Dorrit Lowsen from the Mentor Capital Network interviewed Mitra Ardron, the CEO of Lumeter Networks on August 9, 2016.
Mechanisms for getting paid have been a significant hurdle for energy entrepreneurs tackling energy access in marginalized communities. Lumeter Networks addresses that problem by providing pay-as-you-go metering technology which, when integrated into utility systems, enables providers of those systems to get paid reliably in ways that are manageable for their customers. Lumeter Networks has a two-pronged business model: it sells hardware to system manufacturers and software to on-the-ground energy providers. Its manufacturer customers, who are not necessarily located in emerging markets, integrate the hardware components of the Lumeter Networks solution into home solar, microgrid, and, potentially, other kinds of utility systems which they then sell to on-the-ground solution providers in the developing world. Purchasers of these hardware systems subscribe to Lumeter Networks’ software solution to collect, process, and report on payments.
- Raising money is very difficult. Impact investors still struggle to recognize the role B2B has to play in the impact space.
- Due diligence activities in the impact investing space are extremely time consuming for entrepreneurs, often with little to show for the time spent.
- Measuring Impact costs more than it’s worth. Measurement isn’t free and even if you’re out talking to beneficiaries anyway, asking a lot of extra measurement questions can cloud the responses to questions you really need to ask.
- Working B2B means dealing with local businesses in emerging markets that may have very different ideas about how business gets done. It’s important to avoid compromising your own standards while recognizing that you may not change attitudes towards issues such as women in the workplace or “borrowing” of content from others.
What problem is Lumeter Networks solving?
The smallest problem is how do we enable solar entrepreneurs to reach marginalized communities and solve their issue of getting paid?
What impact is Lumeter Networks having?
Our impact is bringing electricity to underserved communities. We know what that is because we know how many systems are out in the field. We don’t know the demographics of the people in the field. We don’t pay a lot of attention to measuring it, because we think we’d rather be increasing our impact than measuring it. No impact measurer that we’ve ever talked to has done their own impact measurement before in terms of how much time and energy they’ve taken away from creating impact in order to measure it and how much that measurement has improved the outcome and whether that’s a net positive or a net negative.
What advice would you give to the impact investing industry?
There a couple of things I would advise the impact investing industry to do. One is look at solutions that actually have an opportunity to scale, which means you’re looking at B2B. I mean, there are other ways to scale, but it’s the classic question, “don’t tell me how many people you have impacted, tell me how many people you will impact if you’re successful and if it’s not going to be a million people, why are you wasting my time?” The second thing is, if you can’t do the due diligence on a $40,000 loan in an afternoon, don’t waste the time of the entrepreneur.
You’ve engaged with Mentor Capital Network as a mentor and as an entrepreneurs and you sat on the board. What is the value you see in MCN?
I think it’s one of those few organizations where the time you spend participating is more than repaid whatever the outcome. MCN is the only institution that I always recommend to anyone I’m advising to apply to, and that’s why I agreed to be on the Board, because even if you “lose,” which most people do, you get a really useful amount of feedback.
What is the problem that Lumeter is solving and has that changed at all since you first conceptualized the company?
The smallest problem is how do we enable solar entrepreneurs to reach marginalized communities and solve their issue of getting paid? The core problem has stayed the same, but how we solve it has changed and we’ve also expanded the problem to start looking at how other social entrepreneurs can get paid in areas like water or agricultural equipment or things like that, but still 90% of what we do is energy.
You said, “how you solve it” has changed. Can you talk a little bit about that?
We started off working with mini-grids and, basically, there’s very little activity in mini-grids so most of what we do, about 90% of our sales, are small solar home systems and completely distributed.
What challenges has the business faced and how have you addressed them?
Our biggest challenge has been raising enough finance in a social venture space which still thinks that everybody is B2C.
Can you point to any people, organizations, or things that have helped?
It’s tough. It’s tough to come up with things that actually helped. We’ve spent a lot of time dealing with entities that take up a lot of time but don’t actually deliver much.
Other companies have told me that they found it easier to raise capital outside of the impact investing niche because impact investors are too restrictive. Is that something you have found as well?
