002 'No Ordinary Business' with UNTAPPED

Access to clean water is a challenge in much of the world and existing models of sanitised water distribution are unable to keep up with the demands of growing populations and rapid urbanisation. Frustrated by the lack of sustainability within the traditional NGO organisational and funding model, today's guest on No Ordinary Business, Daniel Nolan of UNTAPPED, is working to address these challenges through a platform designed to sustainably empower local entrepreneurs to scale water enterprises in emerging countries. 

 

Gina: Dan, welcome to No Ordinary Business!

 

Dan: Thank you so much for having me. 

 

Gina: Thanks for joining us today. Before we start talking about UNTAPPED, can you give us a little background on your story and how you got to where you are today?

 

Dan: Absolutely. I started in the water sector as my first career out of college doing water engineering and I ended up moving down to Haiti after the earthquake in 2010. I was working for an NGO down there building water treatment centres in schools all throughout the country. Early on I became kind of disillusioned by the traditional NGO model. We were getting money from donors in the United States to build water treatment centres in Haiti at schools and there was no money coming from Haiti. We would build the water treatment centres and six months down the line someone would steal a tap and there was no money to fix it and the water treatment centre would be in disrepair. From that point, I decided I needed to work on a model that was more sustainable. I went off to business school and helped start the company UNTAPPED.  We are the first platform approach to scale sustainable water enterprises. 

 

Gina: I share your feelings about the challenges facing any organisation that is wholly reliant on donations and the lack of sustainability that results. I think it’s something that is a challenge across all civil society and any non-profit organisation that has not developed a separate revenue-generating stream. What you're describing is really timely and a poignant issue and I’d love to hear a little bit about how you structured UNTAPPED to get around some of these sustainability challenges.

 

Dan: Sure, as I was saying, in Haiti what I learned was that 95% of the wells built in the country were in disrepair. Most people had relied on the traditional NGO model: you get money from the United States and you build it. But then there is no training, no one is taking care of it and the end conclusion is that it is going to be in disrepair and no one’s there to solve the problem. So, our model at UNTAPPED became about building water treatment centres and selling the water through local retailers. At each one of our water treatment centres we find a network of anywhere from 50 to 60 local retailers that we sell water directly, that they sell out to the community. Once we really nailed down this last mile distribution with local retailers, these little mom and pop shops, and made this supply chain efficient, we start selling other essential goods. Things like toilette paper, soap, powdered milk (in big demand in Haiti) and we were able to transform these water treatment centres into thriving profitable distribution hubs. This approach makes the whole system sustainable and builds up the economy for the entire area. 

 

Gina: How are you funded and what’s your structure? Are you set up as a for-profit or a non-profit?

 

Dan: We're a for-profit and we were initially funded by the IFC (International Finance Corporation) and the Dutch Development Bank, FMO and received some grants to help with our build up. Having said that, right now in Haiti all of our sites are sustainable and running profitably. In the last six months, we have started to expand throughout Africa and are looking for new funding for that effort.

 

Gina: Okay, before we go to Africa, are you generating revenue from the enterprise partners that are on the ground?

 

Dan: Our business model has evolved from when we first started.  In Haiti, we own and operate all of our treatment centres. Currently, we have ten sites there that serve 150,000 consumers with 527 local retailers in our network. We have 91 employees in Haiti, full-time employees. As we built that model out over five years, we realised that to scale the way we wanted to, we needed to do it with other local partners who are better at local execution and knew the local policies in their own market. So, as our second model, we've taken the tools and the mobile technology that we built over these last five years and we're scaling it with local partners in their markets. That means giving them the financing, the tools, and the technology to empower them, to scale in their markets. So, it’s really two different models and now the companies are actually split so the company in Haiti is still in Haiti and now UNTAPPED is the new model designed to empower local entrepreneurs to scale their markets.

 

Gina: So, they have their own structures in place, and you're contracting with them?

