Saket Vora

Last Monday, I attended a talk by David Green, a recognized social entrepreneur and thought leader in pricing strategies for developing countries. My friend Yin Yin insisted I attend but I didn’t think much about it, but after listening to Green for 2 hours I was so happy I attended. A lot of entrepreneur talks lack the kind of meaty details that practicing entrepreneurs seek (indeed, earlier that very day I was left unsatisfied by the lack of specificity at the philanthropy panel discussion), but Green provided actual numbers and helpful details of how he done what he’s done. As someone who was trying to work out pricing and scaling strategies for a high-tech product meant for the poor in developing countries, this was a truly engaging talk. This posting is my attempt at describing this information.

David Green has achieved remarkable success in bringing medical practices and technologies to people who lack the ability to pay the prices that those in the developing world routinely pay for such treatment. His talk was titled ‘Humanizing Capitalism’ and was wide-ranging in topic and scope. A small number of us, including myself, went upstairs for dessert with David to talk further. David Green, Ashoka Fellow (2002) and MacArthur Fellow(2006), keeps himself busy with more than 10 projects at at time. One of his critical successes has been Aurolab, which provide cataract surgeries and eye care products to people in India and works closely with Aravind Eye Hospital. He is currently working on projects with low-cost hearing aids and solar power.

First: pricing.  Pricing strategy is what Green excels at. How do you address pricing disparity to make products affordable to those who really need them? How can pricing strategies be used to create self-sustaining (read: profitable) businesses that still keep the social good at its core mission? Green has gone about this from both angles: a) how much money does it really cost to make a final product and b) what sort of pricing system can yield the best possible business model? For example, there is a device for cardiovascular problems that is priced at $6,000 for people in the developed world. However, it costs less than a thousand to make. The manufacturer wants to go in developing world markets, but can’t figure out how to price it such that enough people would buy it and to avoid backlash in the developed-world when those customers see that the same product is selling at much lower prices elsewhere.

Let’s look at Aravind Eye Hospital. Blindless is an enormous problem and a majority of cases come from cataracts, which is when the intra-ocular lens becomes clouded. This kind of surgery is routine in some parts of the world, but there are million so of underserved people in India. With the idea of “if McDonalds can do it for burgers, why can’t we do it for eye care”, Green and a colleague set about creating Aurolab, a nonprofit company that manufacturers intra-ocular lenses and other materials/products used for eye care. Aurolab is situated next door to Aravind, but sells products worldwide (has around 7% world market share too). The difference between cost of an intra-ocular lens of Aurolab and its competitor is astonishing: $2 vs $160.

Aravind Eye Hospital (founded back in 1976) has performed 3+ million surgeries to date and last year’s profit was $8 million. It uses a tiered system of payment. Around 50% of its patients pay nothing, a quarter pay around $12, and the remaining quarter pays much more than $100. The differentiation comes in the experience of the patient and is driven entirely by consumer choice. The free service customers don’t have the nicest waiting room or living accomodation. Those who pay money would get a nicer waiting room or outpatient room (hypothetically, maybe the difference between being 2 in a room vs 10 in a room). And for better or worse, the consumer choice comes in because more wealthy patients will pay more for the surgery to avoid sitting with the lower income people. This being said, it is critical to note that the quality of care is the same. The same surgeons, the same materials, etc. When it comes to the actual procedure, everyone is the same.

What are ways that Aravind lowered their costs?

• Increasing staff efficiency. Aravind surgeons perform 2000 cataract surgeries a year, 6x the Indian average.
• Lowering operating expenses. By prepping a larger operating room and treating more people at a time, setup costs are reduced.
• Smart international purchasing.
• Community outreach. Community resources can be mobilized on a fairly massive scale for short period of times. Aravind sets up eye clinics in communities that serve as advance diagnosis, screening,  and identification centers. It works with communities to provide transportation and meals to get people to and from the hospital, and later to assist in out-patient care and followup with Aravind doctors.