Yes. The biggest mistake we made with our last round was going to the impact investing firms. You waste a lot of your time and you’re not guaranteed to do the deals. They waste a phenomenal amount of time given the size of the deals. We did some calculation about a couple of the funds and the probably take more out of the sector in time spent by the entrepreneurs than they put in in investment. All of the due diligence time was volunteer, so they weren’t costing that, but the due diligence time on the entrepreneur’s side, of course, is time that they’re not running their business. You spend more than half your time raising money.
You did, eventually, successfully raise a first round?
From an angel.
What do you see as some of the challenges for the industry in the near-term and looking ahead a little bit further out?
I think there is an unwillingness to be realistic about scale. The industry still has its roots in boutique philanthropy. Put some money in and get a picture of a kid with a lamp or a kid drinking clean water. [There is] very little critical thinking about how we solve problems at scale.
Are there any areas where you see improvement or do you see this as a struggle that has quite a way still to go?
I don’t see a lot of improvement.
What do you, as a company, do to try to overcome that perception or way of thinking about this space?
Within our sector, everybody is commercial. Within the energy access space, there’s very little overlap between the energy access space and the rest of the impact space because the impact investors just haven’t stepped up to the challenge. As each sector starts to find its feet, it starts to find its feet outside of the impact space even though what it’s doing is purely impact.
Do you see interest outside of the impact space in the fact that the company has impact?
I think that, in our space, there are various funds that are set up to do investment and are interested in impact, but most of them are not really around the impact stuff. It’s happening kind of independently of [the financial investment piece]. And I think in many ways the impact space is moving more toward philanthropy and sending some of the funding toward growing chocolate and all that kind of stuff. There’s also a lot of domestic stuff, mostly philanthropy.
What kinds of partnerships have you built, if any and how have they been helpful or challenging?
Our main partnerships are with manufacturers of equipment that we partner with to integrate our solutions into, and then with local ventures who are essentially our customers but who we work with to solve problems and then, to a certain extent, with some companies like for the mobile payments. Phone companies and bureaucracy in general are partnerships which are very hard to make work. The partnerships with companies on the ground and with manufacturers mostly work really well. Not all of them are high quality and that becomes an issue, but that’s the same with doing partnerships anywhere. Both the quality of the company and the quality of the relationship you have to build. We’ve got some really good ones now, but not everybody we started with was as good. Often they haven’t been filtered through the hard commercial process so you end up talking with quite a number of blanks before you find the people that are really solid.
How does your technology actually get into products and in the hands of consumers?
We partner with equipment manufacturers and sell them hardware. And we partner with people on the ground and sell them software. Sometimes the sale to the customer in the field comes from us and then we will introduce them to hardware manufacturers or sometimes it comes from an existing hardware manufacturer and they will introduce them [the customer on the ground] to us.
You mentioned that your customers often haven’t had a lot of business experience. Do you find that in addition to selling them the technology, you also have to provide a certain amount of business advice to help them succeed?
Not really. We have to provide them with a bunch of business experience in terms of running pay-as-you-go, but not in general. There’s not the margin in there to do that.
So you’re doing your best to screen for customers that are likely to succeed?
Or to give them the opportunity to succeed or fail themselves.… There’s a relatively low cost to us from giving them a chance to do it. One of the challenges we have to think about when we’re working B2B is that the social venture space is good at working either with expats who parachute in or with developing country entrepreneurs who are typically expats themselves who are going back so they turn up at things like SoCap or MCN. They function well in a Western environment.
It’s not nearly as good at working with local entrepreneurs who don’t have that kind of background. It’s very easy for us to turn around and start applying certain Western-ish criteria to people who don’t start off with the same set of assumptions that we do. Going B2B means working with local entrepreneurs. They’re mostly all doing it for a social reason, but they don’t necessarily come from the same set of backgrounds and assumptions that we do, especially if we assume just an American perspective on it.
Can you articulate any examples of what that difference in perspectives looks like?
