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CASE: IDE-03

DATE: 08/20/12

D.LIGHT: SELLING SOLAR TO THE POOR

Distribution and marketing for base-of-the-pyramid markets is super challenging. The value
proposition for our product is strongest for people who don't have electricity, who are also people
who typically don't have access to normal distribution networks. And a lot of them are illiterate.
Typical marketing campaigns are not going to work.
1
— Ned Tozun, President, co-founder and Director, d.light

Ned Tozun, co-founder and President of d.light, a producer of low-cost, solar-powered lamps,
chuckled while watching The Colbert Report. Stephen Colbert, in his caricatured role of an
imperious news anchor, was interviewing Neil MacGregor, the well-respected British author of
the book, A History of the World in 100 Objects. As of 2012, nearly 7 million people―generally
extremely poor, rural inhabitants of developing nations―had purchased one of d.light’s
products, earning the solar lamps a place in MacGregor’s book as the one-hundredth object. At
one point, a large picture of a d.light lamp appeared behind them as Colbert peppered
MacGregor with inane questions and the historian patiently explained how useful the light could
be to those living without electricity.

Tozun, along with co-founder Sam Goldman, started d.light in 2007 after graduating from the
GSB. Five years on, he was pleased with the company’s growth and performance. Sales were
strong and continued to show solid growth even through the global recession. For the founders,
the positive social and environmental impacts of the venture were even more rewarding.

The company had been selling its lights to people who lived without conventional electricity and
relied primarily on candles and kerosene lamps for light. Such fuel-based sources are often
expensive, very dim and dangerous. D.light designed its lamps to be safe, durable and functional,
1
All information in this case is based on interviews with Ned Tozun and Erica Estrada-Liou, co-founders of d.light,
unless otherwise noted.
Michael Kennedy, Gina Jorasch, and Professor Jesper Sorensen prepared this case as the basis for class discussion
rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright © 2012 by the Board of Trustees of the Leland Stanford Junior University. Publically available cases are
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d.light: Selling Solar to the Poor IDE-03 p. 2

at a price point affordable for the poorest, or “base-of-the-pyramid,” customers in the world. In a
relatively short time, the company had successfully scaled its operations from selling a few
hundred units per month to selling between 100,000 and 150,000 units per month in nearly 40
different countries.

D.light’s success had garnered the company a large amount of attention from venture capital
funds and the media. Even as the company continued to grow, however, Tozun and the
leadership team still struggled with several complex issues. Foremost among these challenges
was marketing their products to their target customers―the millions of people living at the
bottom of the economic pyramid. While the lights were selling well, market penetration of
d.light’s products in their key markets was still less than 1%. D.light was also dealing with an
increasingly complex management structure. The rapid expansion into new markets during just
five years had necessitated the opening of several offices abroad and the hiring of about 100
employees. For the young company, keeping the geographically diverse organization mission-
focused and culturally coherent would likely be a future challenge.

GLOBAL ELECTRICITY ACCESS AND LIGHTING

For generations of people born and raised in developed countries, having readily available grid
electricity is a basic prerequisite to an acceptable living standard. But most developing nations
lack the infrastructure and generating capacity to provide even low levels of electric power to
their populations, especially those residing outside major cities and commercial centers (see
Exhibit 2).

In 2010, the United Nations estimated that 1.4 billion people worldwide had no access to
electricity, and an additional 1 billion had access only to sporadic or unreliable power networks
(see Exhibits 3 and 4).2 Impoverished households spent a significant portion of their
income―10-15 percent in some cases―on energy sources such as kerosene and biomass.3

Table 1: Population Without Access to Electricity


MM of Percent of
Region People Population
Developing Countries 1,441 28%
Least Developed Countries (LDCs) 824 79%
Sub-Saharan Africa (SSA) 777 74%
Source: "The Energy Access Situation in Developing Countries," The World Health
Organization, November 2009.

Moreover, burning kerosene or biofuels for light involves a variety of environmental and health
risks (see Exhibit 6). The UN estimated that nearly 2 million deaths per year were attributable
to the effects of burning biomass indoors for cooking or lighting. The majority of these fatalities

2
“Universal Access to Modern Energy for the Poor,” The United Nations Development Programme,
http://www.undp.org/content/undp/en/home/ourwork/environmentandenergy/focus_areas/sustainable-
energy/universal-access.html (July 2, 2012).
3
Source: d.Light.

