Social startup hits barriers of capital and stability in Yemen
An exciting all-women startup in Yemen has great ideas to solve an energy crisis but needs more than a good business plan to be commercially successful.
Creative Generation, begun as part of a social enterprise competition, sells its solar-powered appliances in a country where most people live without access to the electric grid. They've successfully marketed their products to government offices and luxury hotels but lack the cash to make their wares affordable to their real target: the average Yemeni. In the developing world, it seems even the best startups can't find investors willing to back them.
One product is an umbrella equipped with batteries, lightbulb and USB port. A success at luxury hotels, the $150 device is far beyond most Yemenis' budgets.
However, Yemen is in dire need of alternative sources of energy. Political instability has made the country’s oil-based electricity supply increasingly unreliable, leading to power cuts that can last weeks. Decentralized energy sources such as solar panels could soften the resulting damage to the economy, according to a recent International Renewable Energy Agency report. These sources remain untapped.
Startups like Creative Generation could meet this need. The question is, who will give them the necessary support to become profitable? Investment banker Alan Hirzel, writing for the Harvard Business Review blog, suggests social enterprises need to focus more on profitability:
It is time to acknowledge that social enterprises earn their right to be in business the same way private enterprises do: by serving customer needs better than their competition.
Unfortunately, social enterprises don't always have access to the same venture capital markets that other businesses do. Hoping to fill this gap in the United Kingdom, London-based firm Social Business Trust at which Hirzel is a trustee, provides financial backing and helps social enterprises to identify and eliminate obstacles to growth. SBT has seen enormous success: over two years, the firms in its portfolio have increased their earnings by a collective average of 77 percent. But all those projects are confined to the British Isles.
Producing similar success stories in the developing world yields a more complicated picture. IRIN reported last month on the case of Abdulmajeed Al-Wahbani, who has run a highly successful small business selling solar panels for over a decade, and like Creative Generation, he hopes to take his business nationwide. The country’s Ministry of Electricity and Energy estimates that renewable energy could increase by up to 50 times current production with the right support, and the cabinet passed a series of measures to encourage large-scale development of renewable energy sources in 2010. Unfortunately, the political upheaval of the Arab Spring has forced the government to focus on avoiding economic and political collapse, removing a key player in the success of the solar market.
There is also the added challenge of cultural expectations. As Wafi Al-Rimi, the CEO of Creative Generation, explains, "In Yemeni society, we have customs and traditions for a girl—at a set time, that's it, she stays at home and doesn't go out much."
While Al-Rimi and her cohorts have good ideas, motivation and the support of their families, their next step is uncertain. Having already done the improbable, they face the new challenge of marketing their company’s business model to the world.
Read about Creative Generation’s story here.