Ned Tozun talks about how to find your funding as you start and grow your social enterprise.

Find your funding with Ned Tozun of d.light

Ned Tozun, d.light

Social entrepreneurs take on intractable problems. To tackle global challenges, you’re going to need to find funding.

One such massive problem is global energy poverty. According to the International Energy Agency, globally 1.2 billion people are without access to electricity. To light their homes, they often depend on kerosene, which is expensive, consuming precious resources from those who can least afford it. Kerosene fumes are hazardous to breathe. When families gain access to solar lights, their expenses go down, their health improves, and often children in the home study later into the night, improving education.

d.light transforms how people use and pay for electricity. They make solar-powered products for people without access to electricity. Their work has impacted 71 million people worldwide.

Earlier this year, d.light raised $40 million in funding. They raised $20 million in equity, $10 million in debt and $10 million in grant funding. d.light co-founder Ned Tozun took the time in this interview to break down the funding process.

Ned has always had a wide variety of interests. While he was seeking his undergraduate degree, he switched degree tracks eight times, ending up with a dual degree in computer science and earth systems.

While he was in college, he started a few small companies. He found that he was well-suited for entrepreneurship. “I found my jack-of-all-trades nature was well-suited for it,” he told me.

After college, he co-founded a couple of companies. And, because he is interested in so many things, he also found time to volunteer. He traveled to Africa and worked with people with HIV/AIDS. “I was really interested in the way technology can make a transformative impact in people’s lives, and where business can be a vehicle for disseminating that kind of technology.”

His interest in the intersection between technology, business and impact compelled him to return to Stanford for his MBA. Because of his interest in social entrepreneurship, Ned attempted to sign up for the Design for Extreme Affordability course, but the course was full. Design for Extreme Affordability is a project-based course where students work in teams, using design thinking methods, to develop products and services that serve the needs of the world’s poor. Unfortunately, the course was full. Not to be deterred, Ned showed up for class. He showed up the next day and the day after. After a month of persistence, he was enrolled.

It was in this course that Ned met Sam Goldman. You may remember Sam’s story from episode 122 of Social Entrepreneur. Together, Sam and Ned created the business model that would eventually become d.light.

Seed Funding

Ned and Sam started with the concept of d.light but did not yet have a viable business model. They were students and needed funding to build prototypes, test proofs-of-concept in the market, fund trips to developing countries and to do research. They entered several pitch competitions. A pitch competition involves entrepreneurs competing for prize money by pitching their idea for a new business. The pitches are quick, often five or fifteen minutes.

As Ned and Sam participated in several competitions, they improved their pitching skills, winning $5,000 to $10,000 at a time. Ned recalls, “For us, that was a huge amount of money.”

With this money, Ned and Sam made progress with their prototypes. They attracted small investments from a couple of their professors in the range of $25,000 to $50,000. This early money attracted more investors. They could raise about $100k from angel investors.

Ned and Sam continued to participate in pitch competitions, honing their pitch with each event. They heard about an upcoming event being held by venture capital firm Draper Fisher Jurvetson (DFJ). The prize money was $250,000. There was only one problem. The competition is open only to those who had one their school’s pitch competition. Though Ned and Sam were participating in Stanford’s pitch competition, they had not yet won. They contacted DFJ and boldly told them that, while they had not yet won, they were going to win. The organizers took them at their word and let them in.

d.light went on to win the Stanford pitch competition and the competition by DFJ, earning them $250,000. Ned remembers that the competition was not based on social needs, but on the business opportunity.

Ned explains, “We told a really compelling story. We presented what was clearly a big market opportunity, and also a market failure that was happening that we felt business could address – our company could address.”

Ned and Sam came to understand that, they had to start with the clear and compelling business case, and that was based on data from their field research. They knew how much families spent on kerosene or other fuels. They knew where they needed to be in a price point. They had prototypes that were well-received in the field.

But they also knew that stories sell. For example, while working in the field, they met a woman who lived on one dollar per day. They left the prototype with her for two weeks. When they returned to collect the prototype and to gather data, Ned says, “Her life was totally transformed. She saved up money to buy this prototype.” The data was critical, but the stories made the difference, especially when the lives of the customers are so different from the lives of the investors.

