The country’s unemployment rate saw a negative spike of 31.9% in the third quarter of 2023, which marked the first time the unemployment rate…
UpEnergy, the Ugandan clean energy company and Unreasonable Institute alumni, has closed an equity investment deal, and is now raising US$1-million more in debt. We had a chance to catch up with UpEnergy co-founder Erik Wurster to chat about the funding round and future plans.
Venture Capital 4 Africa: Congratulations on the investment you secured. What have you secured and what are you still looking for?
Erik Wurster: One of our investors prefers that we not reveal the investment amount so I’ll give you a broad range: it is more than US$1 million and less than US$10 million. The total amount is significant for us, and will allow us to greatly expand our activities over the coming years.
We’re done raising equity, at least for now, but are actively seeking debt investors. We are aiming to raise US$1-million in debt financing.
VC4A: What’s the essence of your business plan, and why is UpEnergy a very interesting investment for investors?
EW: UpEnergy distributes household energy products throughout Uganda. We bring in revenues not only from the sale of the product, but also from the sale of carbon credits associated with the use of those products, which enables us to deliver high quality products at affordable prices.
We already have a significant track record of success, a mature distribution channel and we boast a market leading management team. We’ve proven to be able to execute more effectively and at lower cost than many of our competitors. Our branded distribution channel garners customer loyalty, while our growing list of exclusive arrangements with suppliers and distributors increases the barrier to entry for our competitors.
VC4A: What is special about the technical features of your products?
EW: We are a technology agnostic organization, which allows us the flexibility to select locally-appropriate products for our market. We test our products extensively for durability, efficiency and consumer appeal before we introduce them at commercial scale. Our cookstoves, for example, have to reduce smoke, particulate matter and fuel consumption by at least 50%. They also have a to be affordable and significantly more durable than products that currently dominate the market.
VC4A: Can you tell us a bit more about yourself and the management team?
EW: The management team includes myself, Nicole Ballin, and Mark Mutaahi. Prior to co-founding UpEnergy, I co-founded a company called E+Carbon, Inc, a subsidiary of E+Co, that introduced some of the world’s first innovative cookstove carbon finance projects, as well as one of the earliest multi-country programmes focused on cookstoves under the UN’s carbon trading framework. Before this I worked as a consultant for the United Nations Development Programme’s sustainable energy department and for a private sector energy efficiency consultancy.
Nicole, the COO of UpEnergy, is a serial social entrepreneur who came to UpEnergy with five years experience in finance and two years experience in social entrepreneurship. She also holds an MBA from the University of California, Berkeley. She’s originally South African and has a unique gift for managing teams.
Mark is a Ugandan who spent more than 12 years studying and working in Canada, where he gained experience in the finance sector with Capital One and Royal Bank of Canada. Mark offers an ability to combine his command over western business culture with a native understanding of Uganda in order to run our nationwide operations effectively. Our board also has a strong background in carbon finance and social marketing in emerging markets.
VC4A: What milestones did UpEnergy secure to date?
EW: I think our most significant milestones are those related to our operational traction. With a small seed investment we have grown to a team of about 20, we have sold more than 25,000 clean energy products to date and earned more than $800k in revenues. Beyond the closing of our series A investment round, I think a noteworthy recent success was our contract to sell 500,000 carbon credits to the Swedish government from now through 2021. This gives us full price security in a volatile commodities market, which guarantees us a reliable income stream for the duration of the contract.
But what engages me most is the impact of UpEnergy’s work. Since our founding, UpEnergy has served over 125 000 Ugandans through the sale high efficiency cookstoves. The environmental impact is considerable, with 30 000 tons of CO2 emissions avoided and over 120 000 trees saved thus far. The households we serve save several hours per day through reduced time needed for cooking and fuel collection.
These impacts are significant in aggregate, but perhaps the most compelling impact on the individual level comes from the income generating opportunities we offer our retailers and sales agents. For example, Aaron Okello is a motorcycle taxi driver turned stove salesman whose life was completely transformed due to income from working with UpEnergy. Aaron was able to relocate his wife and three children from northern Uganda to the city, rent suitable housing for the entire family, pay school fees for all of his children and pay 50% of the dowry for his wife, an important step towards recognition and respect in his culture. None of this was possible for him as a taxi driver.
VC4A: Which new milestones do you want to reach with your investments, and what do you hope to achieve in the long run?
EW: UpEnergy is aiming to serve 1 million end users in Uganda by 2015 with life-improving products. This will require investing and innovating in distribution and logistics, after-sales service, consumer and retailer finance, marketing and carbon finance. With these milestones achieved we will have created the foundation to not only become the primary distributor of clean energy products throughout Uganda, but also to replicate our model in other countries.
VC4A: What are your recommendations to other entrepreneurs presently raising capital?
EW: My advice to others raising capital is to be patient and focus on honing your message to investors. Convincing investors to part with their money isn’t easy, even for the most attractive business plans and experienced entrepreneurs.
It takes a lot of time and a lot of persistence.
This article by Miguel Heilbron originally appeared on Venture Capital for Africa, a Burn Media publishing partner.