 

Dan: Yes, for example, one of the groups we're working with now in Burkina Faso is an NGO based out of Oklahoma that was building wells with donations from the United States. They realised they wanted to move toward a more sustainable model. We're empowering them with our tools, technology, and design to build decentralised water treatment centres, teaching them how to sell the water, how to access local networks, how to do the last mile distribution, to build sustainable centres, allowing them to figure out who’s going to run and operate the centres, find people with have the background and history in the country who will help build the sites.

 

Gina: Perhaps we can take a step back for a moment and talk about the challenge to access to clean water in a lot of the developing world and what systems or approaches are currently in place trying to deal with it. Where are the current systems falling short of being able to deliver? 

 

Dan: I think the current system is why we've moved to a platform approach. There are a couple of numbers that are thrown around, one of them is an estimate of around 800 million people who don’t have access to clean water. What that number represents is people who don’t have any access to any kind of improved water, but the real number is four billion people. Over half the population don’t have access to sustainable safe water. They might have access to piped water, but it’s not clean. And so that is the challenge that we are trying to tackle.  When we started building what we call safe water enterprises, sustainable water treatment centres that sell the water as a business, there was already a few players in this field, Water Health International, Safe Water Network, but over the last five years these companies have tripled as a sustainable, effective way to solve this problem. With that said, they are all struggling to scale.

 

Gina:  Why?

 

For several reasons: they don’t have the financing to enable them to scale, they haven’t invested in the technology or developed the tools that would enable them to scale.  Because they're social enterprises they have some grants, a little equity in their company, but they’re building heavy capital expenditure water treatment centres with their equity and then they need to wait five years down the road to get a return on the capital in order to build a second site. This is not a sustainable way to scale and so, we're really supporting them and empowering them to scale with our financing and technology, so they can not only get the capital that they need but can standardise processes across the site with mobile IT and remote monitoring.

 

Gina: Let’s talk a little bit about the technology that you developed and are using.

 

Dan: Sure, so we've built this mobile IT platform specifically for this safe water enterprise sector. The mobile IT covers everything from water operations, to sales, to distribution, to financials specifically in these emerging markets. It’s the whole spectrum of running a safe water enterprise.

 

A great example of how we are using our platform is with a group in Rwanda that had used a point of sales system called SalesVu from Austin, Texas. SalesVu was designed for a coffee shop in Austin, Texas, not for a water treatment centre in an emerging market, so it was not suitable and the group’s local operations didn’t see any value in it. It didn’t have helpful functionality and it would go out whenever there wasn’t a good internet connection, which happened all the time, so the system would be down for three or four hours at a time. They’d end up reverting back to just writing everything on paper as they always did, which made them feel comfortable and safe because they didn’t trust the system. Now we have partnered with them and are giving them our mobile technology that works offline and was specifically designed for local operators in these markets. It was designed for ease of use, for an understanding of their products, how transactions are done in emerging markets. Now they're using our tools and have taken on our system because it was built for them.

 

Gina: Can you walk us through your tools and technology for people like me who don’t know anything about it?

 

Dan: It’s the whole spectrum of safe water enterprise: the first piece is the general water operations.  Our tools allow users to pull it up at any given time and look at any of our sites in Haiti. I can tell you the exact chlorine levels flowing through our system, the TDS (total dissolved solids) levels flowing through our system, the pressure on our tanks, the total flow rates through different parts of our system. Installing this technology in a treatment centre is the easy part, figuring out how to make it sustainable in these markets is more difficult, so our technology goes way beyond that.

 

Second, our tools support all sales. Every time a customer comes and you have a transaction, we developed a POS (point of sale) system to track it in our data system that was designed to help with financials and sales and CRM (customer relationship management) but as I said earlier, we also do delivery last mile distribution through these local retailers. One thing we built into our tools was what we call sales optimisation and sales tracking so now you can look at our system and I can tell you that "Steve" who is one of our resellers who is two kilometres down the road is about to run out of jugs, and we should get over to him and sell him more jugs and “Brenda” whose right next to Steve hasn’t sold jugs this week so we should go over and talk to her and ask "What’s going on? Why haven’t you sold any jugs?"  This system tracks sales all the way down the line and empowers users to optimise their sales.

 

Gina: So you’re applying your tools to an existing system to enhance efficiency. And you're building on existing technology that tracks the actual sanitation process as well?

