They knew they had a good thing in their hands, but they weren’t sure if it would find any takers. So, this quintet, all Stanford Business School graduates, decided to user-test the product. The product in question was a battery-operated light-emitting diode (LED) lamp, developed for the rural market. They distributed a few of the lamps in New Keringa village, Orissa. A week later, they had their market validation, albeit from an unexpected source—the police.

By replacing a kerosene lamp with a D.Light, a consumer can expect to save up to $150 over five years, according to Acumen Fund.

“We were totally surprised by the reaction when we visited the village after a week. A lady pleaded with us to supply another lamp as hers had been confiscated by the local police,” says Nedjip Tozun, one of the B-school grads. The policemen had taken away the lamps because they themselves were often in the dark due to frequent power cuts, sometimes lasting for a few hours.

It was then that the five-some realised that the product they had designed in their classroom in the US was an instant hit. They were part of the ‘Design for Extreme Affordability’ course, which they had enrolled for at the Stanford Institute of Design (as part of their MBA course).

According to the 2001 census, about 43.5% of India’s households have electricity connections compared to 30.5% a decade ago. The majority of the rural population still has no access to electricity and is dependent on kerosene lamps.

Government data says there are about 18,000 villages in remote and inaccessible areas without electricity. Even in villages with electricity, many households don’t have connections.

It was this market opportunity that Tozun, the company’s President, and his four friends—Sam Goldman (CEO), Xianyi Wu (VP-Product Design), Erica Estrada and Gabriel Risk—wanted to tap. However, they knew affordability would be a challenge as a majority of their potential customers were poor. Moreover, reaching them would be difficult because of the thinly spread population.

Convinced that these issues could be handled, the five launched D.Light Design in 2007. Initially, the company operated out of the US, but later, realising that they could do more by being close to the target markets, they moved to India.

Before moving, Tozun spent some time in China, where the lamps are manufactured. Goldman shifted immediately to focus on sales and marketing.

Unique Distribution Strategy

The company has so far launched two series of products—Nova and Solata—with prices ranging from Rs 800 to Rs 1,600. The lamps can be charged using AC power or solar panels. When fully charged, the Nova series can provide illumination for up to 12 hours.

Developing the products was a big challenge. But after crossing that hurdle, the promoters knew they had a much tougher job at hand: Creating awareness among potential users in remote areas. Taking the conventional rural-supply chain route adopted by FMCG firms didn’t seem quite right. Reason: The availability of the products at retail points would not necessarily result in sales.

After some brainstorming and groundwork, the D.Light promoters hit upon the idea of creating ‘rural entrepreneurs’. The plan was to build a base of 1,500 rural entrepreneurs, who would each handle a “captive” market of 2,000 households, says Mandeep Singh, COO, D.Light. The entrepreneurs would source products from dealers. “This (rural entrepreneur network) will function as our main distribution channel,” explains Singh. “Our products need to be demonstrated to the customers by someone known to them, in order to build trust.”

The company is also selling its products through corporate retail chains, which have a presence in rural areas.

Willing Backers

The promoters managed to convince investors to buy into their plan to cater to the bottom of the pyramid. Six of them—Acumen Fund, Draper Fisher Jurvetson, Garage Technology Ventures, Gray Matters Capital, the Mahindra Group and Nexus India Capital—have jointly invested in excess of $6 million in D.Light.

Of that, Acumen has invested $1 million. “We believe this is the best product in the market,” the Fund said in an e-mail response to a question about its investment rationale. “By replacing a kerosene lamp with a D.Light, a consumer can expect to experience cost savings of up to $150 over five years.” The Mahindra Group did not respond to a questionnaire.

In the last two years, D.Light has sold more than 200,000 units in the Indian market. “We need to sell millions of units to achieve economies of scale and make profits,” says Tozun. But he did not reveal any financial details.

Sheetal Attri, who lives in Ghhandhholi village near Aligarh, bought her first LED lamp in March this year. Subsequently, she invested in two more, with a mobile charging facility, at Rs 1,250 apiece. “They have many benefits. There is no light (electricity) in the villages, so cooking becomes a problem at night,” says Sheetal. “During the rains, due to the wind and water you cannot light deepaks (oil based lamps), so this (LED lamp) is helpful.”

The firm aims to sell two million LED lamps (covering about 10 million people) by 2010 and 20 million lamps by 2020. Customers using kerosene lamps would be able to recover their investments in less than eight months, claims Singh.

But it’s not just about money. Amit Kumar Choudhary, from Bhojaka village in Aligarh district, bought the lamps because they provided flexibility in terms of usage. Earlier, he was using a CFL lamp, which did not survive a power surge and was also inconvenient to carry around. “I hope all farmers use this, especially since there is no electricity in the villages. The kerosene that gets wasted can be saved this way,” says Choudhary, who has sold 300 lamps since November last year.

D.Light is now working on new, cheaper products for the nearly 300 million people living in poverty. Slowly but steadily, it aims to expose more and more poor homes to some electricity.