Introduction

OffGridBox is a startup based out of Italy, with a US headquarters in Boston, that is taking on the challenge of bringing clean water and energy to the rural regions of developing countries around the world. According to the United Nations, 1.8 billion people are lacking access to clean water, and 1.2 billion are lacking access to basic electricity. OffGridBox’s solution is — you guessed it — a box, that can be deployed off-grid.

The founder and CEO of the company is Emiliano Cecchini, who has a PhD in Chemistry, and has launched three companies in the renewable energy sector. He demonstrated his personal charisma and the ability to market his brand at Techstars Boston Demo Day 2017, but is that enough to make his business work?

The Product

The box looks a bit like something you might find in a hobbyist’s garage, a 6x6x6 foot storage container with a solar panel array mounted on top. The OffGridBox collects rainwater in a large integrated polyethylene tank. The solar array and built-in inverter produce power from the sun, some of which is used to power an internal water sterilization and filtration system. The rest of the power can be stored in the equipped internal battery, or used externally for other electricity needs. Additional solar panels, batteries and/or a water desalination system can be added to expand the capabilities of the system.

https://www.offgridbox.com/product-1

The company currently has 28 boxes deployed, across 8 countries, although more than half of these are in Italy and the United States.

The main innovation and factor for the company’s success will not be in its technology. Similar to how SolarCity used innovation in financing to become the largest residential solar installer in the U.S., OffGridBox will have to take advantage of new trends to implement a business model that will work and scale in rural locations. As PwC explains in its publication “Electricity Beyond the Grid”:

“For the millions of people who don’t currently have access to electricity, the old assumption that they will have to wait for grid extensions is being turned on its head by new technological possibilities. Mobile payment infrastructure, customer-driven affordable payment systems and new entrant business models are all playing a part in a new bottom-up energy access that can complement the traditional top-down planning of national grid extensions.”

Similar to how Africa skipped the landline phase of telecommunications and went directly to widespread use of mobile phones, the development of electricity and water infrastructure will also develop in a decentralized way. Innovative platforms for making payments via mobile are commonly used in many African countries. On top of this, rural families are often accustomed to paying a lot of money for (sometimes dirty) water and for access to expensive diesel-powered electricity or kerosene-fueled lighting. There is a solid business case based on cost for replacing diesel, and the payment platform is already there.

Competition

There are other companies in this space, such as the Tanzania-based Off Grid Electric (backed by investors such as SolarCity and Microsoft co-founder Paul Allen), and even large solar players such as SunEdison are considering a direct involvement in this space. In my opinion there is room for everyone at this point, it is not a zero-sum or winner takes all situation. Bringing clean water and energy to new regions will take a tremendous amount of resources, getting people out into the field, partnering with local governments and businesses, and catering the solution to the particulars of each locale. There will be competition for grants and other sources of funding, but there is plenty of room for OffGridBox, at least for now.

From a brief look at their product, I do not see anything that competition cannot replicate. The way OffGridBox can build a strong position will be to lock in contracts with governments and sources of funding, such as the World Bank, and execute its projects well. Developing a strong track record will put the company in a favorable position over new entrants as it aims to expand.

Key Risks

Finding the right business model and financing mechanisms will be key. While in developed markets such as the United States, investors are accustomed to pumping capital into companies that might lose $708 million per quarter, with the hope of some day cashing in on huge margins after the product has scaled to millions of users. Investors seem willing to subsidize a $3 UberPOOL ride now, because one day the company will become profitable and money from all these customers will come pouring in (unless you’re Twitter). In undeveloped and unproven markets such as Rwanda (a focus for OffGridBox), such capital expenditures may never bear any economic fruit.

Nevertheless, OffGridBox did manage to lock in $705,000 in angel funding which closed in August 2017, including $620,000 from the Boston-based accelerator Techstars. In addition, the fact that the company is operating in international development means it could qualify for funding from institutions such as USAID, the World Bank, the UN, Bill and Melinda Gates Foundation, and others. Off Grid Electric, for example, received $5 million from USAID’s Development Innovation Ventures program. In July 2017, the World Bank and government of Rwanda announced a deal for the country’s government to receive $49.8 million to increase access to electricity through off-grid renewable energy.

OffGridBox has a 100%-owned Italian subsidiary Exergy which I will assume is primarily responsible for developing the technology. The OffGridBox website lists seven Exergy employees. According to The Local the average salary for entry-level workers in Italy is about $32,000 per year. While these employees are experienced engineers, managers, etc., they are working in a field that is not known for being well compensated (international development). Therefore I think a safe assumption would be each employee costs the company about $50,000 / year total. Let’s round up to $30,000 / month in costs for the seven-person Italian team. The US team comprises four, including two founders. We don’t know if the founders are taking a salary, but let’s assume an average salary of $70,000 for these four. Rounding up a bit, we get $25,000 / month.

With $705,000 of funding and $75,000 monthly overhead, the company would appear to have just secured about 9–10 months of runway. We can assume the company is almost out of cash from the $100,000 seed contribution from Right Side Capital Management in February 2017. This estimate of runway is generous, considering the material cost that goes into each OffGridBox. The company states that the initial cost of each box is $20,000, let’s hope that includes their overhead and labor. Accounting for material costs of producing some new units, I would say they have six months to focus on promoting their product and the success of their pilot projects, with the end goal of landing an agreement for international development funds to support the manufacturing scale-up.

Revenue Model

As mentioned above, the company’s cost for each box is about $20,000. The company expects to receive $10,000 in annual recurring revenue, so the break-even point on each box would be two years. Not bad.

https://angel.co/offgridbox

The World Health Organization (WHO) states that 50–100 liters per person per day are required for basic needs. The claim that one OffGridBox can provide water for 232 families (1150) is enormously exaggerated. Six gallons per family of five translates to about 4.5 liters of clean water per person. This is one-tenth of the absolute minimum dictated by the WHO. The system also depends on catching rainwater and is limited by tank capacity. It can be a great supplement to a family’s water needs, but I do not see it being deployed as a comprehensive solution to water access.

https://angel.co/offgridbox

Recommendation

The company’s participation in and backing from Techstars seems to have been a positive experience. The CEO’s presentation at the Demo Day emphasized the importance their business model. At this point, I would not be ready to invest from a purely economic standpoint. I want to first see a strong government partnership and/or backing from international development funds. However, this company could be a great opportunity to demonstrate the potential of equity crowdfunding from non-accredited investors via a platform like Indiegogo or SeedInvest. A non-accredited investor might be more willing to invest $200 knowing that at worst, it went to a good cause. A VC may not feel the same way about $1 million. OffGridBox could also utilize microfinancing solutions such as TALA to empower the local entrepreneurs to invest in an OffGridBox to sell water and electricity to their community. If OffGridBox can think outside the box, they may very well be able to hack clean energy and water access for the billion people who need it!.

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