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d.light: Selling Solar to the Poor IDE-03 p. 3

were women and children.4 Burns and fires were a particular risk in rural huts constructed out of
wood and other flammable materials. Goldman was partially motivated to found d.light by his
experience working in the Peace Corps in Benin, where one of his neighbor’s sons was badly
burned by a kerosene lamp. The 2010 World Energy Outlook report highlights the potentially
serious health hazards of non-electric lighting:

Candles and low-efficiency lanterns emit smoke. Kerosene lamps produce better
light, but they are uncomfortably hot in a tropical climate and they can be difficult
to light. Use of kerosene also imposes health risks, through fires and children
drinking fuel stored in soft drink bottles, and there is emerging evidence of links
with tuberculosis and cancer.

Managing an International Organization

Almost since its 2007 launch d.light had been a very international organization. While the
company’s corporate headquarters were in San Francisco, products were manufactured in China
and sold in Asia and Africa. Even for mature companies, managing cross-border logistics and
cultural differences between offices can be difficult. As Tozun acknowledged, for a start-up
focused on less developed nations, these problems could be particularly acute:

With such a diverse set of people living in really different geographies, it’s too
expensive to get everybody together physically. We have four regional offices,
but we also have people based elsewhere, like Nigeria and Pakistan, so we have a
very scattered international team. It’s been a challenge to build a consistent
company culture across that team. If we had 100 people from the same culture
working in the same building, it would be a lot easier.

D.light cultivated a common company culture in its hiring and management practices to address
the challenges caused by the multitude of offices and cultures within the company. Three core
principles were emphasized: (1) customer focus; (2) integrity; and (3) open collaboration. Tozun
elaborated:

We were founded on a passion for our end customer, of wanting to provide them a
great product and doing whatever we can to make sure they’re delighted. So,
[that means] having customer pictures on the walls of the offices, telling customer
stories, and making that a central motivator for us. We recruit for this passion in
people and we try to do things reinforcing this throughout the organization.

Another quality is integrity. Specifically, whatever we claim or say on the


product packaging, we will over-deliver on. The other part of integrity is not
accepting bribes or dealing with corruption. As a company doing business in
some pretty tough countries, we have to be really clear on this and take a firm
stance.

4
“The Energy Access Situation in Developing Countries,” The World Health Organization, November, 2009.

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d.light: Selling Solar to the Poor IDE-03 p. 4

A final quality we encourage is open collaboration within our teams. We try to


break down managerial barriers as much as possible, so people feel they can
easily reach out and talk with their Chinese colleagues, Indian colleagues and
African colleagues. We’re all one global team and we're all working together to
this common goal, so these ideas of teamwork, openness, transparency, and
collaboration―that's something that we try to really build into the d.light culture
as well.

Another major feature of d.light’s culture and mission was its emphasis on the social impact of
the venture as much as its bottom line. Many structures within the company and the leadership
team kept the company focused on its social mission. Tozun explained:

The tension between the social mission and the profit mission has been less than
we were initially anticipating. Sometimes it comes up, but very rarely. We did
some things structurally that helped, such as having a diverse set of investors. We
have venture capitalists and social enterprise investment funds. We intentionally
weighted the board towards the social enterprise guys. So while the board is very
business savvy, in the end, their bottom line is to deliver social impact combined
with financial success.

Our approach may not be the right approach for every single product designed for
base-of-the-pyramid. But with our particular business, there's less of a conflict
between profit and social mission. With energy and lighting, there's such a strong
value proposition to the customer that a market-based solution makes a lot of
sense. Whereas for something like a medical technology, it doesn't make as much
sense.