One of Ned’s professors told him, “Once you raise your first $250k, the rest comes more easily.” Ned found that to be true. Early money attracts more money. The day after winning $250,000 from DFJ, an investor who knew Ned from his previous companies took him out for breakfast. After asking several questions, he offered to match the DFJ funding.

During this seed round of investing, d.light also attracted impact investors, those who want to make a social impact with their investments. Graymatters Capital and the Acumen Fund invested. Altogether, d.light raised $1.5 million in seed investment in nine months.

As Ned and Sam graduated from Stanford, they traveled to India. India was an interesting choice. Both Ned and Sam had lived in Africa. However, they chose India specifically because it was a tougher use case. There was a high level of demand for off-grid solar. And, it’s a very competitive market. They wanted to build d.light into a global organization with massive impact. Ned reasoned, “If we didn’t figure out India, we’d never succeed.”

Series A

About 15 months after their initial seed funding, Ned and Sam did a Series A round of funding. Series A is often the first significant round of venture capital financing. Series A is the name of the class of preferred stock sold to investors in exchange for their investment.

Nexus Venture Partners led the Series A. Nexus has a presence in Silicon Valley, but they also have a strong presence in India and understood the Indian context. In their Series A round, d.light raised $6 million.

Other equity investments followed. The Omidyar Network invested. Omidyar Network was started by Pierre Omidyar, the founder of eBay.

Grant Funding

Interestingly, even though there are grants available for providing solar lighting to those living without access to electricity, d.light did not depend on grant funds to subsidize the price. They let the market set the price. However, there are high-risk markets for which venture capital is not well suited. During their series D round of funding, d.light secured grant funding from Beyond the Grid, the Shell Foundation, and others.

Funding through Debt

As d.light became sizeable and sustainable, they could access lines of credit to fund their growth. This debt financing was available from both impact-focused lenders and traditional commercial lenders.

Ned Tozun’s Advice on Finding Funding

After several rounds of funding, the latest raising $40 million, Ned Tozun has learned a great deal about how to find the right funding. Ned encourages aspiring and early-stage social entrepreneurs to think big but to start with small. And as you start, pick the right investors. Find investors who are aligned with your core mission. When investors come on board, they will want to place a representative on your board. Know who that person is before you accept the funding. Find someone who will help you work through the inevitable challenges of starting a company.

Ned encourages early-stage social entrepreneurs to find investors who have the capacity to continue to invest in several rounds. He also says that funding will take longer than you think, so start early. And, because opportunities will emerge, you will probably need to raise more money than you think.

Social Entrepreneurship Quotes from Ned Tozun

[spp-tweet tweet=”“I love entrepreneurship.” @nedtozun, @dlightdesign”]

[spp-tweet tweet=”“I didn’t think of myself as a business school type.” @nedtozun, @dlightdesign“]

[spp-tweet tweet=”“Always have a prototype.” @nedtozun, @dlightdesign“]

[spp-tweet tweet=”“The overall case is data-based, and supplement that with stories.”  @nedtozun, @dlightdesign“]

“We wanted to build a global organization with big impact.”

“Initially, we didn’t take any grants.”

[spp-tweet tweet=”“We never wanted to be reliant on grant funding.” @nedtozun, @dlightdesign“]

“Funding always takes longer than we predicted.”

“You’re probably going to have to raise more money than you think.”

[spp-tweet tweet=”“It’s important to pick the right investors.” @nedtozun, @dlightdesign“]

“You want investors who have the stamina for the long haul.”

[spp-tweet tweet=”“If we want to have a big impact, we’ve got to scale up.” @nedtozun, @dlightdesign“]

“Find out who at your investor is going to be on your board.”

“These are people you’re going to be working closely with for a long time.”

“Find investors who have the capacity to support through the long run.”

[spp-tweet tweet=”“Just go for it.” @nedtozun, @dlightdesign“]

[spp-tweet tweet=”“Think big.” @nedtozun, @dlightdesign“]

“Once you start and get into it, things will start happening.”

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About the Author
Tony Loyd is a leadership development expert. He is a best-selling author, keynote speaker, and coach. He helps purpose-driven business leaders to thrive so that they can connect and contribute at a deeper level. Find out more at

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