The co-founders of two-year-old startup Mera Gao Power are about a month away from generating enough revenues from their solar-power microgrid service in villages in rural India to cover all of their company’s costs. Well, all of their costs except their own salaries, which is about another year away, co-founder Nikhil Jaisinghani tells me in an interview. And Jaisinghani means that in a good way.
The 11-person company has been rocking it lately, and is finally on track with a product that their customers want, enough experience in the marketplace to make the business work, and a recent $ 300,000 grant from USAID that is helping the team expand. By the end of 2012, Mera Gao Power wants to have electrified 70 villages with its solar panels, cell phone charging service, and distribution lines and potentially raise another round of funding from an impact investor to scale the business even more.
But things weren’t always so sunny for the scrappy U.S.-born co-founders — Jaisinghani and Brian Shaad — who met in Nigeria and originally were interested in finding a way for Nigerian villagers to use the natural gas that is unearthed in oil recovery but is usually burned off and wasted. Instead the two went off to India, with little experience with solar technology, but with the idea that an electrification product needs to be sold as a service that is paid off over time, instead of sold via a high upfront fee that requires a microloan.
Know your customer
When the two began to design the solar microgrid product in 2010, they were planning on having it just offer lighting. But Jaisinghani says after they installed it in one village they quickly learned that lighting wasn’t enough: “We couldn’t stop people from charging their phones on the systems,” says Jaisinghani. Cell phone charging was clearly a necessity.
The entrepreneurs then wondered if they could set up solar-powered cell phone charging stations in the villages to address the cell phone power need. But Jaisinghani says they discovered that people really wanted the convenience of charging the phone in their own homes. “It’s the same with us in our own houses; they just want it to be easy and to work,” says Jaisinghani.
The entrepreneurs modified the product to include phone charging and lighting, but stopped at adding on enough power to be able to run a TV or fan (more panels and batteries add more cost to the system). Eventually they realized that 7 hours of power, and 25 rupees per week was the optimal set up for both the customer and the business.
One microgrid system that can electrify about 50 households costs $ 1,200 and includes two solar panels, two batteries and four distribution lines. Each house that signs up for the service and pays the subscription and a small connection fee, gets two LEDs and access to the system. Jaisinghani says that there’s no problem with demand once the system is installed and that at least a quarter of the villagers commonly sign up for the service before its even connected.
Mera Gao Power’s potential customers are commonly paying 30 rupees a week for kerosene and cell phone charging. So the 25 rupees per week price point is not only lower, it’s also combined with the convenience of home charging and not having to trek to the market to buy kerosene, as well as enabling customer to avoid some of the nasty side effects of kerosene use (air pollution in homes and it can be unsafe).
The field as the lab
It took Jaisinghani and Shaad awhile to figure out the perfect price point. In one of the first villages they made the mistake of starting out the service by negotiating the power ceiling and price with the villagers. Later on that put them in a vulnerable position when the villagers came back and wanted more power for less money. The ended up removing that system.
In another of the early villages the group worked with a local villager who acted as the collection agent of the weekly-fees. However that proved to be a tricky situation, because if a household didn’t pay the fee they had to be disconnected from the service. The villager-turned collection agent wasn’t too keen on disconnecting his own neighbors, and also had a penchant for tweaking the system to offer 24-hour power, which killed the batteries. “I don’t think we realized how little knew about the market. We were naive,” says Jaisinghani.
Jaisinghani also learned that non-governmental agencies don’t exactly make good startup partners. “NGOs have their place in this spectrum but they’re not well suited to be partners in this enterprise. They don’t have enough control over their field level staff,” says Jaisinghani.
After all of these trials and tribulations the co-founders, which were funding the company our of their own pockets, at one point last year were going to closing up shop. “We’d run out of money and we were going to fold,” says Jaisinghani. Then the USAID grant came in and offered a lifeline.
Getting it right
Today Mera Gao Power has electrified 13 villages and Jaisinghani says the villagers are happy with the service and the company is meeting its growth and revenue targets. For the rest of the year the team will focus on managing sustainable growth and doubling the amount of villages it electrifies by five.
Down the road the company plans to close more funding, and eventually maybe even bring in a more experienced CEO, says Jaisinghani. If a new CEO comes in, Jaisinghani says he and Shaad could spend their time working on ways to economically enable the microgrid product to add TV and fan-power.
And for next year? The co-founders will finally start getting paid.
Images courtesy of Anna da Costa.
Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.
- Flash analysis: lessons from Solyndra’s fall
- Green IT Q1: Cleantech Breaking Out — and Bracing for Hard Times
- A 2011 Green IT Forecast