Ambitious Harvard students are known for creating startups, and 22-year old Kathy Ku is one of them.
But Ku’s company isn’t in Boston, or Silicon Valley, and it’s not building an app. Her headquarters are in a village in Kumi, Uganda, where mangos grow wild on the trees and, instead of programming from a garage, she pulls all-nighters in her factory that’s filled with terracotta dust.
Ku’s startup, SPOUTS of Water, makes inexpensive clay water filters and sells them locally in Uganda, where 10 million people don’t have clean water, and where water-borne illness is the number one killer of children under the age of five.
Ku is one of a growing crop of ambitious people—often young—who use a startup mindset to approach big problems from hunger to poverty to world health. They call themselves social entrepreneurs and, unlike a previous generation, they don't see making money and doing good as separate.
Entrepreneurs such as Ku believe that a business model can create change faster and more sustainably than traditional government and non-governmental organization channels can, and that they just might be on the edge of the next wave of big world development.
65 million entrepreneurs plan to create 20 jobs or more in the next five years, according to the global entrepreneurship GEDI index, and the Internet is giving local entrepreneurs, in places from Bangladesh to Kenya, resources to innovate. Major development organizations, including the United Nations Foundation and Save the Children, are in on the trend—both are partnering with entrepreneurs and innovators.
Elizabeth Gore, entrepreneur-in-residence at the United Nations Foundation, said young people want to make money and serve causes, and they want to create jobs. "The majority of global entrepreneurs are under age 45, and they are taking the future into their own hands all over the world," Gore said.
"I think we will see a change in the next few years, and we will redefine what an entrepreneur is—someone who sees financial and social solutions—and the lines between those will be blurred."
Blurring the lines for good
Ku's project had a business bent from the start—the original $15,000 to build her kiln and factory came from Harvard’s President’s Challenge for social entrepreneurship, and another $100,000 came from entrepreneurship competitions at MIT and elsewhere.
Philanthropy is increasingly intertwined with higher education. Ku first hatched her idea on a Harvard-sponsored trip to Uganda with Engineers Without Borders, and alternative spring breaks—in which students forego Cancun for service projects in the States and abroad—are de rigueur from Ivy League universities to small state schools.
Exposure to philanthropy is having a "trickle down effect," said Devon Kuehne, director of the United Nations Global Entrepreneurs Council, which courts high-profile entrepreneurs, such as Michael Dell, to consult on UN Foundation projects.“People are more interested in putting money into causes instead of just themselves," she said. "We’re seeing that with all consumers."
According to a 2011 study by advertising agency network TBWA/Worldwide and TakePart, 7 in 10 young adults consider themselves social activists, and four out of five said they are more likely to buy from a company that supports a cause they care about. Three in four think more highly of a company that supports a social cause.
Social entrepreneurs even have their own Silicon Valley techie-style accelerators, including Unreasonable Institute andAshoka, which match would-be do-gooder CEOs with mentors and money. Unreasonable Institute offers a five-week boot camp to carefully vetted ventures with luminary philanthropic mentors such as John Mackey, Chairman of Whole Foods, and major Silicon Valley investors. So far, Unreasonable Institute has launched 82 socially-minded companies in 37 countries, which have raised $42.6 million collectively in venture funding.
Unreasonable venture Eco-Fuel Africa, a Uganda company that converts agricultural waste into clean fuel and combats deforestation, has grown from serving 1,250 people to 30,000 people; Solidarium, an online marketplace for impoverished artisans based in Brazil, has improved the incomes of 8,500 by 80 percent using Unreasonable connections.
Social entrepreneurs are not going to replace NGOs, Gore said, but they do tend to be faster and more flexible, and NGOs will look to partner with them.
Ku sells her filters through NGOs, but starting a business over a nonprofit was a natural fit for her because she wanted the project to be local and sustainable and to “disrupt” the long-standing cycle of foreign aid in Uganda. Besides, being an entrepreneur gave her street cred.
"When you say you're a college grad doing good, people laugh at you, but if you tell people you are running a business and getting returns, it's different," Ku said. "It feels good to say, 'I'm a businesswoman.'"
NGOs rely on donor money, and if funders don't like results or see them fast enough, they pull out. This leaves little room for the experimenting and "fast fails" that allow startups to learn and thrive, and that's where social entrepreneurs have an edge, Gore said.
