‘We’re the disrupters’

In 2010, U.S.-born entrepreneurs Brian Shaad and Nikhil Jaisinghani moved from Nigeria — where they were both living and working at the time — to Uttar Pradesh, a state in northern India that shares a border with Nepal. Why? To bring clean and efficient light to the state’s off-grid rural villages, which, up to that point, were still completely reliant on kerosene. Shaad and Jaisinghani established Mera Gao Power that year and started commercial operations in December 2011. A lighting utility social enterprise, Mera Gao provides low-cost solar microgrids to communities in Uttar Pradesh, India’s most populous state. Costing less than $1,000, each microgrid is able to provide light and charge mobile phone batteries for seven hours a day, seven days a week to at least 30 homes. Each household that subscribes to the service receives two LED lights and a mobile phone charger, and pays a fixed fee of 25 rupees ($0.42) per week. Customers don’t pay for the energy they consume; they pay to gain access to the service. From just one village system in 2011 — which comprises two solar panels, two batteries and four distribution lines — Mera Gao has since been able to set more than 1,200 systems in place. And from serving 7,000 customers in June 2013, Mera Gao now has 21,000 clients. So how was Mera Gao able to expand so quickly in just three years? We spoke with Shaad, co-founder and director handling business development at Mera Gao. Focus on one goal Social entrepreneurs and development advocates often have a lot of ideas on how to make “good sustainable development happen.” “You talk about social entrepreneurs, we’re very much disruptive personalities,” Shaad said. “We see the problems, we see the causes of the problems, and we come in and we try to break those causes down.” To get an investor to fund your social enterprise, however, you need to focus on just one goal and not try to do everything. Investors are very specific when it comes to managing their portfolio. And even though many investors say they invest in the entrepreneur not the company, they still aren’t likely to fund your enterprise if they can’t find the right fit for your business in their portfolio — no matter how much they like you. Provide clear deliverables and outcomes It’s not enough to have one goal and one message, however; you also need to provide investors clear deliverable and outcomes, and prove that your business model works. “With Mera Gao, we’ve been very clear,” Shaad noted. “We’re a lighting utility. We provide quality, cost-effective, clean light to communities. We picked kerosene as our competitor, and we just focused very much on that one goal.” Shaad and Jaisinghani provided the $30,000 seed money to finance and run three pilots — two of which were operated commercially — for a year. The data they gathered from the pilots not only showed the solar microgrids were able to perform and deliver as promised, it enabled Mera Gao to get a $300,000 grant from the Development Innovations Venture of the U.S. Agency for International Development as well. Don’t be afraid to make mistakes Mera Gao had to learn from its mistakes before it was able to settle on its current business model. The first lighting system it installed cost $2,800. But by refining its supply chain and components, it was able to lower costs to less than $1,000 per system. Even its price points and collection system had to be overhauled. In one of the first villages installed with the lighting system, Mera Gao negotiated service fees and maximum energy consumption with the people there. In another community, a local villager was tasked to collect the weekly fees — and disconnect the service if the household was unable to pay. In both instances, the system Mera Gao set in place didn’t work and put the company in a more vulnerable position. But it learned from these mistakes and was able to adjust accordingly. Apart from setting fixed weekly fees, it now sends a collector to the communities every week. “We’ve always been open about our challenges, open about where we’ve made the wrong decisions and I find that investors are very open to that and happy to see that,” Shaad said, noting that any good investor would have expected setbacks and taken those into consideration. But rather than dwell on what failed, it’s more important to see what works and build on that. “As you hit the challenges, don’t quit,” Shaad advised. “Just make sure that you maintain the focus of what it is that you are trying to achieve.” In fact, by continuously refining its supply chain and cost structure, Mera Gao was able to install lighting systems in 125 villages using the grant money from DIV; the grant was only supposed to cover 75 villages. And before the 18-month grant period was up, Mera Gao was able to gain additional financing from the Insitor Impact Fund, an impact investor from Cambodia. With this money, Mera Gao has since been able to grow those 125 villages to more than 900 communities with at least 1,200 systems and 21,000 customers. Understand your market One of the reasons Shaad and Jaisinghani decided to start in Uttar Pradesh was the way communities were set up there. The state has a very dense population, with 600 to 800 people per square kilometer. And communities — which tend to be small villages with 40 to 60 households — are very densely packed as well. This means that in most cases, Mera Gao would only have to install one or two solar microgrids to provide light to all households in the village. In these communities, kerosene remains the primary source of lighting and mobile phone charging is usually done at the nearest larger town. “In the 21st century, no one should be relying on kerosene as a lighting source. It’s not healthy but it makes a lot of money for a lot of people,” Shaad said. Households that continue to rely on kerosene typically spend 20 rupees a week for three hours of light on one kerosene lantern. With its solar microgrids, Mera Gao is not only able to provide cleaner, cheaper and more efficient light to the communities, it also offers locals a way to charge their mobile phones — which serve more as a multimedia device and not just a communications tool for the villagers — at home. This keen understanding of its market has helped Mera Gao grow and scale up quickly. At the moment, it is able to grow at 2,500 customers a month. Know when to grow — and when to slow down Mera Gao grew rapidly in such a short time, but now Shaad said the company is “taking a breather on growth to really focus on strengthening its foundation.” Over the next six months, Mera Gao will be focusing on strengthening its human resources department, providing training to its staff, improving the quality of the lighting system’s design and the supply chain, and marketing, which is something Shaad said they’ve never really done before. As a result, from 2,500 customers a month, growth is likely to slow to just 1,000 clients monthly. This move may run counter to what is generally expected, but Shaad pointed out that the investors he’s talked to actually support this exercise. “They’ve been really happy to hear that we are talking about consolidation and stabilization before going back to the high growth,” Shaad said. “They’ve seen so many times where the company just ploughs ahead with super growth but not paying attention to strengthening that foundation.” Shaad intends to steer the company back to its fast-growth track at the end of the six-month period — and more. While he will remain part of the company’s leadership team, Mera Gao is looking at bringing a local team to take over operations and management roles. This will then allow Shaad more time to focus not just on business development but also on new markets. Mera Gao has established relationships with more than 900 communities, so now Shaad is looking at what other things the company could offer — such as financial products or health services — that could be delivered on the “backbone” of its existing distribution channels. For now, Shaad said the company will start piloting solar home systems after the monsoon season. This would address the needs of households that want more than just lighting. Mera Gao would be expanding to a new district within Uttar Pradesh as well. “Like any good businessman, I have a market to work with. I’ve got 21,000 customers, I’ve got about a quarter-of-a-million-person market to access,” Shaad said. “This is established. This is not theoretical anymore.” Check out more insights and analysis provided to hundreds of Executive Members worldwide, and subscribe to the Development Insider to receive the latest news, trends and policies that influence your organization.