Project Overall Goal
Increase energy access for smallholder farmers by installing small-scale biogas digesters on farms.
Sistema.bio is an anaerobic biogas company that sells small-scale, affordable biogas digestors to smallholder farms. Biogas digestors convert animal waste into biogas, a clean and renewable energy source, and biofertilizer for crop production. While there had been previous attempts to develop biodigester systems suitable for smallholder farmers, few were successful due to challenges such as low-quality systems, inappropriate technology, insufficient training and client awareness, and high costs. Sistema.bio’s business model was designed with these barriers in mind, and the solutions it developed helped it scale to a $17 million in total revenue business and find success in Latin America, East Africa, and India.
To address the cost of installation, which ranges from $600-900, and lack of access to credit, key barriers for its target customer, Sistema.bio developed an in-house financing program. It provides 0% interest loans for up to 12 months that is used by over 85% of its customers. The full lifecycle of the loan, from origination to recovery or repayment, is managed by Sistema.bio through its field offices. To address another key barrier, lack of customer capacity and awareness, the company uses a high-touch B2C sales approach consisting of 5 steps. The approach begins with a demonstration event led by an existing farmer, on-site visit and financing for interested clients, installation by local technicians, monitoring on scheduled visits 30, 90, and 180 days post-installation, and on-going technical assistance. This approach is effective because it relies on peer-to-peer validation by using existing farmers to explain and validate the product to others, custom financing based on clients’ individual needs, and comprehensive customer capacity building and technical assistance.
In 2022 Sistema.bio closed a Series B round for $15 million. Sistema.bio used various types of blended capital – grants, concessional finance, and commercial debt and equity – to support its expansion. Founded in 2010 in Mexico on founder equity and angel funding, Sistema.bio spent its early years developing its biodigester technology and financing solution, and its presence on the Mexican market. In 2014 it reached breakeven at $1 million in sales as well as international recognition with an Ashoka Fellowship Award. In 2015, as it was scaling operations to other Latin American countries, it received a loan from ENGIE RDE. However, it was looking to expand into other regions but lacked the first-loss finance to take the risk. A 2017 partnership with Factor[E] Ventures and the Shell Foundation was its turning point in international expansion. In the partnership, Factor[E] Ventures provided $395,000 in seed funding to develop the technology, while the Shell Foundation provided a three-tranche grant to fund expansion to Kenya and diversify the product base. This was an appropriate risk-sharing arrangement, as Factor[E] was familiar with this technology space and could manage technology risk and Shell Foundation in a position to manage risks associated with new market entry. As a result, within one year, Sistema.bio owned over 70% of the Kenyan market. Based on its growing track record and Shell Foundation’s global brand recognition, the company closed a Series A round in 2019 and, most recently in 2022, a Series B from seven investors.