Social ventures have a dual goal – to make a social impact and at the same time, be financially sound
In the social entrepreneurship panel at Startup50, Umesh Malhotra, Founder, Hippocampus, a rural education venture; K Chandrasekhar, CEO, Forus Health, an eye care medical devices company; and Ravi Subramanian, CEO, Shriram City Union Finance, the financial services firm, discuss the challenges and opportunities social ventures face when they try to create self-sustaining ventures that aim at social transformation. Here, we share a few excerpts from the panel.
In this panel, we had representation from three for-profit companies that are working towards solving major social problems.
Shriram City Union Finance – SME lending and microloans
Shriram City Union Finance aims to free the poor from the clutches of money lenders by providing access to finance at an affordable cost. Additionally, it converts its employees into entrepreneur-partners, providing them the credit and balance sheet support they need, while ensuring that they are the right people to recover the loans that are given.
Ravi Subramaniam pointed out the challenges of working with this segment, citing the example of banks which faced the problem of high NPAs. “So one has to be extremely cautious when investing in the social arena, especially lending,” cautions he. NBFCs are a possible source of finance but regulatory environment is not very conducive. “Retrieval is very difficult and needs three to four years to capitalize in security. It affects the balance sheet,” he points out.
Forus Health – affordable ophthalmology device to help prevent Blindness
Some kinds of blindness are preventable, but there is a great shortage of doctors. Technology is the only leveler. But the existing solutions are expensive. Philanthropy was not sustainable. So does one bridge the gap and reach the right audience – this is the thought that helped us arrive at Forus’s business model, explains K Chandrasekhar.Forus developed a device called 3Nethra that enables doctors to remotely check patients in rural areas and treat diabetics for preventing blindness.
Not wanting to reproduce existing equipment, Forus decided to identify the problem it wanted to address and develop features around it. “Adequate and appropriate is all that we wanted to do at that particular price point,” explains he.
It had no benchmark to refer for its pricing. Competition was four times the cost, and Forus had no rationale except to make it affordable for doctors and ensure ROI for them. Therefore, volumes was critical.
Finding investors is one of the biggest challenges I faced because HLC’s revenues can never be high. It is a hostile environment and not an attractive business. Secondly, the value chain is very confusing – should the donors take equity or give it as charity.” – Umesh Malhotra, Hippocampus Learning Centre
The company aims to develop solutions for those health problems that affect the livelihood of the bread winners. “A man without eyes is a mouth without hands,” he points out as to why blindness was the first disease they decided to address.
Hippocampus – Low-cost rural education
Inspired by the education system in Finland, Umesh Malhotra has taken on ‘Mission Finland’, to deliver quality education to as many children as the population of Finland at one per cent of the cost with comparable outcomes.
Currently, the Hippocampus preschool program reaches 10,000 children and is doubling every year. “We have built a base of 40-50,000 students. In the next five years, we will reach 1.5 million on an annual basis,” he explains. Going village by village, the venture hopes to touch 2000 villages in the next five years.
Malhotra admits that finding investors is one of the biggest challenges he faces because Hippocampus Learning Centre’s revenues can never be high. It is a hostile environment and not an attractive business. Secondly, the value chain is very confusing – should the donors take equity or give it as charity. Is it right to expect returns when investing in a social venture is a dilemma many investors face.
Paying for services can be a challenge for the poor and so address the pricing accordingly