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Monday, Aug. 20, 2012
This OpEd was originally published on Dowser.org and can be found here.
From August 12 to 24, a group of 19 social entrepreneurs from all over the world is in Silicon Valley for the Global Social Benefit Incubator (GSBI), of the Center for Science, Technology, and Society at Santa Clara University. The program combines months of online mentoring and exercises led by Valley executives and industry experts with a two-week “boot camp” of back-to-back classes, capped by a public business-plan presentation event. The program is designed to help entrepreneurs expand and magnify the impact of their social ventures, and prepare their business plans for presentation to potential partners and funders.
Some of the participants at the GSBI are sharing dispatches from the 10th annual GSBI with Dowser. Dr. Paul Meissner, one of the 70 mentors who volunteer their time to work with social entrepreneurs, shared his thoughts.
IMPACT MENTORING
Every year, I look forward to mid-August, when the cohort of social entrepreneurs comes to the Global Social Benefit Incubator. This year I am privileged to work with Hugo Verkuijl, CEO of Mali Biocarburant who produces bio-oils and fuels that are generated locally.
For mentoring to have its greatest impact, it must be a life-changing experience for both the mentor and the entrepreneur. Whether the social entrepreneur is advanced in developing his business, or is just nucleating an idea, I find that mentoring is more than simply “giving back,” or sharing real-life experience from the Silicon Valley. Let’s face it, many parts of the world are as innovative, as fast moving, and breakthrough-producing as we are.
For me it is an in-depth way to open my eyes to parts of the world I would never have known otherwise, and a path to relationships I would never have had had I simply decided to write a check to a worthy international aid organization.
Maybe the easiest way to describe what I mean is to relate my experience with Global Easy Water Products (GEWP) back in 2005. Suresh Subramanian, the brilliant and hardworking board member of this for-profit offshoot of the non-profit International Development Enterprises India (IDEI), where he was COO, came to Santa Clara to get help create a business model to reach subsistence farmers who could use drip irrigation to provide food for their families. It became clear right away that just like many Silicon Valley startups, he had trouble deciding on his target markets and didn’t understand how much money he needed to scale.
Suresh had a heart for subsistence small-plot farmers who desperately needed help but were expensive to educate and hard to reach given his limited distribution network. We spent time together online and then for two weeks on SCU’s campus and found a new way to segment his markets. He realized in the end that to impact subsistence farmers he needed to first focus on more-established farmers who understood drip irrigation and could save a lot of money by using his much cheaper solution. Once his distribution channel was in place, he could better reach those in most need of the social benefit of his product.
Suresh then took this model and worked with agribusiness enterprises in India like sugarcane mills, which agreed to provide very short-term agricultural loans to farmer to buy the drip systems. In exchange, they received price guarantees on the sugarcane produced.
After sorting out the market, Suresh presented me and my fellow mentor, a Silicon Valley private investor named Bob Dench, with a financial model using quarterly and annual figures. He concluded he needed just over $100K to launch his expansion. Not having the least experience in agriculture, I completely missed a critical issue with the model that was caught right away by Bob, who has years of experience in agri-business. The key to the financial model was MONTHLY cash burn, taking into account the seasonal planting and revenue cycles of the business. This simple change to the calculation meant the real cash need was more than 5x larger than the quarterly model predicted.
Getting this insider’s perspective on rural markets, agricultural business and Indian markets brought me to a much better understanding of our small planet, and taught me how an idea and a relationship can impact many thousands of lives.
The energy and excitement created during these late-night working sessions led to celebrations as Bob and I watched Suresh get $1MM in equity funding from Acumen Fund and successfully ramp his business to $4MM per year. GEWP is still a successful for-profit enterprise, seven years later.
Like anything that requires you to really understand something that is foreign or to step far outside your comfort zone, being a mentor to a global social entrepreneur is a thrill, an exciting way to challenge your creativity and innovation in ways even Silicon Valley never imagined. I’ve come away different as a human being, richer and more connected in a globalizing world that needs innovation and collaboration more than ever.
Paul Meissner is a native of the Bay Area and a graduate of UC Berkeley. After receiving a Ph.D. in engineering from Stanford, he spent nearly 25 years in Silicon Valley in companies ranging from Coherent Inc. to Applied Materials. More recently he has held CEO positions in the telecom and renewable energy sectors.
