Business in a Bag

BRAC, the largest non-profit organization in the developing world, is a dream partner for a small organization. But landing the partnership is only the first part. What happens next is where it gets interesting…our Franchise Partner Manager Lalit Kumar reports from the field.

We often joke here at VisionSpring that working with BRAC is like landing a contract with Walmart. It’s the kind of opportunity that every small NGO dreams of – BRAC is known for its massive scale and incredible efficiency. This partnership will allow us to reach a huge new market of people in need in a time frame that would have previously been impossible. Now we just have to deliver!

We’ve been working with BRAC for two years now.  For the last six months, we’ve been selling about 500 glasses per month by empowering BRAC’s network of Shashto Shebikas (community health volunteers) to sell our eyeglasses. Now, with our new plan to scale up, we will provide affordable glasses to almost ten million people in Bangladesh over the next three years.

Our biggest challenge by far is managing the inventory that BRAC needs. At the moment, we’re delivering about 30,000 pairs of glasses every four months, but soon we will need to deliver 30,000 every month. We are mainly focused on getting the glasses into Bangladesh, a complicated process involving multiple inspection agencies.  A 2006 Doing Business (http://www.doingbusiness.org) report from the World Bank notes that when a Bangladeshi company imports goods, it has to prepare 16 types of documents and obtain 38 signatures, and that the whole process takes 57 days. I can tell from our experience that it hasn’t improve much in the last few years.

For example, we received a Letter of Credit from a bank in Bangladesh that was valid only from April through June. Simply getting it updated meant that we had to get signatures from BRAC’s bank in Bangladesh, VisionSpring’s bank in New York, VisionSpring’s offices in India and New York, and our vendor and inspection agency in China.

We at VisionSpring are working hard to understand the whole process and constantly improve our delivery time. The first order took us more than 9 months to clear customs and make it in to Bangladesh, and the next order took about 6 months. Our goal is to get the process down to 3 months, which we are able to achieve in other developing countries where we work. We are certainly going through a period of adaptation, but it has been a very exciting time and I look forward to making more leaps of improvement.

After business school at the Institute of Rural Management Anand (IRMA), I was surprised to find that the challenges we face are the same as private sector businesses, only we are addressing them in some of the most challenging markets in the world. There is a reason that most private-sector companies haven’t tried to reach rural markets in Bangladesh; the start-up and logistics costs are simply too high. However, if our partnership with BRAC is successful, we will be able to provide affordable glasses and business opportunity to millions of people in Bangladesh. For us, it is well worth the struggle.

Microfranchising at the Base of the Pyramid: David Lehr’s paper provides an in-depth analysis of microfranchising as a development tool. The paper highlights three leading microfranchising organizations that partner with Acumen Fund: Drishtee, VisionSpring (formerly Scojo Foundation) and Sustainable Healthcare Foundation. It’s one of a series of written articles that Acumen Fund has produced about the ways market-based approaches are changing the way we think about poverty alleviation.

Read the paper here: http://www.acumenfund.org/uploads/assets/documents/Microfranchising_Working%20Paper_XoYB6sZ5.pdf

This post originally appeared on the Acumen Fund Blog http://blog.acumenfund.org/2008/11/10/new-on-acumenfundorg-ambulances-clinics-and-microfranchises/

This is a guest post from Corey Harris, a student at Stanford Graduate School of Business, who shares his experiences working with VisionSpring in India to continue making our business model more robust and sustainable by addressing key business challenges. 

I first heard about VisionSpring on a Stanford Graduate School of Business (GSB) Service Trip.  I was intrigued by VisionSpring’s business model and wanted to learn more about their operations and sales network of entrepreneurs, and to understand how they were able to deploy their services in rural areas.  Particularly in rural areas, the problem of distribution of services is oftentimes the biggest hurdle to get over.  In order to learn more and hopefully provide some insight, I decided to spend a few weeks on a GSB-funded trip learning more about VisionSpring and completing a small consulting project based on my observations in the field.

I had often assumed that non-profits are less disciplined organizations than for-profit businesses in part because non-profits are not responsible to shareholders or for showing quarterly profits.  I gained a different perspective during my time with VisionSpring.  For non-profits like VisionSpring, their shareholders are their philanthropic investors and their profit or bottom line, at least in VisionSpring’s case, is balancing social mission/impact with business sustainability.  What I learned firsthand was that the challenges facing non-profits like VisionSpring are no different and no less complex than challenges facing any client I would work for in my current job as a consultant with Booz & Company.

