Three experienced social entrepreneurs share valuable insights – 3 steps to understand your business, 4 steps for success, and 5 steps to create sustainable ventures in a panel hosted by Suresh Kotha, Professor of Management and Center for Innovation and Entrepreneurship Research Director, University of Washington Foster School of Business.
Social Venture 1: Krochet Kids
Kohl began his remarks by indicating that Krochet Kids is a “caused centered lifestyle brand.” They focus on quality and selling their handmade items from developing countries to the younger skate/surf/fashionista demographic.
Krochet Kids works with 150 women in northern Uganda crafting hats, scarves and other fashion accessories and recently expanded to Peru.
The unique aspect of the product is that each item is signed by the creator and links to their story online. There you can learn about the person behind the hat, what they have gone through and what they are planning for the future. By purchasing an item, consumers are helping each woman save her money and send her kids to school.
Kohl shared the top three things that were pivotal to understand the business.
- Travel – It took actually going there and getting to know the local needs. “We had these ideas in our head of what it meantto em power someone in Uganda, but I don’t think we had any sort of idea until we had the opportunity to be there with them. To be alongside them and hear their stories. ”
- Use your skills – They knew how to crochet from high school and built the business around it
- Support and trust – Kohl built the business with a core team of friends who respected and understood one another. It helped that they shared a common desire to make a social impact.
Social Venture 2: Micro Energy Credits
James Dailey, Director and CTO, Micro Energy Credits
James had a common challenge in pitching his social venture product. No one understood what they did. The important lesson there is that they had to explain and define the value proposition and keep working on it over time. This was doubly hard because they have two value propositions.
- Microfinance institutions – “We make it easy for you to get this financing from the carbon markets.”
- Carbon Markets – “We’ve got credits from households in developing countries which you need as part of your broad portfolio of carbon reduction.”
How did he develop the idea? James was working in Microfinance and saw that technology could lower the transaction cost. He met April Allderdice who was doing microfinance in clean energy and she saw the potential to scale up clean energy in microfinance. They asked themselves the question, “Can we combine these two ideas and create a platform where we lower the transaction costs so that we can aggregate credits so that we can create a scalable impact on clean energy access for everybody who doesn’t have it right now?”
James identified four steps to success.
- What are you passionate about?
- Stick to principles – For James it was go big or go home. They have 18 partners in 11 countries serving 80,000 households, but that is just the beginning.
- Share the idea with people you trust and who know something. James also won the Global Social Venture Competition at Berkley.
- Get out and try – James spent two years proving and refining the model.
After sharing his story on a recent plane ride, the passenger replied, “That just seems like a really difficult way to earn money.” James agrees and states that Micro Energy Credits is “not just trying to earn money, it is trying to make a huge impact in people’s lives and reform how the carbon markets interoperate with people at the bottom of the pyramid.”
Social Venture 3: Literacy Bridge
Cliff Schmidt, founder, Literacy Bridge
Cliff was interested in the one laptop per child initiative and the content that would be put on them. However, he noticed that the cost was an issue for many rural markets. He began thinking about what could you do with basic technology at very low price points. Cliff talked to local health workers and agriculture agents. He learned through listening to their stories. The gaps and solution they identified was to combine the audio technology from Cliff’s device with the information objectives from agencies.
Cliff shared his five steps to sustainable success.
- Get out and talk to people right from the beginning
- Take prototypes to communities of the potential users
- Analyze the competition – why is it that there isn’t something out there today that could do what you are trying to do just as well? He cautioned against trying to use the “build it cheaper” value proposition, because it probably won’t happen.
- Consider compliments – everywhere in the world there are experts, but they aren’t always the best storytellers or they don’t have the reach needed for scalable impact.
- Show results – People believed in the system when they saw a 48% improvements in crops based on new farming techniques learned on the device.
Suresh rounded out the panel presentation by walking participants through the startup template they use in his entrepreneurship class. Answering these questions can help you determine if you should continue with the venture.
- Are you solving a big problem?
- Does the solution you are proposing address the problem?
- Is it technologically feasible?
- Can I do it in a way that makes economic sense?
- What is the social impact?
- How do you measure social impact? Reference the following link for tools Double Bottom Line Project Report: Assessing Social Impact in Double Bottom Line Ventures
- Do you have the passion and skill set to do it?
- If you don’t have it, can you partner with someone to get it?
Audience Questions for the Panel:
Q: How do you decide how much and when to scale?
James shared his approach of starting small, solving one problem at a time, then building on proven success. James uses technology on the backend plus the hub and spoke model of regional human resources to support a new area. Suresh added that you really need to look at the specific solution and the environmental variables. A technology driven solution might scale better than one based on human resources.
Q: What are the biggest challenges you faced as you started to market the product?
Kohl indicated that they kept trying to reduce the mission statement into a cute phrase that everyone would understand. The result was “Buy a hat, change a life,” but Kohl’s team decided to quit trying to dumb it down. They are now going to “be who we are and share the story the best we can to get people excited about it.”
Cliff had different types of customers and had to learn to speak their language versus trying to just pitch the product. Having a prototype really helps.
Q: How did you let go of your ideas and tune into what you heard from listening to the local people?
Cliff said that it wasn’t hard for them because they did it early during the design phase.
Kohl knew from the get go that they didn’t have all of the answers and was very open to adapting the program and product to the local needs.
James also listened to the locals, but he was willing to tell the institutional partners that Micro Energy Credits had the right program and they needed to adjust to get access to their customer base.
Q: How do you manage the integrity trade off of continuing social responsibility when the business may be negatively impacted?
Kohl admitted that the pressure to bring additional product to market can be strong, but they managed this by making decisions in advance and sticking to their principles. That actually helped increase demand because the product has a limited production ceiling based on the number of women in the program.
Q: What resources did it take to open up in Peru?
Kohl suggested that you need to start small and get someone onsite to listen to the local people. That took 6-8 months in Peru.
Q: How do you measure the social benefit?
For Cliff, education is hard to measure, but by focusing on the two primary impact areas of agriculture and health, he was able to track increased output or changed behavior. His advice is to match your investment to those results.
Kohl looks at getting people out of poverty. That goes for the person doing crochet as well as for her family. The story arc goes from when they enter the program to when they leave. It is a long journey over 3-5 years. They have one mentor for every twenty women that they work with checking in on a weekly basis.
James embedded the benefit into the business model. They know what the carbon emission reduction is for each household. The Net Present Value of the benefit could far exceed revenue as in the case of efficient furnaces in Mongolia.
His advice, “Put [social benefit] into the DNA of your business and then focus on making money so you can stay around.”
Guest post by Sam Rosenbalm who fuels his passion for startups and social enterprise as a director in Microsoft’s BizSpark program, a GSEC advisory committee member and a GSEC judge. @rosenbalm