SteamaCo: invest in talent to build an attractive proposition
8 July 2020: Convening a talented team to underpin a good idea cannot be underestimated when a company is building the foundations for sustainable growth. SteamaCo is a case in point.
Using cloud-based technology to enable access to electricity in low income countries has got to be a good idea. Delivering this idea takes a great team, supported by an impressive finance function.
SteamaCo was launched in 2012 in Kenya and has grown to a modest but talented 36-strong team. February 2016 saw it raise seed capital from angel investors, followed by receipt of grants from InnovateUK and the European Innovation Council in 2017.
Bigger fund-raising was to come with two rounds of equity investment. Series A brought in $2.9m in December 2017 from Shell, Ashden Trust and GReeN Investor Group; and Series B raised $5m in July 2019 from Praetura Ventures and Shell.
Tom Parkinson, CFO, was brought in after the angel investment to lead the equity rounds. Parkinson is an EY-trained chartered accountant with five years’ investment banking under his belt. In his roles he gained practical understanding of financial control, management reporting and the nuts-and-bolts of completing transactions. His next move was to a private equity-backed company in the run-up to its sale to another private equity fund – this time he was operating on the inside of a high-growth company.
All this gave him the right mix of experience to oversee company fundraising while still being within the reach of a young but high-growth company with big ambitions.
So, what did Parkinson need to put in place to get SteamaCo noticed by institutional investors? “Everything,” he responds succinctly. “The existing team had rightly focused on building a great product for the market, but from a finance perspective there was a lot to build. It was exhilarating to start from scratch.”
He continues: “For investment, this meant collating the key documents needed to market a company and building out the analysis that goes alongside that: market opportunity analysis, competitor analysis, value proposition, etc. We had to get all of this distilled into something you can effectively translate to investors.”
Delivering messages to potential investors was just one part of the task; conveying internal messages was just as important. “The key thing we needed to get right was the management information, delivered in a controlled, coordinated, and reliable manner. Also, we needed to get the board comfortable with the direction the company was going in; and we had to get aligned on the investment strategy,” Parkinson says.
There were two angles to these efforts: one practical and the other emotional. “There was a functional aspect to all this work which I led; and then there was a hearts and minds effort led by the CEO to get everyone on board,” he adds.
The early success revolved around the quality of the team. “When you are developing a complex product, there are always improvements that you can make. We completely changed the product architecture in the first year to address customer concerns. There is an old adage that investors will invest in an A* team with a B grade product; they will not invest in an A* product with a B team. That holds true from my experience. The team has now created an amazing product.”
He continues: “SteamaCo is blessed in that it has a very strong executive team, including the COO and CTO, both graduates from Princeton. That’s been very helpful for us. When you hold those early meetings with potential investors, if we can get our executive team in front of them, that always pushes the conversation along and gets investors excited. Assembling a strong team is paramount to an investment.”
Each investment has enabled SteamaCo to make strategic leaps. “Series A was about proving there was a product/market fit. Series B was about proving scalability, in both the market and the product.” In practice, Series A provided the resources to develop the product and build out the management layer under the executive team with a very strong set of VPs; Series B paid for building out the stellar teams underneath.
Having investors on board requires constant communications. “We have very supportive investors, who have been especially helpful during this challenging time. We provide formal management information to them on an ongoing basis, but I’m glad that we have a much richer relationship than just that. They are part of our governance structure and also act as trusted advisors who regularly help us in finding effective solutions."
And having the right investors is at the heart of getting funding right: they can bring their knowledge, experience and networks along with their funding. “Being aligned is vital and it is important for both sides to do their due diligence,” he says.
What next? “To maximise our impact, I would anticipate there may be more funding rounds to come,” responds Parkinson, but he is mindful of the impact of the virus on next steps.
In many ways, SteamaCo is well placed to withstand the impact of the virus: the idea of using remote software to manage everyday utility usage is central to the business. “We have seen our customers struggle to install equipment because their countries have been locked down,” he says. “But we enable utilities to operate remotely and sell their power via contactless solutions, so we are well placed to help our customers out of the crisis in a safe and reliable manner.”
For now, SteamaCo has raised some additional funds to manage itself through the crisis, chiefly to give the team time to execute against the plan in the context of a constrained capital market. “Let’s see what we can get done in the next 18 months,” he says. “We have accessed the Future Fund to give us some more security while our customers get back on their feet. We’re out of fundraising mode now and so the focus is around execution of the strategy. Providing this breathing room is where CFOs really add value to a growing company.”
Parkinson continues: “We are using this time to drive home the strategic goals. We have had to make some hard choices to see us through. We believe we have made the right ones. If the virus had not happened, we may not have had the impetus to do this.
“My advice? Never waste a crisis. Use this time to focus on the real value that the company provides. Many companies will come out of this stronger – I know we will.”