In particular, based on my observations in rural villages in Andhra Pradesh where VisionSpring’s outreach in India is concentrated, I addressed two VisionSpring challenges: 1) how to retain salespeople or “vision entrepreneurs” who conduct the vision screening “camps” or sales days, and 2) how to conduct more targeted marketing campaigns so that the customers who showed up at the camps were experiencing the problems that VisionSpring is geared towards handling, and so they attracted customers who were willing to purchase the reading glasses they need.  The complexity of the VisionSpring model is built on aligning incentives between the vision entrepreneur who makes a $1.50 commission on every pair of glasses sold, the social mission of the organization to provide reading glasses to the rural villagers at the bottom of the pyramid, and the goal of achieving self-sustainability for the VisionSpring business.  The convergence of these three things makes it even more important to align VisionSpring expectations with the value of getting the vision entrepreneur to remain committed to the organization’s mission and to maximizing sales of the reading glasses.  VisionSpring is considering a host of innovations, for example, a hybrid salary/commission-based model, which is aimed at getting these components of their business even better aligned.  Moving forward, VisionSpring’s success in the vision entrepreneur sales channel will depend, in part, on the degree to which these innovations around better alignment are successful.

VisionSpring Senior Director Graham Macmillan reports on new private equity funds from the Social Capital Markets conference in San Francisco.

Is private equity really making a play in this space?  If so, what’s their impact going to be?  Those were the questions I asked myself as I sat down at the session “New Private Equity Funds” at SoCap ’08.  The session’s description piqued my interest enough to choose it over the many other concurrent sessions.   I wanted to learn more about the “serious money” being invested in non-microfinance related social enterprises.   Well, I am happy to report that I found some good examples though I left with some lingering questions.

The session’s Moderator, Scott Smith of Hanson Bridgett, did an effective job of facilitating the discussion among Álvaro Rodríguez Arregui of Ignia Partners, Wes Selke of Good Capital, Christian Schattenmann of Bamboo Finance, and Josh Becker of New Cycle Capital.  For one that doesn’t spend the majority of his time talking with investors expecting a financial return, I was interested in seeing what the investments in the funds were and what, most importantly, were the expected returns—both financial as well as social. Here is a quick listing of the funds, some of the investments the funds have made, and the expected returns:

Good Capital
Good Capital recently launched a $30 million Social Enterprise Investment and Expansion Fund focused on poverty alleviation, health care, and education in the U.S.  While the fund hasn’t closed yet, they have already made two investments: Better World Books and Adina for Life.  Wes Selke noted that the targets of the fund’s investors were social mission-led companies that can demonstrate scalable change.  One of the differentiating factors in Good Capital’s investment approach is its hands-on, VC-like approach to working closely with the management team and taking a seat on the Board.

Target: 8-10% IRR over the seven-year lifespan of the fund.

New Cycle Capital
New Cycle Capital was new to me, but I was quite impressed with Josh Becker’s presentation on their investment strategy.  New Cycle makes early-stage, VC-like investments in energy efficiency/clean building projects and domestic emerging markets.  Some of their investments are: Cool Earth Solar, Goalspring, MK: Michelle Kaufmann, Positive Energy, Terrapass, and Sneaker Villa.
Target: Comparable to top quartile of VC funds over nine-year lifespan of fund.

Bamboo Finance
For those of you who aren’t familiar with Bamboo Finance, they came out of Blue Orchard Finance which is well-regarded for its microfinance investment funds.  Christian Schattenmann described Bamboo Finance’s strategy as trying to help social enterprises tap into the capital markets like microfinance has.  They have set up Oasis Fund to make five investments in social enterprises that provide critical services or goods to the lowest income sectors.  Bamboo provides both debt and equity financing in the range of $250,000 to $3 million.
Target: 10-15% on equity investments.  7-8% debt investments.
Ignia Partners
Ignia Partners hails from Mexico where they are making strategic investments in BoP opportunities in Latin America.  Led by Álvaro Rodríguez Arregui and Michael Chu, Ignia has established Ignia Fund I which has raised more than $20 million to invest in businesses that are scalable, generate cash, part of the last mile of the value chain, and led by experienced entrepreneurs. Ignia has made two investments thus far in Primedic which is a Mexican healthcare provider and an affordable housing project in Chiapas.
Target:  Ignia focuses on hurdle rates and has a target of 25-30% over the hurdle rate.

