Sustainable development goal number seven is all about ensuring universal access to electricity. Yet, some 600 million Africans still lack access to power. How does one tech company plan on making it more profitable for power distributors to increase investments in Africa through a software solution that eliminates theft, reduces losses from faulty networks and increases payment collection rates. And how does that company see its role in the global fight against climate change?
A. Buckley: Hello again to the startup agenda, where we host Egyptian startups and tech companies with solutions for growth and development in Africa. I am delighted to be joined today by the co-founder of Pylon a Y Combinator company. The Chief Executive Officer of Pylon, Ahmed Ashour.
Hello, Ahmed.
A. Ashour: The pleasure is mine. Thank you very much for hosting me.
A. Buckley: Appreciate your time. Let's jump right into it. You seem to have an innovative solution to raise the efficiency of water and power distribution in emerging markets. Can you tell us a little more about it in a nutshell?
A. Ashour: Sure. It all started. with my background in the utilities and distribution sector. So , I've been, I've joined the, one of the leading meter manufacturers across emerging markets since 2009. And, I grew in the corporate ladder, till I was commercial director handling the sales across eight different geographies from the Philippines to Ghana, Zambia, Ethiopia, Czech Republic, Mexico and Brazil, and all along there was one main challenge facing different utilities is that there is a huge loss of resources and a huge loss of revenue.
A. Ashour: We're talking about almost up to 40% of the revenues of those utilities are lost due to inefficiencies. So those inefficiencies we can focus on three different points where the first one is uncollected revenue. people consume electricity and don't pay for it or water even when water it's worse. And we have the commercial losses which is, basically, theft. People, stealing electricity with numerous ways, by tampering with the meter, And the third one, which is technical losses: losses due to technical issues happening on the network. we in Egypt, we have suffered from the losses of energy and from the, the lack of clear flow of energy across the grid. And we have all seen it in 2012 and the years after that, of the big loadsheds that we've went through. a challenge which was disturbing our normal life.
So one thing led to another, given the background and given the challenges that we have seen and the urge to do something of value other than going and working a nine to five that to, to be able to do something helpful to our country and to other similar emerging markets.
So we started building, I've met my co-founder then, Omar Radi, and we started building a solution to solve those challenges.
A. Buckley: And you mentioned you've been working in the utility business for years before, setting up Pylon. And you were quoted saying that conventional metering software that is used by companies such as Oracle and Siemens, they don't sometimes meet the demands of utility distributors in emerging markets. Could you explain the difference between that conventional software and yours and why you believe Pylon's solution is more tailored to emerging markets?
A. Ashour: Sure. Actually, when we started working on our solution, after the first initial meeting between me and my co-founder, we've known each other since childhood, but funny enough we met because I wanted to do a website. and to me he was the technical guy who knows anything about this. we met then, and then I knew that he started a company developing tech solutions for, like an ERP solutions and that he had the very strong clients, and I knew how brilliant he was since childhood. So what started as a website developed as me telling him, do you know anything about meters that we need to data management and how we can have utility?
So we agreed on "let's go and let's research it". So after we started our research, we went on and we decided "okay, so let's build it up". So what are we going to build? we're going to copy the big five. The big five are Oracle, SAP and Schneider, Siemens, and the like.
So we went and we started copying exactly what they did. And we figured out that we built a solution which is, like the top five, but it doesn't serve the markets that we are targeting because those companies, they build solutions for developed economies for, uh, for Europe and for North America, where there is no such thing as stealing electricity, not in the magnitude that we are seeing across emerging markets. People pay their bills, by a phone call and, there was not such urgency for t1he solution of those utilities to be reflected in emerging markets. So we said, okay, let's go back to the basics.
What do we want to build? We want to build a solution to focus on the efficiency. So what are the main challenges? Again, the main challenges are people are stealing; people are not paying; and there is leakage happening across the network. So we went and we tailored the solution to focus on those three main options. This is the main differentiation between us and the giants. This is one thing. Another thing is that the giants there are too big,they are huge and they are working across different sectors. But, for us, our main focus is the distribution sector and this, solution, which solves their challenges. So in terms of speed, we always say that we are like a race motorcycle compared to a huge truck, or a huge, even, Naval base. so we're much faster, much quicker, and we are laser focused solving the inefficiencies of the utility
sector.
A. Buckley: It's a long journey from, just thinking about starting a website to what you've built. So congratulations. And I'm glad that the idea of a website developed into something that is potentially market changing. so from what I understand, the solution that you've built is probably more tailored or better suited for, micro grids and off-grid solutions, which are the go-to solutions now in many parts of Africa to improve access to electricity. Would you say it is better suited for small distributors?
