Capitalizing on Crowdfunding to Scale Up Solar Irrigation
This post is written by Cecily Layzell, consultant, International Water Management Institute (IWMI).
According to estimates, only 6% of Africa’s farmland is irrigated, compared to 35% in Asia. As a result, Africa’s agriculture is largely rainfed and has among the lowest productivity in the world.
Solar irrigation pumps have immense potential to address irrigation and productivity gaps, particularly in off-grid areas. Research suggests that 5.4 million farmers in sub-Saharan Africa alone could benefit from their use. Although a vibrant ecosystem of solar irrigation pump manufacturers and distributors has developed to meet demand, the growth of the sector is limited in part by a lack of funding. Loans from microfinance institutions are usually too small and banks are often unwilling to lend to ventures aimed at small farmers, who are seen as high risk.
Crowdfunding is emerging as an increasingly important means to access capital for entrepreneurs looking to scale up new technologies in developing markets. Toby Hammond, managing director of Futurepump, a company that makes solar irrigation pumps for small farmers, explains.
You cofounded Futurepump in 2013. What attracted you to solar water pumps and to Africa?
My first experience of Africa was from the seat of a bicycle. Back in 2002, I cycled from London to the [United Nations] Earth Summit in Johannesburg in support of the charity WaterAid. Along the way, I saw firsthand some of the problems small-scale farmers faced in accessing energy and water. In 2011, I stumbled across a video on YouTube of a prototype solar pump working in Ethiopia, which had been posted by the PRACTICA Foundation. I was transfixed by the simplicity of the pump and got in touch with the Dutch inventor, Gert Jan Bom. Within a short period, we’d agreed to collaborate to help develop and commercialize his invention.
You specifically target small farmers typically with less than a couple of hectares of land. What makes your pumps so suitable for these farmers, and what are the main hurdles you face in reaching this customer base?
There are something like half a billion small-scale farmers globally, who feed a large proportion of the planet. As a result of climate change, they rely on increasingly unpredictable rainfall to grow crops or spend money or effort on other forms of irrigation, such as petrol pumps or manual irrigation. Solar pumps are an obvious solution to this. The difficulty in serving these huge numbers of customers is their remote location, often far from a paved road, as well as their very limited spending power, which restricts their access even to affordable solar pumps.
There are concerns that higher numbers of cheaper and more efficient pumps will lead to depletion of water resources. Is this something that Futurepump has considered in its expansion strategy?
We founded our business because of the extremely strong (and positive) social and environmental impacts brought by solar irrigation. However, the potential for depletion of water resources is one area where we do need to pay special attention. There are aspects of our product design and system sizing that inherently encourage careful water use by farmers. Even so, we have for some years now had a close partnership with the IWMI to measure and monitor the impact of farmer irrigation on water resources. Most of the 8,000 pumps we’ve sold so far are equipped with remote monitoring technology, which tells us where they are located and also the volumes of water they are pumping. We analyze this in a bespoke dashboard and share that data openly with IWMI and other research organizations.
We also have an ongoing collaboration with IWMI to use the data we collect to augment mapping datasets to identify locations where water can be used sustainably. There are, in fact, huge areas in Africa and Asia where there is plenty of water available that can be used for farming in a sustainable way. But, of course, there are other locations where water tables are dropping and there has been too much unregulated extraction of water. Our vision is that by collaborating with knowledge partners like IWMI and sharing our data openly, we can enable policy makers to develop evidence-based local regulatory frameworks that strike the right balance between conserving water and empowering low-income farmers to feed their families and communities using solar irrigation.
How did you come up with the idea of crowdfunding to scale up the business, and what was your experience of this funding route?
We have been selling and scaling for four years now, and exceeded $1 million in annual sales in 2019, but we are still just scratching the surface of the addressable market. The global agricultural pump market size is projected to reach $6.1 billion by 2025, with smallholders in sub-Saharan Africa accounting for $3.5 billion of that.
Futurepump was lucky enough to secure grant funding for its initial startup years from USAID and other international donors. We have engaged with many of the impact-orientated investors around, but we found their process incredibly slow, the due diligence process excruciating and highly distracting from running the business. Crowdfunding felt like a much better fit with the ethos of Futurepump, which is driven by doing the right thing at all times. With our crowdfunding campaign, we set out to raise $415,000 in growth capital but ended up raising $1 million in a matter of weeks from over 1,200 investors who support our mission. Probably the thing we are most excited about is that the investors come from over 60 countries and include our local distributors, farmer customers and others.
How will you use the money raised, and have your ambitions changed now that you have significantly exceeded your funding target?
The money we have raised will support our growth into new markets and, in particular, be used to develop our end-user marketing, as raising awareness needs a lot of investment. Having raised more money than our original target simply means we have a slightly longer runway and we can move a little faster with our expansion plans. We will remain a pretty small, lean company; we are not going on a big hiring or spending spree, that’s for sure.