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Nigeria’s Rensource raises $20M to power African markets by solar
Nigerian startup Rensource Energy has raised a $20 million Series A round co-led by CRE Venture Capital and the Omidyar network.
The renewable energy company builds and operates solar-powered micro-utilities that provide electricity to commercial community structures, such as open-air trading bazaars.
Launched in 2016, the startup has shifted its operating strategy. “We’ve pivoted away from a residential focus…and we’re building much larger systems to become essentially the utility for these large urban markets we have a lot of in Nigeria,” Rensource co-founder Ademola Adesina told TechCrunch.
The company has a partnership with German manufacturer BOS AG, with whom it designs specialized panels for it use case. Rensource also has developer teams in Nigeria and Europe for its software-related programs.
In addition to becoming a micro-energy provider to Nigeria’s robust SME classes, the startup aims to offer them B2B services. With the $20 million round, Rensource is launching its Spaces Offline to Online platform for supply-chain services, including business-analytics and working capital options.
“It’s a mini-ERP tool. We’re trying to bring a universe of people who are banked, but…still offline — their products are offline, they don’t track anything, and there’s no data behind their business — online,” said Adesina.
The benefit Rensource seeks to deliver to Nigeria’s SMEs — at a profit for itself — is to lower overhead costs through better business practices and free them from the bane of generators.
Across marketplaces in West Africa, noisy, fuel-guzzling and pollution-producing generators are like an unwelcome, yet necessary business partner.
Lack of affordable and reliable electricity in Nigeria creates a massive real and opportunity cost to Africa’s largest economy.
For perspective, the West African country is roughly the size of Texas, with a 200 million population larger than Russia, and generates less gigawatt hours of electricity annually than the U.S. state of Connecticut.
Nigerian businesses (and citizens) adjust for these power deficiencies by spending on diesel fuel and generators.
The IMF’s 2019 Nigeria report quoted economic losses of $29 billion in Nigeria due to unreliable electricity supply. On global Doing Business rankings, Nigeria ranked 169 out of 190 countries in the category of “Getting Electricity.”
This difficulty and cost weighs particularly heavy on Nigeria (and the continent’s) SMEs, which often operate in Africa’s informal economy — projected to be one of the largest off-the grid commercial spaces in the world.
Rensource’s micro-utility model deploys power clusters — made up of solar-panels, batteries and a power management system — adjacent to markets and commercial hubs. The energy application isn’t totally clean, as the startup still uses its own diesel backup system.
Rensourse has used this model to become an off-grid energy provider in six states in Nigeria, and powers the Sabon Gari market — one of the country’s largest, located in northern Kano State.
The company plans to expand to 100 markets within Nigeria and to additional African countries within 24 months, according to Adesina.
Rensource generates revenue from charging merchants daily, weekly or monthly fees. “In 2017, we did a few hundred thousand dollars in revenue. Last year we did about $7 million in revenue, and this year we’ll do better than that,” Adesina said.
The company doesn’t release official financials, but generated a small profit last year, according to Adesina. He named deploying more of its micro-utilities to new markets and diversifying services as the path to long-term profitability.
Rensource differentiates itself from many home-kit solar energy startups in Africa, such as M-Kopa, by becoming a renewable energy utility at scale.
The startup’s CEO sees the model as a classic leapfrog tech business, effectively bypassing Nigeria’s deficient electricity grid and providing a less capital intensive alternative to large (and often complicated) energy infrastructure projects.
Rensource is also following a trend by some Nigeria-based startups, such as trucking-logistics company Kobo360 and motorcycle ride-hail company Gokada, to shape a suite of additional services around the needs of core clients.
In Rensource’s case, those clients are SMEs and traders in the informal economy. “This informality of theirs is what we see as an opportunity in building this new business line and bringing these [merchants] into the online world,” said Adesina.
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Africa’s ride-hail markets are hot spots for startups and VC
When it comes to VC, vehicles, and startups, Africa’s ride-hail markets are becoming a multi-wheeled and global affair.
The big players such as Uber and Bolt are competing in Kampala and Nairobi—where in addition to car-service—they offer rickshaw taxis. On-demand motorcycle startups are multiplying and piloting EVs with funds from international partners. And many ride-hail companies in Africa are adapting unique product solutions to local transit needs.
In this analysis, I take a look at the leading startups in the mobility space and how the future of transportation on the continent will increasingly come from new entrants.
Africa’s in the midst of digital innovation boom
Africa’s in the midst of digital innovation boom, the components of which are intersecting rapidly across its 54 countries and 1.2 billion people.
Smartphone penetration is improving and in 2017, the continent saw the largest global increase in internet users—20 percent.
By Partech data, the continent surpassed the $1 billion VC mark in 2018. And greater connectivity and venture funding are fueling thousands of startups in every imaginable sector, including digital-transit.
While reliable markets stats for the size and potential of Africa’s ride-hail markets are sparse, there are some indicators of the sector’s potential.
