Given the crisis facing South Africa’s electric utility, it’s quickly become glaringly clear that innovations like Sun Exchange are critical for sustainable economic growth and development. South Africa, along with much of the developing world, are in dire need of solutions that accelerate the transition to a modern, reliable, decentralized, clean energy system.
This is what made the conversations so exciting at the Sun Exchange Investor Showcase we held in Stellenbosch, South Africa last week. We were delighted to host a packed room of individuals who are passionate about energy transformation, who were eager to learn more about Sun Exchange.
If you weren’t able to join us last week, no need to worry; we will host another Sun Exchange Investor Showcase in the near future. Details coming soon!
We also recorded our CEO, Abraham Cambridges’ presentation:
One thing is for certain: We had a bright and inquisitive crowd in the house who had excellent, thoughtful questions. So, we thought you might enjoy a recap of some of the top questions (with answers) we received.
Top Questions About the Company
Q: Why should I invest in Sun Exchange?
A: Africa is a major untapped market for decentralised renewable energy generation. In 2016, the continent reached 168 GW total installed electricity capacity, of which only 33 GW was installed renewable capacity. The market for commercial and industrial (C&I) solar (i.e., solar to power businesses) in Africa, in particular, is still small and represents a major opportunity for early investors. Sub-saharan Africa (excluding SA) currently has only 74 MW C&I solar installed, with 494 MW commissioned. There are only 110 known solar projects that are larger than 30 kW. The main obstacle is that businesses (and even schools and clinics) that need small to medium sized systems find it hard to find financing and cannot pay for systems upfront.
Sun Exchange as a pioneer in this market, has demonstrated that there is a strong business case for solving this problem by linking solar projects with millions of people around the world, who are looking to invest in renewables and receive returns in excess of 10%. Our innovative platform currently has 6,500 customers/members from across 90+ countries. There is even an opportunity to use the platform to fund other infrastructure projects, including other renewables.
Q: What are your plans for expansion?
A: Currently, our top priority is to build our marketing capabilities. Half of our current raise will go towards building a world-renowned marketing team. That will enable us to tackle another key priority, which is growing our user and customer base by 30% by February 2020, and doubling that by 2021. We will also invest in converting our existing users who are yet to purchase through the platform, reducing customer churn and increasing average spend per purchase. With these areas effectively addressed, we expect to generate monthly potential gross sales revenue of $638k per month, compared to $153k per month today.
We also need to hire additional solar engineers. Through our new partnership with Dim Sum Group, we’ve gained access to a vast network of solar installation companies, who will handle much of our engineering needs, but it’s also important that we build out our core team’s capabilities in that realm so that we can effectively track and report the performance of our members solar cells and supervise our solar installer network.
Geographically, we plan to expand into the East Africa and West Africa markets next.
Q: Describe Sun Exchange’s current fundraising efforts.
A: We’re currently in a seed investment round looking to raise $3 Million. That will give us enough runway to get to the break-even point. We expect to be cash-flow positive within 18 months, and this round will see us beyond that point. Alphabit, a multi-million dollar hedge fund, recently came in as the lead investor with an equity investment of $500,000.
Q: What are the key regulatory risks that Sun Exchange faces and how are you mitigating those risks?
A: Surplus energy generated by our solar projects is one consideration. Because net-metering regulations are still being developed for embedded generation in South Africa, our projects can’t export surplus energy to the grid yet. To mitigate the risk to our customers, any time we do financial modelling for a solar project we deduct surplus energy from the projected income. We’re confident that it’s only a matter of time before Eskom follows the global trend of enabling net-metering. We will then be able to sell surplus power back to the grid, making our solar projects even more profitable for our customers.
The usage of cryptocurrency in South Africa is not currently regulated. It was recently announced that specific regulations are under development and Sun Exchange will adhere to these, likely having to register as a crypto-currency custodian of the income customers earn through our platform. We already feel we meet the standards that would likely be set, such as taking adequate precautions necessary to ensure customers’ earnings remain secure. All our customer (member) income earned in local currencies is kept in trusts. Customer income earned in cryptocurrency is kept in “cold storage wallets” which offer optimal protection against potential security breaches. Sun Exchange already vets all our customers against a rigorous and automated KYC and AML processes.
Q: What have been the biggest challenges Sun Exchange has faced to date?
A: Getting the right team together has taken massive effort. We know ultimately the success of a company comes down to the people who are behind it, so we’ve strived to find the best of the best for our team. The hard work has paid off, because now we can confidently say that we have an incredibly solid, dedicated team of brilliant industry leaders. That puts us in a great position to scale.
Another major challenge has been the amount of time it takes to build truly great, stable software. As our COO Lisa Lyhne has said, “From space, planet Earth just looks like a blue and green ball. Once you go in, you realize there is a lot more going on.” The same goes for our software. While the vision for our platform was there from 2014, it was incredibly complex to build and took years of hard work from some of the brightest technical minds in the industry.
In 2012 there was a massive global downswing in VC and private equity investment for cleantech startups after a few bad deals scared off investors. For a few years, this made raising capital tough for all of us in the sector. However, with the world becoming increasingly aware of the perils of outdated, crumbling energy systems and climate change, there is now renewed interest in the space. Bloomberg New Energy Finance recently reported that “Global venture capital and private equity investment [for cleantech] jumped 127% to $9.2 billion, the highest since 2010.”
Digital currencies like Bitcoin are a part of our solution, as it allows us to do seamless international transactions within minutes. Customers always have a choice about transacting in regular currency or Bitcoin. With the cryptocurrency space being so new, operating in Bitcoin hasn’t been without hurdles. Understandably, some of our target audiences are unfamiliar and therefore skeptical of this new technology, so we find ourselves doing a lot of education. The fact is that Bitcoin was always meant to be a way to do seamless financial transactions, which is how we use it. This means that if our customers who receive returns in Bitcoin cash out immediately, there is no risk to them because of volatility. It will only be a matter of time before the cryptocurrency market normalizes and more and more people interact with cryptocurrency as a normal part of digital life.
Top Questions About our Solution
Q: When a user buys solar cells from Sun Exchange, are they locked in to owning those cells for the 20-year term of the lease?
A: Based on our platform’s existing capabilities, users do technically own the solar cells they purchase for the 20-year term. However, a very important part of our roadmap is developing a secondary marketplace that allows users to buy, sell and trade solar cells amongst each other. We expect to have that functionality up and running in 2020.
Q: How does Sun Exchange pay its solar cell owner customers, and what role does the SUNEX token play?
A: Sun Exchange customers who own solar cells through our platform receive monthly lease payments for the electricity that their solar cells generate. Customers receive those payments into their online Sun Exchange wallet and can opt to be paid in the local currency of the project or Bitcoin. At any time, customers can choose to cash out and transfer their earnings into their personal bank account/Bitcoin wallet, or they can use the balance in their Sun Exchange wallet to buy more solar cells as new solar projects become available on the platform.
Once the SUNEX rewards program has been implemented (our team is currently building it out), SUNEX tokens will essentially function as Sun Exchange rewards points. Sun Exchange customers will earn SUNEX as they use the platform and diversify their Sun Exchange solar assets across geographic regions and industries. The amount of SUNEX a customer owns will unlock various bonuses, early bird benefits and other perks.
If you have any lingering questions about Sun Exchange or would like to explore investment or partnership opportunities don’t hesitate to get in touch, we would love to hear from you!