Delivering the goods

One Kenyan entrepreneur wants to recycle oil instead of seeing it poured into rivers. Another wants to save lives by providing to the rural poor generic drugs that cost just pennies. With help from a pair of mentors at Santa Clara’s Global Social Benefit Incubator, they’re delivering the goods—and the good. Above: Liza Kimbo of SHF; Below: Collins Apuoyo of EPS Photos: Charles Barry

On a sunny afternoon in Silicon Valley, Jeff Miller ’73, MBA ’76 and Tim Haley ’81, venture capitalists from the influential firm Redpoint Ventures, sit listening to two Kenyan entrepreneurs present business plans for enterprises that are guaranteed to make nobody rich. One of the entrepreneurs, Collins Apuoyo of Enterprise Professional Services (EPS), talks about a business that pays slum-dwellers to collect used motor oil that would otherwise be dumped into the Mukuru-Ngong River. The other entrepreneur, Liza Kimbo of the Sustainable Healthcare Foundation (SHF), talks about how she uses a franchise model to distribute quality generic drugs that can cure or prevent illnesses like malaria, diarrhea, worms, and respiratory infections. Malaria alone kills 34,000 Kenyan children each year, shocking but not surprising in a country where 35 percent of the population has limited access to health care. “Today, in Kenya, 500 children have died because of the lack of access to simple medicine that costs less than a cup of coffee,” Kimbo tells the venture capitalists. “Today we have 476,000 clients served at a cost of $1.27 per client. In five years, we will serve 2 million clients at a cost of just 22 cents.”

It is not the kind of pitch Miller and Haley hear on an average work day. “Here in the Valley, our business is making money—investing in businesses that return money to our investors,” explains Haley, a onetime philosophy major at Santa Clara University whose company has backed businesses like TiVo, Netflix, and MySpace. “We don’t do anything from a professional point of view that’s based on social benefit.”

And yet, as they listen to Kimbo and Apuoyo make their presentations, the VCs are riveted. They have spent the past two weeks working intensively with Kimbo and Apuoyo as they refined their business plans and honed their pitches, subjecting them to the same rigorous scrutiny they would give an Internet start-up with a bil­lion-dollar idea.

“They are running real business­es, but their context is doing stuff that’s good for the environment and good for people,” Haley observes. “It’s pretty interesting, to work with people who are making the same personal sacrifices as the people here in the Valley who are doing it for profit. Both of these people,” he says, “could go into the private sector and do quite well financially. But both of them are interested in making the world a better place.”

Battling filth and the black market

Apuoyo works with urban slum-dwellers. There are 1.8 million of them in Nairobi, and they live without any kind of basic services or sanitation. The BBC describes a typical Nairobi slum as “600 acres of mud and filth, with a brown stream drib­bling through the middle.”

The Mukuru-Ngong River is a primary source of water for slum-dwellers in  Nairobi. It is so polluted, Collins Apuoyo says, that “nobody sane would touch it.” Photo: Courtesy EPS

Kimbo works with the rural poor, in places that are so remote that it is a challenge just to reach them. “If you’re driving into the rural community, first of all you’re driving on a bad road. And I warn you, if it’s raining, you are going to get stuck,” Kimbo says. “These are subsistence farmers. Every shilling they have is very precious. Because it’s so precious, they will wait to fall sick and then come in to be cured. And if a child is sick, a mother has to spend all day getting help.” Even after walking all day to reach a government clinic, patients often find it is out of medicine. Most private pharmacies sell expensive, branded medicines, while the black market is saturated with counterfeits.

Under normal circumstances, high-stakes players like Haley and Miller would never cross paths with entrepreneurs like Apuoyo and Kimbo, who tally their successes in terms of numbers of lives improved rather than quarterly earnings. The four came together through the Global Social Benefit Incubator (GSBI), a two-week entrepreneurial boot camp sponsored by SCU’s Center for Science, Technology, and Society and the Leavey School of Business. The GSBI was founded in 2003, and last year the program paired 20 innovators whose products serve the common good with mentors from some of the Valley’s most influential companies, including Intel, Adobe, and Sun Microsystems. The entrepreneurs, winnowed from roughly 100 applicants, spend 13 grueling days in lectures, workshops, and one-on-one sessions, during which time they learn how to scale their businesses while being interrogated, instructed, and encouraged by their mentors.

“We dissect their business plans,” explains Miller. An SCU engineering graduate and the former CEO of Documentum software, Miller now spends much of his time at Redpoint mentoring young CEOs. And he brings the same scrutiny to bear on plans by Apuoyo and Kimbo, his GSBI mentees, as he does on execs managing for-profit companies.

“At first I thought they were too brutal,” admits Apuoyo, as he describes the experience of being mentored by Miller and Haley. “They didn’t seem to be keen on the social aspect of my work. But the more I talked to them, the more I realized: Maybe if I want my project to help the poor, I have to make it sustainable. They challenged me to imagine myself in the private sector. And that might have been the side of me that was the weak­est link.”