Overall, I found the presentations from the funds to be quite interesting.  Clearly, “real money” is beginning to move into this space and trying to mimic the investment cycle that occurred with microfinance, though there haven’t been any IPOs just yet.  While it is still early days, it was evident that this was a trend all four of the funds were trying to push.  While all four of the presenters were essentially on their first funds, it was interesting to note that one of the presenters said that the purpose of the first fund is really to get to the second fund.  I took that to mean that there is a credibility and proof of concept stage here.  With success breeds success and this is where I became concerned not only for the fund managers but the space itself.  What kind of expectations are we creating?  What happens if we don’t realize a financial return on these investments?  Does this mean that the money will go away?   Or, is there a real pent-up demand for these products?  Will history show during these tumultuous days that social capital investments actually provide a stronger, risk-adjusted return than we’re seeing in the traditional capital markets?  Lots of questions, few answers.
While the game of expectations is my overall take-away from SoCap 08, my take-away from the “New Private Equity Funds” session was measurement, hence the title of my post—two bucket thinking, two bucket standards.  In the session there was a lot of talk about expected financial returns, IRR’s, and hurdle rates.  If I were at a VC conference I would have felt right at home.  The trick is that this gathering is about Social Capital and the phenomenon of the merging of two bucket thinking.  I think it is safe to say that all the attendees believe in the blending of financial returns and social returns.  No longer do we want to live in world where you can’t have your cake (20% return) and eat it too (poverty eradication).  While all of the presenters acknowledged that the purpose of their funds was to provide double and triple-bottom line returns, I didn’t see anything other than anecdotal evidence of this being achieved.   For one who comes from a philanthropic capital-funded organization where rigorous social impact measurement is required and the norm, I did not get a sense that the same rigor was being applied to the Private Equity Funds.  I don’t believe this is the fault of the fund managers or the companies they’ve invested in.  I truly believe that they feel they’ve seen the evidence of the social impact in their due diligence.  Yet, not one of the fund managers could provide quantitative results of impact beyond carbon credit offsets.  So, I left the session in a quandary.  If you’re receiving philanthropic capital, are you held to higher standards of social impact measurement than other types of capital?  If so, why?  Is this somehow an adjustment to risk?  If quantitative social impact measurement is the gold standard of social capital investment, how much are investors expecting a financial return willing to spend?

I was recently invited to speak at this year’s Global Social Benefit Incubator at Santa Clara University on the topic of “Leadership for Growth.” I am a graduate of the 2006 class of the GSBI, which can pretty much be summed up as a two-week, 12-hour-a-day boot camp for social entrepreneurs. The GSBI’s location plays an essential role. I think there is an affinity between social entrepreneurs and Silicon Valley — there is common understanding about entrepreneurialism and its successes and struggles.  Also, venture capital’s approach to investment can help teach social entrepreneurs a lot about how to refine their value proposition, perfect their pitch, and get their financial models right.  I really valued the GSBI because it provided a pause for reflection.  Very rarely do we get the chance to step back and think strategically and be reflective.

When I attended the program, I had the opportunity to work with some incredible people and organizations, including Matt Flannery (Kiva.org), Satyan Mishra (Drishtee), Suresh Subramanian (IDE India), and Bal Joshi (Thamel International), among others. These classmates and their experiences motivated me tremendously then, and still do so today. More than anything, the GSBI helped me to recognize that there are so many smart and talented people out there tackling these enormous challenges, and that with a little coordination, some skills development, and a supportive environment, we can accomplish great things.

I  am amazed by some of the achievements of my classmates from 2006. I recently learned that Bal now has more than $100 million in annual transactions running through his company, Thamel.com, which back then was just getting off the ground. Certainly Matt and Kiva.org’s story is well-documented, but I remember when Matt was sitting in class programming the website and trying to drive enough deal-flow to meet the lenders’ demand.

Looking at the Class of 2008, I saw another “us” – another “generation” of motivated people trying to tackle large challenges and doing it differently.  It was exciting and inspiring.  I wish them the best.

The following is a post from Tim Johnson-Aramaki, a student at the University of Michigan’s Ross School of Business, who spent the summer with VisionSpring India working on a data-collection methodology to measure the long-term impact of VisionSpring’s work on the lives of Vision Entrepreneurs and customers. His project is part of a multi-year impact study conducted by Professor Ted London at Michigan’s William Davidson Institute.

“Over the last few months, I’ve been working to develop a survey instrument with the VisionSpring team here in Hyderabad and the William Davidson Institute team in Ann Arbor.  The first step was survey pre-testing, which involved conducting countless interviews in rural village throughout the state of Andhra Pradesh.  These interviews are meant to help us discover whether the questions we’ve come up with are understood by respondents with varying semantic and cultural backgrounds, and if they prompt valid and appropriate responses. Some of the results we’ve gathered have been really interesting.

