Light As Service

1.6 billion people currently spend 10-15% of their income on low-quality light, burning expensive oil because nobody has made it easy for them to change.

It's a Catch-22 situation, where there is no available electricity and no market for electricity, preventing anyone from moving forward. This traps people in a cycle of poverty, but it's also a US$50bn/year market that can be profitably exploited to the benefit of everyone involved.

Kerosene lamps are one of the least efficient ways to make light, as most of the energy is lost as heat. It's actually very expensive, costing far more per lumen than any other method. And the by-product is poisonous smoke that kills more people every year than malaria.

A modern LED light, with a rechargeable battery, producing a modest 40 lumens of light (with no toxic smoke) costs a lot less per hour than an oil lamp. But it's a very expensive capital purchase for the poorest 25% of the world's population. And without a reliable supply of electricity, it's not a useful product.

People don't want products, they want benefits.

People want light, not 'stuff.' For the end-customer, we need to make this as simple as possible. The local partner offers the lantern to her customers in the same way that your cellphone company offers hardware to you - you agree to buy a service, and they help you to buy the hardware. If you use more minutes, you pay more. This is exactly the same, except that the customer buys minutes of light instead of minutes of talk-time.

The local partner produces the electricity that powers the lights. She is also responsible for finding customers, and for providing them with the service they need. She plays the role of Edison or Bell, building a sustainable long-term business by meeting people's needs.

She carries the financial risk if her customers can't/won't pay for her service. Due to the small scale of the business, all of her customers should be friends, relatives, neighbours, people in her community that she knows.

The entrepreneur borrows from us (you!) to get started in business, and repays this loan from her earnings. The end-customer obtains interest-free service-credit from the entrepreneur, based on his/her social capital.

In theory, $200 of hardware should be able to provide enough electricity for 100+ customers. But each customer also needs finance for the lanterns, so the cost of a new franchise is likely to be around US$1,000 - in theory! This is the basic concept we need to test and prove before moving to the next level.

Business In A Box

A set of tools that enable our partners to build a viable sustainable business in their local communities.

A simple machine to convert human muscle power to electricity is cheap, reliable, and provides a source of income for the operator, who currently earns just US$50/month and wants to earn more. We believe that one 'bike' can serve 100+ customers, if those customers have LED lights already. Without customers, it's not a safe investment, but if you have 100 customers and each one is willing to give you 10% of their income then that's a very attractive business proposal. One entrepreneur should be able to earn $4-500/month.

The key is to make electric light accessible and affordable, and if you watched the video, you will know that my focus is on repeat business rather than on selling hardware.

The photo on the right shows customers of a phone company, who buy communication services again and again - but only buy one piece of hardware. For them, the physical handset is an enabling technology. They don't particularly want a piece of metal and plastic, they just want to communicate with other people. The telephone handset makes this possible, it's a tool that people need, but it's not the thing people want.

The Alchemy Project is designed to meet other needs in similar ways, by focusing on essential and desirable services rather than products. In effect, it's a franchise model, providing everything required to launch a viable business. Except that the franchise cost is provided by outside investors in exchange for a share in the franchise profits.

The local partner is running her own business, but it's a business that is dependent on financial and technical support from outside.

The opportunity to earn a good ongoing income is hugely attractive to her. By providing finance and technology, we enable her to profitably offer a superior lighting source to her family, friends, neighbours and local community.

She gets an interest-free loan to pay for everything she needs to launch her business. She repays the loan as fast as possible, but still has access to credit if she needs anything. Alchemy buys back old batteries (which lose their efficiency after a couple of years) and provides new products, enabling her to maintain and grow her business. She continues to pay a percentage of her income to the Alchemy Network, which repays some of that money as credits to customers and other partners under a 'rewards' program. She may also sponsor new partners, and guarantee their loans, in exchange for receiving bonuses based on their performance. Again, this depends on the social capital of the new licensees.

Social Capital

Every end-customer is personally known to the person they buy from, it's a network.

Our partners don't sell physical products They provide them to their customers, who pay for the electricity they use. By focusing on light as a service, we make the technology affordable and accessable to the end customers, however there is always a risk in doing this. The risk is carried by the local partner, so she will only serve family, friends, neighbours, people in her community she knows and trusts. In effect, she is extending  micro-credit to the poor, based on  their social  capital.

This is basically the same principle as used by the micro-credit industry. But if you have been paying attention to the micro-credit boom in recent years, you will be aware that borrowers in India have been paying 25-35% interest on their loans, resulting in enormous financial hardship and an increase in debt-related suicide. Alchemy works differently from micro-lenders. There are no interest payments, and no enforcement by outside agencies.

While the local partner is playing the role of micro-credit agency, she is in turn funded by outside lender-investors. That's you. She buys generating equipment to use, and lamps to provide to her customers, and repays her loan from the money she earns. After repaying her start-up loan, the lender-investors continue to earn a small share of her revenue.* This is instead of earning interest, and continues even after the loan is repaid.

A local partner 'in good standing' is also able to sponsor new partners into the network. It's an attractive simple business, and successful partners will naturally sell the opportunity to people in their own networks. This helps us grow the business without a top-down sales effort.

All new partners must have a local sponsor who knows them personally and guarantees their start-up loan. Every sponsor guarantees the next generation, and remains guaranteed by the preceeding one, so that in time there are many 'layers' of protection for the lender-investors. Every partner has an incentive to recruit new partners who are capable of building a successful business, because she will receive bonuses based on their performance.

She is effectively lending other peoples' money (yours), but is responsible for any non-repayment, so she has an incentive to lend responsibly. The obligations of friendship and family ties act to prevent new partners from dropping out of the system, and protect your investment. By lending directly to our partners, we remove all the intermediaries that would otherwise be adding to the cost of borrowing. No interest is collected from anyone, but lenders and sponsors receive a small portion of the income generated for as long as the franchise remains in business.

* This is the plan, anyway. At the moment, we're just testing the economics of light-as-service and there is no return for lender-investors. But if the trials are successful, then our lenders will have priority as investors.

Payments

The Alchemy Network receives a small fee every time a customer buys electricity - or any other service that is provided in the future.

As mentioned on the page about technology, an essential component of the franchise system is electronic monitoring of electricity production and financial transactions.

Our franchisees need to know how much electricity they have produced and sold, customers want loyalty bonuses and rewards, and loans have to be repaid. For a business of this size, this can all be done on a mobile phone with a specialised app.

All the franchisees report back electronically, and are charged a fee based on their level of business and loan status. They may also receive credits for reaching various targets, and bonuses for sponsoring successful franchisees. Whenever the balance is large enough, money is transferred via bank or other system. Ultimately, the goal is to become a multi-purpose payment system dedicated to utility services such as energy and lighting, refrigeration, water, clothes washing, biochar, natural gas, agriculture, mobile healthcare, etc. And by providing every customer with a unique ID, we can effectively build a credit history for each individual. This may, in the future, make it possible to help them access lower-cost finance for their own wealth-creation projects.