Startups to Watch: KESK

Five One Invest sat down with Basima Abdulrahman, Founder and CEO of KESK, to discuss her remarkable startup journey, the challenges faced by green building entrepreneurs, and her recent, momentous six-figure seed funding round from Euphrates Venture Capital Fund.

Most Iraqi residents do not have access to 24-hour electricity provided by the public utility. In most cases, residents are getting anywhere from four to twelve hours a day from the public grid, and are left to find solutions from private means. These private generators can be affordable, but are generally harmful to the environment.

Enter Basima Abdulrahman, Founder and CEO of KESK, who is an ardent advocate of sustainable energy solutions. KESK (“green” in Kurdish) was founded in 2018, and offers green engineering and design consultancy. Recently, it has expanded its products to include branded solar-powered AC units. Basima is an expert in green building design and the green building rating system LEED (Leadership in Energy and Environmental Design).

Basima received the much-coveted Cartier’s Women Initiative (CWI) Award in May of this year. One of eight laureates, Basima, representing the MENA region, won the top prize of $100K for KESK. Basima highlights, “The CWI is important because it challenges social norms and gender stereotypes to unlock women's potential. It makes us believe more in what we're doing and know that what we're doing is much needed.”

Be the Change you Want to See

Basima 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 her inspirational entrepreneurial journey. Among her first steps into the green space, she  introduced the Iraqi market to the concept of green building, sustainability, and renewable energy. To address the ballooning gap between supply and demand she sees in the market, Basima keeps advancing a paradigmatic shift for the market. For her, It is not about increasing energy production; rather, it is about energy efficiency. Thus, in her opinion, the problem lies with energy losses, versus energy production, at both the infrastructural and the end-user levels.

A Paradigm Shift 

For a business such as KESK, the opportunity is massive. Basima explains, “We need to change to energy saving, and this way renewable energy can come as a solution to support (not substitute) the main (electricity) grid.” KESK’s consulting services are focused on promoting renewable energy and comprehensive and holistic green solutions with the goal of decreasing the load on the electrical power grid. In 2020, KESK introduced its flagship product, a standalone, batteryless solar-powered AC unit. Traditionally solar-powered units require battery chargers to operate. KESK’s insight into the Iraqi market is that many consumers end up charging the batteries through the primary electrical power grid, thus defeating the whole solar concept of alleviating dependency and pressure on the grid. As a result of this simplification, the KESK units are cheaper and more straightforward than whole-house solar installations. As Basima reinforces, “The units are going to be less complicated, more affordable, and more responsible when they come with no battery component.” 

Another innovation that is helping the sales process is offering end consumers financing plans. KESK has partnered with entities that provide consumer durable financing—these plans enable her customers to buy consumer products upfront and pay in installments over a period. Additionally, Basima guarantees “that consumers can get their money back from the energy-saving within one year. So, they can pay for it and make up for it within the same time.” 

Green Challenges

Basima’s journey was not without its challenges. She had to overcome cultural barriers, lack of technology talent, and a lack of supportive legislation. 

Cultural Resistance

Basima explains, “People are more comfortable dealing with difficult solutions that they’re used to ...versus dealing with easier implementable and green solutions just because they're not used to it.” Businesses and consumers fear the unknown. If it ain't broke, then why fix it? A big piece of Basima’s current role is to promote awareness of her offering through education.  

Local expertise and talent 

With a lack of technical skills in the Iraqi labor market, the green energy vertical has faced slow growth. Other companies and initiatives have attempted to solve this issue by contracting international consultants, which has led to several failures since these external experts have limited awareness of local challenges and complexities. As green energy projects have failed, local distrust grows. “They're creating this false narrative around these solutions,” Basima reflects. Basima is dedicated to building local talent to empower Iraqis and to show that a startup can succeed with a local team. She’s proud of the success that they’ve had in this area up to this point, and is excited about turning this perceived disadvantage into a strength.

Regulatory Support (Or Lack of) 

Government-enforced regulations drive the successful implementation of sustainable building, design, and construction in most markets. Basima muses, “Our codes and regulations are outdated. They don't address the current environmental and economic challenges. We need new and updated regulations that incentivize sustainable solutions.” Basima firmly believes that incentivizing the private sector will drive forth the much-needed change. 