"They're going after something a little faster and they have more flexibility," she said. They have the luxury to "learn, evolve and iterate."
Social entrepreneur Chris Ategeka is CEO of Ride for Lives, a company that makes bicycle and motorcycle ambulances outfitted with a small trailer to carry a patient. They are made extra-tough so they don't fall apart in the rough terrain of rural Uganda, where cars are scarce and thousands of people die every year trying to get to a hospital. Ategeka uses a hybrid nonprofit and for-profit model, with the business part making and selling the bikes to locals, and the nonprofit arm distributing them.
Ategeka grew up an orphan in Uganda. Both of his parents died in an HIV epidemic by the time he was eight, and he was left to fend for himself and his younger siblings. Ride for Lives was inspired in part by the death of his younger brother, who fell ill as a child and died while Ategeka tried to get him to a hospital on foot.
"We were about eight miles away," Ategeka said. "The pain and horror and blame of what I could have done different stuck with me for a long time."
At age 15, Ategeka was taken into an orphanage, where he excelled in school, and a sponsor family in California offered to take him in and send him to college in the United States. He earned BS and MS degrees in mechanical engineering from Berkeley, and now he helps run Biotech, a company that builds medical diagnostic devices for early detection of HIV.
As an entrepreneur he knows how startups work, but there's a different standard for nonprofits, he said. Most companies don’t make money until three, four, or five years into the business, he said, and if a person has $10,000 in funding and spends $5,000 on overhead, that's understood. "But if you do that with a nonprofit, people say, 'Those people are evil; they used half their donations for overhead!' They expect everyone to work for free—and it’s tough."
Fashion for profit
Saba Gul was raised in Pakistan and attended MIT for undergraduate and graduate degrees. She returned to her native country in 2011 on a mission to empower other women in Pakistan, and like other idealistic young people, the 31-year old started a nonprofit. Inspired by the beautiful embroidery of local artisan women, her organization sold luxurious handbags featuring colorful, hand-embroidered details and paid the women artisans a living wage.
The handbags sold in upscale retailers like Nordstrom and Anthropologie, but the company wasn't growing, and eventually they were just months away from running out of cash.
Gul switched to a business model. "If I wanted to have impact, we needed to be a fashion label focused on sales, not a non-profit focused just on social impact because the number of socially-conscious shoppers is a minority," Gul said.
"This meant going from reading 80-page reports on education in Pakistan to reading fashion magazines," she said.
Gul found that a business model allows for something that nonprofits lack—scale.
Gore said that while NGOs are limited by donations, businesses can grow exponentially, and for social entrepreneurs, their influence can grow exponentially too. "Scale is the biggest advantage that social entrepreneurship brings to the table," she said.
Unreasonable Institute, the accelerator program, only accepts ventures that make a compelling case for their ability to grow and reach at least one million people.
Gul is now the CEO of Popinjay handbags, and has tripled her workforce to 150 women. They earn two to three times what they did when the project was a nonprofit. "Since 75 percent of the 250 million people employed by the fashion industry live in the developing world, the potential for this change is so massive that it gives me goose bumps," she said.
Return on Investment
Gul said that she went from feeling shy about asking for money as a nonprofit founder, to being confident and playing hardball as a CEO. Her investors, all Pakistani, have been entrepreneurs themselves, and they act as mentors. "They will test my website, make phone calls to manufacturers. They want me to succeed," she said.
Her success has raised 100 more families out of poverty. The women she employs have five, six, seven children, Gul said, and one income is not enough to support them. For girls, it provides enough money for them to stay in school, instead of dropping out to work in cheap carpet factories.
"The best part is to see what it does for the women," Gul said. "Many of them have not had a lot of choice in their lives. They have a sense of dignity and a sense of purpose and a sense that the beautiful work they make with their own hands has value in the world."
Entrepreneurs offer unique problem solving skills, Kuehne said, and a penchant for risk-taking. "Instead of thinking, 'that's too much,' they think, 'why not?'" she said.
Ategeka said the risk-taking is part of the appeal. "That way you end up landing in opportunities and saving lives that you wouldn't otherwise," he said. The former orphan has job offers for six figures and benefits, but he sees those as handicaps.
"It's easy to get raises, get promotions, and get comfortable," he said. "I may not have done a whole lot yet, but I'm saving one person at a time. And that has a ripple effect. I'm sitting here talking to you, and I'm the product of one person's vision and generosity."