Get The Memo: Issue 8
A-R-E-D (Africa Renewable Energy Distributor)
This blog features some of the best and brightest underrepresented founders around the world. I would be remiss if I didn’t show some love to our brothers & sisters in the motherland! Enter A-R-E-D. ARED is a deep tech micro-infrastructure company helping bridge the digital gap in developing countries. Their vision is to build the largest multi edge network solution that will facilitate access to digital application and digital services for 800 Million people that are unconnected across Africa.
Founder Henri Nyakarundi is originally from Rwanda but grew up in Burundi where his parents were refugees. After he graduated from high school, his mom decided to send him & his sister to Atlanta pursue their studies at Georgia State University. At that time there were a lot of wars in his home region, and it was key for them to continue their education somewhere safe. Henri graduated with a Computer Science degree and realized quickly that having a job is not for him. To be blunt, he says the first 8 or 9 years of his entrepreneurship journey were a total failure, but he kept going, read several books, and learned a lot. He started his first successful business in 2006 in logistics at a trucking company.
After the financial crisis he realized it was time to come back home to East Africa. He started noticing how the East African region was changing in a stable way politically & economically and moving very fast. To be part of the continent’s growth narrative, Henri started developing what it is now ARED.
Market, Model & Inflection Point
There is a huge trend happening in Africa. Digitization of all ecosystems from payment, to government services, media content, or even the health sector. There is a tremendous need today to find new ways for storage processing and minimizing the cost of access so the African people can democratize digital access on the continent. Most of the data storage in Africa is performed on foreign cloud services, but recently, laws are passing to have those data store on the continent. And this is what makes this opportunity so massive.
ARED’s solar kiosk was the first product they developed. The use case was very simple, provide phone charging services, paired with power edge technologies using renewable energy capabilities in areas with no or poor energy infrastructure. It has 100 watts solar panel, 60AH lithium battery, and can charge up to 20 phones at time. Finally, it provides e-mobility for the kiosk operator to move it from one location to another, if needed, including for security purposes.
ARED’s KPIs are twofold:
- How many units can they implement on the ground?
- How many digital applications can run on those units to better monetize the network?
The more mini servers they can implement on the ground, the more processing power and storage capability they will have. Congruently, the more applications they can build on that distributing network, the better they can monetize the network, and that’s really what the key is.
They make a small percentage of the revenue on the sale of the kiosk hardware, but the recurring revenue is what ARED is focusing on. ARED builds the platform that allows their partner to build applications on top of ARED’s platform. So, the more applications customers build, the better ARED can monetize the ecosystem and recover the investment, getting a piece of that revenue. So far most of ARED has not spent any money on customer acquisition, but that is about to change so they can start scaling much faster.
The inflection point is absolutely on the adoption part from organizations, NGOS, and companies as the need for better data and a better understanding of the value that edge technology can bring. Then edge will be adopted as standardized across the ecosystem and it will allow ARED to really grow the company exponentially, but the COVID pandemic did help speed up the process.
Today we are living in a digital age, yet 800 million people in Africa are not participating in this digital revolution. Studies have shown how countries can improve their GDP by increased digital access to their citizens. More and more large corporations such as Microsoft & Google are looking at ways to help on solving this digital gap, and ARED believes now is not only the time for such technology but the time to become a leader in DeepTech space.
ARED’s direct competitor is BRCK from Kenya. They use their edge technology mostly for access to media content but also internet access. BlueTown also uses edge technology and Wi-Fi through what they call long-range Wi-Fi with a focus on only very remote rural areas.
The key differentiators with those companies are mostly based in the business model ARED uses. ARED focuses more on partnerships, by incorporating their technology into the existing value chain of companies & NGOs to scale much faster and minimize the OPEX that will allow them to get to profitability much faster. Using a differentiated technology and white labeling their solution to integrate it into existing ecosystems, ARED helps organizations like NGOs bring solutions to remote areas. ARED also looks to telecoms, banks, and other clients to optimize their existing networks. This helps clients focus on implementing and developing the whole ecosystem by themselves by owning the hardware monetizing it.
Africa is a highly fragmented market. People want the lowest purchasing power in the world with a very fragmented political tax and economic system. If you do not have an agile business model that strongly focuses on partnerships, it is going to be almost impossible to build a profitable successful business. In the DeepTech, solar & e-commerce industry, the traditional way of having huge teams and trying to control the whole value chain is just not sustainable in Africa.
ARED also white labels the technology that allows them to provide a more customized solution to their clients, that no one is offering right now.
How would you deploy capital if you hit your next milestone?
ARED has been bootstrapped since the beginning and they’ve built what they call a modular business model, instead of trying to build the whole development team right away. Internally they’ve been able to partner with companies that handle all their development from the prototypes, to manufacturing, to software development. The key is to find a way to partner with organizations to minimize our OPEX, especially monthly recurring expenses. The biggest hole is building out the team so they can scale much faster and improve on their execution timeline.
ARED is preparing to enter the Nigerian market, which will be by far the biggest market for them. ARED is currently raising $1M for expansion into the Nigerian market.
- 70% of that funding will go into implementing a pilot project and partnership with a telecom company
- 15% will be used to optimize their existing embedded software system & incorporating some smart functionalities to better manage the network and provide a more robust edge solution.
- The remainder of the funds will go towards strengthening the team to bring better support to the clients they have on the technical, business, and training side.
Nigeria is not only the largest market in Africa but has the largest telecom operators on the continent. Entering the Nigerian market will better position ARED for a possible acquisition of the company.
What is the legacy you, as a Founder, want to leave?
My legacy is really to inspire the next generation that we, as Africans, can solve our own problems by developing our own solutions. This idea of bringing solutions from outside to solve our problems hasn’t worked and it’s time for the continent to wake up and inspire the youth, but also support the youth in bringing local solutions to local problems. I truly hope that my journey, my experience, and my story can inspire some of those young men and women to do the same and follow their entrepreneurial dream. Yes, the ecosystem is challenging, yes building a tech company is not easy but Africa is the last continent with massive opportunities within arm’s reach.