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Tuesday, Aug. 14, 2012
This article was originally published by the Huffington Post Blog. The original link can be found here.
It's easy to identify financial-first enterprises that have scaled to a truly global level in many sectors: soft drinks (Coke, Pepsi), financial services (HSBC), petroleum-based fuels (Royal Dutch/Shell), consumer products (P&G), mobile phones (Samsung, Nokia, Apple), etc.; the list goes on with products and services reaching billions. But there are relatively few examples of social enterprises that have scaled significantly or globally. Why? What factors influence whether social enterprises can scale, beyond the obvious need for financial capital? How do these factors vary in relation to the goods or services the social enterprise delivers, as a function of the entrepreneur's personal motivation, or in the cultural context in which the enterprise operates?
Clearly, if there were easy answers to these and other questions, there would be more social enterprises that have benefited massive numbers of poor. Rather than trying to answer them, I'll explore a few dimensions to the challenge and raise more questions.
In June, I wrote about disruptive innovation, with Aravind Eye Care as an example in health care. Aravind also represents a social enterprise that has scaled in at least two dimensions: within a country and across its value chain. Aurolab is the manufacturing division, ensuring high quality, affordable ophthalmic consumables; the Eye Bank procures corneas for sight-restoring surgery; Aravind offers education and training to develop health care and business human resources for its hospitals (and others); notably, the Aravind Medical Research Foundation conduct basic and translational research to ensure a pipeline of new innovations "to reduce the burden of blindness." Arravind essentially has built the full value chain for vision, but it has not scaled (on its own) outside of India. Its singular focus on vision is undoubtedly a factor in its admirable success. Why, so far, has the model not been successfully replicated in other countries at meaningful scale?
Husk Power Systems, which I wrote about in April, is scaling primarily within Bihar, one of the poorest states of India. The technology and business model appear well suited to scale beyond; for instance, the HPS biomass-powered electrical generators can accept other feedstock. But, its ambitions just within Bihar could fully occupy the stellar management team for at least the next 5 years. What would be required to enable parallel scaling in multiple geographies simultaneously?
Gram Vikas, now working in more than 1,000 villages in India, is a great example of what my colleague Jim Koch calls depth scaling, offering an array of programs including safe drinking water, sanitation, education, renewable energy, habitats, food security, and natural resource management. The portfolio of services is somewhat context specific; for example, transforming cultural paradigms such as the caste system are paramount for Gram Vikas to realize its compelling vision of "an equitable and sustainable society where people live in peace with dignity." What changes in the portfolio of services and the ways they are delivered would be necessary to scale beyond India?
Fundacion Paraguaya is another example of deep scaling within a country. FP's initial microfinance services led to programs in entrepreneurship education, organic agriculture, and livelihood training. Notably, FP seeks to catalyze replication of its organic school and provides resources to help others establish self-sufficient schools. The notion is a social enterprise franchise model, in which a different management team operates essentially the same business model in a different geography with whatever (hopefully minor) business model modifications necessary for success in the local context. FP is also a good example of what one might call "open source" social enterprise: the originator wants others to copy a successful innovation for the poor. Who will leverage these social franchising resources, and where?
The scaling model most similar to a multinational corporation might be termed a Multi-National Social Enterprise (MNSE). A MNSE might be characterized as offering essentially the service(s) in a number of different countries. Riders for Health enables delivery of health care and other services by managing appropriate vehicle fleets. Its focus on a well-defined solution has enabled it to operate in 10 countries in Africa.
One could debate whether BRAC is a social enterprise or a "traditional" NGO; its success cannot be denied: it now operates in 10 countries beyond its Bangladesh origin, delivering a broad range of tools for poverty alleviation. BRAC's explicit intention is to identify services that can be scaled in the contexts of a variety of different countries, and reaches over 100 million beneficiaries. Grameen Foundation, which I wrote about last month, may have the broadest geographical reach, operating in 36 countries, with a focus on microfinance and mobile phone based services; it counts 9.4 million of the world's poor helped. While laudable, these numbers raise questions about the ultimate scalability of MNSEs; they pale in comparison to the billions served by multi-national corporations (MNCs). Why?