The “David Green Formula”

How do you go about figuring out a price? Appropriate prices change depending on your geographic and social position. When Green was working on expanding the Aravind system to Egypt, he had to determine the pricing structure.

First, figure out the paying capacity.  Segment the society into high/middle/poor and determine each segment’s average monthly income. For each segment, forecast what % of those you might have as customers.

Now, for Aravind there is a formula: per surgery cost = total operating expenses / # of surgeries performed = the average monthly income for the bottom 60% (income wise) of the population.  A word of caution: this is what I quickly jotted down during the talk, so don’t take this at 100% face value, and this is how it has worked out for Aravind. Smart purchasing and community outreach are drivers to reducing operating expenses a big reason why Green knew Aurolab was an important link in the chain), and staff efficiency is a way to increase # of surgeries. Green said that when he arrived in Egypt, he started talking to everyone he met to get some data points, and then guessed the pricing breakdown. After the deep dive was concluded, the numbers matched Green’s quick estimate. He’s good at this. Very good.

By no means are the results 100% reproducible. Each place has their own sustainable point. In Egypt, 55% of patients are free and 45% are paying. In Nepal, only 7% are free, 4% pay $12, and  89% pay over $35. But we’re still talking millions in profit.

A word on Aurolab. When I say non-profit producer of eye care products, I don’t mean low quality. Aurolab’s products meet the FDA mark regulatory requirements and get the same approvals as the commercial ones that sell for much more.  Aurolab has customers in 120 different countries. Aravind and Aurolab also carry out major education and training projects — a school to train eye care personnel and researchers.

Financing for Social Ventures, Finding Talent

Something Green has been examining is the financing process for companies that have social good as their fundamental goal, rather than shareholder return. Self-sustaining businesses are one that turn profit, and in our case, re-invest the profit into the company. One observation he’s made: registered non-profit organizations are not allowed to use leverage to increase the valuation of its assets, which is something that for-profit companies can and do routinely. The trick is to have a for-profit company with strong and bulletproof governance principles to ensure the social mission is the top priority, but the advantages of this structure are significant. I need to think through more of what this observation means. Another tactic that has become viable in the last few years is obtaining funding from foundations. Typically they aren’t allowed to give to for-profit companies, but there is some form of ’social mission of investment’ clause where they can give foundation money as long as the mission of the investment is for social return — or rather, it’s about aligning the social mission with the foundation’s tax-exempt status.

The challenge in taking equity financing is creating the right structure. Green has worked with the Deutsch Bank to serve as the ‘first-loss cushion investment’ for these types of social ventures.

One person asked Green how he gets these collaborative projects started. He said that he doesn’t work with companies; he works with individuals. Individuals with extreme technical competence and with deep rooted integrity.

Hearing Aid Project & Solar PV

Hearing loss is a big problem and developed world solutions are expensive, requires multiple setup and fitting visits, etc. Green is working with experts in the Chicago area in a new venture, Conversion Sound,  to create a hearing aid device for the developing world. They are using innovative technology to dramatically shorten the fitting and calibration process.

Another thing endeavor Green has taken up is to figure out  a better way of bringing solar cell electricity generation to low-income people in developing countries. He seems to be approaching it more from the financing side and logistics — where & how can the production and distribution costs be lowered. He helped bring people from different backgrounds (entrepreneurs, academics, foundation, venture firms, investment guys, technologists) for a 1 day summit to figure out the problem areas and possible ways of moving forward. Green envisions a sort of Solar Fund that will invest in opportunities towards this purpose.

A final thought.

Green described what drives him with a sort of Chinese accupuncture analogy.  How do we redirect flows of energy from where its concentrated most to where it is needed most?