SELLING TO THE BOTTOM OF THE PYRAMID

By definition, those who are impoverished have little, if any, disposable income or purchasing
power. Though the design of d.light’s lamps and the efficiency of its manufacturing process
allowed the company to sell its lights very cheaply (as low as $8), the products still were a
substantial investment for millions of people living on incomes of $1 or $2 per day. Sales
growth for d.light had been impressive, and the improved efficiency of the supply chain allowed
the company to expand its product offerings (see Exhibit 8). However, as Tozun noted, the
company was a long way from its goal of widespread adoption:

We want to go deeper in the markets that we’re currently in. If you look at the
market penetration of our products in any given market, it’s still insignificant
compared with the potential. We’ve gone very broad and, in some specific
regions, we have gone deep, but we need to go deeper in more places. That's
something we’re figuring out how to crack. We would love to get 30, 40, 50
percent-plus household penetration in the areas we are selling in right now. But if
you look at all those countries, these technologies have penetrated less than 1
percent of households to date.

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d.light: Selling Solar to the Poor IDE-03 p. 5

As Tozun acknowledged, marketing to base-of-the-pyramid customers was challenging due to


their relative illiteracy and their inexperience as retail customers. However, some companies had
succeeded in selling high-volume, low-margin products to large numbers of the poor. Some
successful examples of this strategy include: Hindustan Unilever Limited in India, which
developed consumer products such as soap and iodized salt packets intended for poor customers;
Casas Bahia, a large Brazilian company, which increased sales of low-priced consumer
electronics to poor customers through a short-term financing program; and many cellular
telephone companies, which had encouraged adoption by poor customers through shared
ownership programs or discounted cell phone rental schemes.5

The company understood that, for many of its customers, purchasing a d.light product could
seem like an enormous sacrifice; the opportunity cost of the light could be food or medicine.
However, d.light believed strongly in its value proposition, which highlighted cost savings and
income generation. The company estimated that many of its customers spent between 5 and 30
percent of their monthly income on kerosene. For some customers, the lamps would pay for
themselves within two months. Moreover, d.light highlighted a United Nations Development
Program report, which found that businesses with quality indoor lighting could increase revenue
by as much as 30 percent due to improved productivity.

Additionally, d.light stressed how its products improved the well being of poor children by
eliminating the well-documented health risks associated with toxic fumes and greatly improving
a child’s ability to do schoolwork. The company cited a World Bank study that found children
performed significantly better on tests after gaining access to improved lighting. Tozun reflected
on how communicating and delivering a strong value proposition going forward was critical to
the company’s future success:

If we don't deliver a good, value-friendly product to our customers, we don't get


paid and we can’t grow the business. So it forces us to design products that are a
good value for money for our customers. That discipline has been instrumental
for us. From the beginning, we felt there was a big opportunity in this off-grid,
base-of-the-pyramid market. We thought we could build a valuable long-term
business if we could crack that market. It’s really hard to crack and it might take a
while, but we felt we would succeed if we stayed focused on the customer that we
initially built the company to serve.

Tozun noted that the low penetration rates also represented a sizable opportunity, providing the
possibility of expanding beyond lighting to other electrical needs for the poor:

We see [the low penetration rates] as having huge potential. We need to figure out
how to expand to a more comprehensive set of energy solutions besides just
lights. How do we expand our brand beyond that? How do we leverage our
distribution network to offer a broader variety of products and better establish
ourselves? It’s a move beyond just replacing kerosene to becoming an energy
provider and a real alternative to grid electricity for these households. We want to
5
C.K. Prahalad, Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, Wharton School
Publishing, 2004.

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d.light: Selling Solar to the Poor IDE-03 p. 6

provide more and more solutions for people, so they don't need to have the grid to
enjoy the benefits of electricity.

Marketing Strategy

D.light believed that establishing credibility with “first adopters” was critical for any successful
marketing campaign. According to Tozun, “At the village level, we’ve seen a tipping point with
first adopters. Once enough people are aware of the technology and that it works, then word-of-
mouth rapidly spreads the information.” One of d.light’s main challenges was overcoming the
reluctance of poor consumers to be early adopters of an unfamiliar product. “They're typically
not first adopters of new technology. They like to wait for new technologies to take off in the
urban areas before they take a risk on something new,” explained Tozun.

In developing a marketing strategy, Tozun and d.light relied heavily on developing as much
contact as possible between potential customers and their products. He explained:

For our customers, this is a brand new product, so it requires some explanation
and demonstration. It usually requires multiple points of communication. People
won’t buy on impulse. It’s a considered purchase. Field research shows that
purchasing value changed with different marketing techniques.