Some of the barriers are known, among them, a lack of: systematic market intelligence; management capabilities and capacity in the regions of greatest need; capital investment vehicles and expectations; last-mile distribution infrastructure; and market-distorting subsidies and tariffs. It is unclear whether the best way to maximize impact is through open source models or scaling on one's own; different social entrepreneurs may understandably have different motivations. Moreover, the success of social enterprises frequently relies on relationships with other organizations. Such relationships can be difficult to replicate, or impossible if similar organizations do not exist in target regions.
While continued invention and innovation are still absolutely critical to solve the needs of the poor, robust exploration of models for scaling social enterprises might accelerate impact dramatically with solutions -- technologies and business models -- that already exist.
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Thursday, Aug. 2, 2012
This article was originally posted on Dowser.org. You can view the original article here.
The collapse of India’s power grid cast 670 million people into darkness—nearly one in 10 inhabitants of our planet. It called into question the dominant logic of a fragile centralized power system with chronic outages, growth in demand that greatly outstrips new capacity, yet leaves a fourth of India’s population without basic electricity.
Conventional “solutions” like centralized coal-fired plants and continued price subsidies for energy from polluting fossil plants and the wide use of back-up diesel generators will only exacerbate the scale of future crisis. These subsidies are, in part, motivated by the risks of political instability in the presence of the rising inflation in energy and food prices. Ironically, amongst those prone to protest are farmers forced to run diesel-powered pumps under widespread drought conditions caused by climate change. The day of reckoning for India’s badly inadequate energy infrastructure has arrived, and a plethora of social entrepreneurs is developing solutions that offer great promise.
Social entrepreneurs in India are pioneering a decentralized energy paradigm, characterized by improving efficiencies that bring energy cost into parity with grid alternatives, and contribute to economic development and the eradication of poverty in rural areas. These new technologies provide affordable clean energy through community-scale micro-grids, solar home systems, and solar lanterns that displace the need for subsidized kerosene and provide a hundred times the lumens for a fraction of the cost.
Bihar-based Husk Power Systems’ standalone mini-power plants convert rice husk waste into affordable off-grid energy to over 300 villages at a total capital cost of less than $1.3/watt—less than mega thermal power plants. Each plant is operated by a village entrepreneur, who manages the plant and collects payment from electricity users. SELCO India, operating out of Karnataka and Gujarat, provides customized solar home systems to meet specific customer load requirements with payment plans that dramatically reduce the total five-year cost of energy. Working with commercial banks, rural banks and credit cooperatives, it has made clean energy financially feasible and has over 135,000 solar systems installed. In Kolkata, ONergy has become a valued-added reseller of an array of solar home systems, lanterns, clean cooking stoves and energy-efficient appliances, also providing critical financing, service and support infrastructure to over 150 villages in east India through their Renewable Energy Centers.
While the distributed solutions of these social mission enterprises seek to provide the more than 300 million Indian citizens who are off the grid with access to affordable clean energy, the problem remains that the government continues to subsidize kerosene and diesel, with market-distorting impacts.
On the technology front, solar energy in India is benefitting from positive tailwinds, including a 75 percent reduction in the cost per watt of solar panels in the last five years alone. The policy front is less positive, however, with perverse headwinds designed to prop up a failed central power system. These need to shift to support for potential for these and other distributed clean energy solutions to serve the future of India, its people, and its environment. India could be a showcase, and grassroots social entrepreneurs are prepared to be the pathfinders. The day of reckoning has arrived.
Jim Koch is Energy Sector Director for the Center for Science, Technology, and Society at Santa Clara University and co-founder of the Global Social Benefit IncubatorTM
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Thursday, Aug. 2, 2012
This article was originally posted in the Forbes Blog. You can view the original article here.
The following guest post is by Al Bruno, cofounder of the Global Social Benefit Incubator and the William T. Cleary Professor in Santa Clara University’s Leavey School of Business. He is also the founder of the school’s Center for Innovation and Entrepreneurship.