Entrepreneurial Challenges

Besides the hurdles KESK has experienced as a green energy company, Basima also shared the various entrepreneurship-specific obstacles facing Iraqi startups. She notes that Iraqi startups carry the burden of antiquated regulatory business laws such as exceptionally lengthy registration processes, complex and expensive bureaucratic procedures, and taxation policies that do not favor small businesses. The legal framework/judicial system is not well equipped to handle an innovation economy. Basima states, “The laws don't support entrepreneurs. They are not as flexible as other local and global laws,such as Delaware or Dubai. It does not make investment appealing.” 

Keeping in mind the nascent nature of the Iraqi entrepreneurial ecosystem, there is not enough supply of investment dollars to go around, even while the number of fundable startups remains relatively low. Basima reflects, “Unfortunately, we (startups) don't have many financing opportunities. Also, understanding the whole fundraising parameters and factors, how to negotiate terms, and what would be the best thing for the business at what stage (are a challenge).” 

International Recognition and Investor Interest

Winning the CWI Award opened an entirely new world for Basima. It put KESK (and Iraq) on the global map. Basima proudly states, “Somehow, the CWI Award put our company under the spotlight. A lot of potential investors and partners were not aware of our existence...it sparked this start of negotiating with different potential investors.” And that is when her entrepreneurial journey quickly began to change. Basima explains, “Funny enough; we thought that it was too early to fundraise. We always thought that we can go slowly and cautiously.” Suddenly contacted by local and international investors, her disposition swiftly changed. Basima thought, “Maybe it was time that we get some investment that will help us go much faster than we planned for and grow much bigger!” 

Up until its initial investor conversations, KESK had adopted a conservative growth model, a lean model focused on maintaining a slow cash burn rate. When the investors started knocking on the door, that whole approach was challenged. 

The Process

Among the several local and international investors that showed initial interest in an investment in KESK, The Euphrates Venture Capital Fund stood out from the beginning. The managing partners of Euphrates Venture Capital Fund had a plethora of experience within the Iraqi market from managing Euphrates Iraq Fund, a hedge fund dedicated exclusively to public equities in Iraq, for over a decade. Basima loved the fact that they understood the complexities of the Iraqi market. She also appreciated the fact that the Partners had diverse backgrounds with numerous connections. She thought that they could share operating expertise, provide future funding opportunities, and introduce a vast pool of clients. (Learn more about Euphrates, and its Founder and Managing Partner Geoffrey Batt, in our interview here from last month.)

There was immediate mutual respect and understanding among the parties; as Basima highlights, “They understand the vision, they respect us, they don't want to interfere with what we're doing because they love what we're doing.” According to Basima, much of the original discussions were about the team, as well as the potential scalability of the business. Additionally, she detailed the technology and the modifications that the team would make to succeed in the Iraqi market. Because of that early appreciation for each other, the negotiation process did not take much time.

Basima felt lucky that she had knowledgeable advisors around her who could assist her in the investment process. The Venture Fund, itself, helped KESK by employing the proper company structure, thus safeguarding KESK’s growth and scalability while ensuring its attractiveness to future investors. Basima acknowledges, “We feel that we did not just acquire an investment, but we also acquired a set of skills and expertise to go along with it.” 

Next Steps

KESK is already registered and operating in Erbil. Basima will now register KESK in Baghdad. Expansion means that KESK will deploy a considerable chunk of the investment into hardware and product development, while allocating the rest into human resources, sales, and marketing to meet its growth goals.

Investors. Listen Up!

Basima insists that investors need to realize that Iraq is a massive market. The opportunities are unlimited. The country is on the brink of a new era, and the potential is enormous. Startups are offering much-needed solutions. Basima advises, “The investors need to be adventurous. If a solution is meaningful and if the team is strong, then don’t think twice. There is no doubt that any idea can succeed because there is so much space for new ideas. Just look into the right team and the right idea.”

She would encourage investors into the Iraq market to continue diversifying beyond the more developed industries, such as e-commerce and logistics, and to consider backing more female founders. As a female founder, Basima faces one more additional barrier to attracting funding. Regionally, only 14% of startups in the MENA region are female-led. Basima expounds, “In general women-led startups receive way less VC funding. In 2020 there was a statistic that only 2.3% of VC funding went to women-led startups. Even fewer women-led startups became unicorns. We are talking globally. We are not even talking about the Middle East or Iraq.” 

The investment has been a big morale boost for Basima and KESK in validating their vision to change electricity consumption in Iraq. The icing on the cake of all of this is that the investors sought Basima out and not the other way around. She proudly states, “We feel more confident, and we feel appreciated. But also, we feel stronger that we are not alone now. And that someone else believes in us. This means that this is something (KESK) worth investing in.”