Kenyan off-grid-solar pioneer d.light can power entire homes in rural Africa but must now decide how to fund the growth of its asset-heavy business model. Ned Tozun and Sam Goldman founded d.light in 2006 to transform lives through solar solutions enabling access to electricity, the seventh of the United Nations Sustainable Development Goals for 2030. Originally providing simple portable solar lanterns to people without access to reliable electricity, the enterprise developed solar home systems that included lights, mobile chargers, and an energy-efficient device such as a radio, fan or TV. By 2019, with the success of home systems, d.light had become one of the leading players in the off-grid solar sector, with the world’s largest distribution network for off-grid solar products and a projected revenue of over $90 million.
Key to d.light’s solar home systems was pay-as-you-go (PayGo) plans, a lease-to-own model consisting of a down payment followed by small (<$1.50) daily payments, normally for a period of 12 to 18 months. In 2019, sales from PayGo products were expected to contribute close to 70% of the company’s annual revenue. However, PayGo was an asset-heavy model and in the past 18 months, d.light had raised over $90 million, nearly 75% of which was in debt facilities. As the company continued to grow rapidly, its co-founders were deliberating whether they ought to go out and raise capital again. If so, should it be equity or debt? How much and from whom? If not now, when? Alternatively, should they modify the business model to reduce the company’s need for so much external funding?
Key to d.light’s solar home systems was pay-as-you-go (PayGo) plans, a lease-to-own model consisting of a down payment followed by small (<$1.50) daily payments, normally for a period of 12 to 18 months. In 2019, sales from PayGo products were expected to contribute close to 70% of the company’s annual revenue. However, PayGo was an asset-heavy model and in the past 18 months, d.light had raised over $90 million, nearly 75% of which was in debt facilities. As the company continued to grow rapidly, its co-founders were deliberating whether they ought to go out and raise capital again. If so, should it be equity or debt? How much and from whom? If not now, when? Alternatively, should they modify the business model to reduce the company’s need for so much external funding?
Keywords: Alternative Energy; Business Model; Capital; Emerging Markets; Expansion; Financial Strategy; Renewable Energy; Strategy; Social Entrepreneurship; Energy Industry; Africa; Kenya; India;
Citation:
Chu, Michael, Krishna G. Palepu, and Dilyana Karadzhova Botha. "d.light." Harvard Business School Case 321-069, September 2020. (Revised November 2020.) View Details