Pylon, an Egyptian infrastructure management start-up for emerging water and electricity utilities, has received a seed round of $19 million. The United States-based Endure Capital, backed by British International Investment (formerly CDC Group), the UK government’s development finance institution led the round with participation from Cathexis Ventures, Loftyinc Ventures, Khawarizmi Ventures, and many other angel investors.
This is one of the largest seed investments from the MENA region. Pylon will utilize the fund to grow beyond its existing markets of Egypt and the Philippines to Southeast Asia, Latin America, Africa, and other emerging countries. This is the start-up’s first venture round of investment.
Pylon has been bootstrapped by Ahmed Ashour, and his co-founder, CTO Omar Radi, since 2017. With more than a decade of expertise in the metering and utility industry, he has overseen the installation of smart metering technologies (especially hardware) for different organizations across Africa, Europe, Asia, and the Middle East.
When he recognized a need in the market for solutions targeted to the demands of water and energy distributors in Egypt and other emerging economies in 2016, he came up with the idea that birthed Pylon. Most metering businesses, he added, employed software created for developed countries with different needs and issues.
“We have seen them [foreign software] used in other projects but eventually experienced great failures. We started [Pylon] to replace them because their solution failed on the ground,” Ashour said.
Pylon helps water and distribution firms overcome several issues, including a high rate of unpaid bills, high power costs, water theft, and technical losses due to a lack of maintenance or law enforcement. Because of these three concerns, these utility firms have lost 40% of their revenue. Pylon develops solutions to make them more efficient and stop the bleeding, which results in annual losses of hundreds of billions of dollars in emerging countries.
Pylon’s software collects data from the grids, analyses it, and pinpoints where supply chain theft and losses occur. It then automates the firms’ invoicing procedures, much like telecom providers in these regions have done in the past.
With no upfront investment, Pylon says it can help utility companies reduce their losses to 8%, in addition to improving their top line. The company said it doesn’t charge its customers an upfront cost for its hardware. However, its smart metering-as-a-service (SMaaS) model makes it easy for cash-conscious utility companies to deploy its solution at scale.
“We believe that the electricity sector is following the footsteps of the telecom industry and the curve is starting to show. So we just mirrored the billing solution, and with the data detection, we can detect who exactly is stealing electricity and where the losses are happening,” said the CEO.
“Also, since those utilities are cash-strapped and cannot upgrade, we offer them this solution as a subscription model. So it’s a low-capex model where they subscribe with us, pay around 10-12% of the initial cost of their previous solution, and can recuperate the revenues. So just by signing with us, they start making more money and increasing their top line and bottom line” he added.
Pylon currently enjoys patronage from over 12 different utility companies (seven in the private sector and five in public). In Egypt and the Philippines, it claimed to have served over 1 million metering endpoints over 26 different meter models.
In 2021, the corporation claims to have grown its revenues by 3.5 times and is profitable. Apart from developing a successful company, the founders are concerned about how Pylon’s smart electrical networks contribute to environmental sustainability.
“We believe big time in our role in helping the environment and helping with the challenges that we are currently facing,” the CEO said. “Emissions coming from the electricity sector is one of the biggest sources of CO2 emissions on the planet. We can make electricity efficient and reduce [emissions] by 25% when utilities subscribe with us.”
One of its objectives is to reduce overall CO2 emissions by 1 gigaton by 2035. Water losses in emerging economies, on the other hand, exceed 45 million cubic meters per day. “Pylon has the potential to cut this by up to 22%, providing enough water to service over 40 million people,” the business stated.
The Y Combinator-backed business estimates that the market opportunity for water and energy distribution in ten emerging economies is worth more than $20 billion. It is now concentrating on a quarter of that total, which includes Egypt, the Philippines, Brazil, and Africa. According to Ashour, the Egyptian startup’s ultimate goal is to gain greater market share over time, and an expansion to Southeast Asia, another fragmented market, is in the works.
Pylon’s short-term goal, according to Ashour, is to achieve 3 million meters across all of its markets, indicating a 4x year-over-year increase. Pylon’s smart grid technology has already been installed at over 2 million endpoints across 15 distribution firms spanning two continents, according to the startup.
In this next era of expansion, getting its technology right will be critical. As a result, Pylon will be able to expand its engineering and product development thanks to this seed funding, which is one of the largest in the MENA area.