South African startup The Sun Exchange is on the lookout for funding as it looks to scale up its innovative marketplace that crowdfunds small-scale solar projects using digital currencies such as bitcoin.
Launched towards the end of last year on the back of its own successful crowdfunding campaigns, The Sun Exchange is a peer-to-peer lending platform that connects people wanting to invest in solar energy with projects.
Founder Abraham Cambridge said the startup was establishing itself as a middleman between potential funders and projects, using bitcoin as a way of making effective remittances.
“It allows us to frictionless cross-border payments. And we can also break down the payments into tiny increments. We can do micro-investing,” he told Disrupt Africa.
The Sun Exchange, which has completed a pilot project in South Africa and will shortly be moving on to others across the continent, charges a success rate of between five per cent and 20 per cent for each successfully funded project, depending on the amount of work it has to undertake. It also charges an ongoing management fee.
Cambridge’s background is in climate change and environmental management, all of which he said eventually pointed him towards energy.
“It became obvious renewable energy was the solution to all these difficulties,” he said.
After launching a solar panel installation company in the United Kingdom (UK), he was drawn towards Africa by the greater opportunities for solar to make an impact.
“I came to see there was a lot more to the solar industry. And the industry in the UK was very reliant on subsidies. We were at the beck and call of the government. It wasn’t a market,” he said.
“Here in Africa, solar works on its own merits. From the amount of sunlight to the rising electricity rates, there are reasons for solar.”
Though there is substantial funding available for large solar projects, Cambridge said he had built The Sun Exchange to open up funding opportunities for small-scale, off-grid projects, which do more than simply provide energy for the grid.
“By simply providing energy to the grid, you lose the resilient, self-sufficient aspect. You are still exposed to price increases from central providers,” he said.
“I realised there was a huge need for finance for smaller commercial projects. Anything that doesn’t fit into the larger project finance space.”
The interest rates when finance is sourced from the crowd work for both borrower and lender. The Sun Exchange typically imposes rates of between 10 per cent and 12 per cent, compared to the 15 percent charge a bank would impose on a borrower. Meanwhile, for foreign lenders that, for example, in the UK would only be getting less than five per cent interest, these are healthy returns.
Cambridge said The Sun Exchange concept can also serve to strengthen the relationship between a company and its employees, as typically up to 20 per cent of funding for projects comes from internal stakeholders.
“This strengthens the bond between a business and its stakeholder employees,” he said.
The startup is also looking to provide an easy and transparent way of lenders being repaid.
“We are equipping our projects with smart meters that will tell them the performance of the project, and pay back to the lender by the kilowatt-hour. Nobody else is doing that in the world,” he said.
In fact, The Sun Exchange is a company of firsts. It is the first globally to convert bitcoin into solar energy, and the first to crowdfund a South African solar project.
“We are applying a global solution to a global problem. It has got universal significance. The sun is a universal commodity,” Cambridge said.
Has been selected as one of the five to pitch at the Consensus 2016 event in New York next month, where it will compete for US$10,000 prize.
“Our goal there is to undergo our first actual investment round. We need to build a much more robust platform to accelerate our vision. Once we have that we can scale really fast.”
Having crowdfunded its startup capital, The Sun Exchange is now looking for investment of around US$550,000 in order to build out its platform to serve more projects and transmit more funds. Cambridge will be one of five entrepreneurs pitching at the Consensus 2016 event in New York next month for a US$10,000 prize, but says he plans to use the event to drum up proper investment.
“Our goal there is to undergo our first actual investment round. We need to build a much more robust platform to accelerate our vision. Once we have that we can scale really fast,” he said.
In spite of the limitations of bitcoin in terms of its volatility and limited usage, Cambridge is sure his company is working in the right space.
“The international bitcoin community wants to fund solar energy,” he said.
“We have to identify a niche. The bitcoin community is used to innovative tech, they are used to the risk, as they are already exposed to volatility. They are also interested in money and doing cool, world-changing stuff.”
Moreover, The Sun Exchange is also serving to encourage people to use bitcoin as they want to participate in funding solar projects via the platform. Cambridge said the startup is playing a part in building a new, sustainable economy.
“We’re now getting contacted by bitcoin mines to be powered by solar. They are very energy intensive,” he said. “That would turn sunlight into digital currency, which in turn would is used to finance solar projects. We’ve then entered an era of solar-powered money. That’s a new economy.”