For example, one of the most critical pieces of data in measuring VisionSpring’s impact is the income of its Vision Entrepreneurs and customers. It also happens to be one of the most difficult things to measure as there are challenges when it comes to discussing money.  Through our interviews, we’ve found  that while people are relatively open in assigning a number to their income, that number may not be accurate.  There are a variety of reasons for this, but one is that they fear the income figures may be passed on to state or national agencies, potentially jeopardizing the public assistance they receive. To avoid this, they often provide income figures lower than that which they actually earn.

Responses can also be skewed because interviewees seem to identify the interviewer as higher up on the social ladder.  With that in mind, the interviewees often attempt to please the interviewer with superlatively positive answers about product or service quality and refuse to make any constructive criticism.   Moreover, in areas of the survey that allow for subjective self-measurement, many interviewees have attempted to “impress” the interviewer with potentially inflated responses.  For example, we had to alter an entire section that measured an individual’s self-assessed capacity in tasks such as interpersonal communication because nearly all the responses to these questions were either a four (”agree”) or five (”strongly agree”). There would have been no improvement to measure!

Working through these issues to get an effective impact-assessment tool for the base of the pyramid has been challenging but rewarding. What’s so great about this project is that while it’s being made for and by VisionSpring, ultimately the survey and survey-development practices developed here in Hyderabad could really benefit other organizations working at the base of the pyramid in helping them measure the success of their work.”

Two weeks ago I had the opportunity to attend the fourth annual summer conference of the Aspen Network for Development Entrepreneurs (ANDE) in Colorado. I was pleased to be included in a small group of global leaders dedicated to the idea that Small and Growing Businesses (SGBs) are the primary hope in the fight against global poverty and who are committed to helping entrepreneurial organizations operating in the developing world gain access to the resources and technical assistance they need to flourish.

As the sole participant in the meeting currently running an organization of the kind ANDE looks to assist, I came away from the experience with an enhanced perspective of the broad range of players dedicated to assisting the social enterprise community, and of the potential for this kind of multi-player network to facilitate great progress in the field.

ANDE is comprised of a dynamic group of organizations and individuals. I believe that as ANDE matures, it will become an instrumental force in focusing greater attention and resources to the needs of small and growing businesses throughout the developing world.

VisionSpring’s Maruti Ram on how Salesforce.com helps motivate entrepreneurs, improve sales, and penetrate rural markets.

One of the biggest challenges we face in India is that our Vision Entrepreneurs return from the field claiming that their markets have been saturated.

The truth is that all of our Vision Entrepreneurs are assigned territories of 20 villages – each which have populations of around 50,000 – where they can return once every three months to conduct vision campaigns. The notion that they have reached out to everyone who might be in need of glasses after just a few sales campaigns is false; it just feels that way to them because the first and second visits are often immediately successful, while the third starts to become less so.

To combat this, we’ve begun to use Salesforce.com to generate simple charts that we print out and share with our Vision Entrepreneurs. We input data on population, sales, estimated target market, and the number and kinds of campaigns that have been conducted in each village. These territory reports help combat the Entrepreneurs’ misperceptions as they prove that there are many people they have not yet reached and that their markets cannot possibly be saturated.

We also use these reports as a jumping off point to come up with sales strategies. For example, we can see from these statistics that we are missing a large number of “non-functional Presbyopes” — those who experience near vision loss but have not yet lost their jobs or experienced declining productivity. Eyeglasses can still help them improve their quality of life, and we are developing strategies for educating them on these benefits.

In order for this data to help us effectively reach every potential customer, we must also enhance our marketing techniques. Just conducting sales campaigns is not enough - we need to also focus on viral marketing, or word of mouth. For example, Vision Entrepreneurs could be addressing the town council and teachers meetings that occur every few months and using them as a platform to educate villages in their territories about vision care. Vision Entrepreneurs are not yet taking advantage of all these kinds of opportunities, but they are beginning to. Thanks to the tools we have created, our feedback loop is tighter and has immediate impact on our work.

VisionSpring’s Miriam Stone interviews Acumen Fellow John Tucker, stationed with VisionSpring in India since November ‘07.

MS: What was your background before coming to VisionSpring?

JT: Before becoming an Acumen Fellow I was doing consulting work for a technology services firm and then a design firm. I applied to the Acumen Fund program because I wanted to take a break from pure advising work to do something more entrepreneurial and with more of a social impact.

MS: What is your project with VisionSpring?

