You have a lot of farmers and a lot of land, and a lot of resources,” Ibrahim said.

African small farmers face two big problems as they look to increase productivity, Ibrahim said. One is access to markets, which alone is a huge source of food waste, and the other is food security because of a lack of stable growing conditions exacerbated by climate change.

As one small farmer told The Economist earlier this year, ““The rainy season is not predictable. When it is supposed to rain it doesn’t, then it all comes at once.”

Ibrahim, who graduated from New York University in 2011, had long been drawn to the African continent. His father was born in Tanzania and his mother grew up in Kenya and they eventually found their way to the U.S. But growing up, Ibrahim was told stories about East Africa.

While pursuing a business degree at NYU Ibrahim met Nichols, who had been working on large scale solar projects in the U.S., at an event for budding entrepreneurs in New York.

The two began a friendship and discussed potential business opportunities stemming from a paper Nichols had read about renewable energy applications in the agriculture industry.

After winning second place in a business plan competition sponsored by NYU, the two men decided to prove that they should have won first. They booked tickets to Kenya and tried to launch a pilot program for their business selling solar-powered water pumps and generators.

Conceptually solar water pumping systems have been around for decades. But as the costs of solar equipment and energy storage have declined the systems that leverage those components have become more accessible to a broader swath of the global population.

That timing is part of what has enabled SunCulture to succeed where other companies have stumbled. “We moved here at a time when [solar] reached grid parity in a lot of markets. It was at a time when a lot of development financiers were funding the nexus between agriculture and energy,” said Ibrahim.

Initially, the company sold its integrated energy generation and water pumping systems to the middle income farmers who hold jobs in cities like Nairobi and cultivate crops on land they own in rural areas. These “telephone farmers” were willing to spend the $5000 required to install SunCulture’s initial systems.

Now, the cost of a system is somewhere between $500 and $1000 and is more accessible for the 570 million farming households across the word — with the company’s “pay-as-you-grow” model.

It’s a spin on what’s become a popular business model for the distribution of solar systems of all types across Africa. Investors have poured nearly $1 billion into the development of off-grid solar energy and retail technology companies like M-kopa, Greenlight Planet, d.light design, ZOLA Electric, and SolarHome, according to Ibrahim. In some ways, SunCulture just extends that model to agricultural applications.

“We have had to bundle services and financing. The reason this particularly works is because our customers are increasing their incomes four or five times,” said Ibrahim. “Most of the money has been going to consuming power. This is the first time there has been productive power.”

 SunCulture’s hardware consists of 300 watt solar panels and a 440 watt-hour battery system. The batteries can support up to four lights, two phones and a plug-in submersible water pump. 

The company’s best selling product line can support irrigation for a two-and-a-half acre farm, Ibrahim said. “We see ourselves as an entry point for other types of appliances. We’re growing to be the largest solar company for Africa.”

With the $14 million in funding, from investors including Energy Access Ventures (EAV), Électricité de France (EDF), Acumen Capital Partners (ACP), and Dream Project Incubators (DPI), SunCulture will expand its footprint in Kenya, Ethiopia, Uganda, Zambia, Senegal, Togo, and Cote D’Ivoire, the company said. 

Ekta Partners acted as the financial advisor for the deal, while CrossBoundary provided additional advisory support, including an analysis on the market opportunity and competitive landscape, under the United States Agency for International Development (USAID)’s Kenya Investment Mechanism Program

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Broaden your view of ‘best’ to make smarter, more inclusive investments

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What can we learn from the best 40 venture capital investments of all time? Well, we learn to invest exclusively in men, preferably white or Asian.

We reviewed CB Insights’ global list of “40 of the Best VC Bets of all Time.” All of the 40 companies’ 92 founders were male.

  • Of the 43 U.S.-based founders, 35 were white American; four were white immigrant/first generation, from France, Ukraine, Russia and Iran; and four were Indian immigrant/first generation.
  • Of the 19 Western Europe/Israel-based founders, all were white.
  • Of the 30 Asia-based founders, all were natives of the country in which they built their businesses: 23 Chinese, three Japanese, two Korean and two Indian.

Of course, this dataset is incomplete. There are numerous examples of founders from underrepresented backgrounds who have generated extremely impressive returns. For example, Amazon’s Jeff Bezos is Cuban American; Calendly’s Tope Awotona is Nigerian American; Sendgrid’s Isaac Saldana is Latinx; and Bumble’s Whitney Wolfe Herd is the second-youngest woman to take a company public.

That said, the pattern in the dataset is striking. So, why invest in anyone who’s not a white or Asian male? 

