Stanford Graduate School of Business: Social Venture 101 20November08

Social Venture 101: Starting a Social Venture Leila Chirayath Janah Founder & CEO source responsibly. TM

What I’m Going to Talk About Today How I ended up here Overview of business process outsourcing The problem with outsourcing for development One (small) solution: Samasource and Socially Responsible Outsourcing Case studies Achieving impact Questions?

How I ended up here Overview of business process outsourcing The problem with outsourcing for development One (small) solution: Samasource and Socially Responsible Outsourcing Case studies Achieving impact Questions?

10 years ago... Los Angeles, CA Akropong, Ghana

Competing Views on Development vs.

Aha! Moment Technology and knowlege jobs can lift entire families out of poverty. Home Work Bombay, India Bombay, India Dharavi, South Asia’s largest slum Call center ﬂoor Over 2.5M people living on 175 hectares Many of India’s 1M BPO workers commute from slum areas

The next Bangalore? 1 million English-speaking youth ﬁnish high school and college in Ghana and Kenya each year. They can’t go to Bangalore, much less the U.S.

How I ended up here Overview of business process/IT outsourcing The problem with outsourcing for development One (small) solution: Samasource and Socially Responsible Outsourcing Case studies Achieving impact Questions?

What is outsourcing, anyway? “The services trade at arm's length that does not require geographical proximity of the buyer and the seller.” (Jagdish Bhagwati, Columbia University economist) Business Process Outsourcing (BPO) is practiced by most of the Global 1000 and includes a wide range of services: Creative services, software and web application development, call Client-facing processes center, web-design and maintenance Decision-based processes HR services, live chat and SMS services Transcription, expense processing, video captioning, medical billing, Rule-based processes online reseach, translation Data entry, transfer and coversion Data entry, document management and scanning tasks

Where is it done? $120-150B global business process outsourcing market Eastern Europe USA $3.3B $90B China & Southeast Asia $3.1B Latin America & India Caribbean $17B $2.9B Middle East & Africa $425M Source: NASSCOM-McKinsey Study 2005; http://www.indobase.com/bpo/global-market-of-bpo.html

Key Players Large Outsourcing Firms ...7 billionaires Online Marketplaces 11% 1% US 46% Canada, UK, Australia 25% Europe & Latin America India Africa 17%

The problem: many poor regions are left out Perception that economically 277% of per-capita income spent depressed regions are open for on tertiary education in some countries aid, not trade + + >130M skilled workers in Africa Few opportunities for and rural Asia smaller ﬁrms to connect to US clients + + 60% unemployment among No socially responsible university and high school graduates option that promotes economic development = = Talent Client Surplus Deﬁcit

The problem: talent surplus (part 1) 32 million rural Chinese leave their towns each year for big cities, in search of work 45 million rural Chinese youth are currently enrolled in senior secondary schools Source: Wang, Dewen. “China’s Rural Compulsory Education: Current Situation, Problems and Policy Alternatives.” Working Paper Series No.36. 2003 The Organization for Economic Cooperation and Development (OECD) reports that there are 130 million surplus workers in rural India Source: “Rural BPO.” Drishtee BPO Presentation. March 2008. Over 990,000 young people graduate from secondary and tertiary institutions in Ghana and Kenya each year and face staggering unemployment Source: Kenya Ministry of Education; Ghana Ministry of Education; Samasource research November 2007 - March 2008.

The problem: talent surplus (part 2) “You ﬁnd people completing “The dilemma in Kenya, and Africa at large, their university education with is that the cost of education is getting so honors, and the best they high...upon ﬁnishing, you can’t get a job that can get is a one-off job doing will offer returns commensurate with what something unrelated to what you’ve done in school.” they studied. So you end up going back to the rural area Freda Adundo, IT degree candidate, Kenya where you grew up to do farming.” Peter Kimwele, business degree candidate, Kenya “It’s like the Western countries are missing a generation which they want to import from Africa...our economy and our brains are in America. Why can’t people earn an income while they stay here?” Martin Ntembe, business degree candidate, Kenya Source: Samasource interviews (Kenya School of Professional Studies: Nairobi). November 2007 - March 2008.