For the past decade, my colleagues and I have helped more than 150 social entrepreneurs from all over the world hone their business plans, which they are able to pitch for 15 exhilarating minutes to Silicon Valley financiers and executives. Through our ten years running this mentoring program, called the Global Social Benefit Incubator, we’ve culled some top tips for anyone looking to develop their business plan and pitch it to potential funders or partners:
1. Prove that you know how your customers make decisions. Virtually every social venture we counsel asks its customers to change entrenched behaviors and make a different decision for spending their precious dollars: to pay for clean water instead of making do with dirty water; pay a few pennies for sanitary pads rather than stay home five days a month; invest in clean solar lights that initially cost more than toxic kerosene. Understanding how such customers or beneficiaries decide to spend – or not spend – can be one of the biggest challenges for any kind of venture. What will prove persuasive to get them to change? What evidence do you have that they will change?
2. Understand how your product or service works on a per-unit basis. To grow and thrive, you need to be able to “scale up” the value you bring to your current customers or beneficiaries. This requires a clear understanding of your marginal costs – how much it will cost to produce the next unit – and the prices that your customers are willing to pay. Typically this means adding in costs to expand production and distribution (which many entrepreneurs forget to factor in) in a way that grows the bottom line.
3. Document your key assumptions and provide a plan for testing them. Experienced funders and partners will want to test the assumptions that you make about customer buying behavior, markets, financing, etc. Do the work for them by setting metrics that can be tracked. India-based Naandi Foundation projected it could sell clean drinking water to 40 percent of its target market. To test that, Naandi employees who educate consumers on clean water’s benefits were enlisted for market research. They learned that customers wouldn’t travel to far-away water kiosks, so they added a bicycle delivery service – enabling them to exceed rather than miss their target.
4. Don’t overlook the “packaging” of your presentation, and be strategic with story-telling. Of course, the content of your business plan and presentation matters most, but packaging is more important than you think. Your audience is human, and you must use persuasion to get them on board. Utilizing video clips, “neat” graphics and a compelling – though not overdramatized – story of one beneficiary or group can grab the audience far better than a dry recitation of facts.
5. Be honest— even if you see opportunity slip away as a result. The starting point to being successful is to be brutally honest with yourself and with the stakeholders in your venture. While hyping the size of your target market to epic proportions may seem necessary to catch a funder’s attention, failing to live up to that hype during the diligence period can burn that bridge and many more. Be restrained and conservative in your projections — such as by overstating your expected costs and expenses, and understating your expected revenues — rather than the opposite.
6. Target and time your requests for funding to significant milestones in the evolution of your organization. A recent report indicates that one major “social impact” investing fund, the Acumen Fund, looked at more than 5,000 opportunities in the past 10 years and invested in only 65 of them. Why? The social entrepreneurs did not understand the business stage and maturity that Acumen seeks before it makes an investment. Do your research to pick the right prospective funders — be they grant-makers, equity investors, or lenders – and time your request at the appropriate stage of your corporate growth. And remember that what you have accomplished to date is history. What you hope to accomplish with the contributed capital is what is important to your funder.
7. Emphasize that you’ve built a strong team and organizational infrastructure—or show how you plan to achieve that vital goal. Funders and partners know that having capable people in key roles is critical to your success. Unfortunately, developing countries often can’t supply the key team members or qualified employees you need to scale. India-based Husk Power Systems (a GSBI alumni company) has addressed this problem by forming its own training entity— Husk Power University— to train the workers it needs to staff the 75 + power plants it currently operates, and to provide employees for future needs such as its move into Africa.
8. Show how you use or plan to use partnerships and alliances. Forming strategic relationships with other organizations can be a means to add complementary products or services, stretch scarce resources, or access markets through otherwise-inaccessible distribution channels. Another GSBI alumni company, Hapinoy, partners with the largest microfinancier in the Philippines to provide financing for its network of rural retailers, and teams up with local bus drivers to deliver essential goods to remote locations.
9. Build in governance and oversight into your plan. It is critical that you have strong oversight and governance to ensure appropriate and objective decision-making. Not only can external participants, such as board members, add useful insights to your thinking, but they also can reassure investors that there is an additional set of eyes and minds at work protecting their money from risk.
10. Be a feedback fiend. In addition to getting feedback from customers, expose your ideas and thinking to trusted advisors, mentors and investors to refine your pitch. Most importantly, listen to their comments, observations, and criticisms so you can address them in your next pitch. You must demonstrate that you have anticipated key concerns and have thought through the issues.