Ideally, we would use in-home trials, in which one or more households in the
community use the light for free and then hopefully talk about the products to
others. Research shows that when customers have the product physically
demonstrated to them, their purchasing value increases significantly. If they can
actually take it home and use it for a few days, then the purchasing value becomes
very high because they start to understand the product’s uses and its full potential
value. (See Exhibit X for research published by Lighting Africa.)

While most customers who had a chance to use the light fully appreciated its potential value,
sending a company representative out to every remote village and conducting in-home
demonstrations for a low-margin, high-volume product was very costly. Tozun acknowledged:
“For us, it’s about finding the optimal level of marketing so that it makes economic sense for us.
Doing in-home demonstrations is really expensive, and may not be feasible in many situations.”

Tozun also pointed out that word-of-mouth marketing could function very differently depending
on the local culture, which could complicate marketing strategies:

In certain Southeast Asian cultures, for instance, when someone gets a new
product, they really like sharing it and telling people about it. In East Africa, [in]
some communities when people get a new product, they don’t like to talk about it
because they don’t want to stick out. If the product doesn’t work, they are afraid
of being a laughingstock. If it does work, they’re afraid of being seen as someone
with special access or special privileges, to whom people would go to ask for
money or favors. So they keep quiet.

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d.light: Selling Solar to the Poor IDE-03 p. 7

For d.light, achieving as much direct engagement with customers as possible without inflating
the company’s budget meant relying on an eclectic collection of distribution partners. According
to Tozun, “A lot depends on the country and the capacity of our distribution partner. We try to
do as much direct engagement and physical demonstration of the products as we can.” The
company attempted to identify and partner with organizations that already engaged significantly
with their target customers. These organizations varied greatly from country to country. D.light
had partnerships with agricultural input providers, gas companies and local education
organizations. In the case of the latter, teachers would demonstrate the lights to schoolchildren,
who then took news of the light home to their parents.

As Tozun explained:

In each country, we have to find the distributors that are the best fit for us. You
won't sell anything unless you figure out how to distribute the product and how to
make the product available for people living in these remote areas where there’s
no electricity and roads are bad. Even if you get there and you have a great
product, it still won't sell unless you can get the marketing mix right and really
deliver the message about what the product does, why the value proposition is
good, and that this is a good investment of their hard-earned money.

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d.light: Selling Solar to the Poor IDE-03 p. 8

Exhibit 1
Bios of d.light Senior Leadership Team

Ned Tozun - President, Founder, & Director


Ned co-founded d.light in 2007 and has served as its President since then. Ned partnered with
Sam Goldman to secure private investment for the company, built up the manufacturing
operations and oversaw the expansion of distribution into nearly 40 countries. In 2011, Ned was
recognized by Forbes as one of the country’s top 30 social entrepreneurs and was selected as an
Asia 21 Young Leader by the Asia Society. Prior to d.light, Ned founded several consumer
product start-ups in Silicon Valley. His most recent position was as CEO and founder of a media
technology company, where he designed and patented technology used to develop several
products launched in the mobile content and specialty gift markets in the U.S., Europe and Japan.
Ned graduated from Stanford with degrees in Computer Science and Earth Systems, and returned
to Stanford to earn his MBA.

Sam Goldman - Chief Customer Officer, Founder, & Director


Sam co-founded d.light in 2007 and served as the company's founding CEO. During his tenure as
CEO, he raised over $11 million in funding, started the India sales and marketing division, and
oversaw multiple product launches, including the award-winning S250 and S10. As a result of
his leadership, Sam has been recognized by Forbes as one of the country’s top 30 social
entrepreneurs and selected as an Ashoka Fellow and World Economic Forum Young Global
Leader. Prior to d.light, he founded and managed multiple ventures in Africa, including
improved agriculture and construction businesses, a for-profit NGO cultivating the “miracle tree”
Moringa oleifera, and the distribution of low-cost latrines, cook stoves and rain water catchment
cisterns. Sam has lived in Cameroon, Mauritania, Pakistan, Peru, India, Rwanda, Canada, Hong
Kong, and the USA. After graduating with degrees in Biology and Environmental Studies from
the University of Victoria, Canada, he earned an MBA from Stanford.