It was a great talk and Green was such a down-to-Earth and honest person to talk with.  He spoke plainly on some of the luck that he has had: he found a trusted colleague because a current partner was in the midst of an embezzlement charge and felt so bad that he was stealing from a non-profit org that he told Green that a competitor was a really good honest man. At a summit, he happened to sit next to the 2nd-in-command and Wal-Mart’s health and wellness group who was excited to hear about Green’s hearing aid project that she invited him to speak to Wal-Mart’s executive team. Or a contact in Mexico he made through a network that proved to be extraordinarily well-connected and influential. It really showed me the power of networking.

Probably two companies you wouldn’t hear in the same sentence. Last Friday morning, I went up to the City for my final round interview with Accenture. There were a number of fellow Stanford students there, and one brightened up when I said I did my undergrad at NC State – “I’m from Raleigh!”. He went to Enloe High School, so we chatted about NC for a while. It always feels good to find fellow North Carolinians out here. The interviews went well I think, and they even had some food for us. Accenture is good about having analysts and consultants around to answer questions and talk about their experiences. Overall I had a good time.

I finished up around 2:30pm, and walked around Market St. to get my bearings. I called up my friend Melih to see if he was free for a coffee, and was soon on the MUNI down to the AT&T ballpark (where the SF Giants play). Melih is a friend from NC State – we met in the EE program but he went over to Computer Science and stayed on to get his Master’s (he has also taken many courses in economics). His father taught at NC State and is an accomplished entrepreneur. He is also an outstanding photographer and was a lead photographer for the Technician student newspaper. He came out to San Francisco at the end of summer to work at TokBox, an 18 month old startup which pioneered entirely web-based and easy-to-use video chat. This startup caught my eye a long time ago (one of the few I saw on TechCrunch that I actually went and used) and continues to impress me today. I was so glad that Melih started there — he pierced through the bubble of the NC State CS program.

We greeted each other and walked down to the Panera bread for a light late lunch and coffee. It was easy to recall why I enjoy talking with him — Melih has a keen awareness of the world (we both come from immigrant families) and is quickly able to grasp the fundamentals of almost any topic below all the surface sheen. He spoke to me about the kind of learning experiences he is getting at TokBox, and it’s immediately clear that he has a better handle on the core issues than some budding (and even practicing) webpreneurs I’ve interacted with (Simon, as I’ve mentioned before, is the same way..freakishly sharp.). There’s another quality that I like, and is hard for me to succintly describe. My friends and family know oh too well how loquacious I tend to be, but honestly, in my opinion maybe half of what I actually say is meaningful. With Melih it always seems closer to 100%. Keep an on this guy, folks. He is going places.

After lunch he invited me up to the TokBox office, housed in a converted warehouse. It oozes with Silicon Valley startup vibe — exposed ceiling, spreadout bullpen style cubicles and tables, dim lighting, an amazing breakroom and kitchen (with an enormous 12 foot long island) and a lounge with comfy chairs and a plasma TV. I also discovered that TokBox shares the floor with EventBrite, the amazing event management website that we used last year for the Krispy Kreme Challenge and that blew me away with how awesome their solution was. I love those guys.

Finally, I headed back down to Palo Alto. What a nice day in the City!

Coming out of my MEMS class, I got a fairly unexpected call — Dr. Steve Walsh. Dr. Walsh, as some readers might know, is one of the professors at NC State who runs the Engineering Entrepreneurship Program (EEP). He and Dr. Tom Miller were in town for the Roundtables on Entrepreneurship Education (REE) conference and were by the Oval. I biked over to greet them, and we walked over to Kresge Auditorium where the one and only Vinod Khosla was speaking. Khosla is one of the most famous people in Silicon Valley. He was a co-founder of Sun Microsystems in 1980, then became a general partner at Kleiner Perkins in 1986. He left KPCB in 2004 and started his own firm, Khosla Ventures, which has gained attention (and notoriety) for its energy/greentech/cleantech heavy portfolio. Khosla is well known for making bold statements about how to combat global climate change and he speaks openly about how he takes a different approach to compared to environmentalist friends.