Just the kinds of questions that people are asking entrepreneurs in developing countries. Often they haven’t a clue what you’re asking them and they’re actually just cutting and pasting stuff from something else they found. We have found materials being presented to us that were clearly just cut-and-pasted from someone else’s brochure because plagiarism is not something that’s an issue in many countries. We’ve seen stuff cut-and-pasted from other people’s websites. They don’t even notice that it’s a problem because in their cultures plagiarism is not as big of a deal as it is here. And all the other attitudes that we expect of people here, for example, the way people deal with people of other ethnicities, gender, whatever. People of different cultures are going through that process at different paces. It’s like if you were dealing with someone from ten years ago, they wouldn’t necessarily have the same attitude towards women as we’d expect from people now. I hear things from people in Africa who are really progressive for their own place. If we heard those same things from someone here today we would not work with them, but if we’d heard them from someone ten years ago we’d have considered it normal.
How does that affect how you do business or how you run your business?
We run business as who we are, but we have to be a bit more accepting that other people aren’t necessarily running from the same set of assumptions. We don’t have to change who we are. We can always be part of that process, helping people through their own process, but we can’t come from a set of assumptions that other people feel the same way.
Do you feel that some of your customers are, at least, interested in moving through that process?
I think that when you start dealing with people as individuals and get to know them then you can have those kinds of conversations, but when you’re just starting to deal with them and you’re a supplier to them, you can’t come in with a set of assumptions on how they should work as opposed to how we should work. I’m not going to change who I put in front of somebody just because of their biases, but I’m not going to expect them to change those biases. It’s just that if they’re going to work with us they’re going to have to understand that our head of business development is a woman, and if they try to go around her to get to me because she’s a woman, I’m not going to accept that. I’m not necessarily going to change their attitudes, it’s just that they’re dealing with us and we don’t have that attitude.
Has Lumeter developed as you first anticipated when you participated in the Mentor Capital Network program?
To a certain extent and not to other extents. We’ve had to do several pivots as the space itself has changed and as our solutions have changed.
What do you hope for Lumeter in the future and what are you doing now to ensure you achieve those goals?
Our goal now is to be a pay-as-you-go solution provider across a variety of sectors, to solve one bit of the problem really well and to collaborate with people solving other bits of the problem. I’m a big believer in ecosystems and that means being a really, really good partner. One of the differentiating factors between us and some of our competitors is that we partner really well with people. We see that this sector will grow when we have a thriving ecosystem with all the different bits working well together.
What impact is Lumeter having and how do you know?
Our impact is bringing electricity to underserved communities. We know what that is because we know how many systems are out in the field. We don’t know the demographics of the people in the field. Some of our customers do, some don’t. We don’t pay a lot of attention to measuring it, because we think we’d rather be increasing our impact than measuring it. We feel there’s a lot of time and energy wasted in the measurement space. As I said to someone who asked me about measuring our impact, “show me an impact measurer who’s actually measuring their own impact.” No impact measurer that we’ve ever talked to has done their own impact measurement before in terms of how much time and energy they’ve taken away from creating impact in order to measure it and how much that measurement has improved the outcome and whether that’s a net positive or a net negative. And more importantly, at what level is it a net positive and at what level of detail does it becomes a net negative. There’s an assumption here that it [impact measurement] is free and it’s not. If one of the customers is out in the field and they’re collecting data they need to decide whether or not to make a credit sale, that may or may not have some impact data. But if we ask them to ask a bunch more questions, there’s a reasonable chance that those questions just get filled in randomly and detract from the questions they really need to get correct answers to.
How has your relationship with Mentor Capital Network and your participation in the program helped you?
The feedback we got to our initial business plan was very strong, strong negative on some things and that changed the initial direction. I was on the [MCN] Board for a while. I was the entrepreneur member of the Board, sometime after that [the initial program participation]. I’ve been involved as a mentor, then I submitted as an entrepreneur, then at some point later I was on the Board for a year so I’ve had a long-term relationship from before Lumeter, and still have.
How has your perspective on MCN changed as you’ve been involved in these different roles?
My perspective has been pretty much the same all the way through, which is why I think it’s one of those few organizations where the time you spend participating is more than repaid whatever the outcome. With some other organizations, you can spend a lot of time and a lot of money to participate and there’s a very high chance you won’t get any money out of it so it’s a complete negative experience unless you’re one of those lucky few who get funded. You add enough of those up and you’ve got a significant drain on an enterprise. MCN is the only institution that I always recommend to anyone I’m advising to apply to, and that’s why I agreed to be on the Board, because even if you “lose,” which most people do, you get a really useful amount of feedback.
