Dubai-based commercial solar power company Enerwhere firmly believes that its offerings have the potential to make the world better. But, in order to execute its mission, the capital-intensive entity was smart enough to realize that it needed to look beyond conventional financial institutions and venture capitalists for funds. In January 2017, Enerwhere raised a corporate loan of AED1 million from regional peer-to-peer lending platform Beehive. That’s not all though- the startup managed to crowdfund the entire amount under Beehive’s reverse auction system (which has investors bidding against one another to fund the company’s target, thereby driving down the interest rate) in a few weeks’ time, and also received the entire proceeds in the same week.
Explaining why the company picked crowdfunding as their investment route, Enerwhere CEO Daniel Zywietz says that the mode presented huge advantages for the company, both in terms of accessibility and speed. “The commercial-scale temporary power business is, by its very nature, much more fluid, and requires very quick turnaround times (sometimes less than a week). Contracts are also much smaller (typically less than US$1 million), so keeping overhead costs and fees as low as possible is critical,” says Zywietz. “The traditional banks simply weren’t able to handle our business within their standard processes, and we weren’t big enough yet to get special treatment,” he adds. At the same time, Enerwhere also found Beehive to be a more flexible platform, where the startup was able to raise the amount much quicker and at a cost “much lower” than conventional sources.
Till date, over the last three years, Enerwhere has raised about $3 million from angel investors. “Most of those investors are based here and work in the energy or related industries, so they quickly grasped the opportunity, and this way helped us to get started,” notes Zywietz. As opposed to the nature of temporary power offered by generator companies that run on fuel, Enerwhere provides a cleaner alternative power source for consumers in the region who lack a grid connection- labor camps, construction sites etc. Backed with Zywietz’s more than seven years of consulting expertise in the renewable industry, the company operates commercial-scale solar mini grids, offers solar roof top solutions, and also solar generator rental solutions across the construction, oil & gas, tourism, and other sectors in the Middle East. Enerwhere’s projects include deployments at a construction site on The World Islands, a 5 MVA solar- diesel hybrid production system at Saadiyat Accommodation Village labor camp in Abu Dhabi, and others.
Enerwhere was successful in meeting its target investment of AED1 million thanks to the 100+ individual investors/ lenders who pitched in, with “several” of them providing substantial amounts (less than AED 100,000), qualifying them to be angel investors. “We are now in the process of ordering a bunch of solar equipment, which we will then install in our various plants in the UAE,” says Zywietz commenting on the utilization of the proceeds. As to whether the entrepreneur expected the quick turnaround for Enerwhere, Zywietz believes that they were able to raise the target quickly since people on the platform seemed to like both their technology and business model. “We also made sure to personally invite people that we knew were interested in our company to the Beehive platform, so it wasn’t just a random crowd that financed us, but rather also a lot of people that already knew and liked us,” he explains.
The growth of crowdfunding and peer-to-peer lending portals, though originally fuelled by decline in bank financing post the 2008 financial crisis, is seeing increased adoption on its own merits as MENA’s entrepreneurship ecosystem matures. The Middle East region’s commitment to further grow this segment was also seen in two recent moves of the regulator Dubai Financial Services Authority (DFSA). In February 2017, DFSA launched a consultation paper on its proposal to regulate loanbased crowdfunding platforms (that may provide a clear governance framework for such fintech ventures); Beehive also became the first peer-to-peer lender in the region to receive the official authorization from DFSA earlier in March 2017.
As for Enerwhere, the startup plans to raise “a few million dollars in equity in the coming few months,” to further fund their R&D costs and expansion plans. When asked if he will again look to crowdfund this investment, Zywietz is quick to endorse the new-age investment avenue saying: “We will nearly certainly do this again.”
Daniel Zywietz, CEO, Enerwhere
Can you take us through the steps you had to go through to run your crowdfunding campaign on Beehive?
“The key steps aren’t that different from a conventional bank financing. We provided our basic company information and financials, which was screened by Beehive and an external accounting firm. After that pre-approval stage, we then posted our profile on the platform, and started the reverse auction. In parallel, we talked to a lot of our existing relationships and helped them sign up on the platform, to make sure that we wouldn’t rely only on random outsiders. The auction itself is quite exciting to watch, even if the company doesn’t really have to do muchbut it’s nice to see the amount going up and the rates coming down over the space of the 14 days. At the end of the auction, once the target amount of AED1 million was reached and the rate was confirmed, we signed the financing agreements, provided our guarantees and had the money in the bank the next day. So overall this process took only a few weeks and was a really pleasant experience.”
What are your tips for entrepreneurs looking to take the crowdfunding route to raise funds?
“Spend enough time beforehand to market the raise to your existing network, and make sure that anybody who is interested is registered on the platform in time. The administrative procedures typically only take a few days, but in an auction that only lasts 14 days; this could already mean missing the chance to invest. So better start early, and save a lot of stress for everyone involved.”