Azza Yahia is part of the investment team at Five One Labs, an incubator based in Iraq
Cleantech is a term initially coined in the 1990s by the venture capital community and popularised in 2002. In many instances, greentech and cleantech have been used interchangeably. But what do both terms mean? Cleantech is the umbrella term referring to any technology deploying sustainable products or services. A leading VC fund, Clean Energy Ventures, defines cleantech as “any new business model or technology that increases the performance, productivity and/or efficiency of production while minimising negative impacts on the environment.” Globally, cleantech is predicted to grow at an annual growth rate of 24 per cent (2020-2027). Greentech, a subset of cleantech, refers to environmentally friendly energy production promoting sustainability while creating efficiencies. In 2019, the value of global investments in the green energy sector hit a whopping $302 billion.
In Iraq, forward-thinking startup founders witnessed the move to green energy and sustainable technologies through grassroots initiatives. Three enterprising Iraqi startups steering the sector include Green Shaov, Mosul Solar, and KESK.
Until recently, few companies in Iraq had ventured into the cleantech space, so finding employment in the sector was near-impossible. Upon separately encountering this reality, three Five One Labs graduates in Iraq and the Kurdistan Region in the north, have transformed their skills and passion into sustainable businesses. Due to the longstanding dire economic and energy situation facing businesses and residents, there was a need for radical solutions. Enter Green Shaov, Mosul Solar, and KESK. Green Shaov focuses on resolving farmers’ crop concerns using artificial intelligence (AI) technology. Mosul Solar and KESK provide green energy solutions to both B2C and B2B clients. Although these startups' strategies vary, the end goal remains the same: creating clean and sustainable efficiencies for long-term gains.
When it comes to greentech, the opportunities are massive in Iraq. Faced with 18 to 22 hours of electrical grid blackouts per day, soaring oil prices, and price hikes in generator-supplied electricity, people are desperate for sustainable energy solutions. The average personal income is $600 per month, and generator power charges range between $200 to $600 for 10 Amperes of power. So, substituting generator-fueled energy with solar-power makes financial sense. The benefits include decreasing end-user costs while providing a cost-efficient alternative supply of power. Basima Abdulrahman, the founder of KESK, explains: “We need to change to energy saving, and this way renewable energy can come as a solution to support the main (electricity) grid.”
The crops farmed in Kurdistan have historically been mainly wheat and barley. Green Shaov, a Kurdish phrase referring to germinating land, offers smart greenhouses and can transform and modernise traditional greenhouses through the use of AI technology with the aim of increasing crop variety.
Basil Allawi, an engineering and information technology (IT) graduate focusing on AI, founded Green Shaov in June 2020 after realising early in his career that he should apply his skills for the greater good. A chance meeting with an agricultural engineer as he was graduating from university planted the idea for Green Shaov: improve farmers' circumstances by increasing production outputs and profits through climate-adjusting AI technology. By increasing crop variety, Green Shaov can help farmers address the market demand for a larger assortment of produce, simultaneously generating additional income for farmers and lessening Iraq’s dependence on agricultural imports.
Mosul Solar, a greentech startup, provides and installs solar cells for residential and commercial units. Mohamad Al Qatan was inspired to launch his greentech business in early 2020 when Mosul was experiencing electricity cuts of up to 22 hours a day. Faced with the struggle of finding permanent employment within the private sector and the hiring freeze in the public sector, Mohamad was doubly motivated to set up Mosul Solar. He views his company as a chance for him to give back to his city and generate income and create jobs.
Founded in 2018, KESK (“green” in Kurdish), another greentech startup, offers green engineering and design consultancy. Founder Basima Abdulrahman dedicated her youth to raising awareness on environmental and climate change issues. With essentially no opportunities for a career in the green energy space in Iraq, Basima embarked upon setting up her own green business. Basima built her company to combat the extreme energy shortage in Iraq while also working within a sector about which she is highly passionate. KESK recently expanded its product line to include branded solar-powered AC units.
The creative process
Establishing a business in a new space can be intimidating. These cleantech startups' concerns revolve around combatting cultural misconceptions of clean solutions, alleviating customer cost concerns, and increasing market visibility. These factors serve as motivators to produce innovative, practical solutions with which consumers and users are comfortable.
These ambitious cleantech startups unveil creative solutions that challenge the prevalent socio-cultural mindset. Allawi explains: “When it comes to tech adoption, farmers were not interested. They fear that technology is difficult to use.”
The team noted that the farmers were happy using basic feature phones; whereas, Green Shaov’s solution requires a smartphone. When farmers complained of the complicated user interface, the team modified it even further.
“We stayed away from text because many farmers do not read. The mobile app was based on iconography," adds Allawi.
The team continued to develop a proprietary in-house solution placing the user experience and user interface at the core of product design. Through consultative discussions with the farmers, the team was able to identify pain points and ultimately developed a prototype that was iterated six times.
Empowering the customer
The startups were resourceful enough to encourage and increase adoption with financing solutions to alleviate end-users’ cost concerns. KESK adopted a consumer durable financing scheme in which customers buy consumer products upfront and pay in installments over a period. Mosul Solar adopted a similar strategy and formed an installment payment scheme with Al-Tadhamun, an NGO offering micro-loans. As organisations such as Relief International have noted in the past, microfinance is a new and uncommon business model in Iraq. It is tough to find financial institutions willing to offer loans to individuals or SMEs without extensive collateral. Thus, the financing solutions of KESK and Mosul Solar are quite a big deal.
Establishing a name in the market
Competing for clients with well-established players is a daunting affair. Six months into establishing Mosul Solar, Al Qatan was still running cash flow negative. He was having trouble gaining traction even though he had already approached 70 engineering companies, 50 retail stores, and 30 organisations. He continued attending entrepreneurship support programmes while networking with corporates and business professionals.
“We (Iraqis) are a communal society. If one person tries out this alternative solution and finds it successful, everyone else will follow suit. So, we just need one advocate,” says Al Qatan.
Finally, his hard work paid off. Although private and public sector entities prefer to offer contracts to more “recognised” businesses, Triangle Génération Humanitaire (TGH) contracted Mosul Solar to build solar-powered irrigation gutters for farms. Although Al Qatan offered the company’s services at below market rates, this opportunity meant working with an international player, exploring an unfamiliar sector, and opening doors to the farmers, a potentially new segment of clients.
Cleantech startups face an additional layer of complexity related to the lack of funding available in the market. Investors in Iraq’s growth-stage companies have historically focused their energy (and dollars) on specific industries, such as e-commerce. However, one sign that this might be changing is KESK’s recent six-figure investment round raised from Euphrates Venture Capital Fund. Also, Mosul Solar inked a grant deal with Kapita, a private sector development company in Baghdad which provides consulting and support services to startups, in which it will receive advertising and promotional assistance, social media marketing, and a new logo design.
Abdulrahman insists that investors need to realise that Iraq is a massive market with unlimited opportunities.
“The investors need to be adventurous. If a solution is meaningful and if the team is strong, then don’t think twice," she says.