Bird Flies the Coop: A Startup Social Enterprise Heads From MIT To Pakistan
Attention entrepreneurs: it isn’t always about the technology. Often the real innovation lies in the distribution or business model. Take the problem of providing clean drinking water in developing countries. The technology needed to make individual water supplies safe isn’t rocket science—it ranges from purifier packets of chlorine to special containers that use sunlight to kill microbes.
Yet, across the globe some 2 million people die every year from drinking contaminated water, the vast majority of them children under 5. What’s more, every year there are 4 billion episodes of water-induced diarrheal disease, which causes malnutrition and makes kids miss school, with serious economic consequences and systemic effects on quality of life. In poor areas, boiling and refrigerating water often falls by the wayside because it consumes too much energy and time, and there are few, if any, alternatives.
Enter Sarah Bird, a graduate student in MIT’s Technology and Policy Program and founder of SaafWater (pronounced “Soff”-water—saaf is the Hindi and Urdu word for “clean”). Her company is creating a distribution model for getting safe, clean drinking water to urban areas in developing nations. Her first stop: Karachi, Pakistan’s bustling capital city of 15 million.
Bird, who previously studied mechanical engineering at the University of Cambridge in the UK, was a runner-up in the MIT $100K entrepreneurship competition last year. She and her partners won $10K to help start the company. SaafWater was incorporated in Delaware last June and in Pakistan as a subsidiary, and has raised $50K in angel investment. After spending last summer in Karachi putting the product together, building local partnerships, and lining up suppliers, Bird is ready to take the plunge, moving there next month to run full-time operations.
So what does it take to get such an enterprise off the ground? What are the financial and operational challenges? I caught up with Bird last week after she had spent yet another all-nighter finishing her Master’s thesis.
Xconomy: So give us the elevator pitch for your company…
Bird: SaafWater is a for-profit social enterprise that provides affordable clean water to the urban poor. We provide a daily dose of chlorine as an affordable option through a high-quality, direct sales network provided by saleswomen who go door to door, and live in the same neighborhood as their customers.
Xconomy: Why focus on Pakistan? What is the state of the water supply there?
Bird: Around 250,000 children die each year in Pakistan from drinking unsafe water. I got involved in 2006 when Dr. Aamir Khan, the president of InterActive Research and Development, an organization in Karachi focused on problems of public health, approached the D-Lab at MIT, where I was a research assistant. The idea for the company was hatched in November 2006, while I was working with Amy Smith [head of the D-Lab] on ways to commercialize a water-quality testing tool. We were doing trials in Pakistan, and I realized that the really commercially compelling part was solving the water-quality problem, not the diagnostics.
As in most developing countries, the tap water in Pakistan is not safe, because of poor maintenance of the water supply and unplanned growth. In Karachi, only 10 percent of people get tap water 24 hours a day. Others get it for maybe a couple hours a day. There is a whole private infrastructure of water distribution, with everything from delivery on donkey carts to bottled water, and other ways of moving water around the city. But there’s no way of telling which water is safe.
Xconomy: So what’s your solution?
Bird: We sell capsules for household chlorination. This is based on a CDC idea that has been running for 10 years now. We provide a measured dose of chlorine bleach to disinfect one day’s worth of drinking water for a family. SaafWater buys the capsules and chlorine solutions and puts them together. We sell it to you day by day, or by the week.
Xconomy: How does your distribution model work?
Bird: We use, essentially, Avon ladies as independent franchisees. We call them SaafWater ladies. On a weekly basis we sell them a bunch of capsules. They’ll have about 100 customers each, and sell it on—they get a sufficient markup. Right now we have 8 women, 1 full-time and 7 part-time. They sell a daily dose of chlorine, customized to the water container of the particular household. Eventually we may make a sexier water-cooler type container to hold the water supply as well.
Each capsule costs 5 Pakistani rupees, or about 8 cents. We’ve sold 763 capsules to date—which corresponds to 11,445 liters of water chlorinated. We started in December and ramped up in March.
Xconomy: Sounds like a tough revenue model. Can you talk about the unique challenges of your marketplace?
Bird: Yes, so far we’ve made a fantastic total of $93, and spent $10K! As in any bottom of the pyramid company, the trick to this game is scale. We need something on the order of 16,000 customers across Karachi to break even. Once our pilot is complete, our hope is to raise a quarter to half a million dollars by hitting up angels, social VCs, and regular VCs, and to provide a good return on their investment within 5 years.
SaafWater has to be good at finding, recruiting, and training SaafWater ladies. It’s a classic supply-chain problem. We’re just like any other business, but the tightrope we have to walk is not to get so focused on the profit that we forget we started this for social change. Say we get bought out by Avon for our distribution channel, and they want to use it for other products. That would be a problem. We have to hold onto our integrity.
Xconomy: Why did you go the for-profit route?
Bird: I used to work at a not-for-profit, and it was great. But when you’re not for profit, you’re not accountable to your customers, you’re accountable to your donors. By being for-profit, if our customers say they don’t like our product, we have to get better and better—we will learn and innovate. It’s about pushing ourselves to be the best for our customers, as well as the best for our salespeople, and the best for our investors. If we don’t, we’ll go under. The grand view is, we’ll make a killing and use that to solve more of the world’s problems.
Xconomy: Any other insights on starting a business in Pakistan?
Bird: There is such diversity in culture, background, and language. Traffic is appalling, electricity is unbelievably bad—in March, the power went out for 6 to 8 hours a day. On the other hand, your Blackberry will work—mobile telecom is very advanced—and there’s a huge pool of smart and talented graduates to recruit from. Rent and property costs are high. It’s taken us 9 months to get a bank account. It took 20 minutes to set up the company here in the States, but it took months in Pakistan, and cost nearly $1000.
The Karachi pilot will end in June 2009. By then we hope to have 15 SaafWater ladies, 1500 customers, and a fully developed business model so that we’re ready to launch throughout Karachi. If all goes well, we’ll start thinking about raising our next round this fall.
Xconomy: Sounds like a great learning experience. What are the broader business opportunities that you’re looking at down the road?
Bird: I would say the market for clean drinking water is something like 4 billion people—basically the entire developing world. There’s also huge potential to go up-market. The first thing my wealthy friends in Pakistan ask is, “When can I get some?” There is a much larger global problem looming, and that is access to water at all. This is on the horizon as a great opportunity for social enterprise, and it’s also a problem in the developed world. And obviously, it’s not just water. The list of opportunities for social enterprise is endless.