Financing Social
Entrepreneurship Efforts
David Green
Creating a Different Economic
Paradigm
• Examples of sustainable eye care that serve all
economic strata, where free is the lowest price
• The interplay of affordable technology combined
with cost-effective and affordable eye care
service delivery
• Social enterprise business models with the right
control and governance to ensure fidelity to
social mission
• Financing to bring about the revolution
Our “Calling Card”
• Over 300 eye care programs are self financing
and serving low income
• Eye care, more than any other medical
specialty, has proven that primary, secondary
and tertiary care can be self financing and
serving the poor
• Lessons learned in eye care need to be applied
to other medical arenas
Aravind Statistics 2011-12
Charity Pays: Aravind in Kerala
Initial situation
Activities
Result
Paying
patients
• Only 2% of Aravind’s
paying patient
population was
coming from Kerala
• Aravind held over 40
outreach camps in 12
months
• One year later, over
25% of Aravind’s
paying patients came
from Kerala
Word of mouth generated by doing affordable care is sufficient to
drive paying volumes; cannibalization doesn’t occur
Aravind Has Helped 285 Eye Hospitals Become
Sustainable
Other Countries:
Bangladesh
Bulgaria
Bolivia
Botswana
Cambodia
China
Egypt
Indonesia
Kenya
Malawi
Maldives
Nepal
Zambia
Zimbabwe
Guatemala
El Salvador
Tanzania
Tibet
Nigeria
Sri Lanka
Lions (SF)
Sight Savers
CBM
- 112
- 53
- 21
WHO,ORBIS,IEF,RTS
Seva, others - 45
Total:
231
Participants: 1148
80% of these eye care programs have become
profitable while serving the poor
Grameen Eye Hospitals
Surgeries:
47,000
70% pay
$33
20% pay
$78
10%
free
Profit
$222,222
Lumbini Eye Hospital, Nepal
AlNoor
Magrabi
Eye
Hospital
Egypt
Year
2005
2006
2007
2008
2009
Expenditure
Revenue
Profit/loss
5,492,345
5,870,038
377,693
8,026,917
8,373,917
347,000
10,007,394 10,617,815
610,421
9,936,205
9,946,984
10,779
13,349,988 16,611,784 3,261,796
Total
% Free
% Free
Cataract Cataract Total All
All
Surgery surgery Surgeries Surgeries
4727
49%
6,138
41%
4260
60%
5,435
51%
4447
58%
6,208
47%
6859
41%
9,330
33%
6356
43%
10,147
31%
Annual Data of Shenyang He Eye Hospital
Chitrakoot- Sadguru NC
Exams & treatment
Surgeries
Surgery free or below cost
Percent free or below cost
Surplus revenue
2011-12
411,774
100,691
86,719
86%
8%
Visualiza : Public and Private Together
Waiting room private
Waiting room Social
Operating theatre
PACIFIC
VISION
FOUNDATION
EYE
INSTITUTE
San Francisco
USA
Humanizing Capitalism
• Use profit and production capacity to serve
• Profit is good; it’s how you use it that makes a
difference
• Profit is a means to an end and not the end
itself
• Maximize distribution while being profitable
VS Maximizing return on investment
• Use pricing to change the competitive
landscape in favor of the consumer
Finance from the Customer
Policy Implication for INGO’s
• Instead of re-inventing cash flow
each year to pay for programmatic
operating expenses:
–Make programs self financing from
user fees
–Use freed-up finance for start up or
expansion of new service delivery
Create and Use Market Forces
• Change the competitive landscape by
providing accessible high quality services
• Consumers become program planners
• Stimulate industry development by converting
need into demand and proving that markets
exist
Aurolab
Interplay of technology, disruptive pricing and compassion
14 million eyes regained sight through affordable Aurolab products
8% global market
share of intraocular
lenses
1.9M annual volume
Products sold in 120
countries: 60% to nonprofits; 40%
Volume
commercial
Aurolab Price USD
Competitor Price
CE Mark for most
products, FDA for
suture
IOL
Suture
Pharma
1,337,901
1,173,953
1,675,122
$4.50
$100+
$1.10
$10
$1.50
$60
Aravind’s Growth and IOL’s
Total procedures over time
350,000
300,000
250,000
200,000
150,000
Aurolab 1992
100,000
50,000
0
Paying
Free
Source: “Restoring vision to Millions – underlying management concepts” a presentation by Aravind Executive Director Thulasiraj, 2010
Humanize Capitalism-Product Development
1. Demystify product development,
manufacturing and regulatory costs
2. Control technology/IP to be in control of
manufacturing, distribution and pricing to
insure affordability to end users
3. Engage extreme technical competence –
find people who already know what they
are doing
4. De-construct supply/distribution chain to
cut out unnecessary margin
5. Take the help of IP lawyers
• Aurolab
Humanizing Capitalism- Distribution
1. Create novel channels that remove non-value-added
margin
2. Use pricing and quality to change competitive
landscape
3. Create companies that transform their industry and
are in favor of lower income people
4. Convert great unmet need for lower income
populations into demand
5. Sculpt costs and margins to result in affordability,
while achieving reasonable returns
6. Create novel, disruptive supply chain ecosystems
that reach middle class, lower middle class and poor
Technology Development Formula
• Find individuals with extreme technical
competence
• Build company around them
• Low cost product development
• Short product development cycles- typically 2
years
Sculpting Costs & Margins to fit Reality
Comparing Apples to Apples
• Figures for 2007
IOL's
Price
Volume
Revenue
Cost of goods
Manufacturing
Aurolab
Major competitor
$2-30 ($4)
1M
$5M
$2.50
$1
$50-400 ($130)
7M
$920M
$32
$1
Manufacturing costs may be the same but
margins and distribution are vastly different
SoundWorld: Hearing in 30 Minutes
Attach to Ear
Quick test
User adjustable
$2000 vs. $100-$200
Quantum Catch Fundus Camera
• Fully automated operation
• Field of view about 55
degrees in diameter
(mosaic) high resolution
• Separate images under
near-infrared, red, and
green retinal illumination
• All images are stereo pairs
• Price not yet set but far
lower than existing cameras
Glaucoma Detection
• RAPDx is a
pupillograph
utilizing a highdefinition,
machine-vision.
