Creating a Greener Future & Sustainable Revenue, with Ecoligo's Markus Schwaninger
Markus Schwaninger is co-founder and CFO at ecoligo, a Berlin-based startup in the renewable energy sector, which provides fully financed solar-as-a-service solutions for businesses in emerging markets.
He believes that creating a positive impact and generating a healthy revenue are not mutually exclusive, as has proven this point with ecoligo. Their unique, crowd-investment business model has brought affordable solar energy to Kenya, Vietnam, Ghana, Costa Rica and Chile, and has delivered steady returns to investors.
Here, we chat with Mark about his vision for ecoligo, and the role of finance leaders can play in creating a more sustainable future…
How did ecoligo come to life?
I started my career in the carbon credit sector in Kenya, which gave me a great overview of all sorts of renewable energy projects. Later on, I was a project manager at the Renewable Energy Project Development Programme at GIZ (German Corporation for International Cooperation) for some years. This was a great experience but I realized that I would never be able to really create the impact I wanted because I was only in a facilitating role and not in the driver seat.
During that time, I tried different financing methods to develop impactful projects, from development finance institutions, PE, and local pension funds, but the problem was always the same: ticket sizing. That’s when I decided to leave the institution, and shortly after I met Martin Baart (my co-founder of ecoligo) at a solar conference in Kenya, and we talked about working on our own solution. In 2016 we finally founded ecoligo, which started with an accelerator program, followed by a Seed round then a Series A - a pretty classic startup path.(Unrecognized node type) embedded-asset-block
Markus Schwaninger and Martin Baart at the inauguration of a project in Kenya.
What exactly do you do at ecoligo?
Our mission is to lead and deliver solar-as-a-service solutions to emerging markets. We operate in Kenya, Vietnam, Ghana, Costa Rica and Chile; all of these regions were chosen because we knew there was a big market opportunity there - thinking about the sunny weather most of the year, and at the same time high electricity tariffs that businesses are facing in those markets.
We offer solar solutions to commercial and industrial clients to provide them monetary savings from cheaper solar power and lead the project from beginning to end. That way we make sure everything is done in the best way and ensure a great quality. Simply put, we generate revenue from selling energy. This is how it works:
We find projects that can be interesting on the impact and investor side.
We open the project on our platform and investors can participate wherever they want. In return they get a 5,5% p.a. fixed interest rate on their investment.
We own and operate the project and thereby ensure its sustainable operation also in the long run.
At ecoligo we’re committed to creating a positive impact on the long-term which can only be achieved if all sides benefit economically from a long-term operation - one of the main differences between working with grants and government funding - which is why the running time of our projects goes up to 20 years.
We track the IRR on each project to see whether we reached the goal or not, and of course, we get a return by selling power so we also focus on projects developed. So, one of our purposes is of course to fight against fossil fuels and polluting energy sources which are still highly used in our markets, but we also work to pair financial returns with positive impact.
What was different about funding ecoligo, vs a tech startup for instance?
Not that different, and with our recent focus on our own software development, we are more and more seen as a tech startup by investors. The main difference is obviously that not every investor is keen to invest in a startup doing business in the exotic markets where we operate.
Our business model - managing assets that generate recurring revenue of up to 20 years - tends to attract long-term oriented investors which isn't common at most VCs, at least in the early-stage rounds. When funding an impactful company, you also tend to focus on likely minded partners like our latest funder, Saxovent. Saxovent is specialized in the renewable energy sector, so their trust in our project is different than it would be with a classic VC. However, our recent growth rates demonstrate that our business model is highly scalable and more classic VCs are becoming interested as well.
Overall, the sector and markets we operate in are sometimes harder to predict, but you can have the biggest impact in those markets (both from a sustainability point of view and from a financial perspective as margins are higher than in developed markets) and those two elements are what our investors value.
How did your past experience help you manage your role as CFO?
