Unreasonable, Maybe, but It’s on a Social Mission
By HANNAH SELIGSON
DANIEL EPSTEIN wants to get one thing straight: He is an unreasonable man. Happily, proudly unreasonable. Entrepreneurs who want to change the world, he says, have got to be a little crazy.
And so, to foster some practical zaniness, Mr. Epstein is a co-founder of something called the Unreasonable Institute, in Boulder, Colo. For the last two summers, he has helped preside over this academy for entrepreneurs who want to solve social problems and make some money, too.
Part schmooze-fest, part group hug, this six-week program connects entrepreneurs with one another, as well as with executives, investors and thinkers who might help them. Its name derives from a quotation by George Bernard Shaw: “All progress depends on the unreasonable man.” For good measure, Mr. Epstein recently had the world “Unreasonable” tattooed on his derrière.
Welcome to the age of the spreadsheet humanitarian. The central idea of the Unreasonable Institute is that profit-making businesses can sometimes succeed where their nonprofit counterparts might falter. Mr. Epstein, 25, and a serial entrepreneur, says the Unreasonable Institute wants people who are willing to think big, even when skeptics scoff.
Competition is stiff. This year, about 300 people vied for 26 spots. Many who have attended praise the program for its networking opportunities. Some have even gotten businesses off the ground.
One of them is Ben Lyon. Two years ago, Mr. Lyon, a recent college graduate in international relations and economics, was in Sierra Leone and feeling highly discouraged. Through a nonprofit group, he had tried to start a pilot program meant to allow microfinancing organizations to receive loan payments via their cellphones. But he just couldn’t get it off the ground.
Today, he is running Kopo Kopo Inc., which is based on that earlier effort. With four full-time employees in Kenya, it offers a mobile payment app that helps people make purchases in areas where banks don’t exist or where fees are too high for the poor to open accounts.
How did it happen? Mr. Lyon, 24, originally from Hanover, N.H., attributes his success to a commercial structure he created with the help of the institute. So far he has raised nearly $1 million from institutional investors.
“We select for-profit ideas that we think have the ability to meet the needs of at least one million people,” says Mr. Epstein, who founded the institute along with Teju Ravilochan, 24, and Tyler Hartung, 26.
The selected entrepreneurs include people like Myshkin Ingawale, 28, of Biosense Technologies, which makes a device that tests women and children for anemia; Luis Duarte, 30, who started YoRecicolo (I Recycle) in Monterey, Mexico; and Jamie Yang, 31, founder of a EGG-energy, a company based in Tanzania that sells rechargeable batteries through a portable power grid.
The institute conducts its program at a fraternity house it rents at the University of Colorado. The six weeks are intense and communal. Fellows sleep three or so to a room. A chef prepares three in-house meals a day. The fellows dine at a table seating 60, alongside mentors who might include the chief technology officer of Hewlett-Packard or the former director of Google.org.
On any given day, the fellows might go on a hike or a bike ride with a potential investor, attend a workshop about building corporate partnerships, or take part in “family pitch night,” when two entrepreneurs present their companies to the rest of the group for feedback. At the end of the program, the fellows travel to San Francisco and pitch their ideas to a group of investors.
Mr. Epstein says market-based solutions are important in spurring economic growth throughout the developing world.
“This is really in contrast to the prevalent model of international aid,” says Cynthia Koening, 33, who attended the program this year. Her company, Wello, based in Rajasthan, India, is aimed at people — most of them women — who must walk long distances to bring drinking water to the home. Her cylinder-shaped product allows women to roll water home from the source rather than carry it on their heads, which can be dangerous and time-consuming.
Ms. Koening says the decision to run Wello as a commercial business — it will sell its product, the WaterWheel, to consumers — was an easy one. “When people make choices in a market economy, they are deliberately choosing the solution that best meets their needs, she says. “Also, we don’t want to have to depend on donor grants and donations. That’s not sustainable.”
MR. LYON, of Kopo Kopo, agrees that it’s time to use more commercial muscle to help solve global woes. His company plans to generate revenue through small subscription fees. “The nonprofit space has been so massive but has had disproportionally little impact in solving some of the world’s biggest problems,” he contends.
But investors can be leery of commercial social ventures. One obstacle is due diligence. Investors generally “can’t go to Liberia or New Delhi to kick the tires before they write a $50,000 check,” says Nick Flores, investment director at Investors’ Circle, a network of more than 150 people who finance businesses with a social or environmental impact.
He says one question kept tugging at him when he attended the institute’s pitch day last June: “Is it financial first or impact first?” The network, so far, has not invested in any companies based on those pitches, he says.
“One of the only fellows who got a standing ovation was a young man helping rehabilitate child soldiers in Liberia,” he recalls. “We will have investors interested in that from an impact standpoint, but the larger question will be how are they going to get their money back?”
