South African pay-as-you-go (PAYG) solar energy startup Yellow has raised $14 million in series B funding in a round led by Convergence Partners with participation from the Energy Entrepreneurs Growth Fund, managed by Triple Jump, in addition to follow-on investment from Platform Investment Partners.
It is rapidly emerging as one of the continent’s most promising start-ups, but the journey has been anything but linear. The off-grid solar market has been notoriously difficult to crack, with many pioneers in the sector building great products but being plagued by the challenges of last-mile distribution and consumer financing.
Yellow was founded in 2018 to deliver life-changing tech-focused energy financing products to low-income households in Africa. To date, it has provided power on a pay-as-you-go basis to 30,000 homes in Malawi and Uganda, where the company specializes in providing asset-backed finance to households in underserved areas that lack access to electricity, financial services, and connectivity.
Following the new funding, Yellow plans to deepen its reach in its current markets Malawi, Rwanda, Uganda, Zambia, and Madagascar, launch digital and financial products in the near term, and prepare for future debt funding rounds to ramp up its growth. The new round brings the total equity funding raised by Yellow to $45 million.
The newly injected capital is being used to leverage more debt finance to reach more customers with financed smartphones and solar systems. While the business will broaden its product offering to include other mobile financial services, growth will be fueled primarily by deepening our expertise in our existing product categories.
Yellow Founder and CEO, Mike Heyink
Commenting on the Yellow investment, Convergence Partner CEO, Brandon Doyle, said:
We are excited to be backing the Yellow team. We have been tracking the off-grid solar power asset finance space for many years but have failed to find a business model and team that we felt we could back until now.
Yellow’s offering also sits well with our promise to our investors of strong investment returns married with solid social development impact; in this case by tackling the triple challenge of financial inclusion, green energy distribution, and broadband penetration, and doing so profitably while servicing the unbanked communities of the lowest income countries of Africa.
Asset financiers like Yellow, Sunk King, and M-Kopa operate pay-go models that offer asset-based financing (pay-to-own) for solar kits and lanterns, products that are hugely popular in Sub-Saharan Africa, where millions of people are off-grid, as national power grids remain underdeveloped. It is estimated that sub-Saharan Africa accounts for 75% of the world’s population without access to electricity.
These companies, some of which offer financing for other assets, have also been quick to add new revenue streams and to tap debt financing to further tap and increase their clientele base.