JT: Originally when I joined VisionSpring in November, Neil Blumenthal (VisionSpring’s Director) designed a project in which I would collect stories and develop sales/marketing techniques to help start up VisionSpring’s innovation program. But it’s ended up that I’ve gotten involved in everything: operations, marketing, and training.

MS: What is it like to start an innovation program for a Base-of-the-Pyramid sales and marketing organization?

JT: I think the principles of these programs are essentially the same, regardless of whether you’re selling luxury items in the US or affordable products at the Base of the Pyramid. You have to experiment, learn quickly, take iterative approaches, and make things replicable.

At VisionSpring, we’ve focused on determining when we’ve gathered enough information to proceed with launching a new product and when we have enough evidence to know that an innovation is going to be beneficial to the overall model.

MS: What are some of the things that make VisionSpring’s market unique?

JT: Cultural barriers certainly shape our sales and marketing strategies. For example, women Vision Entrepreneurs have more success selling to women because they are able to actually enter the homes of other women. But at the same time, they cannot travel freely because of strict family obligations and because of the large role that approval from fathers and husbands play in their professional decisions. Also, geographically, rural markets are by nature very spread out, so traveling times are high.

The result of these two factors is that we attract a lot of women Vision Entrepreneurs, but the duration of their time with us remains on average around 6 months. By understanding the roots of this pattern, we can take steps to work with the environment and be successful.

MS: Do you have any advice for someone coming in to do a project with an organization based in the developing world?

JT: You need to be a really good listener for the first few months, and recognize the deep experience of the people you’re working with. The learning curve at the beginning is incredibly high. Then, after some time, you get to better understand the market and the individuals you are working with and can actually begin to add value.

View John Tucker’s short film on Rama Devi, one of VisionSpring India’s most successful entreprenuers, on YouTube at http://www.youtube.com/watch?v=HkKoXJTC5I4

Read more from John Tucker at the Acumen Fund http://www.acumenfund.org/investment-story/walkabout.html website

I recently returned from a field visit to our Franchise Partner in Ghana, Freedom from Hunger http://www.freedomfromhunger.org/. One of the biggest problems their HealthKeepers (the local name used for Vision Entrepreneurs) face while selling VisionSpring eyeglasses is credibility.

Because of limited access to eyeglasses and information regarding eye health in the country, it is difficult for communities to believe that reading glasses can be purchased “over-the-counter”, i.e. without a prescription from a doctor. It is also particularly hard for people to accept that a woman who one day has no job is, after a few weeks of training, qualified to conduct vision screenings and distribute reading glasses and the other health-related products they carry in their basket.

Disbelief on the part of community members has emerged as a serious obstacle as people are sometimes reluctant to believe that the HealthKeepers have the knowledge to properly sell non-prescription reading glasses. This can hinder the confidence of HealthKeepers, who need to believe in their own abilities in order to be successful saleswomen.

One way that Microbusiness for Health (the name of this particular Freedom from Hunger program in Ghana) has addressed this issue of credibility is in the way in which they choose HealthKeepers. Each woman must fit a profile that Freedom from Hunger feels will instill confidence in their communities. This profile is based on a series of factors, including level of education and their image within the community.

Another vital component to gaining credibility is through marketing. All HealthKeepers are given uniform aprons and baskets (the colors are yellow and maroon) with official logos from Freedom from Hunger to use on their sales campaigns. VisionSpring assists in the marketing push by providing templates for banners that promote the use and benefits of eyeglasses, as well as official Vision Entrepreneur identification cards.

Perhaps most crucially, VisionSpring and Micro Business for Health provide close training and support to make sure that HealthKeepers feel confident in their role as eye-care salespeople. We’ve found that the little things count the most, such as making sure the HealthKeepers know how to the hold eye charts properly, so that they don’t fumble during a vision screening. We teach them basic eye care vocabulary so they feel comfortable discussing issues of near vision loss and non-prescription glasses. And we also try to drive home the importance of professionalism, so that their communities respect and value their work.

Finally, each HealthKeeper carries letters of support with them when making sales: one from Jordan Kassalow, founder of VisionSpring, one from Daniel Mensah, the director of Microbusiness for Health, and one from me.  Although these documents are rarely requested, they are crucial in building the HealthKeepers’ confidence.

In our work around the world we have found that these small things are the key to building credibility and trust in communities, and to helping ensure the success of our Vision Entrepreneurs. But it’s an interactive process – we learn from our partners and the Vision Entrepreneurs themselves what works and what doesn’t. Then we just try to adapt as quickly as possible.