South Africa Power Cuts See Record Seed Round for Solar Startup

(Bloomberg) -- Interminable power cuts have driven a record seed-funding round for South African startup Hohm Energy, which connects homeowners with installers and financiers to ease the process of installing rooftop solar panels. 

The Johannesburg-based company raised $8 million from venture capitalists including E3 Capital and 4DX Ventures LP, eclipsing the previous seed funding record in the country of $5.3 million set by Inseco Ltd., which converts maggots into insect oil and meal, it said in a statement on Wednesday. 

Hohm is capitalizing on a boom in home solar installations in South Africa where rolling power cuts can exceed more than 10 hours a day as the state utility, Eskom Holdings SOC Ltd., struggles to supply the grid. While the installations were initially the preserve of affluent homeowners, requiring a large immediate payment, banks and solar-installation companies are now providing finance or deals that allow people to pay for the panels, inverters and batteries over several years. 

“We’ve seen a massive shift from solar being this high-end, hyper luxury, out-of-reach purchase for only the richest people in South Africa to now becoming accessible to the middle class,” said Tim Ohlsen, who co-founded the company in 2021, in an interview. “Everyone is now thinking about solar as a viable option.”

Hohm provides homeowners with financing options from banks including Investec Ltd., Nedbank Group Ltd., FirstRand Ltd. and Capitec Bank Holdings Ltd.

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Ohlsen, whose company grew revenue more than fivefold over the past year, said the average cost of a solar installation has fallen by about half from the equivalent of about $12,000 in 2022 as less affluent South Africans put panels on smaller homes. 

Eskom data shows that that amount of rooftop solar panels installed increased to 4,412 megawatts in South Africa as of June last year compared with 983 megawatts in March in the prior year. 

Other investors in the seed round include Breega Capital Sarl, E4E Africa, To.org, Tekton Ventures, Sunu Capital, Musha Ventures LP and Climate Capital Ventures Fund LP. Its founders retain more than 50% stake in the firm, which raised $800,000 in a pre-seed-funding round.

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