LET’S NOT FORGET THE “HARD BUT ESSENTIAL” ENTREPRENEURIAL INITIATIVES!

I have been frustrated for some time with the high level of “noise-hype” in Silicon Valley about social media and the so-called ”disruptive technology” start-ups. The noise has abated a little – but only a little – since the Facebook IPO debacle. Yet one still opens the Business Section of the San Jose Mercury News to find one story or another of “wunderkinden,” aged 25 or less, unleashing “earth-shaking” startups with enormous growth prospects and stratospheric potential valuations. And this phenomenon is not limited only to the local press. The New York Times seems to have a similar tendency to regularly “feature” such up-and-coming high tech companies.

To be fair, I acknowledge that I tend to be somewhat “old school” and am therefore struggling to be “in the flow” with the social media revolution. I am, however, starting to appreciate social media’s significance as a powerful vehicle for communication, marketing and connectivity, as well as the remarkable flexibility represented by interlinking technologies such as cloud computing being implemented by many of the companies with which I am involved. I certainly do not want to discourage any entrepreneurial efforts, as they are the life-blood both of the young and of our economy.

But I am concerned by a seeming lack of balance. Our world’s population is growing at a frightening pace. We need an injection of innovation to produce enough food, clean water, energy and health services to survive. These industries require entrepreneurship just as much as do our pure-play high tech efforts. I want to see as much enthusiasm about starting (and financing!) a new solar photovoltaic cell concept or a novel targeted disease therapy as I want to see another clever App – maybe even more, especially when it comes to game Apps. Our young university graduates must be encouraged to deploy their creative juices in new ventures in the engineering and science-based industries in spite of the fact that they will take years to develop and millions of dollars to commercialize. The motivation should be to make a significant impact in the world, not merely near-term financial gratification.

This is one reason that I have agreed to put together an entrepreneurship course with biotech executive Howie Rosen for this Fall at Stanford University. The course will focus on capital-intensive, long-development/lead-time industries with high intellectual property content, such as biotech, bio-engineering, material science and energy. It will be offered to senior and graduate level Engineering students and to participants in the Stanford Center for Professional Development. It is intended to complement the many excellent “high tech” courses that Stanford offers in both the Engineering and Business Schools.

The need for innovation in the “hard but essential” industries has come home very clearly to me during these last few weeks. I had the privilege to serve as a mentor to an outstanding and inspirational group of Third World entrepreneurs in the 10th Anniversary Class of the Santa Clara University Global Social Benefit Incubator (GSBI.) I wrote about this critical initiative in my August 26, 2011 post titled “The Pleasure of Combining Entrepreneurial Experience with Social Impact.” The current cohort of 20 entrepreneurs comes from a broad range of nations in Asia, Africa and Latin America. They serve the poorest four billion citizens of this earth, the “Base of the Pyramid.” Their initiatives are characterized by a deep social purpose coupled with a drive to be self-sustaining and scalable. They spent nine months in an often grueling qualifying effort to be considered for the in-residence program just completed a few weeks ago. Once the cohort has been reduced from 180 applicants to 20 winners (a process that takes about four months), each winner is paired with two Silicon Valley executives who serve as mentors. Mentors and social entrepreneurs are then engaged in a series of tasks to build and refine their business plans. The effort culminates in a two-week, in-residence boot camp comprised of classes and working sessions that produce a business plan good enough to pitch to potential investors. The description of the “Class of 2012” makes for inspiring reading.

What struck me about this year’s group is that innovation does not pertain only to new products. Some does, to be sure, in particular as designs are tailored to the true needs of the local customer base, needs which are seldom met by our more advanced and complex products in the developed world. But more impressive to me was to see the innovations in other aspects of the product life cycle, such as in creative distribution approaches to serve the market. This is especially important in the very difficult last mile, where our social entrepreneurs labor under political and logistical circumstances that would challenge the best among us!

So I want to encourage our eager young university students, when they consider their careers, to tackle the exciting and essential initiatives needed to create potable water, clean energy, plentiful food and better health care for this world. And if the entrepreneurial spirit calls, take the plunge – even if the journey to success takes years, not just months, and requires Malcolm Gladwell’s ”10,000 hours”, not just a flash of an idea and a quick 12-month development cycle. (See my Dec 1, 2010 post “Are Your Start-up Ideas Good Enough?)