Khosla spoke to us about his approach to the energy problem, highlighted several companies he has invested in and why, and took many questions. Among hardcore environmentalists, he has taken flak for his lack of interest in the push to change US society’s behavior regarding energy usage — he utterly dismisses one claim on how we should only use 1 square of toilet paper, for instance. He asked people who drive a Prius to raise their hands, then said that instead of the extra $5,000 they paid for the Prius, they could have painted a 10 ft x 10ft white square on their room and have the same carbon reduction. He is a technology optimist that and says we as a global society need to produce 10 times as much energy as we do today — AND we can do it without causing the harm we do the planet today.  People protested and seem to think that Khosla doesn’t care about efficiency and conservation, but I disagree. He is smarter than that. His whole family drives hybrids. He is just thinking long-term — energy efficiency gains are only 10% to 20% of the problem, and they are vital to lowering the hurdle for upcoming alternatives. We should as a society adopt these changes, but Khosla is placing the bulk of his time and energy (and money) into going after the Goliaths — oil, gas, materials. The BIG sources of carbon.

I greatly admire and respect Khosla and agree with his approach. The talk was outstanding and I left feeling inspired. As soon as it’s online I’ll link to it.

After the Khosla talk I got a free Jamba Juice (they always mess up Nader’s order) and then we went to hear a performance of “Bagpipes from Around the World.” I like bagpipes, but in short quantities. It’s unusual in that it has a drone, but as Nader pointed out it removes any silence from the music, and often moments of silence is as important as the notes themselves. Still, it was pretty cool. I finished up by heading up to Nola’s on University Ave for a Social-E dinner where I had great conversations with Andi and Silvia.

On Saturday I attended the Startup School started and organized by Y-Combinator. The Startup School brings many notable speakers to talk about all things entrepreneurship, funding, the web, ideas, etc. This year’s speakers included:

• Jeff Bezos, founder and CEO of Amazon.com
• Marc Andreessen, creator of Mosaic, Netscape, Ning
• David Heinemeier Hansson, creator of Ruby on Rails
• Michael Arrington, founder of Techcrunch.com
• Paul Buchheit, creator of Gmail
• Sam Altman, founder of Loopt
• Paul Graham, founder of Y-Combinator
• Greg McAdoo, partner at Sequoia Capital
• Jack Sheridan, partner at Wilson Sonsini Goodrich & Rosati (the tech law firm)
• David Lawee, VP of Corp. Dev. at Google
• Peter Norvig, Dir. of Research at Google

There are over 500 people there who flew in from all over the country. The talks ranged from how VCs think about ventures, the legal issues of starting a company, how to get publicity, how to scale your business, and core principles can serve you well. My personal favorite was David Heinemeier Hansson, who gave a very entertaining but solid presentation on the flip side to web startups – you don’t have to be the next Facebook or YouTube or Google! Imagine if you (gasp!) charged money for your service, you could get profit! I mean, he had a picture of Eric Cartman on one slide and a lolcat reference (”I can haz scaling probs plz?”) on another. It was great. Paul Graham stressed the value of being good, Paul Buchheit described the importance of listening, and Michael Arrington gave a rather thoughtful (perhaps a tad bit melodramatic) about the troubling state of the community here in the Valley.

It was neat to see and hear from so many famous names, and during the breaks there was always a buzz of…yes…the next Facebook or YouTube or Google. Overall it was a great way to spend a Saturday.

This past Saturday, WaterPLUS presented in the final round of the Duke Startup Challenge and won $15,000 in awards. Joel, Naman, Kari, and Will gave an outstanding presentation, winning 1st Place in the Social Track ($5k) and taking 2nd Place Overall ($10k). This is a great achievement and I’m personally so honored to work with this team. We plan on using the money to fund Kari for the summer to conduct technology evaluation and perhaps start some early prototyping. See here for more information about the winners.