A. Ashour: Small distributors and microgrids are part of our client base, but however, we target to the huge utilities as well. So our current markets we're targeting around 200 million metering points across different geographies, whether in Africa, Brazil and the Southeast Asia.
So we focused on either one, whether it's a micro grid or it's a main network, it's all the same challenges.
A. Buckley: Yeah. I understand you're already working with construction companies in Egypt and the Philippines, that you have an eye on Africa, but, could you tell us more about where you're starting in Africa? Where do you see natural potential for growth in the African market?
A. Ashour: Definitely. For us we have a strong focus on Africa. And the only thing that made us move towards Philippines and Brazil first is that they have a semi liberated market when it comes to the electricity distribution sector. So this is why we targeted those areas. However, saying this, we have seen the same movement happen now in Nigeria and South Africa. So our main focus going forward other than Egypt, of course, is Nigeria, South Africa, Tunisia, Morocco. and we're also, we're starting, because after the round that we've raised, our main focus is the commercial expansion. Commercial expansion is a big part of it. And so we are open for partnership across the African continent, and we're always looking for partnership and now with developing some of those. So we're looking for partners and to expand and to offer our solutions. A very important aspect to our solution other than the technicalities and how we are laser focused on the efficiency is that many of those utilities who are already losing 40% of their revenues they are technically bleeding daily. So they are cash strapped since they are not able to collect all their revenues and they are making losses.
So they are not able to go and upgrade their solution to go to a smart grid solution and make that huge investment. So what we do is that we provide our solution and our hardware as a subscription based. So they come, they sign with us. And they start making money.
A. Buckley: So there's no upfront investment by the companies that subscribe to your solution.
A. Ashour: Exactly. And to give you more perspective, if a company has 1 million customer, which is a mid size company, in order to upgrade to go to a smart grid. Usually would cost from around 200 to $250 million. So it's a huge investment to be made. What we do is that we have different partnerships with different financial institutes, whether DFIs or others who are focused on the climate and focused on, on offsetting carbon emissions and helping emerging markets and solving the challenges of the utility sector in emerging markets who are able to get the financing and offer it as a subscription basis to them.
A. Buckley: When you start exploring these emerging markets, are there any legislative or regulatory hurdles that you've encountered? What are some of the regulatory showstoppers that can prevent you from engaging in these markets?
A. Ashour: Usually there is some certifications which needs to be done, but it depends on the country. We always work with hardware so we work with different hardware providers and work with now almost 30 different, 30 hardware providers. And we position ourselves as the Android, but for smart metering. So we are open. We are working with different hardware providers and we adopt international protocols. We are hardware agnostic, and communication agnostic. when it comes to the legislation, There is some, but usually focused on the hardware and, and it's manageable and it's not a show blocker usually, unless there is some, some manipulation in the market, which wants to block it for a certain competitor, which is not usually the case.
A. Buckley: You've landed a very good round of funding recently, it's very impressive. 19 million us dollar. which goes to show the great amount of trust and promise that you've shown [00:10:46] But this is your first, fund series and you've been bootstrapping the company since you've began. And, I wonder if you have any advice to startups on how they can go so far, before they start going for funding rounds.
A. Ashour: Sure. It's true at, it was, we were lucky enough to bootstrap the company and to push, the funding till that point. because usually when there is funding going into the company there's dilution, and there is a new shareholders coming in, new shareholders agreements, different terms, different setup. So it's a different story. However, we were lucky, to push it. And I won't say it was an easy task. It was very tough, mentally first. And to be able to maneuver to the different risks. And anyone who asks me about you're surviving. So I've seen it to the point of time when we were about to earn, or sort of landed a contract. It was in the early days of the company, worth $16 million. And then a month later we lost it, lost the opportunity and we didn't even the startup journey: so it's a roller coaster! One day you're up, the other day have enough money to pay the salaries for that month. So you can go from 16 million to none,, to zero in one month.
A. Buckley: How nimble are you as a team? What number of employees are we talking about?
A. Ashour: Now we are around closer to 50, we're hiring as we speak. However, we're always being lean. Thank you for raising this There is different schools in every, in everything in life. So I have seen it even before, so everyone was pushing for hiring and growing and scaling. And don't give a damn about the unit economics and just go with just like, just acquire market share, which is a strategy. However, given the current economic situation that we have seen, we know that this is not very sustainable and whenever there is a huge turbulances, you can see as you have seen with the different, stocks around us, the international stocks. The Netflix stock, for example, went from around 600 to 170. So it almost got divided by four. so it's, I'm not saying that, that the Netflix, any concerns about that, Netflix is a great company, of course, but in terms of, when there is rough times, no, this gives you a big, low. So we've always adopted a positive, unit economic. So always focused on the economics. Don't burn cash that you don't need to burn. and, eh, Always be as lean as possible.
