Why Give a Damn:

Five years ago, Steve Bachar and I decided to invest in companies capable of transforming the livelihoods of at least 100 million customers living on $2 a day, generating at least $10 billion in annual revenues and earning sufficient profits to attract commercial financial investment. There was only one problem. We couldn’t find any.

The author of this post, Paul Polak, has brought 22+ million farmers out of poverty. His work is dedicated to designing products for the Other 90% (the 2.6 billion customers who live on less than $2/day).

Five years ago, Steve Bachar and I decided to create a venture capital fund that would only invest in companies capable of achieving three goals:

  1. Transforming the livelihoods of at least 100 million customers living on $2 a day or less,
  2. Generating at least $10 billion in annual revenues; and
  3. Earning sufficient profits to attract commercial financial investment.

There was only one problem.

We couldn’t find any companies to invest in that met these criteria. Among social entrepreneurs, design for scale is as rare as hen’s teeth.

So my partners and I decided to launch such businesses on our own to prove the feasibility and set a course for ending poverty on a truly big scale. Five years later, we’ve created four new companies. The one that’s furthest along sells safe drinking water to $2-a-day rural customers in eastern India at a home-delivered price of 8 cents per day for a ten-liter jerry can. Eight cents a day, or $2.40 per month, is significantly less than what families now pay to treat the illnesses they get from drinking bad water. This company is fast approaching the tipping point of achieving both profitability and scale, and three other companies, addressing energy, education, and smallholder prosperity, are at various stages of early development.

Among social entrepreneurs, design for scale is as rare as hen’s teeth

Better still, Mal Warwick and I have just published a book called The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers, which describes in some detail how to create such businesses. We hope to jumpstart a new generation of multinational companies capable of earning attractive profits while transforming the lives of 100 million poor customers at a time. We call the method we’re using zero-based design, a comprehensive approach to designing a business venture from scratch, starting with zero assumptions or templates, learning what customers need and want, and designing radically affordable technologies and services to solve customers’ problems and the last-mile distribution strategies to make them available at scale.

Creating the Runway

There are one billion $2-a-day customers with no access to electricity, clean drinking water, affordable health care, education & sanitation

With 2.7 billion people now living on $2 a day or less, any effort that truly hopes to achieve a material reduction in global poverty must be conceived to reach enormous scale. In my opinion, each business must set a goal of transforming the lives of at least 100 million poor people. To stimulate the creation of startup companies capable of reaching that scale, a reasonable starting point is to identify markets with a minimum of one billion prospective customers. If you assume that a 10% market share would be a reasonable goal, then gaining a customer base of 100 million over the course of a decade should be attainable for a successful multinational enterprise. But the existence of many markets with one billion or more $2-a-day customers is already well documented. There are one billion $2-a-day customers with no access to electricity, another billion without access to clean drinking water, a billion without access to decent affordable health care, a billion needing affordable education, and another billion without access to sanitation. A small, world-class executive team could fairly quickly identify a hundred opportunities to create transformative new markets serving poor customers and pick gifted entrepreneurs who could form scalable startup companies to take advantage of them.

A small, world-class executive team could fairly quickly identify a hundred opportunities to create transformative new markets serving poor customers

A $30 Million Fund to Create the Runway

What I propose is to form a $30 million “runway fund” to jump-start the process. After identifying 100 startup companies and lead entrepreneurs capable of transforming the livelihoods of 100 million poor customers, generating $10 billion in annual revenues, and earning profits attractive to commercial investors are identified, the fund would operate on the basis of three phases:

  • Phase 1: Proof-of-concept prototype of the technology and key elements of the business strategy for six months, with each startup receiving $75,000 in funding
  • Phase 2: Beta test of the technology and business strategy with potential customers for six to twelve months, with each startup company that successfully passes Phase 1 receiving $150,000
  • Phase 3: First-stage commercial rollout for three years with total funding of $1.5 million for those ventures that succeed in Phase 2.

I would estimate the fund’s budget at $30 million as follows:

  • 100 startup businesses, proof of concept phase — $7.5 million
  • 30 businesses pass successfully to beta test phase — $4.5 million
  • 10 businesses go to commercial rollout — $15.0 million
  • Executive team $500,000 x 4 — $2.0 million
  • Total = $29.0 million

With 10 businesses in commercial rollout, we would launch a second investment fund of $100 million to finance their global expansion.

