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Scaling Low Cost Services for the Bottom of the Pyramid

Venky Natarajan
Managing Partner-Lok Capital
Tuesday, May 13, 2014
Venky Natarajan
Established in 2000, Lok Capital is a financial and strategic bridge that helps create and grow businesses which make a social impact in the areas of financial inclusion, education, healthcare, and livelihoods in a commercially sustainable and scalable manner.

One in four private equity investments taking place in India today are in impact enterprises, targeting the Bottom of the Pyramid (BoP). Of the $390 million invested across 80 transactions in 2013, 23 are in healthcare and education - where entrepreneurs are using an innovative mix of new technologies and local processes to scale their low price point businesses.

Take Drishti, a rural eye care chain operating in Devanahalli district, North of Bengaluru. India has an estimated 12 million blind people and with only 14,000 ophthalmologists, about 1 in 10 patients at different stages of blindness will be treated. The company provides eye care services to a population of 1.6 million in the district at low cost - glasses start at Rs.200 while cataract surgeries are provided from Rs.1,500. Servicing a distributed rural population at this price point required several innovations. At the hi-tech end this means using Forus Health's indigenous 3Nethra screening device, which brings down equipment costs for Drishti from $20,000 to $8,000 for each of its branches or "vision centres". Equally effective has been the company's mobile vision centre - a 20 seat custom built bus that comes with a 3Nethra device, refraction equipment and an optical store, which is also used to directly transport surgery patients back to Drishti's district hospital. Keeping operating costs low also requires organizational/process innovation - Drishti's permanent centres are co-located with the local GP on a revenue sharing basis - thereby attracting natural footfall. Given the ophthalmologist shortage, centres are operated by an assistant who connects patients to the district hospital using telemedicine. In its first year of full operations, by December 2013 Drishti had seen 30,000 patients, provided 6,000 glasses and undertaken close to 500 surgeries.

In Chennai, a different set of innovations are taking place at start-up Quest Explore Discover (QED) which creates interactive science kits for private and government schools in India - improving engagement and inquisitiveness amongst K-12 students. Present in over 100 schools in Tamil Nadu, Karnataka and Kerala, innovation is needed beyond the core product to ensure reach to low income schools - while science labs are sold upfront, the company also provides a Build-Operate Transfer (BOT) service to public schools, where it operates the lab for two years before transferring it to the school. Labs also come in three sizes, again to suit a range of school budgets. At the same time, the company is building solutions provided in the past typically to middle income schools - digitizing content for online learning; and building a big data mining platform for predictive analytics in learning outcomes, which will help schools drive decision making on their curriculum and teaching methods.

What are the common elements amongst numerous impact enterprises like Drishti, Forus and QED? The global experience of entrepreneurs now being used towards indigenous innovation, a growing ecosystem of impact enterprises where local product innovation is making service delivery viable, and the continuous improvements (large or small) required to operate and scale in this high-cost, low-price environment. While it is early days yet in the impact space, the presence of over twenty BoP focused seed funds and angel networks will ensure innovative thinking continues to be funded across the broad social enterprise spectrum.

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