Roadside epiphany

Through pharmacy franchises, the Sustainable Healthcare Foundation is getting quality generic drugs to the poor people who need them most. Photo: Courtesy SHF

Like his mentors, Apuoyo has a quality of barely-contained energy, like a parked race car revving in neutral, ready to leap into gear. He grew up in a vil­lage in western Kenya and has spent most of his adult life working in the development field. Five years ago, while having the oil in his car changed by one of Nairobi’s many roadside garages, he began wondering if there was something to be done with the used oil, which is typically thrown on the ground or directly into the Mukuru-Ngong River that flows through Nairobi and is a primary water source for slum-dwell­ers. Of the 13 million liters of used oil generated in Kenya each year, only 2 million liters are accounted for. “Which means that 11 million liters of oil disappears into the environment,” Apuoyo explains. The result is obvious to anyone who works—as Apuoyo does—alongside the Mukuru-Ngong River. “The river is completely polluted,” he says. “It is smelly, unsightly—nobody sane would touch it.”

In its first 11 months, EPS collected 81,000 liters of used oil that would other­wise have disappeared into the environ­ment. The oil is then treated and sold as fuel to power companies, sugar millers, and steel manufacturers. The trick now is to make the venture self-sustaining.

“Collins is a wonderful concept guy,” Miller observes. “He had relatively little experience on the financial side. One of the key lessons for Collins was having him go in with us and build a financial model and use it as a learning tool to see exactly when or by what time he had to make certain choices.”

Through the modeling process, Apuoyo was able to project when he would have enough volume to move from selling the recycled oil as fuel for scrap metal smelters and zinc oxide manufacturers to re-refining it so that it can be used as feedstock for manufacturers of lubricant oils. The first process is inexpensive to set up but has a low gross margin; the second requires a higher initial investment but could provide enough income to make his business profitable. “We see ourselves breaking even somewhere in 2012,” Apuoyo says, “and from there on we’ll be moving toward sustainability.”

“If he can do that,” Miller says excitedly, “then he can sell it, give it, or transfer it to small business people in Kenya, and promote their livelihood, while cleaning up the rivers in Kenya. It’s win-win-win—a triple bottom-line profit.”

A black belt in Excel

The Sustainable Healthcare Foundation ensures that quality generic drugs for treating com­mon diseases like malaria, tuberculosis, and dysentery reach the rural poor by using the model of a McDonald’s: Start-up costs for the pharmacy franchises are low, and quality is carefully controlled. Health-care workers can assure themselves a modest living by opening a franchise and using it to dispense both medicines and medical advice. Kimbo is very comfortable working with numbers; before becoming the CEO of SHF, she worked in banking and the pharmaceutical industry. Miller describes her as “an eighth degree black belt in Excel.”

“She had this incredibly sophisticated financial model,” Miller recalls. “What she needed help with was thinking outside the box on her franchise model.” Out of their discussions came the idea of having the central organization own some of its clinics and use them as a place to develop best practices that could be spread to the franchisees. “There’s a good idea—there’s a real leveragable idea,” Miller says. “When you help somebody like that come up with an idea that fundamentally could change the success quotient of their business, and their business is so fundamentally altruistic, it makes you feel good when you go home at night.”

Kimbo felt good about the collaboration as well. “I’ve had to justify and rework my plan,” she says, “and then these absolutely brilliant guys looked at my business plan and they said, ‘If you can deliver drugs to 2 million people and it only costs 22 cents a person, I’m sold.’ For me, that was the a-ha moment.”

Since Kimbo returned to Kenya from the GSBI, the SHF model has been featured in Fast Company magazine, Harvard Business Review, and in an article titled “What Works in Africa” in the American Enterprise Institute’s online journal American.com.

Kenya’s lessons for the Valley

Execs with something to learn from one another: from left, Collins Apuoyo; Tim Haley ’81; Jeff Miller ’73, MBA ’76; Liza Kimbo. Photo: Christine Le

Both Haley and Miller say that they learned as much from the experience as Apuoyo and Kimbo did. “They learned from us about the rigors and excruciat­ing detail we go through in analyzing new business ventures, and we learned from them the unique factors they confront in run­ning a social benefit venture,” Haley says. “Silicon Valley is a relatively homogenous, insular environ­ment. It’s the rarefied air of the technology industry, and rarely do you have the opportunity to look out­side. This was an opportunity to look at a social-ben­efit entrepreneur in Kenya. When I compare them to the entrepreneurs in Silicon Valley, I come away very impressed with their fortitude—they have to be extraordinarily dedicated to pull together these enterprises with the limited resources they have.”

The collaboration isn’t over. It has continued by e-mail and phone as the entrepreneurs face the everyday tribulations of growing their businesses. In the months since summer 2006, Kimbo has been grappling with governance issues and working to build the right management structure for SHF. And Apuoyo’s business has gone from collecting 17,000 liters of used oil each month to collecting 26,400 liters. But he also lost a major buyer of his recycled oil, which has forced him to think about transitioning into the business of refining it into lube oil feedstock faster than he’d planned.

“They play a challenge role—challenging me to think more creatively,” Apuoyo says of his mentors. “Also they are like buddies I can talk to and bounce my ideas about the project.”

That, says Haley, is the key. “The CEO position is very lonely,” he explains. “You don’t have anyone to talk to as freely as you might want. And so a little bit of discussion or reflection or grappling with tough issues with independent parties can be very helpful.”

While the mentors have encour­aged Kimbo and Apuoyo to find peo­ple to talk to close to home, as well, they say that they hope to continue to be a resource long into the future. “They are trying to do something that makes wonderful sense for their communities,” Miller says. “To the extent that Tim and I can help them, we will have done our small bit to make the world a better place.”

Photo: Nu Ho

—Dashka Slater writes about the environment, business, education, and law for publications ranging from More to Mother Jones. She is the author of four books of fiction and nonfiction.