I wrote earlier about a talk that I attended by Dominic Orr, CEO of Aruba Networks. I was looking through the EdCorner by the Stanford Technology Venture Programs when I saw that the video from the talk is now available online.

Here is one of my favorite parts of his talk.

What he says exactly summarizes my own beliefs about how to make decisions when working with really smart, passionate people.

I’m happy to finally show Omnisio, the web startup that my roommate and his friends launched a few days ago. Omnisio lets you slice and dice, assemble, comment on, and add meta data to video clips in a really simple and easy to use way. When I was in Alaska, I took several movie clips with my camera. I didn’t want to hassle with stitching them together before uploading to YouTube. With Omnisio, I just pasted in the YouTube URLs, arranged them (you can even edit each individual clip’s start and end point), then published as a single video. They just integrated a YouTube search feature too. Search whatever you want, click, click, click, and publish and you’re set. No many clumsy multi-part video files!

You can click on the video and leave comments too. Check it out and share it with your friends. Let’s give them a traffic boost.

Update: Small version of player embedded below:

I learned today that WaterPLUS is one of the 7 teams out of 35 to be accepted the pilot phase for BASE, the Business Accelerator for Sustainable Entrepreneurship at UNC-Chapel Hill. We also got some good feedback from judges in the Duke Startup Challenge, where we are currently in semi-finalist standing. Our business plan is due this Friday for the Carolina Challenge, and with all these recent developments our first ever ‘all hands meeting’ on Wednesday should prove to be well worth it, both for enjoying how far we’ve come and for charting our course into the future.

I just wanted to try out one of the Y-Combinator launches: Mixwit. You can create little music player widgets that have a distinctly retro style. Here are two songs from The Shins latest album. The first one, “Australia”, is incredibly catchy and I’ve been playing it a lot these past few days. I love the little “no!” at the beginning when told “it’s time to put the earphones on.”

The attention to detail is pretty nice: if your playlist is long enough, the tape will spool and unspool from side to side.

Did a bit of work with the amplifier this morning and met up with Babak who updated me on his progress. We mapped out a gameplan for later this week. It’s going to be absolutely brutal. Sigh.

At 1pm I went over the Stanford Terrace Inn to meet the Engineering Entrepreneurs Program group; they just landed today for their spring break trip. It was great to see Tara, Dr. Walsh, Dr. Miller, and Dave Mainella again. I recognize Pavak of course and I’m glad that Glen Garner made it on the trip too this year. It’s a more diversified group, with a few students from the college of management and one biomedical student. Doesn’t seem, on first impression, that a lot of seniors chose not to come.

I’ll rendezvous with them tomorrow for dinner briefly, then back to work on amplifier. The amplifier will be more or less non-stop until Friday. I wish Dr. Lee would extend it to next Wednesday. The strategy class as sucked away so much time…most of it I don’t mind too much but that forced-participation into that rubberband innovation tournament was just bad.

We woke up, got dressed, and took the bus over to the University of Washington by around 9:30am. The GSEC was being held in their Foster school of business, so we found an empty conference room and took some of the nice food they had setup in the hallways outside the classrooms. We spend the next several hours going through the presentation, assigning slides and rehersing the talk, and making handouts. We found a Kinkos nearby to print and did four full run throughs before go time. We were the first teams to present.

For context: the day before, the 16 invited teams had the first round of presentations. Kari, Will (who both arrived wednesday night) and Naman (arrived thursday at like 1am) presented in the morning. Six teams would advance to the final round.

We gave our 10 minute presentation which went well, and followed by 10 minute question period. The finalist judging panel was five people and they asked very pointed very detailed questions. Kari and Will said that these questions were orders of magnitude over the questiosn they had yesterday. We did our best and watched the five other teams go. It was readily clear that three other groups had truly impressive financial analysis and projections. The Akan Energy team from Cornell was particuarly strong. The last group was Help For Malaria, and Naman was a bit skeptical of some parts of their presentation, the health science side of it anyway. I’m saying this not as a conflict of interest as a competition — I wouldn’t be surprised if Naman is currently considered a world top 50 malaria researcher. He knows his stuff regarding malaria.