THE PLEASURE OF COMBINING ENTREPRENEURIAL EXPERIENCE WITH SOCIAL IMPACT

My posts are triggered by events that grab my attention. I recently attended one of those events. On August 18, 2011, I participated in a day-long session at Santa Clara University, where 18 young entrepreneurs summarized their business plans. What made this event unusual is that all were from abroad and had, as their underlying missions, plans to create value for their communities. They are part of a growing Social Entrepreneurship movement that serves the “Base of the Pyramid.”

If you had mentioned the terms “Social Entrepreneurship” or “Base of the Pyramid (BoP)” a few years ago, I would have had no idea what you were talking about. Today I find myself increasingly intrigued by what they represent, and increasingly enthusiastic about applying my business background to something that could be world transforming. Do I have your attention?

My good friend Allen Hammond put this whole topic in perspective in his 2007 study, “The Next 4 Billion: Market Size and Business Strategy at the Base Of The Pyramid.” From his introduction:

“Four billion low-income people, a majority of the world’s population, constitute the base of the economic pyramid. New empirical measures of their behavior as consumers and their aggregate purchasing power suggest significant opportunities for market-based approaches to better meet their needs, increase their productivity and incomes, and empower their entry into the formal economy. The 4 billion people at the base of the economic pyramid (BOP) — all those with annual incomes below $3,000 in local purchasing power — live in relative poverty. Their incomes in current U.S. dollars are less than $3.35 a day in Brazil, $2.11 in China, $1.89 in Ghana, and $1.56 in India. Yet together they have substantial purchasing power: the BOP constitutes a $5 trillion global consumer market.”

The essence of the social entrepreneurship concept is that while the fundamental mission is to help the BoP, many accomplish this by creating for-profit, sustainable and scalable businesses. This gives them the opportunity for growth and the potential to access capital markets. Perhaps the best example is Al’s own initiative, eHealthPoint, a for-profit social enterprise aimed at transforming healthcare in rural parts of the world by building community-scale water treatment facilities and rural clinics electronically linked to urban doctors. It is a concept that Al had considered for many years, going back to 2006. Then in 2008, while attending a meeting at Santa Clara similar to the one I recently attended, he met an Indian entrepreneur and together they refined the idea and launched the pilot phase. It soon blossomed into an intense initiative that has been very successful at raising financing and proving the concept. The numbers speak for themselves: in one Indian state alone, their clinics have performed over 13,000 diagnostic tests, conducted more than 25,000 medical consultations, filled in excess of 32,000 prescriptions, and the organization has also provided 22 million gallons of safe drinking water. Remember, this is NOT a philanthropic effort, this is a for-profit social venture that is serving the Base of the Pyramid!

A number of organizations are helping these social entrepreneurs. The foremost are Ashoka, a support and networking organization where Al Hammond serves as Senior Leader, and the Santa Clara University Center for Science, Technology and Society in Silicon Valley, focused on mentoring and incubating social entrepreneurs. I joined the latter’s Advisory Board earlier this year.

On August 18, I had the pleasure of serving on one of the Review Panels of the most recent group of entrepreneurs being mentored by Santa Clara. They presented their business plans at the 9th Annual Meeting of the Global Benefit Social Incubator. The 18 participants span more than eight countries on five continents and serve eight industrial sectors. To excite your interest, examples include:

➢ Thermogenn, Coolers for off-grid rural Uganda to permit small dairy farmers improve the marketing for their milk.
➢ Angaza Design, solar powered LED lights to replace kerosene lamps in East Africa. Very interesting cellular billing model.
➢ Kopo Kopo Inc. Expands mobile financing services to the “last mile” in Sub-Sahara Africa.

