Rwandan Henri Nyakarundi (38) is the founder of African Renewable Energy Distributor (ARED), a company that led him to be named winner of the Seif Award for Social Entrepreneurship in 2014.
Formed in 2012, his solar energy start-up has developed the Mobile Solar Kiosk (MSK) in Rwanda, a one-stop shop for mobile users looking for low-cost and convenient phone charging, amongst other things. ARED also makes use of a franchise model for its kiosks, allowing people with little capital to start their own business whilst also providing stable and reliable energy solutions to rural and semi-urban areas.
Nyakarundi answered How we made it in Africa’s questions and shared his vision for his start-up.
Tell us about ARED’s business model.
ARED has developed a smart solar kiosk in Rwanda which is a one-stop shop, income-generating business solution for people at the base of the pyramid (BoP) level. We provide services such as charging small electronics, electronic vouchers (like mobile money and airtime), digital advertisements, and content distribution through a built-in WiFi technology. We also use a low-cost franchise business model.
ARED will be able to offer product availability and brand visibility to different partners. Our vision is to lay the groundwork for more comprehensive intelligence services through a cloud data management system.
What was the inspiration behind starting your company, and how did you finance it?
I had another business prior to starting ARED. I owned a trucking company for six years. It was a successful business, however, I have always been attracted by innovative technology. I wanted to come up with something unique, fulfilling, and that can have a big impact on the ground. So in 2009 I had an idea of a charging kiosk that can bring energy to rural and semi-urban area and create income for people.
I hired a designer and an engineer to develop the first prototype. Some 80% of funds went to research and development. I did not realise how expensive it is to develop the product. Now we are looking for outside investment to grow our business.
And if you were given investment of US$1m, where would it go?
Towards opening our in-house designing and engineering facility by purchasing a commercial 3D printer so we can lower our product development costs. But in the meantime, [it would go towards] finishing development of the hardware (which is the kiosk) by adding a GPS system, and some sensor technology. And also finishing the development of our software to allow us to communicate with the kiosk and monitor them more efficiently.
Some 70% of the money will go towards our expansion plans in Nigeria, Uganda, Kenya and Ethiopia which are the key markets we plan to focus on since [we expect] 70% of our revenue will come from these markets.
Recruiting the right team, producing kiosks and [investing in] office space and equipment will be focal points. Also, I’d create a small fund to help men and women who show entrepreneurial skills but cannot afford to buy into our franchise business. I believe that there is so much untapped talent, and all they need is a little boost.
So far, what has proven to be the most successful form of marketing?
We recruit our franchisees using radio campaigns, but the most successful form is referrals. Because our business is unique, the best way we can recruit is through existing franchisees who are on the ground and can share their experiences and results with potential clients.
Have there been any mistakes you have made with your business? What have you learnt from them?
One of the biggest mistakes was to underestimate the challenges of doing business at the base of the pyramid. I did not anticipate how low the revenues are when dealing with a micro business, so I had to quickly shift strategy and find new ways to generate cash flow.
The second big mistake that cost me a lot of money was not knowing how manufacturing companies work. I have learnt to always get several quotes from different manufacturers, and always ask for pricing of all the parts so you can estimate what the product will cost and minimise the risk of getting cheated. I was getting charged twice the price on some parts. And if you can, you should also visit their location to make sure you are dealing with a professional company.
The same applies with hiring an engineering or design company. Do not ever rush development of a prototype. Always ask for a conceptual design to study the feasibility of your technology first. Take your time. Any error can be very costly.
All these mistakes allowed me to better understand the process of developing a product, what to look for and the right questions to ask. I also learnt to be patient, because developing an idea into a prototype can take months, even years.
If you are not patient, it will be extremely hard to keep your head in the game and momentum going.
Your most exciting entrepreneurial moment?
My best moment of all time was when I received the first prototype, which was shipped to my house. Mind you, it took four years to build it, and I spent many hours on a computer looking at the design. But when I saw it live, it had a different feeling. It was unreal. I could hardly believe it had finally arrived and my business could actually start. Of course it was also just the beginning of a long journey.
Describe some of the risks ARED faces.
There are several risks. For example in Kigali the outdoor kiosk business types are not approved. They do not fit into the new city building project. We also run the risk of our technology being copied since we do not manufacture our own kiosks, even though we have applied for a patent.
Partnership with major companies is one of the cornerstones of our business, and any [change in this] can disrupt our growth. Also, as a small company we outsource a lot, and that has its benefits and risks as far as keeping proprietary data safe, finding a reliable company and quality control.
Finally, technology cycles are getting shorter, so staying informed is key to keeping up with new trends and staying relevant and competitive.