Anyway, we were really hungry (skipped lunch) and eventually the bus left to a convention center downtown where they had the awards banquet. The groups milled about outside the dining room for almost a hour before it got underway. I should mention two people here: Duane Dunk was the mentor that we were introduced to via GSEC. He is Director of Drinking Water at HaloSource, a Seattle-based company specializing in point-of-use water purification units. Duane has had experience is so many countries (is taking his 20th or 30th trip to India on Monday!) and is a tremendous resource. He was there the whole week meeting with Joel and our team and providing invaluable feedback. I spoke with him at length that night about point-of-use vs community approaches, difficulties in patent enforcement in the developing world, distribution and sales models, possible partnerships, etc. Amazing guy. Getting to know him is probably the best thing we took away from GSEC. The other is Eric Reed, the UW team ambassador. Eric is a senior in HR at the B-school and was a lot of fun to hang out with and took good care of us while we were there.

The dinner was like the ones for the Park finalist dinner only a bit more nicer. Li Li joined us for this and that’s actually where I got to meet her. A lot of distinguished guests in the audience from Seattle businesses and the UW. They asked all the teams to come up and say something they learned from GSEC. One of the students from the India Institute of Management said that he learned to a) speak slower and b) how to pitch to American investors: use more pictures, fewer numbers. Best line of the night. Bill Clapp, a major figure in microfinance world, gave a keynote address. The “People’s Choice” award for a poster talk given on Monday was given to Help for Malaria. The ‘Investor Award’ for the company most likely to be a real business was Slag Works, a team I’m not familiar with and not one of the finalist teams. The final awards were in two categories: normal and global health. Seeing as two of the six finalists were health related, we knew what might happen.

WaterPLUS took 2nd place in the global health category, while Help for Malaria took 1st. In the normal category, a business plan regarding a sunflower farm to combat poverty won 2nd place, while KAITE, a German-Zimbabwe partnership venture won the grand prize. I thought KAITE had a great chance — they have been going since 2007. KAITE was working with Zimbabwean villagers to create organic products like essential oils and herbs and sell them at a premium in the booming European market. They already have EU Organic certification, pretty cool.

We hung around the hall for a while, meeting other people. I spoke with the President of the Grameen Bank (the microfinance bank started by Muhammed Yunis who won the Nobel Peace Prize in 2006 for this). An investor came up to us afterward and told us to keep him up to date on how we are progressing. We also said goodbye to Duane, but we’ll be keeping in contact with him going forward.

We took the chartered bus back to UW and were too tired to go out on the town. It was around 10:30pm this point. We bid Eric adieu at the bus stop and made it back to Li Li’s house, we sat in the living room having tea and just having some really thoughtful conversations. I felt so at ease and comfortable with all of them, despite Naman being the only person I’ve met personally for more than a few days. Tremendous people.

Our flights were scattered, with Will having to leave around 9am, Kari at 12pm, me at 5:45pm, and Naman at 10pm. We ended up heading to sleep around 1:30 or 2am.

Kari called me this morning to let me know that WaterPLUS one of six teams to advance to the final round of the Global Social Entrepreneurship Competition at the University of Washington. Big congrats to Kari, Naman, and Will who pitched the first round today.

I’m heading out the door on the way to the airport. I’ll update later from Seattle.

Last quarter I went to a panel discussion that the Computer History museum about the founding of Intel. One of the panelists was Gordon Moore, the engineer whose famous analysis that the number of transistors in a microchip doubles every 18-24 months is known as Moore’s Law.

I was able to snag a photo of him with me and a few friends!

 It was snapped really fast before Moore left the stage.