I would say my background helped me mainly as a founder. My experience at GIZ and in the carbon credit sector helped me define the best business model for my company: I had already seen the limits of certain models and funding options out there. On the CFO side, one of the biggest takeaways from my time at GIZ is the project finance aspect. I was constantly finding solutions to make projects viable, handled financial modelling, both things that I still do a lot in my current position.
The aspects I didn’t have a lot of exposure to in previous jobs were the accounting and admin parts of the job. Thanks to my finance background though, it was quite easy to learn this on-the-job and I also have an amazing team to support me in managing our global activities from an accounting and controlling point of view. We also have a fundraising team who manages the crowd investing campaigns.
What are some of the biggest challenges in your industry, and have those changed over time?
The biggest challenge at the start was to get the first client. In the renewable energy market, it’s sometimes hard to convince people about the benefits, a lot of people don’t believe in the cost-efficient side of green energy, and tend to stress about the technical risks of installing such services. Truth is, there really is an economic advantage in renewable energies, and we’re not just a crowd investing platform: we manage the entire project, from development to its operation and the end-user only has to enjoy the benefits of cheaper and cleaner energy.
In our operating markets, it’s all about trust, so it was difficult to start building relationships without proof - probably similar to most businesses. At the start, our challenge was to find local key-partners that could lead us to more. “Seeing is believing” really had an effect and after the first projects, the following clients were much easier to convince.
Our challenge today is to grow our crowd investor audience as much and fast as our project portfolio. When we started we had a lot of crowd investors but not enough projects, and now it’s the other way round. As with every two-sided market, the two sides need to be kept in balance. At this stage we’re preparing to focus on more marketing activities and advertising to boost our crowd investor base.(Unrecognized node type) embedded-asset-block
View of the finalized solar panel project at the Nyaho Medical Centre in Accra, Ghana.
How do you think about the role of finance leaders in creating a positive impact?
It all starts with building sustainability in your DNA, and finance professionals can simply start by being aware of the positive and/or negative impact their actions are having.
Simple things such as seeing where you can be CO2 neutral for instance can help to reduce the negative impact, but we have to take this to a new level and take actions on where the business model itself can potentially contribute to do good, and those possibilities are endless.
There are so many challenges in nature and society that big firms can tackle in a profitable way. I particularly believe there’s a big responsibility on the investor side, if you have different assets in your portfolio it’s important to think about what can benefit the future instead of what you can exclude - at the moment, investors focus too much on exclusion lists rather than on going for real impact-driven investments at large scale.
co-founder and CFO at ecoligo
How do you see the future of impact finance?
I see a bright future. The topic has gained popularity through the years, and the recent crisis has only made awareness grow. Popularity itself isn’t enough for sure, but it’s a good thing to start tackling the topic on a bigger scale. I think it’s great to see big investors like Blackrock creating impact funds, it shows there’s not only a social interest but also a financial one.
Unfortunately, some of the biggest companies here in Germany are not leading by example. Thinking about the Siemens case to supply an Australian coal mine, decisions are still made with a short-term financial perspective which won’t succeed in the long-run.
What do you enjoy most about your job?
The diversity of people in our team. We have employees working in 6 different countries spread all over the globe with very different cultural backgrounds. We have also managed to keep a gender balance of 50:50.
In my particular role as CFO, I enjoy being not only exposed to the classic finance topics but also having the responsibility over the marketing department, as this is an elemental piece of our project fundraising via the crowd investors. As the topic of crowd investing is gaining great momentum and a lot of policies change here in Europe to facilitate online investments, it is a fabulous industry to combine with the renewable energy sector of which I’ve been part of for many years.
Any resources you’d recommend for those who’d like to learn more impact finance?
I am more into classic startup literature, and recently I’ve been hooked up with No Rule Rules by Reed Hastings (Netflix’s founder). My philosophy about impact finance is to practice it as much as possible rather than reading a lot about it - although it’s a great way to learn too! I don’t think there is a certain “art” you must learn to do good, but practicing on how you invest, how you create projects, makes the difference.
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