Unlocking the Potential of Hardware-Based Invention to Solve Global Development Challenges
A leader in social enterprise provides advice on how to create a supportive ecosystem of mentorship and funding for game-changing innovation
As the international development community looks at the decade ahead, unlocking innovation across the globe will be crucial to achieving the Sustainable Development Goals (SDGs), from health to agriculture to the environment. The pandemic has only underscored how local invention and entrepreneurship is necessary to create context-appropriate solutions and to circumvent disruptions in supply chains.
P. R. “Guns” Ganapathy has been at the forefront of identifying, funding, and mentoring promising social entrepreneurs and Invention-Based Enterprises (IBEs) that achieve positive social impact — while making a profit.
Ganapathy has been on all sides of social entrepreneurship and venture capital funding. He was both a senior executive at multinational corporations and a social impact start-up founder himself.
For seven years he was the president of Villgro Innovations Foundation in India, the country’s pioneering incubator of social enterprises. Then, as co-founder of the Menterra Social Impact Fund, he helped the fund make early-stage, investment in startups in the health, agriculture, and education sectors. Now he serves as the Regional Director in South Asia for Stanford Seed, an initiative of Stanford University’s Graduate School of Business supporting entrepreneurs in emerging economies.
We recently talked to Ganapathy about the unique value proposition that IBEs offer to solve development challenges, as well as the supportive ecosystem that can be built to ensure hardware-based inventors are able to bring their products from the idea stage to prototype to market, where they can achieve impact at scale.
This interview has been edited for length and clarity.
What is an Invention-Based Enterprise, and how is it different than a social enterprise?
One deals with the problem you are trying to solve, and the other deals with how you’re trying to solve that problem. A social enterprise is an organization using entrepreneurial principles to solve a social problem. An invention-based enterprise is one that is using a creative new way of doing something — particularly with physical products and devices — to solve any sort of problem.
And that doesn’t necessarily need to be a social problem. It could be a new gear mechanism on a bicycle to make it easier for people to cycle. But when that same invention is used in a village to help somebody thresh crop, that’s where the two concepts intersect — where you’re using an invention to solve a social problem, which is make the small farmer more productive.
How have they both played a role in economic growth and addressing the SDGs, particularly in low- and middle-income countries?
Social enterprises attempt to solve social problems in a way that involves creativity and innovation, but some of that may just be business process innovation or innovative software. What I have found is that these innovations may provide an incremental improvement on current solutions — they may make something more productive by 20–30%.
But when you use new scientific approaches and develop new devices, you’re typically able to achieve a significant quantum improvement. And a product that may cost 50 rupees is suddenly now five rupees because you’ve done something radically different in terms of what materials you’ve used or how you’ve approached the manufacturing of that product. And that creates a very interesting opportunity to really solve a social problem at scale.
What role does the international development community and governments play in fostering invention-based innovation?
The international development community is a very important player in that space, and countries like India have given government money to achieve some of these development ends with the likes of USAID, DFID [FCDO], or The Bill & Melinda Gates Foundation.
Unfortunately, governments by nature are not well set up to work with innovative ideas. They’ve got an inherent conservatism and tendency to adopt the tried and tested. In a country like India, where we have 297 million people below the poverty line, governments need to see things working at scale. A small innovation or invention-based enterprise doesn’t inspire a lot of confidence.
What I’ve seen over the last 10 years is the focus has shifted away from where almost entire budgets were spent through either governments or large NGOs. Now the development community is saying we’ll spend 80% of our money with government. But we’ll take a piece of that, and let’s try and find some of these innovative ideas so that we can scale them, we can show that they work in the field, and then the government will have more confidence in adopting them. You’re seeing this priming of the pump.
Can you give us an example of that?
I think a wonderful example is the program called Saving Lives at Birth, which the Gates Foundation, USAID, the Canadian government, and The Lemelson Foundation have all been involved with. They declared that they want to save the lives of mother and infants in childbirth. And they have three levels of grants — one that they provide to people who have ideas, and then once they’ve developed that idea, they provide a small validation grant, and then they provide them with a larger scaling grant. And then they take that evidence and go back to partnering governments and say, “This works at scale. We’ve proven it. Now why don’t you adopt it within your system?”
How can governments also play a more active role in fostering and supporting innovation?
I’m beginning to see governments wake up to the power of some of these things. We have an Indian government program called the “Biotech Ignition Grant” or “BIG” Grant providing a fair amount of money to invention-based hardware startups to develop and validate their ideas. They’re also providing incentives to other government departments so they can now actually experiment, like an innovation budget that’s being provided to them so that they can procure these products.
The other thing is South-South cooperation, so the data that we gather in India can be used by other developing countries so they don’t have to run a pilot in their country. They can use other countries’ data and quickly go through a validation or approval process with organizations like the World Health Organization saying, “This is an approved device because I’ve seen the data coming out of Vietnam,” for example. We’re seeing it with vaccines, so there’s no reason why it shouldn’t happen also medical devices and things like that.
What is the stand-out opportunity for investors when it comes to supporting IBEs?
I think the most powerful thing about IBEs as an investment is their value proposition after they’ve crossed that risk zone and have made that quantum improvement in the solution to that end problem. The next thing is that they’ve created intellectual property that’s always valuable in an investment and an acquisition situation.
For a large corporation buying a small startup, there’s very little value in a company that has just an innovation in business model or process or software. On the other hand, a product innovation company truly brings something that is valuable and increases the chances of an investor getting a good exit and realizing the upside that comes from making that investment.