The conventional answer is that diversity pays. Research from BCG, Harvard Business Review, First Round Capital, the Kauffman Foundation and Illuminate Ventures shows that investors in diverse teams get better returns:

  • Paul Graham, cofounder of Y Combinator (2015): “Many suspect that venture capital firms are biased against female founders. This would be easy to detect: among their portfolio companies, do startups with female founders outperform those without? A couple months ago, one VC firm (almost certainly unintentionally) published a study showing bias of this type. First Round Capital found that among its portfolio companies, startups with female founders outperformed those without by 63%.”
  • Kauffman Fellows Report (2020): “Diverse Founding Teams generate higher median realized multiples (RMs) on Acquisitions and IPOs. Diverse Founding Teams returned 3.3x, while White Founding Teams returned 2.5x. The results are even more pronounced when looking at the perceived ethnicity of the executive team. Diverse Executive Teams returned 3.3x, while White Executive Teams only returned 2.0x. As mentioned above, we report realized multiples (RMs) only for successful startups that were acquired or went through the IPO process.”
  • BCG (June 2018): “Startups founded and cofounded by women actually performed better over time, generating 10% more in cumulative revenue over a five-year period: $730,000 compared with $662,000.”
  • BCG (January 2018): “Companies that reported above-average diversity on their management teams also reported innovation revenue that was 19 percentage points higher than that of companies with below-average leadership diversity — 45% of total revenue versus just 26%.”
  • Peterson Institute for International Economics (2016): “The correlation between women at the C-suite level and firm profitability is demonstrated repeatedly, and the magnitude of the estimated effects is not small. For example, a profitable firm at which 30 percent of leaders are women could expect to add more than 1 percentage point to its net margin compared with an otherwise similar firm with no female leaders. By way of comparison, the typical profitable firm in our sample had a net profit margin of 6.4 percent, so a 1 percentage point increase represents a 15 percent boost to profitability.”

How do we reconcile these two sets of data? Research going back a decade shows that diverse teams, companies and founders pay, so why are all of the VC home runs from white men, or Asian men in Asia, plus a few Asian men in the U.S.?

First Round did not include their investment in Uber in their analysis we reference above on the grounds that it was an outlier. Of course, one could rebut that by saying traditional VC is all about investing in outliers.

  • Seth Levine analyzed data from Correlation Ventures (21,000 financings from 2004-2013) and writes that “a full 65% of financings fail to return 1x capital. And perhaps more interestingly, only 4% produce a return of 10x or more, and only 10% produce a return of 5x or more.” In Levine’s extrapolated model, he found that in a “hypothetical $100M fund with 20 investments, the total number of financings producing a return above 5x was 0.8 – producing almost $100M of proceeds. My theoretical fund actually didn’t find their purple unicorn, they found 4/5ths of that company. If they had missed it, they would have failed to return capital after fees.”
  • Benedict Evans observes that the best investors don’t seem to be better at avoiding startups that fail. “For funds with an overall return of 3-5x, which is what VC funds aim for, the overall return was 4.6x but the return of the deals that did better than 10x was actually 26.7x. For >5x funds, it was 64.3x. The best VC funds don’t just have more failures and more big wins —  they have bigger big wins.”

The first problem with the outlier model of investing in VC is that it results in, on average, poor returns and is a risker proposition compared to alternative models. The Kauffman Foundation analyzed their own investments in venture capital (100 funds) over a 20-year period and found “only 20 of the hundred venture funds generated returns that beat a public-market equivalent by more than 3% annually,” while 62 “failed to exceed returns available from the public markets, after fees and carry were paid.”

The outlier model of investing in VC also typically results in a bias toward investing in homogeneous teams. We suggest that the extremely homogeneous profiles of the big wealth creators above reflect the fact that these are people who took the biggest risks: financial, reputational and career risk. The people who can afford to take the biggest risks are also the people with the most privilege; they’re not as concerned about providing for food, shelter and healthcare as economically stressed people are. According to the Kauffman Foundation, a study of “549 company founders of successful businesses in high-growth industries, including aerospace, defense, computing, electronics and healthcare” showed that “more than 90 percent of the entrepreneurs came from middle-class or upper-lower-class backgrounds and were well-educated: 95.1 percent of those surveyed had earned bachelor’s degrees, and 47 percent had more advanced degrees.” But when you analyze the next tier down of VC success, the companies that don’t make Top 40 lists but land on Top 500 lists, you see a lot more diversity.

