Essay About Nuru Energy And Social Venture Capitalists

Nuru Energy: Financing a Social Enterprise
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Nuru Energy: Financing a social enterprise Analysis of the situation: Nuru Energy is at a clear crossroad due to its will of scaling-up while there is a need of financing. Throughout these recent years, they succeeded in obtaining grants and financing from the United National Environmental Programme, the World Bank or the Tulane University. However, as exposed, they “didn’t think they could rely on grant funding to scale up and reach profitability”.[1] They already lost a manager in Kenya due to this lack of financing. They were willing to scale-up in India, where they had already made some movements, and they wanted to better establish themselves in Kenya as well. However, as one of the main drivers to start operating in a country is the help of microfinance institutions, they always rely on finding these institutions. Depending on grants, which may sometimes come, but it also may not, leaves the company in the mercy of these caritative institutions. Then, there are no stable cash-flows and the company may lack financing. Thus, this makes it difficult to have an implementable long-term plan, as they cannot easily secure this financing money. Moreover, the CEO and co-founder, Sameer Hajee, was tired of these frenetic years he’s lived. Therefore, he introduces us four possible future scenarios in order to scale-up and progress with the business model: 1) Angel investors financing, 2) Social Venture Capitalists/Venture Philantropy 3) Carbon Financing (BAML) and finally 4) Selling Nuru Energy. Table with the pros and cons for these different financial tools: ForAgainstAngel investors1) Nuru Energy could raise financing quickly.2) Angel Investors could add value beyond capital.1) Insufficient investment with only one Angel investors.2) If there were many angel investors, there would be too many stakeholders with many different ideas, which could jeopardize the decision process and the social mission.Social Venture Capitalist/ Venture philanthropy1) Less demanding on time and had “patient” capital.1) New unexperienced type of investing and investors.2) Social venture capitalists were putting too much emphasis on impact first rather than being profitable. 3) They were too “patient”. There are not many exits from these kind of investors. 4) Traditional venture capitalist would put profitability ahead of impact: quick win, early exit. Carbon Financing (BAML)1) Through the non-guaranteed credits of BAML, Nuru Energy could get the needed investment. 2) It is a win-win situation both for Nuru Energy and BAML: BAML could have a brand enhancing project for being socially responsible.  1) The need to be approved by the United Nations CDM was a drawback which could imply an increase in the cost of the units. 2) If Nuru Energy was to be unable to meet the specifications, there would be no deal.3) BAML was a large investor with little credentials in CSR and could neglect the social mission. Selling Nuru Energy1) CEO and Co-founder, Sameer Hajee, was tired of the high pressure: the will of the founder is capital. If this will to make things better starts to get lost, it is bad for the whole start-up. 2) The company who wanted to buy it, had already proved credentials of being interested in alternative energy business. 3) Nuru Energy would receive the financing and Sameer Hajee would “alleviate some of the responsibility on his shoulders”[2].1) Sameer Hajee and the rest of Co-founders would lost autonomy and control of the strategic direction of the venture which could imply risk on affecting the social mission.