IIX has recently facilitated investment into Spring Health, a Social Enterprise (SE) aiming to revolutionize access to safe drinking water in India. Ria Bhatnagar, from IIX’s SE team, have a conversation with the Founder and a serial entrepreneur, Jacob Mathew, to get insights into his motivation for setting up Spring Health and unique challenges he overcame in raising capital.
Getting to know the Social Entrepreneur
What encouraged you to build a social enterprise in the clean water sector in India?
As a designer and practitioner, I’ve seen the disproportionate impact of Business Design on our mainstream commercial clients. I was intrigued to see how impact in the social sector can similarly be scaled. To this end, I was working on an idea for early stage social enterprises when I met with Paul Polak founder of iDE and Spring Health at my graduation from the Dasra Social Impact program. What started as a design and branding assignment snowballed into my acceptance of a position of interim CEO and Co-founder of the startup. We now have a professional CEO, Kishan Nanavati, who joined us in May 2013.
Can you describe your working relationship with Dr. Paul Polak and how that contributed to the success of Spring Health?
Both, Paul and I, designers, by way of attitude. Since I am also a designer by training, seeing Paul in the field -how he interacted with customers, and derived insights from the conversations – clinched it for me. Both of us operate using a zero-based design approach (“ identifying nails and developing the appropriate hammer, instead of “a sledgehammer looking for a nail”, approach). This requires us to focus on extreme affordability and to learn through rapid testing and in a fail-forward mode.
The potential scale that Spring Health offers, was certainly a very important factor as far as making a long-term commitment to the company went. I saw potential not just in Phase 1, as a safe water company, but also in Phase 2, as a last 50-meter supply chain company (using our last 50 meter distribution capacity to bring other critically needed services and products to people) and in Phase 3, as an aggregation and distribution company, (where we will start aggregating products of village level production for urban and rural market distribution) to impact, hopefully, a 100 million people.
Who or what was your inspiration you to pursue your dream to become a social entrepreneur?
Design education at India’s National Institute of Design (NID), was a life changing experience. We had two programmes in our foundation years: (i) Rural school and (ii) Environmental exposure. Both prepared us to think and view life holistically. While at NID, I was inspired by my Professor, Ravi Matthai, the former Founding Director of the Indian Institute of Management (IIM) in Ahmedabad. Some of the people in his orbit included Vijay Mahajan, and Verghese Kurian of AMUL.
Professor Matthai sent 2 classmates and I off to the Rajasthan border to visit a project site focused on encouraging underserved and marginalised tribal populations to embrace government welfare schemes. This opened my eyes to the skewed levels of development and unequal distribution of both, wealth and opportunity.
Interestingly, of the other two classmates, one went on to found Daily Dump, a waste management social enterprise in Bangalore, while the other, who is now my wife, founded Industree Crafts. The view of what it was to be a social entrepreneur, from over her shoulder, and some not-too-gentle prodding to enrol at the Dasra Social Impact program cemented my fate.
Getting to know the Social Enterprise
Having successfully finished your proof of concept, what were the challenges that you faced in this venture and how did you overcome them?
There were 3 challenges.
- Human capital. We also need the best minds and talent available to lead these enterprises. I tapped on my professional team at Idiom, the design company I co-founded, to develop high-level business design and the implementation of design.
- Finding C-Level executives willing to relocate to a second tier city, and to spend most of their time working in the field was challenging. For field staff, we work with a multinational manpower sourcing and management company alongside referrals from our staff and village-level entrepreneurs to create a robust pipeline. More recently, we have started hiring female field staff who seem to be far more effective in converting cold calls.
- Customer acquisition, retention and brand loyalty. When you talk about building a brand in urban India, the conversation immediately shifts to advertising in different media but what do you do in rural Odisha where penetration of press and the reach of national media is miniscule? We have now developed a pretty effective way of buzz marketing, where multiple marketing initiatives are simultaneously deployed at the launch of new kiosk set up to collect and test water for bacterial contamination at the point of consumption. We also provide entertainment, while educating through drama performances in the village squares in the evenings. Finally, we make it a point to meet with customers who drop out to understand their reasons, and to counsel them, if needed.