A. Buckley: Yeah. You mentioned how much of a roller coaster it is. The startup ecosystem, one day you're up, one day you're down. But you've definitely had some help, within the ecosystem. Would you like to give a shout out to anyone in particular, any institution that has helped you along your way here?
A. Ashour: Yes, definitely. One of the very nice things about the startup ecosystem, is the support that you get from, different fellow founders. One of those that I needed to thank for, of course, like, Omar Hgras from Trella who has been very supportive. Mostafa Amin. Very supportive also. And they're both great founders. Mahmoud El-Sayed, also, of Wasla.
And they have all given lots of support, throughout. And I've learned a lot from them and from, from the institution side, of course we're very lucky to have a great group of investors who are very helpful in Endure Capital,Tarek Fahim, specifically.
And they have been, have been here. They wanted to join our journey in 2019, but we decided that will keep on going with the bootstrapping and he was quite pissed about it, but now he's on board and have been super supportive and given us great advice while growing the company. One of them was to join YC. So definitely YC was a great experience. Although we were a bit ahead, we had the revenues and we were profitable and everything, but we joined YC and that proved to be a great experience. Support from, especially from our group partner, from Nicolas Dessaigne, the founder of Algolia, he was great help and hands-on, extreme hands on. He would go on to, to, to aligning when we're working on the pitch deck. So he'd go and revise the aligining and the wording and everything. So he was of great support. and also we were blessed to have main founding adviser Ahmed Medhat who was .... Data scientists at Facebook have been with us all along the journey, starting July, 2017, but .... was, quite from afar. Then he was with us officially from November 2019. During the very rough times of the Corona and afterwards then he is more of a brother now.
A. Buckley: So, YC have helped you nail down your very short pitch. So please give me your best elevator pitch, your best one minute pitch of the company. What would you say?
A. Ashour: I would say that across the emerging markets, that is loss of around $400 billion. And what we do is we provide our solution, focuses on the data collection and we detect the challenges happening on the network. We automate the billing. We automate the revenues and we detect those who are stealing electricity. And the customers who come and sign up with us, they get an uplift in their revenues up to 50%. So yeah, we have more than 1 million customers throughout our grid in Egypt and the Philippines and we're expanding as we go.
A. Buckley: So obviously, environmental issues are very big and Egypt is hosting CoP-27, and I can see how your solution would have a very important environmental impact by saving on the waste, of, electricity and by making revenue channels optimum, are you planning on doing anything on the side of CoP-27?
A. Ashour: Definitely CoP-27 is a great opportunity for us. We have a very strong focus on the environment. And we believe, as I told you from the beginning for us, it was, we wanted to have an impact. Now the impact is to preserve the planet. Our target and our vision and many startups, they want to be a unicorn or a decacorn. Of course, it's good to have. It's good to have the, to reach that, to be a decacorn, to achieve the, that, that status. but for us we want to be a gigacorn. by gigacorn is by reducing the way, reducing the emissions by one gigaton. Currently the world emits around 52 gigatons per year. We want to offset one gigaton of emissions. Our target is to offset 2% of the world's, CO2 emissions.
A. Buckley: That's a very large burden and responsibility to take on. A trivial question about the name of the company. I understand that the pylon refers to electricity towers, but it's also, the large sort of trapezoid entrances to Egyptian temples. I don't know the play on words intentional or just a matter of coincidence. who came up with the name?
A. Ashour: Thank you for bringing it up and for making the research and knowing, knowing this, information. We had a different name was which will, which was, which will give the impression of company before that, or a family business. but we had a great PR agency. Molly el-Masry and Rahma Zain and Trina. And they came up with the name and we were very happy and very excited about it because of the meanings. And especially that it's subtly linked to our culture as well as to our, ancestors.
A. Buckley: Yeah, absolutely. I won't take up more of your time. This was fantastic. I certainly learned a lot and my admiration for you has grown tremendously. I wish you the best. And it was really a pleasure to talk to one of the first Egyptian gigacorns, hopefully.
A. Ashour: Thank you very much. I really enjoyed it. And it was even beyond my expectations. So thank you very much. And thank you for all the preparation that you did. It's still, it's usually very tough to talk about what we do with different people, because usually the conversation is a bit different, but you are very aligned with our vision. So thank you for your time. And it was a pleasure, and looking forward to having more shows together.