Donn Tice - Chairman & Chief Executive Officer


As Chairman & CEO, Donn Tice is accelerating achievement of d.light’s goal: To improve the
lives of 100 million people. As a d.light advisor since March 2008, a director since November
2008, and Chairman since 2010, Donn brings 30 years of experience in consumer products, clean
technology, and global distribution. He has built $100+ million global businesses and raised
$100 million in capital. His passion for base-of-the-pyramid consumers began as a United
Nations Fellow, where Donn was mentored by the late C.K. Prahalad. As Founder of Sustainable
Solutions (2006-2010), Donn accelerated consumer venture capital-backed portfolio companies.
While CEO of start-up Nano-Tex (2003-2006), his team expanded distribution to 90 brands in 30
countries, through 100 distribution partners, creating a 25x valuation increase. As CEO of
Winterland (1997–2002), sales grew 3.5x, from $30 million to $110 million. Donn is “d.lighted”
to be part of changing the lives of millions of people.

Arun Gore - Director


As President & CEO of Gray Ghost Ventures, Arun brings his entrepreneurial skills, general
management experience and commitment to economic development to Gray Ghost's
international operations, portfolio development and social and financial value creation. He has
run a business operations and management consulting practice since 2006, which manages joint

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ventures for T-Mobile, establishes overseas operations for U.S. firms and promotes private
equity investments for start-ups. As CFO of Cook Inlet T-Mobile, he engaged in managing joint
venture operations and procuring funding of over $1 billion through syndications of senior
secured credit facilities. Arun acquired and transacted multi-million dollar deals and was an
authorized bidder for purchase of licenses worth over $1 billion.

Rajan Kundra, Director


Raj is the Deputy Chief Investment Officer at the Acumen Fund. As Deputy Chief Investment
Officer, Raj oversees Acumen's global investing process, including management of d.light’s
global investment committee, new investment origination, and portfolio management. Raj also
leads Acumen’s principal investing effort in renewable energy, where he led the portfolio launch
in 2007, and in Capital Markets where he helped develop Acumen’s strategy for raising invested
capital, including the successful closing of Acumen Capital Markets, Acumen's first invested
social capital fund. Raj previously held senior positions at Lehman Brothers and J.P. Morgan

Jayant Sinha, Director


Jayant Sinha is the Managing Director of Omidyar Network India Advisors, where he leads
overall investment strategy and operations in India. In his role, Jayant helps Omidyar Network
manage and develop the India-based portfolio across d.light’s Access to Capital and Media,
Markets & Transparency initiatives. Jayant brings more than 20 years of experience in investing
and strategy consulting to his role as Managing Director, as well as a deep understanding of
managing investments and advising businesses in India.

Sandeep Singhal, Director


Sandeep Singhal is a co-founder of Nexus Venture Partners. Prior to Nexus, Sandeep was Co-
Founder and CEO of Medusind Solutions, one of the leading healthcare outsourcing companies
in India. Sandeep is also the co-founder and Managing Director of eVentures, a leading Venture
Capital firm focused on early-stage investments. Sandeep has invested in Customer Asset
(acquired by ICICI Onesource), Mentorix Solutions (acquired by Lionbridge), Intigma (acquired
by Emptoris), MakeMyTrip (sold to SAIF Partners), and remains an investor in Netmagic
Solutions, Contests2win, and Connecturf. Sandeep has held senior roles at McKinsey &
Company, Digital Equipment and EDA Systems.

Source: d.light.

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Exhibit 2
Household Income and Electricity Access

Source: “World Energy Outlook 2010,” International Energy Agency,


http://www.worldenergyoutlook.org/publications/weo-2010/ (July 3, 2012).

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Exhibit 3
Share of Population Without Electricity by Country, 2008

Source: “The Energy Access Situation in Developing Countries” The World Health
Organization, November, 2009.

Exhibit 4
Number of People Without Acess to Electricity and Relying on Traditional Biofuels

Source: “World Energy Outlook 2010,” International Energy Agency,


http://www.worldenergyoutlook.org/publications/weo-2010/ (July 3, 2012).

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Exhibit 5
Relative Energy Consumption, New York state and Sub-Saharan Africa

Source: “World Energy Outlook 2010,” International Energy Agency,


http://www.worldenergyoutlook.org/publications/weo-2010/ (July 3, 2012).