In VC, 100x investment opportunities only come along once every few years. If you bet your VC fund on opportunities like that, you’re relying on luck. Hope is not a strategy. There are many 3x-20x return opportunities, and if you’re incredibly lucky (or Chris Sacca), you might get one 100x in your career.

We prefer to invest based on statistics, not luck. That’s why Versatile VC provides companies with the option of an “alternative-VC” model, using a non-traditional term sheet designed to better align incentives between investors and founders. We also proactively seek to invest in diverse teams. Given the choice of running a fund with one 100x investment, or a fund with two 10x investments, we’ll take the latter. The former implies that we came perilously close to missing our one home run, and therefore we’re not doing such a great job investing.

“While we all want to have invested in those exciting home-runs/unicorns, most investors are seeking the data points to construct reliable portfolios,” Shelly Porges, co-founder and managing partner of Beyond the Billion, observed. “That’s not about aiming for the bleachers but leveraging experience to reliably deliver on the singles and doubles it takes to get to home base. A number of the institutional investors we’ve spoken to have gone so far as to say that they can no longer meet their targets without alternatives, including venture investments. “

Lastly, the data above reflects companies that typically took a decade to build. As the culture changes, we anticipate that the 2030 “Top 40” wealth creators list will include many more people with diverse backgrounds. Just in 2018, 15 unicorns were born with at least one woman founder; in 2019, 21 startups founded or co-founded by a woman became unicorns. Why?

  • “All else being equal, a larger pool of female-founded companies to select from for VC investing should increase the odds of a higher number of female-founded VC home runs,” said Michael Chow, research director for the National Venture Capital Association and Venture Forward. According to PitchBook, investments in women-led companies grew approximately 54 percent from 2015 to 2019, from 459 to 709. In the first three quarters of 2020, there have been 468 fundings of women-led companies; this figure beats 2015, 2016 and nearly 2017 total annual fundings. ProjectDiane highlights that from 2018 to 2020, the number of Black women who have raised $1 million in venture funding nearly tripled, and the number of Latinx women doubled. Their average two-year fail rate is also 13 percentage points lower than the overall average.
  • “Millennials value a diverse workforce,” Chow added, according to Gallup and Deloitte Millennial surveys. “In the battle for talent, diverse founders may have the edge in attracting the best and brightest, and talent is what is required for going from zero to one.”
  • The rise in popularity of alternative VC models, which are disproportionately attractive to women and underrepresented founders. We are in the very early days of this wave; according to research by Bootstrapp, 32 U.S. firms have launched an inaugural Revenue-Based Finance fund. Clearbanc notes on their site they have “invested in thousands of companies using data science to identify high-growth funding opportunities. This data-driven approach takes the bias out of decision making. Clearbanc has funded 8x more female founders than traditional VCs and has invested in 43 states in the U.S. in 2019.”
  • More VCs are working proactively to market to underrepresented founders. Implicit biases are robust and pervasive; it takes a proactive and intentional approach to shift the current status quo of funding,” Dreamers & Doers Founder Gesche Haas said. Holly Jacobus, an investment partner at Joyance Partners and Social Starts, noted that “we’re proud to boast a portfolio featuring ~30% female founders in core roles —  well above the industry average —  without specific targeting of any sort. However, there is still work to be done. That’s why we lean heavily on our software and CEOs to find the best tech and teams in the best segments, and we are always actively working on improving the process with new systems that remove bias from the dealflow and diligence process.”

Thanks to Janet Bannister, managing partner, Real Ventures, and Erika Cramer, co-managing member, How Women Invest, for thoughtful comments. David Teten is a past Advisor to Real Ventures.

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Facebook launches BARS, a TikTok-like app for creating and sharing raps

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Facebook’s internal R&D group, NPE Team, is today launching its next experimental app, called BARS. The app makes it possible for rappers to create and share their raps using professionally created beats, and is the NPE Team’s second launch in the music space following its recent public debut of music video app Collab.

While Collab focuses on making music with others online, BARS is instead aimed at would-be rappers looking to create and share their own videos. In the app, users will select from any of the hundreds of professionally created beats, then write their own lyrics and record a video. BARS can also automatically suggest rhymes as you’re writing out lyrics, and offers different audio and visual filters to accompany videos as well as an autotune feature.

There’s also a “Challenge mode” available, where you can freestyle with auto-suggested word cues, which has more of a game-like element to it. The experience is designed to be accommodating to people who just want to have fun with rap, similar to something like Smule’s AutoRap, perhaps, which also offers beats for users’ own recordings.

Image Credits: Facebook

The videos themselves can be up to 60 seconds in length and can then be saved to your Camera Roll or shared out on other social media platforms.