• Hopkins Study Conclusions: A prototype
pupillography device appears able to discriminate
glaucoma from normal with relatively high
specificity and sensitivity.
Non-Invasive Blood Glucose
Monitor
Aqueous Humor
Light
We measure optical properties of the
aqueous humor related to glucose
concentration
Concept: shine light into eye, measure
output; correlate to blood glucose level,
all in a hand-held device for home use
Change Competitive Landscape with Pricing
• India market growth in cataract surgery
after Aurolab 1992-2002:
• 2 companies grow to over 10
• Commercial companies compete with Aurolab
on price and quality
• Market grows from 800,000 to 5 million
cataract surgeries per year
• Big Co vs Aurolab /Indian Govt.
– Aurolab forces competitor to reduce pricing
for suture from $240/ box to $23 using
competitive pricing as the weapon
Changing the Competitive Landscape
with Finance
• Financing as tool of influence to tilt an
industry in favor of the poor
• Criteria by which funds are invested
changes competitive landscape
• Engineered financial instruments are
needed to grow social enterprise as an
asset class
Eye Fund 1
Deutsche Bank – IAPB - Ashoka
Investors
• Storebrand Livsforsikring , Norway
• SPP Livförsäkring AB , Sweden
• Agence Francaise de Developpement, France
USA Investors
• Overseas Private Investment Corporation
• The Bernard A. Newcomb Foundation
• Deutsche Bank Americas Foundation
• COFRA Foundation, Switzerland
• Janet A. McKinley
Investments:
• China
• Nigeria
• Paraguay
$14.48 million
$2.3 million
Senior Debt
Investor Protections:
• 84% first-loss protection to commercial
socially motivated investors provided by
Deutsche Bank, foundations, and
development agencies
• 1% loan loss reserves
• 6-month interest reserve
$10.18 million
Subordinated Loans
$0.5 million
Subordinated Debt
$1.5 million Equity
IAPB Capacity Building: $1.5M to 8
Institutions to Provide Training to 37
Eye Fund Two
•
•
•
•
$50M affordable debt
Presently accessing demand
Regionalize
Combine with grants and possibly equity fund
Enhancing Organizational Effectiveness
Raise $10-20M to support creating sustainable eye care:
• Strengthen organizations providing sustainability
planning, consultation and training services with
clients in their region
• Create IT infrastructure to support all activities,
including monitoring and reporting to donors;
demonstrating results
• Take lessons learned in creating sustainable eye
care and apply to other medical specialty arenas.
• Apply lessons learned in developing countries for
creating more equitable and cost-efficient eye
care service delivery in developed countries.
For-Profit Social Enterprises
• Development of a new asset class to
facilitate financing for social enterprises
– For profit social enterprise that can leverage off
of increasing valuation of assets vs. non profits,
which can’t
– Go beyond Corporate Social Responsibility to use
assets and core competencies to be socially
transforming
“Middle-Way” of Capitalism
• Philanthropy is not sustainable and often does
not reach the beneficiary
• Strictly return on investment commercial sector
does not address problem in it’s full public health
magnitude
• Need for “Middle-Way” of capitalism that
maximizes distribution while being profitable
• Socially transforming vs. CSR
• Service to others ‘baked’ into the organizational
DNA
Fight All Forms of Blindness
• Physical Blindness
• Blind to the needs of
others
• Empathy with the blind
and visually challenged
and our desire to do
something about this.
• IAPB – we are small but
powerful in our collective
quest to serve others and
ameliorate human
suffering
Dr. V and Systems Change
Guiding Philosophy
“… Spirituality
allows the divine
force to work
through each of us
for a greater good