One (small) solution: Mission to create knowledge jobs for skilled, economically disadvantaged people to create business value for US enterprises through low-cost, high-quality business process and IT outsourcing services Method a new socially responsible outsourcing concept among Deﬁning and promoting US enterprises small- and medium-sized outsourcing ﬁrms (SMOs) in Training economically disadvantaged regions Connecting SMOs to a global marketplace for services

a new “socially responsible outsourcing” concept Deﬁning and promoting among US enterprises small- and medium-sized outsourcing ﬁrms (SMOs) in economically Training depressed regions Connecting SMOs to a global marketplace for services

One solution: socially responsible outsourcing Low-income Foreign capital Small ﬁrms Individuals $$$ a small slice of the $160B services poor people with outsourcing industry micro-, small- and untapped talent mid-sized businesses Socially responsible outsourcing promotes economic development and reduces poverty

One solution: socially responsible outsourcing (2) Socially responsible outsourcing creates positive social impact by: Outsourcing jobs in sub-Saharan Africa 1 Ghana directly generating jobs for skilled Senegal workers in low-income regions with Kenya high unemployment levels Uganda 0 1,000 2,000 3,000 4,000 2 1 direct job 2.5 indirect jobs indirectly generating jobs for semi- and unskilled workers 3 reducing skilled-labor emigration, or “brain drain,” in low-income regions

Wait, what does “socially responsible outsourcing” mean? Right now, it’s a nascent set of guiding principles for buyers who want to help low-income and socially disadvantaged people pull themselves out of poverty. Buyers are encouraged to follow any 2 of the 3 principles in choosing a service provider for outsourcing work. Principle Clarification 1 Includes firms located in: (a) a developing country, as Hire firms in poor or very defined by the World Bank*; (b) an economically poor regions distressed region (e.g., Ceara, Brazil; Bihar, India) 2 Hire micro-, small- and mid- Includes firms that employ between 1 and 249 people sized firms 3 Hire firms that are owned “Disadvantaged” means: belonging to an ethnic or by, or employ a majority of, religious minority group, living at or under the poverty disadvantaged people line, physically or mentally disabled *http://www.imf.org/external/pubs/ft/weo/2008/01/pdf/statapp.pdf

What kinds of service providers are included? Principles Example 1 + 2 Daproim Africa, a 10-person Hire firms in poor Hire micro-, small- digitization company headed by a or very poor and mid-sized firms person from rural Kenya regions 1 + 3 Digital Divide Data, a nonprofit Cambodian data entry firm that Hire firms in poor Hire firms that are or very poor owned by, or employ a employs 500+ socially regions majority of, disadvantaged people disadvantaged people 2 + 3 Preciss International, a 15-person data entry firm headed by 2 women Hire micro-, small- Hire firms that are and mid-sized owned by, or employ a Oriak Digital, a 10-person online firms majority of, research and transcription firm disadvantaged people headed by a Kenyan woman For case studies, see the following slides.

Current Focus Defining and promoting a new “ethical outsourcing” concept among US enterprises small- and medium-sized outsourcing firms (SMOs) in economically Training depressed regions Connecting SMOs to a global marketplace for services Samasource is piloting a web-based brokerage process with 8 small firms in Kenya, India, and Nepal

Brokerage model Our platform and sales team will help US ﬁrms identify, manage and pay providers... US enterprises due diligence > quality assurance > payment solutions > web-based tools SMOs in Africa and rural Asia ﬁrms direct jobs indirect jobs (x2.5) ...and create needed knowledge jobs in poor regions

Continued Brokerage model: results to date Services offered include data entry, digitization, transcription, website and software development 5 2 contracts signed: Website development 1-4 plus industry knowledge 3 proposals out: Web testing (750 Industries); Website redesign American Association of University Professors 4 Client-facing processes 3 Decision-making and problem-solving processes 2 proposals out: online research (World Trade 2 Speciﬁc rule-based processes Press); fact-checking (Google) 3 contracts secured: validation of books (Benetech) library card conversion (Digital Divide Data) 1 1 proposal out: additional book digitization Data entry, transfer and conversion tasks (Benetech) Projects and proposals underway or in development

Brokerage model: prospective market Nonprofits Rationale: Nonprofits face increasing competitive pressure to outsource and have mission-related reasons to outsource responsibly; existing options in India, China are risky from a PR perspective Size: 1.4 million registered 501(c)3 organizations spend $5B on administration & overhead annually Over 98% of nonprofits outsource at least some IT-related functions Socially Responsible Companies Rationale: CSR movement moving deeper into global supply chains; increasing number of “triple-bottom line” companies concerned with social, environmental, and financial impact Size: Networks like Business for Social Responsibility have 200+ members committed to CSR practices; sector could spend up to $6.6B annually on responsible outsourcing

Stories from the Field “Samasource is really adding “One of our workers, Mona, has two kids value by allowing and is a single mom. She really cried when organizations to focus on our contracts were terminating earlier this delivering quality services to year. This is her life, this is her livelihood. We clients rather than procuring need to generate a sustainable pipeline for business.” business development to ensure this doesn’t keep happening.” Gagan Singh, Source for Change, India Gilda Odera, Skyweb Evans, Kenya “Business development is a major challenge for us. We can’t afford to send salespeople to the US every few months to drum up businesses and work on branding” Steve Muthee, Daproim, Kenya