In a previous post (April 14: Entrepreneurship Abroad Is Alive And Well – With A Strong Social Context) I shared my experience judging a competition of business concepts at the 12th Annual Global Social Venture Competition (GSVC) at the Lester Center for Entrepreneurship of the University of California at Berkeley. That was my first face-to-face experience with an equally impressive cohort. In the Santa Clara case, rather than a competition, the effort is focused on mentoring and nurturing these budding social entrepreneurs through interaction with faculty, students and Silicon Valley mentors. More than 150 applicants from around the world submitted their companies for consideration. All of them were then coached by a group of Santa Clara Business School students under the direction of their entrepreneurship professor, Eric Carlson. They received help in sharpening their value propositions, target market segmentation, and business models. Subsequently, through a series of interviews by several Santa Clara Business School faculty, 18 were chosen to participate in the Incubator program. Each invitee was matched with 2 Silicon Valley mentors and attended a two-week residence program at the university. The August 18 event was the culmination of the process. Summaries of their businesses can be found in the following link: GSBI 2011 Cohort. I encourage you to read them, although words cannot adequately describe the energy, creativity and enthusiasm conveyed in person by these young entrepreneurs.

The expectation is that the process not only allows the entrepreneurs to enhance their plans, but also guides them to ideas that would improve both the sustainability and scalability of their ventures. Also, through exposure to Silicon Valley mentors and Santa Clara faculty, they are introduced to financing alternatives consistent with both their for-profit and social objectives. This is a very important and evolving part of the process. If you are interested, I direct you to an excellent study released a few weeks ago by Santa Clara in conjunction with the Aspen Network of Development Entrepreneurs: Coordinating Impact Capital, and a recent article by the Santa Clara Center’s CEO, Thane Kreiner, in XConomy.com where he highlight the challenges and the opportunities in creating capital formation structures for this important and transformational business opportunity.

ENTREPRENEURSHIP ABROAD IS ALIVE AND WELL – WITH A STRONG SOCIAL CONTEXT

I love entrepreneurship. I have dedicated my life to it. But seeing it flourish globally with a strong social emphasis gives me an even greater sense that it is a force that can and will change the world.

Last week I had the honor of serving on a panel of judges in the 12th Annual Global Social Venture Competition (GSVC) at the Lester Center for Entrepreneurship of the University of California at Berkeley. (See GSVC for more information about the competition.)

Twelve finalists came to California to present and defend their business plans. They had been chosen from a slate of 850 proposals from 31 countries. The nine judges represent many different skills and areas of business. Some are leaders of venture capital divisions of major global companies like Dow and Intel. Some lead practices in major law firms. Some run their own venture capital firms. And some, like me, are retired or acting business executives. Several are headquartered abroad and traveled internationally to be judges at this competition.

Just the sheer number of applicants gave me a sense of the scale of interest in social entrepreneurship around the globe. Looking at the 12 final business plans showed how serious the effort is. The concepts were thorough, the analysis sophisticated, and each plan showed a good balance between sound business and social responsibility. But what really touched me most were the entrepreneurs themselves. Some had traveled from far away to be there, and their excitement – and awe – was palpable. Many had brought along prototypes of their products, and had assembled good management and advisory teams. In some cases they invested their own money to test the ideas. Their business concepts were diverse, including, among others: fuel efficient, clean burning cooking stoves (Prakti Design); reliable information on potable water availability (NextDrop); cheap, eco-friendly construction materials for low income housing (Beti Halali); low cost detection of cervical cancer (DeepScan); water puirification products (Findg One Drop); more cost effective sanitation systems (Sanergy); improved supply chain for coffee growers (Ikawa); and even a smartphone app that allows game-players to participate in reforestation efforts around the world (TreePlanet.) Learn more about the finalists and winners by going to Finalists.

Listening to the entrepreneurs and sensing their commitment and pride in their endeavors took me back to the early stages of my career when I was pitching our incipient concepts to investors. Yet while we had a strong notion of how our ideas would change the world for the better, our sense of social responsibility was much less substantive than what I saw in these plans. Initiatives like Berkeley’s GSVC are a wonderful way to stimulate and promote the creation of profitable ventures with sustainable and meaningful social value. Above and beyond the prize money, the exposure generated for these young enterprises will serve them well. I fully expect that many of these businesses will succeed and thrive.