Small firms which want to profit from doing good
- 6 May 2013
- From the section Business
Dr Bill Rodriguez has three big, audacious goals.
He wants to solve a major public health need in Africa, prove that he can make a viable business while doing good, and attract great employees who will not have to choose between feeding their families and making a difference in the world.
"It's a lot," he admits. "So far, it's gone OK - better than I would have hoped."
Traditionally, charities and other non-profit organisations have led efforts to provide safe food, water and medications in the developing world.
But Dr Rodriguez is part of a new generation of entrepreneurs and small businesses who see a market in some of the world's poorest communities - despite challenges such as a lack of infrastructure, haphazard government regulations, investor reluctance and the absence of role models.
This growing entrepreneurial interest is particularly evident in Boston and neighbouring Cambridge, Massachusetts, home to Harvard University, the Massachusetts Institute of Technology, Boston University and other leading US colleges.
These universities turn out technology that allows devices to get cheaper, smaller, and more portable, and attract innovative people who come from and care about all parts of the globe.
Dr Rodriguez, for example, was an infectious disease doctor at Harvard when, on frequent trips to Africa and South East Asia, he noticed a dangerous gap in medical diagnostics.
Doctors in Africa can rapidly determine which patients have HIV, and can provide relatively inexpensive medications to those sick enough to need them. But it remains difficult, costly and time-consuming to identify exactly when people with slow-moving HIV should start the drugs.
In most cases, a trained technician must draw blood from the patient and send the sample hundreds of miles away.
It can take weeks to get the results, by which point it's challenging to find the patient and their disease status might already have changed.
Dr Rodriguez, with the help of other academics, developed a prototype that can count the number of a certain immune cell in a patient's blood - a good indication of their HIV state.
The device, which can be used with very little training, provides results in about 10 minutes and costs $5-$10 (£3.20-£6.50) a test.
"We expect to improve lives by getting these out there, and that's huge," says Dr Rodriguez, who founded Daktari Diagnostics in 2008 to market this and other medical devices.
Perhaps unsurprisingly, Dr Rodriquez found that working in the developing world presented extra challenges, and assistance was often very difficult to come by.
When Daktari needed help with regulatory issues in Africa, for instance: "We couldn't find anyone who had any idea how to help a start-up do that."
Yet while it would have been cheaper for the company to run its clinical trials in India, Dr Rodriquez said he needed to learn from the countries where Daktari is launching, so on-the-ground trials went ahead in Kenya, Uganda, Botswana and South Africa.
It is always hard to fund a start-up, but Dr Rodriguez said it was particularly difficult to get investors to buy into the idea of a money-making investment in Africa.
Investors and foundations, he said, "know how to work with non-profits and companies trying to make as much money as possible", but not companies like Daktari.
That is beginning to change, though. A few venture capital firms are starting to show interest in companies that address the needs of the world's poor.
Shuaib Siddiqui, deputy chief investment officer of Acumen Fund, is already a believer.
When Acumen started backing socially responsible companies 11 years ago, Mr Siddiqui said that they were "one of very few people in town".
"As we've grown up, a whole industry has grown up around us."
Mr Siddiqui says that operating a financially viable company in the developing world requires different skills to those needed in mature economies.
Before he backs a start-up, Mr Siddiqui looks for an entrepreneur who understands local consumers, and is motivated enough to ride out the difficulties that are inherent in this kind of business.
It is not that returns are less in emerging markets, he says, but that more patience is required before they materialise.
Mr Siddiqui says he also looks for a product or service that's truly innovative and has transformative power.
"If this business can [for instance] bring sanitation to the slums, you're talking about a model that could revolutionise not just the one slum, but slums across the world," he says.
Usually, his firm invests early in a start-up's life cycle, providing, say $750,000 to help an experiment reach the next level, and potentially more as the company develops.
Andrea Sreshta and her architecture school classmate Anna Stork considered several different financing approaches when they started their Boston-based company, Lumin Aid.
Their goal was to provide an extra-bright, waterproof, rechargeable light to disaster victims around the world. But so few other companies are in their niche that it took some time to get the structure right, said Ms Sreshta.
At first, they hoped to use micro-financing, but that was not a good match, they decided, for a product mostly needed in emergencies.
And though they initially wanted to distribute the lights directly to victims, they realised it didn't make sense to develop a whole new delivery infrastructure with every disaster.
Instead, they discovered that American campers and hunters loved Lumin Aid's light-weight, inflatable light.
Now, online customers are given the option of buying one light for $18.95 (£12.60), or of paying $8 more to donate a second light. The donated light is delivered by a partner organisation that provides broader disaster relief.
So far, the company has donated about 3,500 lights for use in 15 countries.
Muhammad Zaman, an associate professor of biomedical engineering at Boston University, is cobbling together a variety of funding sources - including regulatory agencies, hospitals, foundations, and private companies - for his fledging start-up, PharmaCheck.
Mr Zaman and his colleagues have developed a hand-held device to test medication quality, looking for fakes and compounds that have gone bad. He said 30-40% of anti-malaria drugs are suspicious, and good medications are desperately needed to treat 220 million cases worldwide.
Customers in developing countries are very different than they are in Boston, though, says Mr Zaman.
Many cannot read product descriptions; some are fatalistic about death and figure that if it's their time to go, no product will make a difference. They also lack universal health insurance and patent protection is inconsistent or nonexistent.
"It requires one to be fairly creative in coming up with a sound business model," says Mr Zaman.
Despite the challenges, Mr Siddiqui of Acumen said he still sees great potential in leveraging capitalism to bring about social change.
"The reason I'm in this space is I'm optimistic," he said.