From an investor viewpoint, how do you balance the quantum improvements offered by IBEs with the assumption of higher risk due to the breakthrough nature of these solutions?
The question for investors really becomes, “How do I pace my investment in my time so that I have the patience to last that period, and I have the skills in-house to help the enterprise minimize the chances of failure and increase the chances of success.” And so that’s where I think it’s important to be a focused and disciplined investor.
It also means investors can make a much better call because they’re much more savvy about the science that’s going into it — what it’s going to take from something working in the lab to a device working in the field creating results, generating revenue, and having impact.
You really need to have the technical resources, you need to have mapped out the space. In malaria, here are the problems that need to get solved. In improving agricultural productivity, climate resilience for small and marginal farmers, here are the problems that need to be solved. You need to do that problem area by problem area, within the sectors of your focus, so that you’re proactively going and searching for solutions for that instead of responding to what entrepreneurs are coming and pitching to you.
I think IBE investing is not for somebody who’s very broad based, somebody who’s very sector agnostic, who hasn’t really built the technical capability, and has only built the investing capability.
Not all impact investors will have an extensive knowledge of the technical problems that need to be solved. How can those investors maximize their effectiveness?
It’s actually a good question not only for the investor. There are also trained engineers and scientific faculty in educational institutions who are looking for problems to solve. And often they don’t know which are the really important, big problems that need solving.
Unless there is this robust painting of the landscape, they will end up pursuing the wrong sort of problem. And then it’s difficult to find funding for it, your enterprise is poorly capitalized, you run out of money, and you’re frustrated. The whole entrepreneurship journey gets a bad name from this.
On the other hand, if the problems have been identified — for example, if someone were to say: to reduce infant and maternal mortality at birth, here are the problems that need solving — entrepreneurs would be attracted to that. And now the investors in the donor community also will know that these are the problems that need solving. If it’s like an orchestra conductor, writing the sheet of music off which everybody is playing, the efficiency of the system will become tremendous.
It’s like what we did with anemia. Such a big problem in India, but what we said was we need non-invasive, point-of-care testing of anemia, with reasonable accuracy and low cost. That’s all we need. And then all the dominoes begin to fall, with companies like Biosense creating hardware-based solutions, and then we can really solve this problem.
What is the role of innovation and entrepreneur ecosystems in helping create the environment for inventors to flourish and succeed?
One is to provide the IBEs with a lot of the support that they need out of the box, almost like a plug and play. Have the supportive ecosystem for both design — a small-batch manufacturing or prototyping — and the places where they can do some of the initial testing and trials and learn their lessons quickly.
Have support in terms of consultants who can get them the necessary certifications and steer them through that process. If the funding support would come with all of these relationships pre-built, that allows entrepreneurs to really accelerate the process to develop the first prototype, get it out into the field, test it, learn their lessons, come back, quickly iterate, and take it back into the field.
In the past, a lot of the focus was just on giving inventors hardware, give them office space, give them a 3D printer, and somehow magically innovation will bloom. But that’s not enough. If we don’t have a stronger support infrastructure, we’re going to find that a lot of that initial enthusiasm to solve social problems with invention will be like water in a desert — it finds its way into the dunes, gets stuck, and dries up.
We’ve got to really accelerate the pace at which these organizations get support, and that support should be effective, proximal, and delivered to them in a way that is entrepreneur friendly.
What do those platforms look like?
An effective incubation system has entrepreneur support organizations (ESOs) to help hire the right sort of staff, help you really get your invention out there, license it out or commercialize it. And incubators and business accelerator associations are sharing best practices, creating various forums by which they’re learning from each other and creating mechanisms that are going to improve the quality of incubation.
For example, we have the The Indus Entrepreneurs network (TiE). As a member you have access to other like-minded, budding entrepreneurs who are interested in solving problems. You can find a co-founder in a place like this who has a completely different and complimentary set of skills. Those multifunctional teams are where the magic’s going to happen.
What does a robust and healthy invention ecosystem look like?
A mature ecosystem is one where you have all of these things, you have risk-taking investors, you have grant-givers, you have incubators, you have mentors, who are giving back by spending time with these entrepreneurs. If you have all of these pieces, that spark that gets lit by these people who are seeking fuel for the soul can be very carefully nurtured, where they begin to see the impact, they begin to really get excited by what they’re doing.
You know, it really disappoints me that some of our best and brightest minds are going to work for large multinational tech companies where they’re spending time on a better algorithm that suggests another product for consumers to buy, or that keeps them on the website for another seven seconds. And that’s the best brains out of our top Indian Institutes of Technology (IIT). It is just such a painful thought. So an ecosystem that nurtures these bright minds and gets them to a point where they’re working on solving these problems — that’s super critical.
Are you optimistic about a growing pipeline of inventors tackling these challenges? Has the pandemic created additional opportunities for inventor entrepreneurs?
Increasingly in middle-income countries, you have this cohort of young people who are looking for something that not only fills the wallet, but also fulfills the soul — and hardware social enterprise provides them that opportunity.
I’m extremely optimistic about the future because of what the pandemic has shown us. Some of these techniques have just accelerated the pace and productivity of developing and getting products out there. Now you can create this wonderful, virtual team that can work on a virtual product, and get that product 3D printed at some virtual location.
I feel like the pandemic has truly opened our minds to those possibilities — the ability to convince people about an idea, to pitch and raise money, to sign up partners, all of these things have become much more productive. So I’m really hopeful that we do not lose some of the lessons that we’ve learned even after we are in a post-pandemic world.