Car ownership and cars per capita in Africa is among the lowest in the world. Parallel to that, any eyes and ears survey of the continent’s big cities reveals that shared transport by buses, cars, or motorcycles is big business that’s already ingrained in consumer culture. Millions of people daily pay fares to pack onto East and West Africa’s Mutatu and Danfo minibuses and Okada and Boda Boda motorbike taxis.
As Africa continues to urbanize, converts to smartphones, and discretionary consumer spending continues to rise—it all adds up to suggest strong potential for conversion to on-demand mobility services.
Unsurprisingly, the most active markets for ride-hail startups and investment in Africa align with the continent’s top spots for VC and tech activity: primarily Nigeria, Kenya, and South Africa.
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Nigeria’s Gokada raises $5.3M round for its motorcycle ride-hail biz
In many large cities across Africa, motorcycle taxis are as common as yellow cabs in New York.
That includes Lagos, Nigeria, where ride-hail startup Gokada has raised a $5.3 million Series A round to grow its two-wheel transit business.
Gokada has trained and on-boarded more than 1,000 motorcycles and their pilots on its app that connects commuters to moto-taxis and the company’s signature green, DOT– approved helmets.
The startup has completed nearly 1 million rides since it was co-founded in 2018 by Fahim Saleh — a Bangladeshi entrepreneur who previously founded and exited Pathao, a motorcycle, bicycle and car transportation company.
For Gokada’s Series A, Rise Capital led the investment, joined by Adventure Capital, IC Global Partners and Illinois-based First MidWest Group. Coinciding with the round, Nigerian investor and Jobberman founder Ayodeji Adewunmi will join Gokada as co-CEO.
Gokada will use the financing to increase its fleet and ride volume, while developing a network to offer goods and services to its drivers. “We’re going to start a Gokada club in each of the cities with a restaurant where drivers can relax, and we’ll experiment with a Gokada Shop, where drivers can get things they need on a regular basis, such as plantains, yams and rice,” Saleh told TechCrunch.
The startup differs from other ride-hail ventures in that it doesn’t split fare revenue with drivers. Gokada charges drivers a flat-fee of 3,000 Nigerian Naira a day (around $8) to work on their platform. The company is looking to generate a larger share of its revenue from building a commercial network around its rider community.
“We don’t do anything with the fares. We want to create an Amazon Prime-type membership…and ecosystem around the driver where we’re going to provide them more and more services, such as motorcycle insurance, maintenance, personal life-insurance and micro-finance loans,” Saleh said.
“We’re trying to provide a network of great services for our drivers that makes them stick with us, and not necessarily see a reason to switch to other platforms,” said Saleh.
Competition among those platforms is heating up, as global players enter Africa’s motorcycle taxi market and local startups raise VC and expand to new countries.
Uber began offering a two-wheel transit option in East Africa in 2018, around the same time Bolt (previously Taxify) started motorcycle taxi service in Kenya.
Rwanda has motorbike taxi startups SafeMotos and Yegomoto. Uganda-based motorcycle ride-hail company SafeBoda expanded into Kenya in 2018 and this month raised a Series B round of an undisclosed amount, co-led by the venture arms of Germany’s Allianz and Indonesia’s Go-Jek.
SafeBoda will use the round to further expand in East Africa and Nigeria in the near future, the startup’s co-CEO Maxime Dieudonne confirmed to TechCrunch.
In Nigeria, Gokada faces a competitor in local startup MAX.ng, which offers mobile-based passenger and logistics delivery services.
Overall, Africa’s motorcycle taxi market is becoming a significant sub-sector in the continent’s e-transport startup landscape. Two-wheel transit startups are vying to digitize a share of Africa’s boda boda and okada markets (the name for motorcycle taxis in East and West Africa) — representing a collective revenue pool of $4 billion and expected to double to $9 billion by 2021, according to a TechSci study.
“There is a formalization of an informal sector play here…to make it safer and higher quality,” Gokada investor Nazar Yasin of Rise Capital told TechCrunch.
The appeal to passengers is the lower cost of motorbike transit compared to buses or cabs ($1.85 is Gokada’s average fare) and the ability of two-wheelers to cut through the heavy congestion in cities such as Lagos and Nairobi.
A notable facet of motorcycle ride-hail companies in Africa is better organizing a space with a reputation for being somewhat chaotic and downright dangerous (see Nigeria’s past bans on the sector entirely due to safety).
For Gokada that includes training courses and certification of riders, the ability to track trips and safety stats from the app, and quality control for motorcycles — something that’s been lacking in East and West Africa’s non-digital moto-taxi space.
The company’s rider program offers a way for drivers to buy, own and maintain their motorcycles as they earn. Gokada has entered into partnership with Indian motorcycle maker TVS Motors to create a custom version of the company’s TVS Apache motorcycles for Gokada drivers.
Gokada is also experimenting with adding sensors to its fleet to better track safety standards. “We’re looking at seat sensors and another GPS sensor to track things like ‘did this driver add more than one passenger on the bike’ and all that data will feed back into our servers,” Saleh said.
The company won’t enter any new countries in Africa in the near future. “We plan to expand all over Nigeria. We think it’s a large enough market for now,” said Saleh. Nigeria is Africa’s most populous nation (190 million) and largest economy.
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