 

Dan: Right, so we're using existing technology but ours can adapt to take those different technologies and display the information on our platform. Because as these different local entrepreneurs and operators want to scale the way they want, to they're going to need more standardisation and that’s where the technology piece comes into play.

 

Gina: As I understand it, you've moved away from a model where you were building and running the water treatment systems and distribution to a model where you are focusing now on supporting the local entrepreneurs who have existing treatment systems and sales of clean water. Is that fair?

 

Dan: Yes, that is definitely an option. I’d say we are supporting local partners and some of them have already built their own sites and some of them are just starting up and looking to build sites so we will give them everything from the design and how you build one of these treatment centres, to going out there and building it for them, to the training of how you run them, to the sales and make sure its sustainable, to how you clean the bottles, how you fill the bottles, how do you check inventory, so the whole entire process. 

 

Gina: For the local partners that have existing systems in place, how do you work with them to create standardisation? I know that you said that your technology is adaptable but how are we moving forward towards standardised end product, so you have quality control? 

 

Dan: That’s exactly what our technology does. It allows for remote quality control from each one of the sites. As I said, I can look at each one of our Haiti sites and tell you exactly what the TDS is at our sites now in Haiti we have automatic shut off valves or remote shut off valves so I can advise you that the TDS levels are too high and I don’t want to be a part of our product, I can shut it down from here.

 

Gina: So, if users see there is an imbalance or certain levels are out of whack like you just described they would be able to use your technology to identify that and then also to make the requisite adjustments remotely. 

 

Dan: Right. 

 

Gina: Okay, with your new business model, are your customers today the local entrepreneurs who are providing the sanitation services?

 

Dan: Yes. We call them local entrepreneurs or local operators and they come in many different forms, but they are the ones who we see as super important to our model and who are there to execute in their markets. We've worked with different social enterprises. We've worked with local operators. We hope to get to work with larger utilities and government organisations who understand that there is an incredible need in these areas affected by lack of access to basic infrastructure and that this model can service these people.

 

Gina: Tell me how big is the market opportunity here? I understand that this is affecting a lot of the emerging economies, but can you give us a sense of scope as to how much opportunity there is for this solution?

 

Dan: Yes, Dalberg did a great study in 2017 about this lack of access to basic water.  That’s where I got the number that four billion of people live with unimproved services. Within that number, the group that our model can serve, people who can pay for it and are in a densely enough populated area for the existence of safe water enterprise to make sense totals about two billion people right now.

 

Gina: Where are these two billion people living?

 

Dan: Mostly Sub-Saharan Africa, South East Asia, and Latin America. 

 

Gina: I assume the issues in Latin America and South East Asia are not a lack of access to water, but an access to clean water. 

 

Dan: Right, there are those who lack access to water on the one hand, but that is not the issue we're trying to solve. We work in areas where there is water but there is limited access to clean water, to clean, sustainable, safe water. 

 

Gina: What’s the threshold in terms of population in any given area that makes sense for your business model?

 

Dan: Our model is definitely designed for more densely populated areas so we're talking around 3,000 people per square kilometre, at least. In areas that are more rural, this is a model that doesn’t fit. In those cases, I would say that there is still a need for the NGO well-model or other opportunities, such as empowering or teaching people from these rural areas to build wells and giving them that empowerment through education.

 

Gina: And to educate them on how to maintain the wells.

 

Dan: And maintain them, exactly.

 

Gina: Unfortunately, one of the biggest challenges that I come across is that many NGOs are building schools, wells, or other infrastructure but there are no resources or ongoing support to maintain what’s been built.  As you mentioned earlier, if something breaks down then quite often it’s the end of it or if there are no resources to keep the school operating, there’s no school.  This was pervasive in the traditional charitable model.

 

Dan: For sure, that’s always a problem and I think one of the saddest pieces is that it’s always sexier to build than maintain. There is such an opportunity to go and repair some of these wells but it’s sexier to go and build your own well and feel like you did something on your own. For example for governments, instead of repairing roads they often build a new road to put their name on something.

