With South Africa’s energy crisis worsening, marked by increasingly severe power outages, implementing daily electricity rationing has become imperative to avoid the risk of a collapse of the national grid. According to the state electricity generator Eskom, the country suffers from a significant electricity deficit, which sometimes exceeds 6,000 megawatts.
This situation is similar in most African countries, increasing demand for solutions provided by cleantech startups across the continent. In the latest development, three-year-old Hohm Energy, which connects homeowners and businesses with accredited solar installers, product providers and integrated solar financing in South Africa, has raised $8 million in seed investment.
The funding, whose first tranche of $4.25 million arrived in the fourth quarter of 2022, is the largest seed round for a tech startup in South Africa, according to Hohm Energy. It was led by E3 Capital and 4DX Ventures, and attracted participation from Breega, E4E Africa, Musha Ventures, Climate Capital Ventures, TO.org, Tekton Ventures and Sunu Capital.
Hohm Energy says its solution was built as an alternative and sustainable energy source for more than 7 million homes connected to South Africa’s national grid. Founded in 2021 by Tim Ohlsen and Emir Gluhbegovic, Hohm Energy runs a marketplace and software model that connects different stakeholders in the $51 billion rooftop solar market value chain. Clean technology streamlines design, programming and procurement for installers while improving accessibility for buyers.
CEO Ohlsen, in an interview with TechCrunch, said the startup wants to empower homeowners to take advantage of clean, renewable energy despite the challenges of navigating a complex industry with technical nuances and product options.
“Purchasing a solar system can inevitably be a very expensive investment. The average value of our orders ranges between $8,000 [and] $12,000. We’ve also done extensive installations, so it’s not something people decide at random,” Ohlsen said. “It’s something they’re very interested in and it’s just a difficult place for them. “We do a lot of research so that when they hit the market, we connect them with a trusted solar installer, so they don’t have to worry about the quality of the installation.”
The CEO added that one of the startup’s strongest offerings is its “Home Ranger” feature. Each installation initiated through their marketplace is overseen by a Home Ranger who performs a comprehensive assessment to ensure technical and legal compliance.
In short, Hohm Energy offers solar installers the opportunity to build trust and manage all aspects of their solar projects, from design and management to financing and procurement. Meanwhile, customers benefit from a digital platform that assesses their property’s solar needs and provides access to credit financing. The platform also facilitates a fulfillment process, including after-sales services such as repair and maintenance.
“We accompany the customer throughout the journey and also work very closely with our trusted solar partners, providing them with mobile applications and SaaS tools and workflows to optimize the way they work with us and gain access to quality work that originates and finance through our market. commented Ohlsen. “Inevitably, we are reducing friction for the homeowner, solar installer and financing providers and unlocking new growth potential that makes this, in our view, the model for scaling the solar industry.”
Image credits: Hohm energy
Before launching Hohm Energy, Ohlsen ran a solar installations and digital services startup in South Africa. However, the company faced scalability challenges inherent to vertically integrated solar service provider models across the continent. Managing procurement, installation and construction turned out to be labor-intensive, as the company needed to invest in more resources, including installers, engineers, procurement managers and larger warehouses to import panels and inverters, Ohlsen said in the interview.
Ohlsen, recognizing these limitations, founded Hohm differently: a light asset platform focused on reducing friction through software that automates custom design and proposal processes and connects stakeholders through a marketplace that facilitates transactions. between installers, homeowners, finance providers and product providers, ultimately. streamlining processes and reducing costs for all parties involved.
Initially, Hohm Energy’s process involved homeowners entering the market, designing their initial solar system using the SaaS tool, and selecting components through its procurement system. They would then schedule a consultation with an energy advisor to ensure the proposed solution meets your needs. Hohm Energy would then generate a final engineering proposal and present it to its banking partners for financial approval.
However, redirecting owners to third-party portals with retail banks often resulted in friction and abandonment. That’s why cleantech partnered with some of South Africa’s leading retail financial institutions, including Investec, Nedbank, MFC, WesBank and Capitec, allowing their clients to access three structured financing options: home loan financing, solar loans or subscription. lease with option to purchase.
So far, Hohm Energy, whose model is similar to Norway’s Otovo, has produced more than 17,000 custom solar roof designs using its $190 million solar proposition engine. Additionally, it has provided more than $90 million in financial applications to its retail banking partners. Ohlsen reported during the call that the company has seen a 4-5x increase in GMV (gross merchandise value) and revenue since launching.
“The uniqueness of Hohm in the South African market is that we have the most comprehensive way for a homeowner to purchase a solar system because we work with the banks,” the CEO said. “What also makes Hohm unique in the landscape is that we are the only software-first business and market in the country. “We are looking to allow the sector to grow so that we are not perceived as the service provider.”
Ohlsen also notes that while Hohm Energy recognizes the scalability of its software and market model to other markets facing similar energy issues in Africa and other emerging markets, cleantech remains focused on deepening its presence in South Africa, particularly as the level Current energy disruption persists in the country. With the financing, Hohm Energy, which hopes to achieve sustainable profitability this year, will also look to double down on its climate fintech strategy, bolster its technology and launch a program to train local solar installers.
“We are delighted to announce our inaugural investment in Hohm Energy. With its technology-driven approach, Hohm is at the forefront of the green energy revolution in South Africa,” Vladimir Dugin, Senior Partner at E3 Capital, said of the investment. “The team is uniquely positioned to create a “one stop shop” for all green solutions for residential customers and address existing challenges around energy supply.”