Like NPE’s Collab, the pandemic played a role in BARS’ creation. The pandemic shut down access to live music and places where rappers could experiment, explains NPE Team member DJ Iyler, who also ghostwrites hip-hop songs under the alias “D-Lucks.”

“I know access to high-priced recording studios and production equipment can be limited for aspiring rappers. On top of that, the global pandemic shut down live performances where we often create and share our work,” he says.

BARS was built with a team of aspiring rappers, and today launched into a closed beta.

Image Credits: Facebook

Despite the focus on music, and rap in particular, the new app in a way can be seen as yet another attempt by Facebook to develop a TikTok competitor — at least in this content category.

TikTok has already become a launchpad for up-and-coming musicians, including rappers; it has helped rappers test their verses, is favored by many beatmakers and is even influencing what sort of music is being made. Diss tracks have also become a hugely popular format on TikTok, mainly as a way for influencers to stir up drama and chase views. In other words, there’s already a large social community around rap on TikTok, and Facebook wants to shift some of that attention back its way.

The app also resembles TikTok in terms of its user interface. It’s a two-tabbed vertical video interface — in its case, it has  “Featured” and “New” feeds instead of TikTok’s “Following” and “For You.” And BARS places the engagement buttons on the lower-right corner of the screen with the creator name on the lower-left, just like TikTok.

However, in place of hearts for favoriting videos, your taps on a video give it “Fire” — a fire emoji keeps track. You can tap “Fire” as many times as you want, too. But because there’s (annoyingly) no tap-to-pause feature, you may accidentally “fire” a video when you were looking for a way to stop its playback. To advance in BARS, you swipe vertically, but the interface is lacking an obvious “Follow” button to track your favorite creators. It’s hidden under the top-right three-dot menu.

The app is seeded with content from NPE Team members, which includes other aspiring rappers, former music producers and publishers.

Currently, the BARS beta is live on the iOS App Store in the U.S., and is opening its waitlist. Facebook says it will open access to BARS invites in batches, starting in the U.S. Updates and news about invites, meanwhile, will be announced on Instagram.

Facebook’s recent launches from its experimental apps division include Collab and collage maker E.gg, among others. Not all apps stick around. If they fail to gain traction, Facebook shuts them down — as it did last year with the Pinterest-like video app Hobbi.

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In freemium marketing, product analytics are the difference between conversion and confusion

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The freemium marketing approach has become commonplace among B2C and B2B software providers alike. Considering that most see fewer than 5% of free users move to paid plans, even a slight improvement in conversion can translate to significant revenue gains. The (multi) million-dollar question is, how do they do it?

The answer lies in product analytics, which offer teams the ability to ask and answer any number of questions about the customer journey on an ad-hoc basis. Combined with a commitment to testing, measurement and iteration, this puts data in the driver’s seat and helps teams make better decisions about what’s in the free tier and what’s behind the paywall. Successful enterprises make this evaluation an ongoing exercise.

Often, the truth of product analytics is that actionable insights come from just a fraction of the data and it can take time to understand what’s happening.

Sweat the small stuff

A freemium business model is simply a set of interconnected funnels. From leads all the way through to engagement, conversion and retention, understanding each step and making even small optimizations at any stage will have down-funnel implications. Start by using product analytics to understand the nuances of what’s working and what isn’t, and then double down on the former.

For example, identify specific personas that perform well and perform poorly. While your overall conversion average may be 5%, there can be segments converting at 10% or 1%. Understanding the difference can shine a light on where to focus. That’s where the right analytics can lead to significant results. But if you don’t understand what, why and how to improve, you’re left with guesswork. And that’s not a modern way of operating.

There’s a misconception that volume of data equals value of data. Let’s say you want to jump-start your funnel by buying pay-per-click traffic. You see a high volume of activity, with numbers going up at the beginning of your funnel and a sales team busy with calls. However, you come to learn the increased traffic, which looked so promising at the outset, results in very few users converting to paid plans.

Now, this is a story as old as PPC, but in the small percentage that do convert, there’s a lot to learn about where to focus your efforts — which product features keep users hooked and which ones go unused. Often, the truth of product analytics is that actionable insights come from just a fraction of the data and it can take time to understand what’s happening. Getting users on board the free plan is just the first step in conversion. The testing and iteration continue from there.

The dropped and the languished

Within the free tier, users may languish — satisfied with whatever features they can access. If your funnel is full of languishing users, you’ve at least solved the adoption problem, so why are they stuck? Without a testing and tracking approach, you’ll struggle to understand your users and how they respond, by segment, to changes.

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