I recently had a call with Manoj Sinha, co-founder and CEO of Husk Power Systems. I’ve known him for several years via my work with Miller Center for Social Entrepreneurship, and it was great to have a catch-up call with him.

Manoj grew up in India, went to IIT, then came to the US to get a Master’s in engineering and then also got an MBA. Typical overachiever. 

While working in the NYC corporate world, he and some friends created a startup on the side to solve a big problem back in India – many people in rural villages didn’t have access to electricity. These rural villagers are forced to burn wood and kerosene which impacts both the planet’s health and theirs, plus the kids can’t read and study at night, etc. In fact, the UN says this is true for 1.3 billion people around the world, and that access to electricity is highly correlated to life expectancy, literacy, and per capita GDP. 

So Husk Power Systems was founded with Manoj in an engineering role and his co-founder as CEO. They developed a carefully-engineered system by which electricity could be produced in a village using waste rice husks, powering a mini grid that provided power to each house in the village. Envisioning this as a social venture, they raised some money in grants from philanthropic foundations and subsidies from the government in India and went on to build 80 biomass powered mini grids in rural India, with a goal of eventually serving 1,000 rural villages in the country (I’ve condensed this whole part of the Husk Power Systems journey, but you can read more in this excellent Harvard Business School case study). 

But here’s where the story really gets interesting: 

Eventually they ran out of money, the economics of the model wasn’t working, biomass power didn’t seem to be the right solution, and the co-founder quit. 

In the startup world, this is known as a “WFIO moment” – as in “We’re F****d, it’s over”. It’s that horrible, terrifying moment that nearly every entrepreneur goes through when they are certain that their company is dead. Every great startup must have one (I’ve gone through a few) and for Manoj and Husk Power Systems, this was theirs.

So Manoj took over as CEO, and basically decided he had two choices: Shut it down, or do a complete pivot. He was living in Pittsburgh at the time and had to convince his wife that he needed to move to India for a few months to really understand the situation on the ground with the 80 installations they had. 

What he found was not good. There was a lot of economic leakage at each installation – In India, 30% of all electricity produced was stolen as it was very common for people in rural areas to just illegally tap into electrical lines. And many villagers were just using the Husk Power hookup to their home and never paying the bill. Bill collectors, employed by Husk, often did deals with customers and just pocketed the money. The biomass power plants required more maintenance than expected, and would only produce electricity about 6 hours/day. Plus, the cost of photovoltaic cells had dropped dramatically, making biomass energy production much less attractive than it had once been. On top of all this, the government of India had proven to be an unreliable partner. While the deal was that they were to subsidize some of the capital investment, those disbursements were uncertain and subject to bureaucratic roadblocks. 

Given all of this, Manoj made the decision to shut down 75 of the 80 installations, and he flew home to figure out a completely new approach. 

The new approach had to address the learnings so far:

• Fix the “economic leakage” of so much of the power generated not being paid for. 
• Switch from biomass to PV, taking advantage of the lower operating and maintenance costs. 
• Add an additional geography, so that Husk Power Systems would be insulated a bit from Indian political currents, and have a larger, more global Total Addressable Market to talk to investors about. 

There was another thing going through Manoj’s mind – he really wanted to get away from funding from philanthropic grants, and move to a model where he could get financing from traditional venture capital and private equity funds. 

“Grants helped us to make mistakes and not get obliterated…but free money also brings indiscipline”, he says now. He wanted to create a legitimate company with the discipline and fundamental economics that private investors would be eager to invest in.

So Manoj and his team engineered a whole new approach to solving the problem of providing rural villages with sustainable electricity. 

These would be mini grids powered primarily with solar, and biomass for backup. The cables would be shielded, making it more difficult to steal electricity. And each house would have a mobile-phone enabled meter to make it easy for villagers to pay – and make it easy for Husk to automatically turn the power off for any villager who didn’t pay their bill. 

Armed with all this, Manoj went out to raise money from conventional sources of capital. “The problem”, he told me on the phone last week, “was that at this point we really didn’t have anything more than learnings. We had shut down almost all our existing operations and where pitching investors on something completely new”. 

So with “nothing but learnings”, Manoj went out pitching for conventional capital. 

I’ll fast-forward now to the happy ending. In October of last year Husk Power Systems raised $100 million from traditional sources of capital.  They now have over 200 power installations in India and West Africa, serving over 50,000 households. Their unit economics are strong, and they are growing fast. Bloomberg says they’re headed for an IPO. 

All this despite the fact that the original idea (biomass power) failed. Manoj went through his “WFIO moment” by staying true to the original problem to be solved (rural electrification), but being willing to pivot to a better solution.