Case Study: Oriak Digital View Video >> http://www.youtube.com/user/samasource

Case Study: Daproim Africa • Headed by Steve Muthee, a young entrepreneur from rural Kenya • Started in 2006 with 4 people • Types of services: form and survey processing, transcription, digitization (tiers 1-2) • Before Samasource; average revenue per project $4K • First large project with Samasource: $13K • In pipeline: projects between $10K and $100K • Plans to grow to 20-30 people

Case Study: Preciss International • Run by two women, Ivy Kimani and Mugure Mugo • Started in 2002 with 5 employees • Types of services: online research, data processing, subtitling • 4 proposals/trials initiated through Samasource • In pipeline: projects between $10K and $100K • Planned growth to 70-80 employees

Case Study: Digital Divide Data • Nonprofit social venture started by Harvard grads in Phnom Penh • Employs 500 people at 3x Camodian minimum wage • First project: digitizing old issues of the Harvard Crimson • Operationally self-sufficient with revenue from services such as digitization, double-key data entry, and survey management • Social programs: education for sex- trafficked women, on-site medical care, scholarship program -- financed through donations

Results to Date 2007 2008 early 2009 late 2009 Milestones Reached Pilot Alpha launch Beta launch Full launch July-November - 5 contracts; 15.5K visits ~10 vendors 10-25 vendors 25+ vendors 35+ vendors Who March-July - oDesk data entry, data entry, data entry, additional services transcription, software transcription, software transcription, software partnership, GSVC finals Nairobi pilot & Facebook Developer Garage; 50% increase in Kenyan service providers since Kenya, India Kenya, India East Africa, India East Africa, India Where then Feb - Deployed client survey (40+ responses) Offline (MOUs with Online Online with Online with Jan ’08 - Web platform specific firms), supplemented by minimal offline minimal offline How with Kenyan vendor oDesk offline inputs support support Nov/Dec ’07 - Won Business in Self-reported with Certification and Development Challenge; Self-reported with 5-10% annual 5-10% annual conducted feasibility Self-reported background Standards auditing by third auditing by third study in Kenya with 20+ check/follow-ups party party vendors

Team Leila Chirayath Joy Sun CEO Initial director Visiting Scholar, Stanford University Director, Clinton Foundation HIV/AIDS Initiative Consultant, Katzenbach Partners Stanford Graduate School of Business (MBA World Bank Development Research Group expected June ’10) BA, Harvard University (African Development Studies) BS, Georgetown University (Foreign Service) Expertise: Outsourcing, social Expertise: Non-proﬁt management and enterprise, development operations, development Alice Wang Henry Thairu Business Development and Finance Kenya Program Advisor Investment Associate, FT Ventures Deputy Vice Chancellor, Jomo Kenyatta Investment Banking Analyst, JP Morgan University of Agriculture and Technology Consultant, UN Industrial Development Chairman, Kenya Council of Science and Tech Organization PhD, Norwegian University of Science and BS, Economics, BS Finance, MIT Technology, Trondheim (Thermodynamics) Expertise: Outsourcing, ﬁnance, and Expertise: Entrepreneurship, business strategy education, technology in Africa Advisory Board Premal Shah Darren Berkowitz President, Kiva Founder & CEO Emeka Okafor Katherine Barr Director, TED Global Partner, Mohr Davidow Ventures Ken Banks Mohamoud Jibrell Developer of Frontline SMS CIO, Ford Foundation

Key Lessons for Aspiring Social Entrepreneurs • The hybrid model: to be or not to be? • Avoid agnosticism - look at critical decision factors and choose • For SS: team priorities, cost to launch, risk inherent in business model • If possible, identify a revenue model • Incubation time - overestimate • Reﬁne your pitch (to team members) • Recruit an all-star advisory board • Partner whenever possible • Take advantage of free stuff • Google tools, Salesforce, conferences, etc. • Find a peer group • Physical space • Measuring progress/benchmarking Above all, know that this is one of the hardest things you’ll ever do, and prepare for it. (living in a van, selling your guitar, tutoring on the side, etc.)

Thank you! Leila Chirayath leila@samasource.org www.slideshare.net/leila_c www.samasource.com www.youtube.com/user/Samasource Facebook.com >> Samasource www.sourceoutpoverty.org

Stanford Graduate School of Business: Social Venture 101 20November08

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