 

Gina: You hit on a very complex issue.   Your first comment reminds me of one of the challenges in the philanthropic world where there is an absence of long-term committed funding and instead, a short-term focus; it hinders the ability to have impact. A donor might get excited about the fact that his or her money went to building 1,000 wells, but may be reticent about continuing to commit funding for maintenance over a five or ten year period.

 

Dan: For sure.  That’s everywhere from the largest organisations down. It’s always easier to sell building your own structure than maintain an existing one.

 

Gina: I have a lot of sympathy for implementing organisations because that model is really restricting their ability for impact.

 

Dan: Right.

 

Gina: The other point you made also brings to mind inherent limitations in the system with respect to government leadership. Due to short terms in political office, the temptation as you say to "build a new road” versus maintaining one is compromised. You're going to do what is most visible so that you can be re-elected. From an infrastructure perspective, I think that the reliance on government to build sustainable infrastructure is often challenged by the nature of the political system and its short-term focus.

 

The other thing that I also see in terms of infrastructure in developing economies is that there is often a lot of corruption so that the original budget never fully gets to the end product.  Shortcuts are taken compromising the quality of materials or the construction work itself because a lot of people are skimming off the top. What you end up with is not necessarily what was intended. It’s not visible all the time because people are just taking shortcuts and buying cheaper product and therefore you’re not creating infrastructure that is solid and enduring.

 

These are both big challenges and I think it’s important to say that even though your solution is focusing on a part of the problem of access to water, it is very important work because increasingly more and more people are moving to the cities resulting in rapid urbanisation. You’re attempting to meet the needs of the population where centralised and that’s great.

 

Dan: Right, so to that point, there is rapid urbanisation and we work in areas most frequently called peri-urban, which at one time were rural and where drinking the groundwater was acceptable because it was clean.  However, as the population starts to grow in these areas, suddenly instead of one person defecating behind the tree there's ten people defecating behind the tree and now the groundwater is no longer clean. That’s what’s happening in many of these areas, what they were used to and what was acceptable at one time, because of the rapid urbanisation and rapid population growth, is not anymore.

 

Gina: What are your primary barriers to entry or to scalability, what are the challenges that you're facing?

 

Dan: So many! 

 

Gina: Can we break it down into pieces?

 

Dan: I think one of the challenges is bringing in the financing we need for this sector.  I think we're doing pretty decent sized off grid assets between the water treatment and solar energy. In the United States for example, if you are building any kind of large asset there would be all types of project finance available with different tax equity structures for people to come in and take out the depreciation and for banks to come in and make this a very valuable asset. That doesn’t exist in emerging markets so you really only have one thing available – short-term loans that do not come with great terms. Trying to bring real project finance into this area is one of our short-term and long-term goals in order to really accelerate the growth of the sector. 

 

Gina: What about the potential in the impact investing space; are you finding opportunity there?

 

Dan: In that space, there is a gap. Most impact investments are dealing with products that are channelled and singularly focused. I think a lot of the groups that have been successful at receiving impact capital, especially in the water space, are new technologies to treat water such as a portable backpack, or a wheel barrel that you push the water through, and the impact investment market responds by saying "that’s super cool, I know how to finance that with equity”. Then you just sell a bunch of products to other NGOs and that’s the end of it. There’s not enough variation within the impact investing space to look at models that have the heavier infrastructure and so we struggle with that a little bit. 

 

Gina: Are you finding better luck with philanthropic capital that you can tap into by way of grants?

 

Dan: Oh, definitely and there are some great foundations that are doing a lot of work in our area and they're leading it. Hilton Foundation, Stone Foundation, Vitol Foundation, and Danone Communities. They really understand the value in our sector and they are pushing the sector to collaborate and to accelerate it as much as possible. With that said, impact investment is growing every year and as someone who goes to a lot of these conferences, you just see the growth and the excitement as more groups such as ourselves are getting into this space. It’s really helping to grow the sector and getting people to believe it’s a real investment, not just a partial donation, partial investment. As I say that, we haven’t seen it yet, I won’t be surprised if we do see more project finance soon from several different groups. It just takes one to take the lead but I’m sure it’s coming soon.