- Financial Capital. By far, lining up financial capital has been the biggest challenge. Social enterprises are, by nature, risk-taking – what they do has never been attempted before. Precedents are hard to come by. Institutional social venture capital, unfortunately, tends to be rather risk-averse and finds itself tied down by regulation while exhibiting a bit of a herd mentality.
However, we have found individual investors and small family offices to be far more excited by Spring Health’s potential to be a game-changer. They were more appreciative of the audacious goals that we had set for ourselves. At last count, we have 12 investors, one of which would qualify as an institutional investor.
Capital raising experience
From your experience, what advise can you give to other Social Entrepreneurs in terms of how to attract investors and raise capital?
It always takes longer to do attract investors as a social entrepreneur, and it would be prudent to prepare for capital raising. Missing an opportunity is painful and wrenching. Getting back on track with capital raising does not usually equate to starting from where you left off, but starting from way behind over again. It may be prudent to line up even smaller investments to fill the gap instead of reaching out to large institutional funding.
Social enterprises, therefore, have to constantly be in ‘capital raise’ mode, because you never get all of what you need when you need it. Fundraising requires dedication, focus and high quality human capital. It is useful to have a capable team member whose sole focus is to raise capital, in addition, to using the equivalent of an investment banker or an investment platform. We have been fortunate to engage both with platforms and professional investment bankers.
We have worked with the Artha Platform and with the IIX platform. In fact, it was the Artha platform that connected us to the IIX platform. Platforms take care of much of the effort involved, such as rounding up of investors, sharing of essential information for diligence processes and arranging high-calibre presentations with a receptive and informed selected audience, This can really cut down the amount of foot slogging an entrepreneur has to otherwise do independently. While the entrepreneur still has to be engaged fully in the capital raise process, a lot of the details is taken care of by the platform. This leaves the entrepreneur with more bandwidth to focus on the essential enterprise building activities.
IIX worked with Spring Health’s legal counsel and we only needed to present our case and then sign on the dotted line after funds were transferred. It was UNREAL! And very smooth!
Looking to the future
Given a chance, would you have considered doing anything differently in your journey during the past year? Any last remarks for our readers, such as your management mantra?
In retrospect I would have:
- Looked at crowd funding to raise capital at the idea and seed stages much earlier, rather than go in for Social Venture Capital funding. Again, every enterprise may not capture the crowds’ imagination, but in hindsight, it is certainly something I could have tried.
- Doubled the time estimates that we had in mind and made sure I was prepared for it. Deepen your pockets before starting a social enterprise, especially from a personal finances angle. I have had to dip into my children’s college funds several times. Prepare people around you – family, colleagues, etc. for the long haul.
- Used best-in-class services and service providers. I should have avoided pro bono services. When you pay peanuts; you get monkeys… when you pay nothing, you get worse than monkeys… you get a disaster!!
- Incorporated design earlier. This is important, and not something you do when you think you can afford it. Using principles of design to ‘fail forward’ through rough and dirty ‘rapid prototypes’ is invaluable. It mitigates risk, builds confidence and inspires humility.
- Started from zero. Stepping away from my knowledge domain has opened me up to possibilities that were not there when I approached an issue from an “I know” perspective. Engage empathically with your end consumer. This means having your eyes and mind open to, both, what he is and is not saying.
What are your plans looking forward for Spring Health?
Spring health for me personally is the first of a number of enterprises, that I hope to scale massively with IMPACT EDGE, an early stage Social enterprise incubator that looks at the creative manufacturing sector. I look forward to Phase 3 of Spring Health when it becomes an aggregator and distributor of village-based industry products in value-added processed agricultural products and artisan industry products.
Spring Health itself is poised to scale exponentially in Eastern India to touch close to ten million lives in 5 years. Impacting a 100 million lives while generating a few billion dollars of business from a set of scalable enterprises does not seem impossible or too far fetched anymore!