What inspired you to start Lumeter?
I was mentoring innovators for three years looking for people with technology solutions to development problems. By technology, I mean hardware, not just IT, because I thought it was a really underserved segment and I have a background of doing that in the West. I kept seeing the same issues come up around the strategy for getting paid. There were solutions that could be offered but weren’t being offered because they couldn’t get the payment piece to work and I knew how to solve it because I’d seen other people who had come up with the solution, but were not making it available because it was part of their vertically integrated competitive advantage. There were a couple of companies that were doing pay-as-you-go, but they didn’t sell it because they weren’t selling technology and I knew how to do it. So you’ve got a problem, you see a solution, that’s a good reason to start a company.
So your background isn’t necessarily specifically in energy, but more broadly in use of technology to solve development problems. Is that correct?
My background is I started an NGO trying to bring the internet to Africa in the late 80s, early 90s and I also ran a fairly large solar company in Australia.
What challenges did you face personally as you worked to build the company?
Basically a year before the company was officially founded I was putting most of my time into building the prototypes. Technology for development is very hard to fund so you’ve got to build a prototype before you can get the money, so you have to basically build the prototype on your own dime. It’s been hard on a personal level. We ran out of money at one point and, of course, that meant I was the one not getting paid. That’s the classic personal impact on founders. And also the toll from a stress perspective. I pull ninety-hour weeks every week and there’s a limit to how much you can do that.
Who or what has helped you work through those challenges?
Mostly friends from prior work, people I’d worked with before, other entrepreneurs. As an entrepreneur, you can’t really talk about it with your staff or with your customers or with your investors, and you have to be careful whom you talk about it with in the sector because the sector leaks like a sieve.
What has surprised you the most about running this business and what have you learned?
I didn’t really understand how bad the sector was at looking for large scale solutions. I was relatively naïve in thinking that if we showed people solutions that could scale, they’d actually get funded. Raising money’s never easy, but it’s a big surprise how hard it is to raise money in this impact space compared to the commercial space.
What advice would you have for someone thinking about starting a new impact business?
You mean, apart from don’t? I would say that the thing to do is ask other entrepreneurs about specific things they’re thinking of spending time on. Never think that something that looks like a gift horse is worth the amount of time you’re going to spend trying to get it. There’re probably a lot of things you should not bother wasting your time on that have fancy PR and look really good.
What was the top one or two or three of those?
A number of organizations say they’re going to raise money for you. It really depends on what you’re trying to do…. It’s very specific to what you’re doing. There are a lot of organizations that are going to waste your time, especially if you’ve got a scalable solution and don’t have photos of the beneficiaries. That’s the kind of general advice I would give entrepreneurs is dead ends not to go down and to ask other entrepreneurs about those dead ends.
The thing is, most people won’t put it in writing. I did something where we were required to do a prospect and it’s supposed to take half a day or a few hours and it took like two days of two or three people’s time and with almost no result. When I tried to get the other people who’ve done that to go public about it and nobody would because nobody wants to appear to be the sour grapes. The only way you’re going to find this out is if you go talk to entrepreneurs in person. All these organizations, even if they’re incompetent, are run by people who are trying to do the right thing. They’re trying to make positive changes so you don’t feel badly about people as people, but depending on what you’re trying to do and what they’re trying to do, you may be completely wasting your time talking to them.
What advice would you give to the impact investing industry?
There a couple of things I would advise the impact investing industry to do. One is look at solutions that actually have an opportunity to scale, which means you’re looking at B2B. I mean, there are other ways to scale, but it’s the classic question, “don’t tell me how many people you have impacted, tell me how many people you will impact if you’re successful and if it’s not going to be a million people, why are you wasting my time?” Don’t ask people how many people they have impacted, ask them how many they will impact if they’re successful. The second thing is, if you can’t do the due diligence on a $40,000 loan in an afternoon, don’t waste the time of the entrepreneur. When I was in the commercial sector, those small loans were usually done over a handshake and a lunch. I’ve done about 15 angel investments, and I’ve never spent more than a lunch and a couple of hours on them, because you can’t. If you spend more than that time, you’re going to lose, but we’re not thinking that way and as a result, we’re spending inordinate amounts of time of the entrepreneurs.
Learn more about Lumeter Networks here.