Investment Fund to Achieve Global Scale

A reasonable budget for the expansion fund would look something like this:

  • Three companies @ $25 million each = $75 million
  • Two companies @ $12.5 million each = $25 million
  • Total = $100 million

If five successful enterprises then each succeed in reaching 100 million customers, helping them to transform their lives, a total investment of just $130 million – a tiny fraction of the $2.5 trillion the rich countries have invested in traditional anti-poverty efforts – would result in 500 million people living on $2 a day or less to make their way into the middle class. That’s an investment of just 26 cents per person! If our projections are realistic, that could easily represent the best investment ever in its social impact.

About the author

Paul Polak

Paul Polak

Dr. Polak is Founder and CEO of Windhorse International, a for-profit social venture leading a revolution in how companies design, price, market and distribute products to benefit the 2.6 billion customers who live on less than $2 a day. He is an author of The Business Solution To Poverty and Designing Products and Services for Three Billion New Customers.

  • Tammy Hartmann

    Thank you, Paul, for sharing your informative article and heart to help to bring millions out of poverty. There is plenty of information and also many other interesting posts and resources on the Facebook page. You have done so
    much for the world. I love your passion—keep it going.

  • ghilonipt09

    I would have to agree with you Tammy this article is very interesting and poverty can be helped anywhere in the world but we cannot help everyone in the world today. I posted in a different comment that not everyone can end poverty because there is so much poverty in todays world.

  • Bangyan Zhang

    I like the article and the opinion. Helping people out of the poverty is a really hard and long-term work. However, there are lots of people in the world who have a relatively good life. If they can contribute a little to help those poor people. I think it will be a long-term, but it is not hard to achieve.

  • mbah7

    I love the fact that theres a company out there improving millions of lives while being able to turn a profit. If all companies had the same end goal there wouldn’t be 2.6 billion people living off of $2 a day

  • rhildner

    This is the first I’ve ever heard of a investment model with such innovative goals and frameworks. If successful, this type of investment could seriously change the world. Amazing!

  • osonbol

    The article was very magnificent, especially talking about helping people, and end poverty. There are many people that are working hard to contribute to end poverty, and make them feel that there is no longer poverty. Thus, i think it will be a long-term work life that will make them feel also more achievable.In one word, End poverty will be one of the biggest step.

  • AmberDraina

    I like how when they didn’t find any companies that fit there goals that they went out and created one. they are truly doing life changing innovations that are going to affect thousands of people.

  • osonbol

    I love how the investors could innovative goals and frameworks. These kind of innovation would keep us more seriously to change into a better investment that would help to end poverty which is one of the largest step in the world.

  • reedwar3

    This article sounds good in retrospect because these men want to start up companies that will ultimately benefit the poorer populations around the world with getting clean water, electricity, sanitation, etc. This is a wonderful group that is trying their best to make a change on a global scale when no one else was.

  • yencheskcj27

    This article shows how much potential we have to better the lives of millions of people in the short future. I like how you brought up using zero-based design approach when creating solutions to global problems. I also could not believe how you broke down the math to investing just 26 cents per person to move them out of poverty. My only questions are, has anyone helped create the $30 million dollar fund to make this possible, and do you think this concept will change the way more wealthy countries approach aiding poorer nations?

  • sauerm29

    I personally don’t like reading numerical values, but I am passionate about positively impacting the lives of others. Dr. Polak is using his knowledge and skills in business to try to make a large scale change. My mind, like many other people’s, is not wired for dealing with numerical values, but Dr. Polak’s is. He is applying his strengths to a cause that could better the lives of tens of millions and more. The point I am trying to make is that we all have unique skill sets. When we tap into them, it can have a major impact.

  • sergio moyano

    this is very interesting and also very true, companies are helping others while making profit, not many have this mentality because they are greedy people, but this concept is great, helping people around the world its just amazing and setting goals on the amount of people helping is just a way to strive to success.

  • sergio moyano

    i think it will not, just look at how many corrupted governments are out there, unfortunately only a handful of people aid them selves while everyone else has to find different ways, i think like the people in the article, we have to start it ourselves and a few have already we just have to keep supporting them.

