Mr. Hande with Al Gore

How did you venture into cleantech entrepreneurship and form SELCO?

It is strange, but my enterprise was not formed with the aim of promoting cleantech. My primary objective was to improve the quality of life of the rural poor, and providing solar products was only the means of doing so.

The idea of SELCO emerged when I spent two years without electricity in the rural hinterland in upper Sri Lanka and Karnataka, way back in 1993. It was soon after I completed my PhD in Energy Engineering from the University of Massachusetts at Lowell. Witnessing the lives of the poor in countries like Sri Lanka, Vietnam, Latin America and India, I realized that poverty was more real than boundaries, and the stories of the poor stayed the same - no electricity, no water, inadequate basic infrastructure.

I had prior experience in installing solar lighting in Sri Lanka, used for lighting at homes and temples or used as elephant barriers. So when I returned to India and wanted to start an enterprise in rural areas, the idea of using solar equipment as a tool for sustainable poverty alleviation appealed to me. This led to the creation of SELCO in 1995.

How did you view the market when you founded SELCO? What marketing strategy did you use?

About 70 % of the rural areas, even today, are without electricity. My target customers were poor farmers and daily wage labourers earning less than Rs 200 a day, and had limited or no access to electricity. It was a large and largely untapped, untouched market.

We realized that the problems in the market were manifold. First, there was lack of awareness about solar lighting among our potential customers. Second, they had no money to pay for our products. So on one hand, we held demonstrations and door-to-door campaigns in villages, educating them on the benefits of solar lighting. On the other, we approached and convinced rural banks to lend money to the poor to buy our products.

How did you grow SELCO? How did you raise money?

We had no money when we started. So we had to depend on innovation, and do things differently. We marketed through word of mouth, minimizing marketing cost. We trained and employed the local youth - thereby facilitating job creation and reducing HR cost at the same time. We provided customized products and services to our customers. We worked on our processes; worked harder on developing trust and a sense of vested interest among our customers.

We raised our first money, through private equity, in 1998. We received the second round of funding in 2003, and the third round in December last year. Throughout, we were very clear that we will not take money if the funding plan did not support our ambition and business model. Also, we do not take more money than we need.

In the first year, we made Rs 1 lakh. In the second and third year, we had a turnover of Rs 2.5 lakh. Our turnover shot up in 1997 when we crossed the Rs 50 lakh mark.

Who was in your founding team?

We started with a team of three. Being a techie (Mr Hande is a graduate from IIT - Kharagpur), I brought in the technology expertise, but I had no field experience. My partner Thomas was an alumnus of Nirma Institute and had worked in villages of Rajasthan.

In 93-94 there was no concept of social entrepreneurship. I was in my early 20s, but my initial funders were far older, classically environment-sustaining hippies. One was a British spy, another an anti-war journalist who had reported from Vietnam. One of them was an activist who had met Mahatma Gandhi. They helped me with connections, and taught me a lot about passion.

What were your challenges in the early years?

Our biggest challenge was to convince financial institutions to fund our customers. Their loan schemes were based on direct income-generation models, and the idea of linking children's study time in the evening to overall rural development took us two years to convince.

Today, we are piggybacking on rural banks, which provide loans at 13.5 percent interest per annum under priority sector lending category to our customers. We couldn't have grown without the help of rural banks.

What difference have you made in your customer's life?

Earlier, our customers did not have access to, or could not afford electricity and lighting. 60% of our customers had no electricity, and they used kerosene lamps which cost them Rs 15 a day. With our solar lamp they have five hours of electricity in a day - one hour before dusk when they begin their day, and four hours after dusk when their children sit down to study - and this at a much cheaper cost of Rs 150 to Rs 400 per month (for five years).

Also, many of the products the poor use are energy-inefficient. For example, an electric sewing machine or carpentry machines that the Government provides consumer large amounts of electricty. However, the people who design it are not bothered about who is going to pay the bill. We provide customized products, and services at the doorstep of the customer. Our technician visits every house to decide on their requirements. Based on their needs, we provide products along with financing options. Thus, we help not only make our product affordable, but also reduce maintenance costs.

Where is SELCO poised today? What are you future plans?

We are presently focusing on Karnataka and Gujarat. We have 25 centres with 170 employees. We expanded in Gujarat two years ago, in Ahmedabad and Gandhinagar, providing products for the urban poor. It's a pilot project and we are taking the help of local NGOs to reach our customers. We have 1,05,000 customers. About 25 percent of our customer base comprises middle and upper middle class.

Turnover-wise we are growing steadily. Our overheads are very low because of our business strategy, and we have maintained an 18-20% gross margin of profit. This year's turnover has been Rs 15 crore, and we hope reach Rs 25 crore by 2012.

What is your biggest challenge today?

Human Resource is the main challenge. The urban youth do not want to work in villages. The rural youth are migrating to cities lured by the urban glamour. Not many want to give up comforts, take a bus to a village, and install a solar lamp.

What are your plans for the future?

In future, we would like to penetrate deeper into the economic strata - providing benefits of solar products to the poorest of the poor. We raised $ 2.8 million in December, despite the recession - and we plan to use this money to scale up.

What is your message to new and future entrepreneurs?

Young entrepreneurs should go from the bottom to the top. Focus on sustainability, implementation, and people who need your help most. Respect the poor. Did you know, despite our customers being poor, less than 2 per cent have defaulted on their payments!? Don't let the 'Green Bus' be just hype - Talk green, and walk the talk.