In partnership with Saisan, PayGo will expand operations to Asia, starting with Vietnam and Bangladesh.
Under its ‘Gas One’ brand, Saisan sells and supplies LPG (liquefied petroleum gas) in Japan to households, medical facilities and industries. Besides Vietnam and Bangladesh, Saisan has downstream investments in Mongolia, Indonesia, Cambodia, Nepal, Thailand, Laos and India.
The strategic partnership has a financial aspect too with the corporation investing capital in PayGo’s broader plans to expand into Asia, including a Series B round that has kicked off this month.
At PayGo Energy, a Kenyan startup founded in 2015, the solution is to trust technology and chill. Their main product is called a Cylinder Smart Meter, a patented portable device to help households monitor and manage consumption, and for gas retailers to extend reach and track distribution metrics.
The startup raised US$1.43 million in a seed round that closed in April 2017, with participation from Novastar Ventures, Energy Access Ventures, Village Capital, Global Innovation Fund, and Global Partnerships/Eleos Social Venture Fund.
According to Berman, the average Nairobi household using PayGo consumes over 4kg of gas per month. Some families are cooking more than usual, thanks to children who could have been in boarding houses now staying at home due to coronavirus lockdowns.
But 85% of payments on the platform are less than US$3, with the average top amount being US$1. The numbers speak to PayGo’s target of providing LPG to the mass market, particularly to households that need clean cooking fuel to replace kerosene and firewood stoves.
With the meter, households are able to pay for gas in the amounts they need using familiar payment means like mobile money. A gas top-up via MPesa is a popular among PayGo users in Nairobi, Berman says.
The startup’s business model in Kenya rests on partnerships with gas distributors. None of them are on the scale of Saisan’s capacity however, and the startup believes this sort of engagement with trans-national distributors is the path to scale in fast-growing emerging economies.
In 2019, LPG demand grew by 9% in Africa and PayGo wants to expand across the continent where there is also an unmet demand for clean cooking fuel, Berman confirms to TechCabal. But the opportunity to test the product overseas is an important way to demonstrate capacity for scale should a big corporate become interested in Africa.
A crucial player in PayGo’s move to Asia is Kepple Africa Ventures, an investment firm backed by the Japan Startup Immersion Program that helps startups raise funds from Japanese corporations and potentially sign partnerships with them.
The firm says it has made 52 investments across 8 African countries since December 2018. Some of its portfolio companies include Sendy, Lifestores Pharmacy, Decagon, Termii and Carry1st, the South African gaming company that closed a US$2.5 million seed round in May.
In October 2019, the Kenyan Bureau of Standards launched the world’s first technology standard for LPG metering, with PayGo’s meter acclaimed as the first fully compliant one in the market. The startup’s device also conforms with ATEX directives – a European Union safety certification required of explosive equipment.