Raising debt and equity through crowdfunding: A guide for energy access companies

Crowdfunding has become a popular choice for energy access companies seeking capital from investors. Since it first emerged as a viable option in the 2010s, energy access-related crowdfunding platforms have facilitated more than $350 million in financing, accounting for roughly 9% of total off-grid investment volumes in 2023. Over 90% of this capital has been raised via debt platforms, mostly in Europe, while only a handful of companies have successfully secured equity funding via crowdfunding.

Most debt crowdfunding platforms operate similarly to traditional investors, much like impact investment funds. However, debt platforms, such as Charm Impact, Kiva and bettervest, plug a key market gap by providing small-ticket loans. Equity crowdfunding, on the other hand, remains a niche proposition, suitable for very few energy access companies.

Since 2015, Energy 4 Impact’s Crowd Power program has been supporting the growth of energy access-related crowdfunding, helping companies raise capital through these platforms. This guide is intended for companies considering whether crowdfunding is the right choice for them. With a dozen platforms available, it can be challenging to navigate the options. This resource aims to help companies identify the most suitable platforms for their specific business models, products, and revenue levels.

Who is crowdfunding for?

Crowdfunding allows individuals or companies to raise debt, equity or grant capital from groups of investors typically via an online platform. There are two broad categories of crowdfunding: investment-based crowdfunding, which includes debt and equity crowdfunding, and non-investment crowdfunding, which covers donation and reward-based models. In the energy access sector, investment-based crowdfunding is the main form of financing, as non-investment crowdfunding is difficult to raise at scale. Among investment-based energy access-related crowdfunding, debt dominates, accounting for over 90% of volumes on average, while equity crowdfunding represents less than 10%.

Debt crowdfunding is generally used by post-revenue energy access companies to raise working capital, finance receivables, and fund capital expenditures. Loan sizes range from $50k to over $4M, showing the versatility of crowdfunding. Most of the borrowers however raise between $100k and $600k annually. There are currently nine debt platforms relevant to energy access companies, most of which are based in Europe or the USA, though borrowers can be African- or international-owned companies.

Equity crowdfunding is much more challenging to secure. Crowdcube and Seedrs are the main platforms used by energy access companies, but they require investees to be domiciled in Europe. There are limited options for African-owned energy access companies seeking to raise equity this way. Equity crowdfunding also demands that companies play an extremely active role raising the anchor investment, fundraising from the crowd and preparing marketing materials. The cost and effort involved often deter eligible companies from pursuing equity crowdfunding, unless they are highly confident of success. This often leads to equity crowdfunding being viewed as a one-off strategy rather than a continuous approach.

Which debt platform is right for me?

The nine debt platforms currently lending to energy access companies and projects can be grouped into three main categories:

• Small-ticket loans ($50k to $300k): Kiva (USA) and Charm Impact (UK) fall into this category. These platforms cater to a range of business models and technologies e.g. pay-as-you-go (PAYGo) solar, clean cooking, e-mobility, productive use equipment (PUE), mini-grids.  
• Larger loans ($300k to $1M): Platforms such as bettervest (Germany), Energise Africa (UK), Klimja (Germany), Lendahand (Netherlands), Goparity (Portugal) and the upcoming Sow Good Investments (USA), expected to launch Q1 2025, lend to companies that can service larger loans. They support a wide range of energy access business models and technologies, including PAYGo solar, clean cooking, e-mobility, PUE, commercial & industrial (C&I), and mini-grids. bettervest can lower the ticket size to $100k for specific biogas & clean cooking projects in East Africa.
• C&I projects ($500k+): ecoligo (Germany) and Trine (Sweden) provide financing for larger borrowers in Asia, Latin America, and sub-Saharan Africa. Trine’s portfolio is currently mostly focused on C&I projects, but is open to other sectors, such as e-mobility, while ecoligo is solely focused on C&I.