Exhibit 6
Premature Deaths Attributed to Various Causes, Developing Nations

Source: “The Energy Access Situation in Developing Countries,” The World Health
Organization, November, 2009.

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Exhibit 7
Comparison of Basic Light Design Options

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Exhibit 7 (continued)
Comparison of Basic Light Design Options

Source: “Comparison Chart: LEDs vs. Incandescent Light Bulbs vs. Compact Fluorescents
(CFLs),” Design Recycle Inc., http://www.designrecycleinc.com/led%20comp%20chart.html
(July 13, 2012).

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Exhibit 8
d.light: Products and Features

Left to right: the d.light S250, the d.light S10, and the d.light S1

Product Features

 Solar Charging (All models)


o d.light products come equipped with a high-quality, efficient solar panel that is
weather-resistant and installation-free. Extensive outdoor wire included when
panel is separate from the lantern.

 Multiple Usage Options (All models)


o At d.light, we know our customers use their lights for many different activities, so
each product is designed for maximum versatility. The lights can be carried, hung,
or placed in various locations and in many different ways.

 Robust Design (All models)


o All d.light products are designed to withstand daily usage and harsh
environmental conditions. Each individual product is carefully manufactured to
ensure weather-resistance, ability to withstand a two-meter drop, and protection
for internal circuitry from dust and insects.

 Multiple Brightness Settings (d.light S250 and S10)


o d.light products offer 2 - 4 brightness settings. This allows our customers to
optimize light output and energy usage based on their specific needs.

 Smart Battery Indicator (d.light S250)


o The d.light S250 is equipped with a Smart Battery Indicator to show when the
battery is 25%, 50%, 75% and 100% full. The indicator flashes red when the
battery is empty to alert our customers to the need for a full recharge.

 Mobile Phone Charging (d.light S250)


o d.light products can also serve as an energy source for charging mobile phones.
Mobile phones may be charged up to 80% full in as little as one hour.

Source: d.light

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Appendix: d.light Company History

COMPANY HISTORY

After graduating from college with an engineering degree, Ned Tozun worked briefly as an
engineer of audio mixing equipment for film companies before quitting to pursue an
entrepreneurial career. He founded two companies in the Bay Area before applying to the
Stanford GSB with an eye toward launching a social venture. As Tozun explained:

When I went to business school I was really drawn by the concept of social
enterprise. There was an interesting movement happening at Stanford around
social enterprise at that time. I had been doing a lot of volunteer work with my
wife with NGOs in Africa on the HIV/AIDS epidemic and found that experience
really meaningful. My dad’s family is from northern Cyprus and, when I went
there as a kid, electricity was really sporadic and in some areas they didn't have
running water. From a young age I had a sense that there was a very different
part of the world from Silicon Valley, and I really wanted to do something with
my life that would have an impact on people living there. That was my intention
coming into business school. I really wanted to get myself plugged into doing
something in social enterprise, and I really wanted to start something by the time I
graduated. 6

D.light’s other co-founder, Sam Goldman, also had several formative experiences in developing
nations while growing up and then in the Peace Corps that sparked an interest in social
enterprise. According to Tozun:

Sam had a similar perspective going into business school, but he came from a
totally different background. His parents were in USAID, so he grew up in India,
Pakistan, Peru, and parts of Africa. He joined the Peace Corps after undergrad
and then stayed in Benin to start an organization that took Moringa, a medicinal
plant, and distributed it to hospitals as nutrition for pregnant women. Even
though he came from a somewhat anti-corporate mentality, Sam realized that
business actually had an amazing role to play in development, and that attracted
him to business school.

The GSB and the Stanford Design School (the “d-school”) co-teach a class titled
“Entrepreneurial Design for Extreme Affordability” for both MBA and engineering students.
While in the class in the spring of 2006, Tozun and Goldman were paired with Erica Estrada-
Liou and Xianyi Wu, who were earning their engineering graduate degrees. The team’s
assignment was to work with a Burmese irrigation equipment manufacturer known as Proximity
Design. Estrada-Liou, who would travel to Burma several times as part of her research, recalled
the ubiquity of candles in Burmese houses as a lighting solution: “Candles were a big deal. They
didn’t have electricity in the really rural areas and kerosene [had] been banned by the

6
Interview with Ned Tozun, June 13, 2012. Subsequent quotations are from the author’s interviews unless
otherwise noted.