Want to see all this in action? Come hear about innovation that can change lives at the GSBI 2012 business plan presentations on August 23, 2012 in the Mayer Theatre at Santa Clara University. For more information, see http://www.scu.edu/socialbenefit/entrepreneurship/gsbi
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Wednesday, Jul. 25, 2012
This article was originally posted in the Huffinton Post Blog. You can view the original article here.
As its many supporters well know, the Grameen Bank's name bespeaks its Bangladeshi roots; Gram is a Bengali word meaning "rural" or "village," and ever since its founding in 1983 by the Bangladeshi banker, economist and Nobel Peace Prize recipient Muhammad Yunus, the non-profit microfinance organization, an early pioneer of so-called "solidarity lending," has served the country's rural poor out of its headquarters in Dhaka. Lauded for lifting millions out of poverty, the Grameen Bank is one of the great successes of development, and its model of micro-lending has been replicated in dozens of countries around the world.
One of those countries is the United States.
In fact, Grameen itself began doing business in the U.S. in early 2008, when it opened the first outpost of Grameen America in Queens, New York. It now operates a total of seven branches -- in Indianapolis, Omaha and San Francisco, and three others in New York, including one in Manhattan. Indeed, just miles away from Wall Street, where billions of dollars change hands every day, a Bangladeshi social venture is providing the poor with access to credit free of the fraudulent terms they're typically forced to live with. And it has plans to expand.
That growth is proof that the Grameen Bank's brand of group lending -- which relies on peer pressure rather than collateral to ensure that debts are repaid -- can work in America. But just as important is what it says about social enterprises across the board: while they typically target underserved communities in places very different from America -- places with no access to electricity, much less credit -- their work can teach us a great deal about solving the problems we face at home.
After all, Grameen isn't the only social venture to successfully transition from the developing world to the developed. There's also the non-profit Kiva.org, which allows microfinance institutions from around the globe to post profiles of qualified local entrepreneurs on its site and invites would-be lenders to browse and fund those individuals over the Internet. Inspired by the Grameen Bank, Kiva's creators built one of the world's most successful social enterprises -- and one we're proud to have worked with through the GSBI -- by catering exclusively to entrepreneurs in the developing world.
Then, in 2009, after lending more than $150 million in 53 countries, Kiva partnered with the Opportunity Fund and Acción USA to provide its services in America, where the economic downturn had created new demand for affordable loans. Despite initial skepticism that the model would work, new user sign-up went up dramatically in the days after Kiva's launch, and all loans solicited as part of that launch were completely funded within 18 days. Now, through its new Kiva City program, the organization aims to spur job growth in some of the country's most anemic local economies. Co-sponsored by Visa, Inc., Kiva City extends access to microloans in U.S. cities where microfinance institutions aren't operating at scale, providing small businesses with a rare source of capital -- and city officials across the country are getting on board.
If Kiva and Grameen are making the case for microloans in America, Samasource is doing the same for so-called "microwork." That's the term founder Leila Janah coined in 2008 to describe her non-profit's novel approach to fighting poverty -- one that provides unskilled, albeit capable, workers in underserved communities with small tasks that pay a living wage and can be performed online.
Headquartered in San Francisco, Samasource secures contracts to execute large data entry or digitization projects from leading U.S. tech companies like Google and LinkedIn. It then moves those projects to its proprietary online platform, the SamaHub, where the work is broken down and distributed to service partners in six different countries -- Haiti, India, Kenya, Pakistan, South Africa, and Uganda. To date, the award-winning social enterprise has created more than 2,000 jobs and paid out more than $1 million in wages.
Now, like Kiva and Grameen, Samasource has turned its attention to the U.S. -- specifically the Bay Area, where it plans to pilot its first domestic program, SamaUSA, later this year with support from the California Endowment. If that effort proves effective in helping marginalized women in two low-income communities boost their incomes through online work, they'll seek funding to scale it up.
For all their success overseas, social enterprises like Samasource, Kiva and Grameen are up against a far different challenge in the U.S., and it may be years before they make a dent in the nation's poverty rate, which continues to climb. Still, as we search for paths out of the economic crisis, we would do well to remember that across much of the developing world, financial hardship is a constant -- and that fact is the driving force behind the kinds of innovations that could one day help us fix what's broken in our own backyard.
Follow Thane Kreiner on Twitter: www.twitter.com/thanekreiner
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