Wednesday, January 5, 2011/
If vision, determination and social conscience were the only benchmarks of entrepreneurship, Stewart Craine would be considered one of the top business leaders in Australia.
Six years ago, Craine created Barefoot Power, with the goal of providing electricity to the world’s poor. By providing solar-powered LED devices to people in Africa and Asia, Barefoot Power aims to provide a cheap, sustainable resource that reduces carbon footprints, as well as train local entrepreneurs to sell the product.
Craine speaks to StartupSmart to explain his ambitions for the business.
What was your inspiration for Barefoot Power?
I did volunteer work in Nepal and it was clear that the aid industry was not able to reach all villages. They needed LED technology on a larger scale and I wanted to see if it I could do it commercially.
There are 250 million households in the world spending $1 a week on kerosene. That’s $15 billion a year. That requires not only new products but also to transform attitudes. We needed to convince them to stop using kerosene.
I started the business with Harry Andrews, who I worked with at Hydro Tasmania on renewable energy products. It was clear that the company didn’t want to execute the plan we wanted so we thought we could so something ourselves. We had $65,000 to start the business and we did consultancy work for 18 months before focusing 100% of our time on the business.
I did some commercial engineering training too as I didn’t want to be written off as a hippy.
How have you set up the business?
There are two parts of the business model. Firstly, as supplier of the lamps (although in Kenya and Uganda we are distributors) we have 10 to 15 people on the ground to implement the lamps.
Secondly, we sell the lamps. They are solar lamps, while some of them have AC chargers. Primarily, we sell solar. Our core operations are in Uganda, Kenya, India, PNG, Tanzania and Ghana.
We’ve built the grid backwards in small incremental steps. We distribute one lamp, then more lamps and then a grid and then link those grids. This reduces the pay-back periods for investors.
How do you source and sell the lamps?
We get the lamps from China, for a 25-30% margin. In terms of selling them, we don’t focus on governments because they are part of the problem.
Instead, we train local entrepreneurs and they go out to sell them. We target the micro finance industry which gives loans to entrepreneurs. We look to borrow the best entrepreneurs who can sell the products while running their own businesses. They then train others – we are expanding from an initial 50 people to 2,000 by 2012.
How have you funded the business?
Raising the first $5 million took 60 separate deals – 20 equity deals and 40 debt. It was very difficult to raise money during the GFC but we are doing another $6 to 8 million raise and it’s proving significantly easier.
It took us about four years to get the money – we started with friends and family and then we won a business plan award in the Netherlands in 2006, which allowed us to get a couple of angels.
The attraction for angels is there isn’t risk for them – they can sell within six months and make 10% per annum on their money. That takes away the risk and gives people electricity and jobs, so it’s good for their image.
We tried to bring the model back to Australia but got nothing from investors. From being a 100% owned Australian company, it went down to 20% as all the socially motivated investors came from overseas. We had four different supply gaps where we couldn’t get the lamps out there due to investor resistance.
Why couldn’t you find the funding in Australia?
When we were in Europe we came across the phrase “social entrepreneurship”, which we didn’t know about at the time, but it is huge in the UK and US. Australia is a long way behind – you go to social entrepreneurship events and there are no Australians there.
It’s a shame. We’re an island – Africa is a distant concept and PNG is an uninvestable country. Companies don’t have a strong enough imagination to change the world. If you have to battle with philosophies before getting the money, it’s very difficult.
It’s very hard to find the funding in Australia. All the government programs are very ex-pat focused.
How is the business faring now?
We have 15 ex-pat staff and 30 local staff who are involved in training and logistics.
We now have revenue of $6 million – we’ve seen a growth of around 300% in the last three years.
We expect that to slow down to 50 to 100% growth, which is typical of world-class start-ups that we’ve benchmarked. That’s what we’re trying to build.
Did you do this for the social benefit or to run a profit-making business?
It was both. Only a big, successful business can make an impact in this area. Aid and charity have e had 50 years to get it right and just weren’t scaling it.
We still have 1.5 billion without electricity and we can’t solve poverty without solving energy poverty. It’s a solution to a social problem.
If we do it right, it will be financially rewarding. We want to scale it to the point where we can do an IPO.
What are your ambitions for the business?
We want to provide electricity for five million by 2012 and 10 million by 2015. We want to have $30 to $40 million in revenue by 2015. We need that $6 to $8 million investment to get there.
Will you look to exit?
We will have to look for equity exits at some point. Harry has this thing called a wife and needs to spend more time with her! I’m not able to attract a woman, much to my investors’ joy.
We’ve taken a haircut in cash but we wanted to prove that this was a viable career choice. We want to make something bigger than us.