Reward-Based Crowdfunding

Overview

Results-based crowdfunding is mostly used by companies who are in their pre-seed to seed stage. The idea is to crowdfund using online platforms where interested funders can make a financial contribution. In return, the funders might either get a small reward or a gift (mentioning the names on the websites, Tshirts, solar lights). The funders are usually motivated by altruism. E.g, off-grid companies can organize crowdfunding for buying the technologies. Off-grid solar companies that have done crowdfunding include: Okra Solar, Pollinate energy and solaris off-grid .

Popular crowdfunding platform include: indiegogo and kickstarter.

Benefits

• Allows for pre-seed and seed funding for companies
• Faster than applying for other grants.
• Opportunity to engage and build network of supporters which can later be tapped for building product awareness and getting new talents .

Challenges

• Mostly suitable for early-stage companies or a specific project/outcomes.
• Must leverage existing network and have innovate solutions. Entrepreneurs without existing network and an innovative idea that appeal to the funders might be at disadvantage.
• Cost of reward needs to be considered when they are offered to the funders.
• Difficulty to find the right platform - international companies might not be familiar with the local platforms and the international platform may have limited payment options (e.g only credit card) which might not be feasible for all the contributors .

Case studies

Gravitylight - Kenya

Gravitylight

GravityLight is a low cost light (15 lumen LED) and is powered by kinectic energy i.e you hang the light with a bag and then fill the bag with heavy objects, as the pulley does down it creates light. In 2013, they raised USD 400,000 in 40 daysvia reward based crowdfunding and the reward ranged from a "thank you"  on their website to gifting the light (depending on the contribution). In 2015, the company started another crowdfunding on Indiegogo. The campaign funding was matched with funding from Ben & Jerry. They raised USD 400,000 to lauch commercial pilot in Kenya. In 2018, they raised again USD 115,000 on Indiegogo. .

Okra Solar - Cambodia

Okra Solar

Okra Solar is an early-stage Australian start-up piloting a “plug-and-play smart controller” that facilitates power sharing by neighbors. It allows SHS installers to create modular minigrids by enabling a household with an SHS to share its energy production with a neighbor that does not have one. The household with the SHS effectively becomes a “prosumer,” consuming and producing a product. Okra Solar provides the back-end to ensure that there is a record of energy production and consumption, which can then facilitate payments between neighbors. When Okra Solar launched its reward-based crowdfunding campaign, in December 2016, it had just completed a small-scale pilot to prove the technology. Its demo in Cambodia showed that excess power from a single solar panel and battery could be used to power other houses when there was excess power. The company raised $45,000 in seed capital through the Australian crowdfunding platform Pozible, which it used to build a prototype. The campaign received more than $10,000 match funding from the United Kingdom’s Department for International Development (DFID). It subsequently won a $210,000 grant from the Swedish International Development Cooperation Agency (SIDA) and secured pre-seed financing from the Energy Access Ventures (EAV) Fund, which is backed by Schneider Electric, the CDC Group, and DFID, among other investors .

Further Information

• Financing and funding portal on energypedia
• Role of Crowdfunding in Raising Finance for Energy Access Businesses and Projects