 

Gina: What occurs to me is that there is a need, and tell me if you agree with this, for players in your space to collaborate to help raise the bar and awareness of investment opportunities?  You mentioned that there may be some sharing, are you working together to raise awareness or are you operating relatively independently?

 

Dan: I think that was the point of our platform. When we are in Haiti we know a lot of the other “safe-water enterprises” as they're called, but the group was kind of fragmented so it wasn’t easy to invest in the entire sector. You had to invest in individually in a bunch of small groups. The intention of our platform is to bring the sector together and to accelerate it together and the goal is to bring the commercial capital that we need to really push the sector in a way that we see it going. Right now, there are about three-dozen groups that serve around two to three million people, but as I said we see this group being able to serve two billion people, but it needs that catalyst. And we're hoping to be that on the tools and technology side, but it needs commercial capital. 

 

Gina: I’d like to switch the conversation towards risk. Putting aside the funding challenges, what are the principal risks jeopardising your organisation’s success? This can be from any perspective.

 

Dan: As we expand our platform, the intention was to take some of the risks away.  Instead of us being responsible for each individual employee on the ground and making sure there wasn’t fraud going on, we wanted to step back and be more high level. For example, in Haiti, we run a program called "Watering Minds". Because we set up water treatment centres, we feel like we're best positioned to serve schools and to get children free clean water. So we set up a foundation on the side that delivers clean water to schools who only pay for the cost of producing the water. We had been running that program for a while and I think we're in 50 different schools in Haiti. Ordinarily, when we supply our treated water, our sales are tracked at our site, so if someone wants 10 jugs of water, we track it, it gets delivered to the person and everything’s tracked down to the penny. At the schools, because we deliver it to the schools for free, we discovered some of our truck drivers were taking those deliveries and bringing it home, which didn’t occur to us as a risk until the schools started to complain.  So we are trying to reduce that risk by empowering some local groups to take care of that.

 

Another example of risk, there are inherent risks about working in new markets and having assumptions about how these markets work, and if there is competition, there is potential for conflict.  The other part of it is that we sell our product through local retailers.  In the areas where we work the price of products is anywhere from thirty to forty percent greater just to get them from the central cities to where our distribution hubs and water treatment centres are and they have to get through ten middlemen to get there. So, we create that kind of direct distribution line and bring down product costs for different products as I said the toilette paper, the soap, the powdered milk and so if there is one person we are hurting in this system is that middleman. We obviously feel, I think are justified to feel that we are empowering such a larger group of people, the people working at our sites, the local retailers selling the products, we're getting better products to all these consumers at a cheaper price but in every new market we work we are bringing in competition.

 

Gina: So you would describe that as an unintended consequence? By delivering secondary products to the communities you are serving for a cheaper cost you may be cutting out some of the middlemen that would otherwise be performing those functions?

 

Dan: Right.

 

Gina: It’s difficult to weigh the benefits of bringing products that are considered necessities affordably to the consumer versus taking away from the earnings of the middlemen that were driving prices up.

 

Dan: Exactly, I think any time you do something more efficiently you are jeopardising an earlier version of the system and someone it is earning money from the current system. You're replacing someone, but we feel like in the end the benefit we add to the entire ecosystem justifies what we're doing.

 

Gina: What is your vision for UNTAPPED in five years?

 

Dan: In five years? That’s a long time! In five years we want to get to over 600 sites in over six different countries with around twenty different partners. That doesn’t mean necessarily that we build all 600 sites, but that we work with partners that have sites and help them scale so that each one of our sites serves around thirty to forty thousand people getting us to serving twenty million people in five years.

 

Gina: What are your priority countries?

 

Dan: Right now, we are looking mostly at Sub-Saharan Africa to develop a concentrated hub there, but we're not opposed to moving to different places. Our focus countries are Kenya, Rwanda, Uganda, Ghana, and now we’re in Burkina Faso, and we are looking to work in Tanzania and Zambia.

 

Gina: Great! How are you tracking and measuring your impact?