  • mmorris93

    Thank you for this informative and detailed
    piece. I agree that by creating a monetary incentive and investment in
    businesses that the outcome can create a positive impact on those at the bottom
    of the pyramid. I would add that I think this model would also see success at
    the university setting, with undergraduate and graduate students competing to have
    their small businesses win investments and start-up capital. I think we are
    beginning to see a change in the way businesses operate, with much more
    emphasis on social impact, and I think students are helping to lead the way.

  • scray2

    This is an interesting article. Now the next step that would probably be challenging would be to find organizations to invest in that provide education, health care, and sanitation to those living on $2 per day.

  • Erin Klein

    My class has been studying how to develop sustainable businesses in developing countries. As I was reading this article, I wondered what need companies should address first: education, healthcare, sanitation, or clean water. I am curious if there is a trickle down effect that will result from addressing one of these issues first. I also appreciate the breakdown of investment costs, and how to utilize funds in a way that will actually have an impact, rather than throwing money at poverty without evaluating if the money is actually producing fruit. Making a prototype is key to testing a product’s effectiveness in the market, and determining what changes can be made to make it more useful. It is essential that entrepreneurs are local so they can identify the needs of their community, and provide proper feedback to the investors.

  • osonbol

    This is really interesting article, thank you for posting it. i think it will help me create and understand much more. one of the amazing articles i have read.

  • jrigau9

    I really like your idea of bringing this to a university level. Allowing students to compete for spots with their ideas will generate many innovative ideas.

  • thomas kearney

    I really admire what you are doing in your efforts to try to decrease poverty. Starting a organization to help other people out is very selfless and i appreciate you willing to help other people. I hope there are companies out there that are willing to invest in the organization because we should do our best to try to eliminate poverty.

  • good articles

  • charlaharvey

    Wow, I am so humbled by the company that sells water to people who make under $2/day for $.08 a day. That just warmed my heart, and at the same time reminds me how lucky we are in this country where water comes out of our sinks. I also really appreciate the model of starting a business venture from scratch and basically letting the customers decide the outcome. Thus, what they want is what the company provides, and it is affordable and beneficial to those customers.

    You say, “Each business must set a goal of transforming the lives of at least 100 million poor people.” I think a very common viewpoint is that any little amount of change for the better is good enough, but your perspective encourages people to step farther. Sure, we can make a small, beneficial change, but why not set the bar high enough to make at least 100 million peoples’ lives better? That is amazing and inspiring.

    Thank you for this article. I have been overwhelmed by the amount of problems and unfair circumstances around the world, but your words have truly given me hope that things can actually be done to make so many peoples’ lives better. It just takes some innovation and entrepreneurship!!!

  • Anniep1023

    It is astonishing to think that there are people in this world that are living on about $2 a day. What these two men did is incredible! By incorporating other businesses and companies, they were able to help so many people. These people are now given a chance to succeed and live without a few less worries every day. By fighting poverty, these two men and their companies are helping to improve other areas, such as the overall economy, education, and energy sources. By creating an incentive for companies to help, it motivates the companies to do all they can so both parties can be successful. Overall, this was an enlightening and informative article.

  • Katelyn Vaughn

    I agree with your post. I believe that poverty can be helped throughout the world but it is impossible to help every individual who is struggling in poverty. I think that, as a society,we need to be more educated on the issue of poverty as a whole. Many people do not think that poverty is an issue because its not a topic that many people think about on a daily basis, especially in America. I do however, feel that with time and a lot of publicity on the issue of poverty (new paper articles, television, social media), poverty can be greatly improved.

  • Taysia Justus

    I love the passion you have for our world! It’s truly inspiring to see someone do so much good for a community.

  • Bjackson5

    Taking people out of their comfort zone is most difficult when it comes to donating money. Many feel that their simple dollars wouldn’t make a difference in the world around them. Even if the donation of every individual was organized in the most simplistic way for people to follow, it would still come up short because of the unknown decision making of the people in this world. Some would give their life, others would be afraid to hand over a cent because their friend didn’t agree.

  • ryanstorto

    It is truly inspiring to see that they are some people who do so much to help the world. Doing good things will always get you a long way and seeing peoples efforts to end poverty is so amazing. This is really a great article.