Charm Impact and Kiva are particularly important for addressing the ‘missing middle’, offering smaller ticket size loans that are hard to come by due to their high transaction cost relative to loan size. Charm Impact targets African- and women-owned businesses, providing loans between $50k and $300k, typically in GBP, EUR or USD, although the platform has experimented with local currency lending and quasi-hedging instruments. Kiva offers low-interest USD-denominated loans starting at $50k, however, there has been limited new energy access borrower activity on the platform over the past year. Both platforms focus on inventory financing and support a range of technologies from solar lanterns to PUE.

bettervest, Energise Africa, Klimja, Lendahand, Goparity and Sow Good Investments lend to companies capable of managing larger loans, typically ranging from $300k to $1M. Klimja, bettervest and Lendahand provide EUR-denominated loans. Energise Africa offers GBP-denominated loans, while the soon-to-be-launched platform, Sow Good Investments—expected in Q1 2025 and run by impact investor SIMA—will offer USD-denominated financing. Initially though, loans will only be available to existing SIMA borrowers. These platforms typically finance inventory and PAYGo but can also finance capital expenditure, e.g. mini grid development.

Trine and ecoligo focus on C&I borrowers across Asia, Latin America and sub-Saharan Africa. Trine originally provided loans to PAYGo solar companies but pivoted to C&I in the past two years due to poor loan performance amongst some PAYGo solar company borrowers.

What are debt platform requirements?

Although it might seem obvious, borrowers need to demonstrate they can reliably service the loan. Debt platforms operate much like other debt investors, such as impact funds and review company financials as part of the due diligence process. Typically, companies are required to provide two years of audited financials before disbursement. Platforms also scrutinise balance sheets for indications of overindebtedness, and assess the company’s unit economics, as profits are typically used to service debt. Importantly, there must be a clear path to profitability. It is also crucial to keep in mind that the process from initial screening to loan disbursement takes at least six months and can extend beyond a year, if the borrower fails to provide relevant information promptly.

There are four key phases of the investment process: screening, due diligence, approvals and disbursement.

During the initial screening phase, platforms request up-to-date management accounts, audited financials and company registration documents. Potential borrowers can be rejected at this stage due to issues like a lack of loan servicing income, overindebtedness or poor quality financials. Companies should ensure they have a quality auditor and maintain current management accounts as outdated management accounts (e.g. providing financials up to June in October) are a common reason for rejection.

Passing the initial screening is a good indicator of success. Investors won’t usually engage in due diligence unless they are optimistic about the prospect of lending to the company given that due diligence is an expensive process for investors. Due diligence is an in-depth process lasting several months and typically conducted by an investment analyst, covering all aspects of the company’s operations. It may also involve an in-person visit by the investor. Once due diligence is complete, the investment analyst presents the investment case to the investment committee. If approved, the loan is usually disbursed within a few weeks, provided all conditions—the provision of audited financials—are met.

What about equity crowdfunding?

Equity crowdfunding accounts for around 5% of all energy access-related crowdfunding volumes and is suitable for a very narrow investee profile. Companies using platforms such as Crowdcube and Seedrs must be domiciled in Europe and need to have developed innovative hardware or software with intellectual property (IP) to be eligible. Equity crowdfunding is not currently suitable for distributors or project finance. Energy access companies that have successfully raised equity via crowdfunding include M-Power, Africa Greentec and Inclusive Energy.

Crowdfunding offers energy access companies a promising way to raise capital, but it’s important to carefully assess which platforms and financing models best align with a company's business model and objectives. With the persistent lack of funding for small ticket transactions, below $500k, crowdfunding will continue to play a pivotal role in bridging the gap between early-stage grants and larger institutional financing.

Authored by Davinia Cogan, Senior Advisor at Energy 4 Impact.  

Davinia Cogan helps energy access companies to raise capital from investors. She also researches the role of financial innovation and crowdfunding in the energy access sector. She is the lead author of the World Bank publication, Funding the Sun: New Paradigms for Financing Off-Grid Solar Companies. Davinia holds an MBA from the University of Oxford and an MA in International Studies from the University of Sydney. She was previously a Research Affiliate of the Cambridge Centre for Alternative Finance at Cambridge Judge Business School.