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d.light: Selling Solar to the Poor IDE-03 p. 17

government. Basically, the only lighting sources they had were burning candles or diesel fuel.”
The four team members began thinking of how to design a cheap lighting product for use by
Burmese shopkeepers.

Designing and Manufacturing

In the initial design of the product, the d.light team noted that most lighting solutions in Burma
besides candles and kerosene lamps were battery powered. Estrada-Liou recalled:

In Burma, there was usually a person somewhere that had a diesel generator, and
you could take your battery to this guy and recharge your battery for a fee. Or, in
some cases, the guy would go out on his bike and collect a lot of the batteries, go
to his shop, charge them, and then deliver them back. So in most of the places we
looked at, there just wasn’t any electricity. It was all diesel generator power.

Some on the d.light team also briefly considered developing a village-wide power system, but
according to Estrada-Liou: “We really wanted to do household level, some kind of small
consumer device that you sell to individual families. The smaller unit is scalable and easier to
target and market to smaller buyers.” Once the team decided to design a household lighting unit,
they considered two alternative technologies on which to base their lamps: fluorescent tubing
and LEDs. (See Exhibit 7 for comparison of basic lighting options.)

Fluorescent tubing
Fluorescent lighting is common throughout the world and typical in larger commercial and
industrial spaces because it converts electricity into light more efficiently than incandescent
bulbs. Estrada-Liou elaborated:

We considered fluorescent lighting because it was something that was readily


available in Myanmar and in a lot of developing countries. A lot of the more well
off shopkeepers were using fluorescent tube lights attached to a flooded lead acid
battery―similar to a car battery. But that system’s expensive and dangerous and
environmentally hazardous. We had seen video of a guy recycling a battery in
Burma: he took out the lead plate, took out the acid, put new lead plates in and
poured in new acid, all with no gloves on.

LEDs
In developed countries, Light Emitting Diodes, or LEDs, have typically been used as point light
sources such as in traffic lights and digital signage. Though LEDs rarely featured in household
lighting technology at the time, they had a much lower power consumption rate than fluorescent
bulbs. LEDs could run off a battery and recharge more efficiently, attractive traits to the nascent
d.light team.

LEDs also had a number of intrinsic properties that attracted the design team. They were more
environmentally friendly than incandescent bulbs and fluorescent bulbs because they consumed
less energy and did not require dangerous chemicals. They were also much more durable than
fluorescent and incandescent bulbs, which were usually made of very thin, breakable glass. The
team eventually agreed on a basic design of an LED light powered by a rechargeable battery.

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d.light: Selling Solar to the Poor IDE-03 p. 18

After submitting this concept as their final project in the design course, the d.light team
presented it to Proximity Design and received an extremely positive response.

Founding D.light

The autumn following the Extreme Affordability course, Goldman suggested that the team
members seriously pursue the idea of starting a company. The group decided to manufacture
additional prototypes and explore fundraising options. Estrada-Liou recalled: “We made the
prototypes while were still in school. We tried to improve each new prototype because we
wanted to make a lot of these lights so we could test them in the field. Our first prototype was
made out of PVC. In our next iterations, we moved up to laser-cammed plastic.”

After raising some initial start-up capital and developing the prototypes, Wu and Estrada went
back to Myanmar and Cambodia for additional testing in the field. Meanwhile, Goldman and
Tozun (the MBAs) focused on formalizing the organization and raising additional funds.
Estrada-Liou explained:

Sam and Ned had started entering business plan competitions. One of the
competitions they entered was given by Draper Fisher Juvertson, and the prize
was $250,000. They entered very much on a whim and ended up winning the
competition. Xian and I woke up one day in Cambodia and in our email was a
picture of a giant $250,000 check. At that point, we realized we had a really good
idea and that we could get funding and start manufacturing and selling these.

