Rivy: financing solar in Nigeria
Rivy is financing solar panels for homes and businesses in Nigeria.
Biography
Dami Olawoye is the CEO of Rivy, a Nigerian startup extending loans to homeowners and businesses purchasing clean energy equipment, as well as to vendors selling and installing said equipment.
The company (previously named Payhippo) went through Y-Combinator in 2021 and just raised a $4M round, including both debt and equity.
Dami joined the company in 2022 as head of corporate finance, and became CEO about a year later. Dami sports two decades of experience in various finance roles, in both the UK and Nigeria.
Rivy started as an SME lending startup. Why the pivot to solar financing?
We extended over 35,000 loans to SMEs in Nigeria. A commonality we noticed across the SMEs we worked with was their struggle with electricity. Nigeria’s electrical grid doesn’t produce enough energy compared to the country’s demand. To palliate this, most businesses use petrol generators, which are both expensive and polluting.
Our foray into solar came from that postulate. Solar panels were a better alternative to these generators and we wanted to help SMEs purchase them. For most SMEs, the upfront cost of the panels was too steep, so we provided them with asset finance (ie: a loan) to buy them.
What started as a product expansion led to a pivot. We started extending this asset finance to homeowners wishing to install solar equipment. We deepened our relationships with solar installation companies, whom we noticed also needed loans to buy up inventory.
We gradually realized how that specific niche - solar panel financing - was underserved. We decided to fully focus on it.
How is Rivy’s product segmented today?
There are two main ones.
The first is asset financing, where we extend a loan to a business or a homeowner wishing to purchase solar panels. The customer doesn’t actually see the money - we directly pay the solar installation company that quoted them.
Loan tenures are 12 months maximum. The longer the loan duration, the longer Rivy is exposed to potential panel deficiencies. This means dealing with customers who might want to pause repayments, causing complexity on our side. Since we don’t actually source and install the panels, we didn’t want to take that risk, hence the loan’s short tenure. That being said, we are using our data to rank equipment brands and installers. This ranking is being used toward extending tenures to 18 months, in some instances.
Our second product is inventory financing, for the solar installation companies (installers) we work with. We provide funding for them to buy their clean tech inventory in bulk.
Today, inventory finance makes up the largest chunk of our revenue, due to larger average ticket size (around $20K loan for inventory finance versus $2K for asset financing).
Why don’t you internalize the purchasing and installation of solar panels? Wouldn’t it reduce complexity?
Not really. We are finance people, not hardware people. Hardware is a different trade, it involves risks and operational heaviness we don’t want to get involved with.
Working with installers also has a symbiotic effect: some of their clients might need loans to purchase the panels, so they send them over to us.
RO insights: why a solar startup would internalize hardware
Starting from a similar postulate, Mexican solar startup Niko eventually altered its model and started internalizing solar panel installation.
Here’s how Raffaele Sertorio, Niko’s co-founder, explains the rationale:
“Finding high-quality solar installers to install the panels we sell [is tough]. This industry is still new in Mexico, so the corresponding talent pool is still thin.
We’ve decided not to rely on the limited number of companies offering such services (they prioritize their bigger clients over us) and have started building our own internal payroll of Niko technicians. We can still outsource “blue-collar” functions (ie: picking up the solar panels, physically installing them) but we need a Niko engineer to oversee the entire process.”
And why this responds to one of the company’s challenges:
“I’m frustrated by our speed of installation. We aim for it to be 3 weeks from the moment the client signs, but in effect we hover around 6 to 8 weeks, because of the installation talent bottleneck I mentioned earlier.”
Excerpt from Niko: scaling solar panels in Mexico, originally published in The Realistic Optimist
How does Rivy finance these loans?