Why This $5 Million May Matter Most for Off Grid Electric
When it received a $5 million award from the U.S. Agency for International Development last month, Off Grid Electric became the first company to receive all three rounds of funding from the Development Innovation Ventures program.
Following the DIV application trajectory of this social enterprise working to bring affordable solar power to 1 million Tanzanian homes by 2017 reveals both the benefits and limits of this new model to turn bright ideas into breakthrough solutions for global development.
While $5 million may not seem like a lot for a company that raised an additional $65 million in 2015, Xavier Helgesen, the founder and CEO of Off Grid Electric, said the DIV grants were catalytic in attracting investment.
“Investors seek a combination of risk and returns, and the best way for USAID to drive private investment in frontier emerging markets is by reducing the risk side,” Helgesen told Devex. “USAID is in a unique position to take lots of risk because it isn’t seeking a return.”
It probably also helps that the company is in an industry that’s particularly hot at the moment and represents a significant opportunity for growth.
Donors can do a lot to up the numbers of investors taking chances in frontier emerging markets, where the capital is expensive and the time horizon is short, Helgesen said. Of course development agencies face budgetary pressures and bureaucratic constraints that many impact investors do not. But given USAID’s track record, DIV grants are a signal to other investors that they can save some of their due diligence work, said David Ferguson, director of the Center for Development Innovation at the U.S. Global Development Lab, which is home to DIV.