Soon after, the four team members decided to commit fully to launching a company. In the
spring of 2007 d.light became incorporated. Tozun and Goldman successfully raised around
$1.6 million in funding from a variety of venture capitalists, individuals, and development
financiers. The group then decided that, although they had conducted most of their market
research in Myanmar, the country’s political situation was too risky for their initial launch.
Instead, the company shifted its focus to India. According to Estrada, “I think a couple of our
investors were having a hard time with the fact that our main market was Burma. So, we decided
to change our focus to India. All of our previous design and research was centered on Burma, so
we decided at the end of the summer to go to India with a bunch of prototypes.” The d.light
team began to re-evaluate the light’s design with an eye toward cost control and the Indian
market. According to Estrada-Liou:

We went to India and retested all of our assumptions. Do LEDs make sense? Is
there anything about the Indian household that we need to know in order to
inform our design? And in general, how do people like our light? There were
also a bunch of functional questions about the electronics of the light itself. For
example, we had decided to include multiple brightness levels, but we didn’t want
a ton of different buttons and controls because every single part adds cost. Those
were the types of things that we went to the field to test in India. There were
some minor tweaks that needed to happen, but in general people really liked the
light.

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d.light: Selling Solar to the Poor IDE-03 p. 19

At that point, d.light’s lamp still contained a rechargeable lead acid battery. However, given
India’s extremely unreliable power infrastructure, the team eventually decided to incorporate
solar powered recharging into their lights.

Low Cost Manufacturing

With a goal of achieving low-cost, high-volume production, the company decided to


manufacture its products in China. Tozun recounted how he and Wu traveled to the country to
establish relationships with a local supplier: “We needed to figure out how to make the products
at really good prices, at really high quality. We realized we couldn't do that unless we were
working side by side with our suppliers. There was no way to do that remotely.”

Tozun ended up living in Shenzhen for over three years, developing d.light’s manufacturing and
distribution networks. Despite China’s well-earned reputation as an easy place to do business
and a mecca for low-cost manufacturing, d.light’s status as a start-up company with an unproven
business model posed difficulties. Tozun recalled: “Initially, we arranged meetings with
suppliers through whatever means we could find―through our investors, networks and business
schools. We worked with a third-party organization that helped U.S. companies vet and select
supplier partners in China.”

Although d.light was targeting a very poor customer base, they nonetheless insisted on producing
a quality product that was reliable and durable. These demands, coupled with their low sales
volumes at the time, put the company at a disadvantage in negotiations with Chinese
manufacturers who preferred to make products with cheaper materials and at higher volumes.
Tozun explained:

When you’re a start-up, it’s very difficult to find suppliers in China that want to
work with you. We were very demanding. We had high quality standards. Our
design team was not that organized, so we were always changing our designs and
modifying things, which the suppliers hated. They wanted consistency. And our
volumes were next to nothing. These guys wanted to do hundreds of thousands of
units a month. We were struggling to sell 1,000 units a month. And we were
very demanding on price. So we were definitely not the most attractive partner.

Overcoming the reticence of these suppliers meant convincing them of the future viability of
d.light. Tozun noted how being a start-up company in the notoriously unreliable solar-powered
product industry also posed challenges in partnering with distributors:

No distributor wants to work with a new company with one product to sell. If you
look at the history of solar lighting products in these markets, anything that had
launched previously had been a disaster because the products were so low quality.
People try them out, they break after a couple months and customers reject them.
It’s really bad for the distributor and it’s bad for the distributor’s brand. Since we
had no track record and no real volumes, it was a problem with distributors who
hadn’t marketed similar types of products before. We couldn’t drive any

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d.light: Selling Solar to the Poor IDE-03 p. 20

marketing support. We had no real teams on the ground in these countries. So


what distributor was going to want to work with us?

These problems had been somewhat ameliorated as the company grew its sales and revenue.
According to Tozun: “Now that we’re bigger, we have good marketing support, we have a strong
track record and we have a lot of volume. We're a much more attractive partner for these
distributors. Getting those initial partners to come on board on both the supply side and the
distribution side was absolutely critical.”

Source: Written by casewriter from d.light company sources.

This document is authorized for use only in Casos Insper Casos Insper's MARKTRENDS_OPT_A - 2018/61 course at INSPER - Instituto de Ensino e Pesquisa, from February 2018 to August
2018.