 

Dan: Through our mobile IT, which is very helpful. Obviously, we track sales at each and every site daily, but we don’t track it to the individual end-consumer level, so some of that is done through survey data.  We're able to track sales and gallons sold every day. We also track our impact through our economic development, so we track not only our operators who run the site who have very good jobs, but also through our local retailers, our little mom and pop shops, and how we improve their income. 

 

Gina: Do you see an exit strategy for your organisation?

 

Dan: I got this question before and maybe it’s just the way its worded, but it puts me off! I love what I do, I love what we're doing, and I love our mission. We're one of the first groups ever to be able to sell clean water to people with very low resources who basically have no money and we are doing this in a sustainable and profitable way. The last thing I want to do is exit. With that said, we understand that in order to grow the company the way we want to, we need to make it commercially viable. In order to get that investment, we need to grow to 600 sites in five years and our goal is to service 100 million consumers by 2030.

 

To get there we need to bring in groups that have interest in our last-mile model distribution. Danone is one of our investors and they've seen the value in the last-mile distribution we've created in Haiti and going forward in Africa to bring some of their products into that and reach these consumers. These underserved communities that they haven’t been able to reach and they’ve wanted to reach but they’ve never been able to work down to the level to develop those last-mile distribution channels. 

 

Gina: So, you're not getting pressure from your investors or your prospective investors to develop an exit strategy? I understand why you might resist that, if UNTAPPED is a lifestyle business that you want to continue to build and run.

 

Dan: To an investor I’d probably give you a second piece of the answer that I gave, but in general, the last thing I want to do is exit this right now. It’s been a crazy challenge, but it’s been the best job I’ve ever had and it’s the most fun. We're constantly running around trying to figure things out, but nothing beats it.

 

Gina: Not too many people can say that about their work, I’m happy for you.

 

I’d like to take a step back for a minute and ask you more broadly, moving away from UNTAPPED specifically, what’s your definition of a social enterprise?

 

Dan: That’s tough, I see a lot of groups in the social enterprise space, I see the competitions and a lot of the conferences, there are a lot of groups coming through that I almost question whether they are a social enterprise or not. As long as your mission and your business model as well are aligned, I guess at the end of the day if you're improving lives or improving the environment in underserved or affected areas, I think you can claim to be a social enterprise. Yet, there are some groups whose business model and mission are not aligned, and they eventually realise that this can adversely affect the areas that they're trying to help. Toms shoes for example, have been in the news because they were giving away shoes in underserved areas and unintentionally hurt the economy of the local shoe retailers. If your mission and your business model are aligned toward improving underserved areas, then that's a social enterprise for me. 

 

Gina: That’s a really good example, and without trying to take away from what Toms shoes was doing because I think its admirable, it strikes me as being more similar to corporate philanthropy than a social enterprise because the model is to give a pair of shoes away for every sale.  While it might not be just about giving away profit, it appears more aligned with the charity model. The intention is noble but it has unintended consequences as you describe.

 

Dan: Exactly.

 

Gina: In my experience working in philanthropy and in business throughout my career I’ve often come across a distinction between what people traditionally see as ‘doing well’ financially versus ‘doing good’ for society. I often come across individuals who are very successful in business and also very committed to their philanthropy, however, they view the two as mutually exclusive. This view can lead to contradictions and often business or investment activities can counteract the efforts made to solve a social problem through philanthropy. As you mentioned, when you don’t integrate mission and values into your business model no matter how dedicated you are to philanthropy, the former can negate any impact caused by the latter.

 

Dan: I don’t think those two have to be mutually exclusive at all, more and more companies and groups are seeing that. Even in financial groups there is so much activity in microfinance right now that’s really helping to empower lower-income people to grow their business and grow the economy in their areas. It’s more about having consciousness around how you're doing it and making sure you're doing it in the right way, so that business and mission are not just aligned, but also having both together makes sense for your business model and for your financial return. I’d say in the micro-lending space there are a ton of groups doing very well correctly where a person helped by a loan and empowered is coming back to help them. There are other micro-financiers that are doing it not so well and are almost exploiting these groups and taking advantage of them, but I think the ones that have done it well, have been more successful and seen that in the end it’s the financially sustainable way to do it.

