South African solar marketplace Hohm Energy plans to accelerate adoption of rooftop solar by improving access to finance for homeowners and installers, says co-founder and CEO Tim Ohlsen.
This comes after the firm’s successful final close of seed funding totalling $8 million (R153.8 million).
The funding, said to be the largest seed round for a tech start-up in SA, was led by E3 Capital and 4DX Ventures. It attracted participation from new investors, including Breega, E4E Africa, TO.org, Tekton Ventures, Sunu Capital, Musha Ventures and Climate Capital Ventures.
In an interview with ITWeb, Ohlsen revealed that in 2022, the company raised a pre-seed round of $800 000. The following year, it raised a seed round of $3.7 million, culminating with a $4.25 million investment at the end of 2023.
He said the funding will enable Hohm to scale its model. Additionally, it will bolster its tech, product innovation and solar installer skills development, to make rooftop solar more accessible, trusted and affordable for everyone.
“What we realised, particularly last year, was that access to funding is more crucial to really getting more solar installations to happen and there’s still so much friction for homeowners and installers to get access to funding.
“What we’ve doubled down on a lot more and what we’re going to be scaling this year is really enabling access to finance, making it more digital, more automated and more affordable, so that more home-owners and installers get access to finance, to help those installations to happen.”
Ohlsen notes that last year’s load-shedding doubled compared to 2022 and resulted in a lot of demand for solar.
“Last year, the average solar system went from R250 000 in 2022 down to R170 000. We are forecasting that this year, the average system value in our marketplace will probably touch on about R120 000.
“This data point shows that [solar installation] is moving away from being this hyper-luxury, unattainable purchase for only the wealthiest households, to being accessible and affordable to the middle class, which is why financing is now the key.
“The previous evolution of the market had a lot of people using cash or available equity in a mortgage, but most people don’t have available equity in a mortgage to finance a solar system. You’ve got to make solar finance readily available to everyone so that any household in the country can actually afford it.”
South Africa’s solar market exploded last year, as rolling power cuts continued to significantly limit economic growth and burden households. The country endured a record 332 days of load-shedding in 2023.
Describing itself as a climate fintech company, Hohm Energy was established by Ohlsen and Emir Gluhbegovic in July 2021.
It aims to help homeowners and businesses to go solar with accredited solar installers, product suppliers and embedded solar finance by providing an alternative and sustainable energy source to the 7.7 million addressable households.
To date, Hohm Energy has generated over 17 000 custom solar rooftop designs using its solar proposal engine, originating over $90 million (R1.7 billion) in finance applications to its retail banking partners. It counts local retail banks − such as Investec, Nedbank, MFC, FNB, Wesbank and Capitec − as its partners.
The name of the company is a play on the word ohm, reveals Ohlsen, explaining that ohm is also friction in the electrical engineering sense.
“Hohm as a brand is trying to unlock friction for everybody when it comes to the broader solar and clean tech category. We see this as a big emerging opportunity in the marketplace, where it’s about solar panels and batteries today, but longer-term it’s going to be about electric vehicles, insulation, energy-efficient lighting, smart home devices and green appliances.”
Explaining the motivation that led to the company, Ohlsen says: “We decided to build an automation tool, a software-as-a-service tool for our own business to become more efficient and generate customised solar proposals faster, look at different finance options, source product and automate some of the workflows that are required when you commence the installation of a solar product.
“The defining principle behind Hohm is to enable the sector to become more efficient and help more solar installations to happen, reducing friction for everyone.
“We are a software company; we use a marketplace model to connect everybody to transact and we look after everybody that transacts, so we’re not biased to any one side – we are here to enable the sector to grow.”
Profit margins
According to Hohm Energy, the business is poised to attain sustainable profitability in the current year.
Vladimir Dugin, senior partner at E3 Capital, comments: “We are thrilled to announce our inaugural investment in Hohm Energy. With its tech-driven approach, Hohm is at the forefront of SA’s green energy revolution.
“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.”
Peter Orth, managing partner at 4DX, adds: “We strongly believe in Hohm’s mission to drive rooftop solar adoption across SA and beyond, and have seen similar businesses thrive in a number of markets globally.
“We believe Hohm is best positioned to bring this solution to SA, where it is sorely needed given the state of the electric grid, and are thrilled to be backing Tim and his team at this stage of their journey.”
Ohlsen indicates the business is looking to scale its platform, workflows and business model to service South African households. The focus will be on the local market for now, with plans to scale across multiple different territories in future, he notes.
“There is an incredible, exciting opportunity globally for renewables and rooftop solar…solar is exploding in terms of growth and it’s part of this energy transition that everyone talks about, and part of how we as a society solve climate change from an energy resource perspective.
“In SA, it’s a unique opportunity because load-shedding is driving the adoption and making solar the painkiller to what Eskom is causing in the country.
“Right now, we’re very much focused on building the South African market and that will probably be the case for the next year-and-a-half or so. Over time, based on the way we’ve set up the business and platform, it is definitely going to multiple markets in Africa and other emerging countries.”
Following the investment, the company will launch the Hohm School programme, to train and empower local solar installers, through the Hohm Energy Standard for Solar Systems Installations across the country.
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