Mr. Epstein says: “These companies are forcing investors to rethink investment terms beyond just having equity that liquidates. They’ll have to get creative with their financial mechanisms, but most firms and funds aren’t comfortable with that.”
Nevertheless, about half the fellows in last year’s class received financing, ranging from $40,000 to $400,000, from the investors they met on pitch day, the institute says. The companies might aim to generate revenue through subscription fees (as Kopo Kopo is doing) or through government contracts, charging for advertising and — in the most time-honored way of all — charging for a product or service.
MR. EPSTEIN is no stranger to starting businesses. He turned down Princeton to go to the University of Colorado because he thought it would be “less academically intense” and give him give more time to be an entrepreneur.
By the time he was 19, he had started two companies: Tuition Specialists, which helps out-of-state students at the university work through the complicated process of paying in-state tuition legally, and Unreasonable Adventures, an ecotourism Web site.
But neither company fully captured Mr. Epstein’s vision of an enterprise that would be good for both shareholders and consumers. So he set about creating the institute, which is a nonprofit, financed through a combination of private donations and grants.
The institute, which has four board members, has raised more than $300,000 to run the program. Entrepreneurs compete fiercely for spots. Finalists raise the $8,000 tuition by mobilizing their friends, families and professional networks to donate in small amounts. (This process avoids what the institute calls the “rich uncle” advantage.)
When the two dozen or so finalists who have won the funding race meet, ideas are proposed and retooled, eureka moments happen, and help is offered, sometimes by way of crowd-sourced fund-raising.
During the first week of this year’s institute, Raj Janagam, founder of Cycle Chalao, a bicycle-sharing program based in Mumbai, received an e-mail from the Ministry of Urban Development in India requesting a meeting to discuss a government partnership with his company. Mr. Janagam, 23, had been trying to schedule this meeting for two years and had to get back to Mumbai, but he did not have $2,000 for a last-minute plane ticket.
Ties Kroezen, another fellow at the institute, set up a campaign on ChipIn, a Web service that helps individuals and groups raise and collect money for various projects. Five days later, Mr. Janagam had a plane ticket to India.
“I had never raised that amount of money in my life,” Mr. Janagam said. “In India, $2,000 is a lot of money. It was amazing the kind of support I got.”
As for the meeting with the ministry, Mr. Janagam says it gave Cycle Chalao national credibility, and moved it closer to a partnership that will help it expand throughout India over the next few years. Forty-eight hours after the meeting, Mr. Janagam returned to the institute.
For others, the benefits are not that instantaneous. Mr. Ingawale, 28, and a 2011 fellow, recently quit his job at McKinsey & Company in Mumbai to start Biosense Technologies, which makes the ToucHb, an iPad-size device that tests women and children for anemia.
In 2008, Mr. Ingawale was in a village outside of Mumbai and witnessed a woman die in childbirth because of complications related to anemia, which she had never been tested for. “I come from an engineering and consulting background,” he said, “so it struck me that there had to be a business solution for a disease that impacts millions of women and children in South Asia.”
Mr. Ingawale and his company have a long road ahead, even though the World Health Organization named ToucHb as one of the new emerging technologies to address global health concerns.
Like any start-up, the company will have to raise capital, but it will also have to navigate issues specific to socially minded ventures: How to market a product in the developing world? And how to strike the right balance between being a profit-making business and having a social mission?
Mr. Ingawale went searching for answers at the Unreasonable Institute. He says he didn’t come away with much that was concrete, but he felt more energized.
“Being at the Unreasonable Institute created the complete feeling that we can do anything,” he says. He also met people like Rajesh Anandan, a senior executive at Unicef. “That’s someone I will definitely be reaching out to,” he says, “when it makes sense to deploy ToucHb across the developing world.” The device is now in clinical trials.
FOR some participants, the institute is just one stop on a kind of social entrepreneurship circuit; they’ve been awarded numerous fellowships, won different business plan competitions and are regular faces at industry conferences. For others, the institute is their first encounter with this scene. This is especially true for many of the 60 percent of fellows who live outside the United States.
By coming to Boulder this year, Mr. Duarte of Mexico, founder of YoRecicolo, which operates recycling programs, was able to meet like-minded people who work on recycling and waste issues. He even received an invitation to speak at a Clinton Global Initiative conference in New York last month. His company has been profitable since last year.
Like Mr. Duarte, Mr. Janagam of Cycle Chalao found that the institute helped him forge contacts with other people interested in tackling social issues.
“I do not come from a business family,” Mr. Janagam says. “I lack connections with high-profile people.” After six weeks, though, his smartphone was packed with contacts.
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