 

Gina: I’ve seen a lot of micro-lending models where the interest rates are prohibitive and on that basis alone I question their social commitment.

 

Dan: Yes.

 

Gina: I also think that on a bigger scale there is room for improvement in finance regarding loans made to large corporations.  The banks are starting to shift towards considering social impacts of corporate activities and consequently are being more selective in who they finance, what industries they finance, and including socially responsible criteria in their evaluation.

 

Dan: I think in a way there’s definitely been a shift in that mindset. It started with the consumers but it’s gone all the way up to the financial institutions.  You have these private equity funds that are developing more impact funds and not just as a part of their corporate social responsibility programmes to say "Hey look! We're doing good!" It’s because they believe these groups can get them a decent return and that people that are investing in these funds demand that they’re not just getting a return on their money but want to know if their investment is causing harm or doing good.

 

Gina: I wanted to ask you a big question. Where do you see opportunities for major transformation towards sustainability? Where do you think we should be focusing our attention?

 

Dan: This is a big question.

 

Gina: It could be on the investment side, it could be systems focused, for example, the way that governments hold companies accountable, the way in which NGO's can be held accountable. Is there anything that you think "I see this opportunity as having potential to really help shift the needle that we just need to focus more resources or attention on."

 

Dan: I’m living in San Francisco and I think, at least here, on the investment side there is this obsession with getting out in three or four years. Show me the hockey stick model where you build an app and suddenly, in three years you're going to have a billion users. That’s the opposite of anything that should be sustainable. That’s not a model that’s going to grow sustainably or have long-term impact. Getting away from that mindset is important and to think long term. If investors only want to be involved in something for the shorter term, how do we develop and promote different mezzanine financing structures so that they can invest in a group for the shorter term but that will support longer-term sustainable growth? Perhaps this won’t generate incredible growth but they could work with a group that’s more interested in that long term. How do you bring those entities together to invest at a singular time to support groups that are looking more for long-term sustainability?

 

Gina: What comes to mind as you describe this is patient capital.

 

Dan: Yes. I’m not the first person to think of this, it’s there, but we are still facing the venture capital two-and-twenty model that’s looking for companies that are going to just shoot off in year three and all you have to do is to give them one hundred million dollars in year one and then by year three they're going to be shooting off like rockets. This has become the standard mindset. There are groups that are now giving patient capital and there are different mezzanine financing groups but I think the standard and the go-to around selling your business: you never show a sustainable model down the line, you show a model that accelerates and scales and goes crazy in five years.

 

Gina: Larry Fink, CEO of BlackRock, which is the world’s largest asset manager, promotes the need to have a longer-term strategy in business. I think that the institutional investors have the luxury of investing for the long term see the value which is why they are occupying much of this space. Plus, it makes sense that a longer-term strategy is going to create a stronger company.  Once you add the element of social impact to the equation, given the complexity of the challenges that we're facing socially and environmentally I don’t think there are many quick-fix solutions. 

 

Dan: Exactly.

 

Gina: Further, society is operating in out-dated institutions that need to be overhauled in order to reflect current societal needs.

 

Dan: That thinking trickles all the way down to impact investing as we discussed. Most groups are looking to invest in companies coming up with product spot-solutions, little solar LED lights that they can sell to a million homes by year three. But these products don’t change the ecosystem of the economy in those areas. It’s just a little product they can sell and sell a bunch at a cheap price. That’s where investments tend to go because it has that same trajectory that they're looking for, that they're used to from Silicon Valley.

 

Gina: I think that this is a great place to end off.  Dan, thank you very much for joining me today on No Ordinary Business.  I thank you for your time and want to wish you and UNTAPPED all the success in the world.

 

One last thing, if our readers want to get in touch with you, how can they reach you?

 

Dan: Thank you. 

They can reach us through our website at www.untapped-inc.com or email me directly at dan@untapped-inc.com

 

 

Daniel Nolan is the co-founder of UNTAPPED, a platform to empower local entrepreneurs to scale water enterprises in emerging countries.