In popular imagination, India’s startup ecosystem is synonymous with the posh software firms of Bengaluru, Pune and Gurgaon. While these have made the country a global powerhouse, their appeal eludes two-thirds of its population that are fighting for access to basic needs like clean toilets, good schools and hospitals. This is where a new clutch of companies have come up in recent years. These ventures are laying the groundwork for tapping these needs as business opportunities; they are not dependent on charity or grants, but on the citizens at the middle and the bottom of the pyramid to sustain them as paying customers. “The raison d’etre for all these companies is market failure at the mid- to low-income levels,” says Srikrishna Ramamoorthy, a partner at Unitus Seed Fund. “The entrepreneurs we fund are always asking ‘how can I make this scalable so I can make money because of the volume’.” Here’s a look at five such companies.
Catching Them (Really) Young
Hippocampus Learning Centres
Vertical: Early childhood education
Business model: Fees from schools, ranging from Rs 3,000-Rs 7,000 per child per year
Investors include: Asian Development Bank, Unitus Seed Fund, Khosla Impact
Funds raised: Rs 21 crore
Impact: 11,000 children getting structured pre-school education from 600 teachers in 285 schools
Status: Seeking between $4 million to $6 million in VC funding to expand and break even in the next 12 months
Power To Young Adults
Vertical: On-demand digital services
Business Model: Revenue from serving global clients in technology, financial information, and internet retail
Investors include: Omidyar Network, Michael and Susan Dell Foundation, Khosla Impact
Funds raised: About $5 million
Impact: In the process of expanding from close to 600 employees (emphasis on young women) from low-income households to 6,000 in 15 centres by 2020
Status: Operationally profitable, investing back into technology and expansion
Radha Ramaswami Basu decided to focus on young adults, but used a different approach. The 65-year-old Basu, a former general manager at Hewlett-Packard’s $1.2 billion channels business who also started the MNC’s India operations, saw an opportunity to skill thousands of Indian youth, especially women, from very low-income households, to serve in the digital economy.
Based in Kolkata, iMerit provides tech-enabled services—digital as opposed to the call centre kind—to global companies from centres in eastern India. “I have fundamentally one belief: That is in the power of youth and young women, particularly rural, marginalised and minority folks,” co-founder and CEO Basu says.
She shuttles between San Francisco, California and Kolkata, and is also the Regis McKenna Professor of Frugal Innovation at Santa Clara University. iMerit has a sales-facing office not far from Palo Alto. Basu points out that while, in the last 20 years, the IT industry has created well-paying jobs for young engineers from the Indian urban middle class, “it has, at the same time, created or even widened” the divide between those who have prospered and those who have been left behind.
Ask any Nasscom company if they’d hire an underprivileged person, the answer is likely to be “well, they don’t have engineering degrees” or even a college degree, she says. iMerit wants to prove that, given the right training, even these young women, who aren’t fluent in English and have, at best, managed to clear class 12, do exceptionally well. “The vision is to see how we can create a model that taps into the massive digital transformation that is going on all over the world, and have these young people coming from very low-income households become part of that transformed economy.”
In October 2015, iMerit raised $3.5 million in its second round of funding from Michael & Susan Dell Foundation and Khosla Impact; Omidyar had previously given iMerit close to $1 million in the startup’s first major round of funding in March 2013. These funds will be used to expand from six centres and about 600 employees to 15 centres and 6,000 people over five years. iMerit, however, declined to provide any revenue details.
From verifying driver documents for Uber to validating information on hotels and travel sites to categorising data and images for online shopping sites, the iMerit staff learn to handle a myriad set of tasks. The company is able to do this through a combination of automation as well through its employees who are trained to use new technologies and software on a sophisticated platform built by iMerit—one that matches client requirements with specific job skills. “The nexus of machine intelligence and human intelligence will be the future of work,” Basu says.
iMerit finds most of its staff from among the poor youth in the country. The training is delivered over several months at Anudip Foundation for Social Welfare, which Dipak Basu, Radha’s husband, co-founded with her in 2007. Thus far, Anudip has trained some 45,000 marginalised youth, helping them get jobs in mainstream IT-enabled services companies, including iMerit. Clients such as Microsoft Corp, eBay Inc and Catholic Relief Services use iMerit for projects including machine learning, mobile and cloud support, and big data analytics.
iMerit has also succeeded in building training programmes that help their employees handle tasks such as “sentiment analysis around Twitter images or YouTube or categorising news and graphics”, says Basu. Sentiment analytics refers to extracting information from studying data from sources like social media feeds, and is increasingly being used in marketing and customer services.
“India can be the laboratory where this [kind of workforce] can be created for all the emerging markets,” she says.
Prevention is Better
Vertical: Biomedical devices
Business model: Revenue from sale of biomedical products, and from recurring subscription for cloud-based technology platform for remote diagnosis
Investors include: IDG Ventures, Accel Partners, Asian Health Fund
Impact: Retinal eye imaging device benefitted 2 million people in 25 countries, bringing affordable early detection of preventable blindness to places with low access to healthcare
Funds raised: $13 million
Status: Expanding into new products; projected to be profitable in the current fiscal year
Hi-Tech At Low Cost
Vertical: Biomedical equipment and device as a service
Business model: Revenue on a per-scan basis by various public and private health care providers
Investors include: Unitus Seed Fund, Aarin Capital, Pennsylvania Department of Health, University City Science Center
Funds raised: About $4.1 million
Impact: Affordable early detection of breast lesions at Rs 80-250 a scan
Status: Setting up manufacturing and distribution in India; projected to break even by Q32017
Non-invasive scanning at affordable rates for the masses is also the vision behind iBreastExam, offered by UE LifeSciences. The company has built and commercialised an ultra-portable scanner that pairs up with a smartphone and local health workers can be trained to use them. A scan can be as inexpensive as Rs 80 to Rs 250 compared to as much as Rs 2,000 for a mammogram in a private hospital, co-founder Mihir Shah says.
iBreastExam, however, also represents a more modern and discomfort-free alternative, he says. With bases in Philadelphia and Mumbai, UE LifeSciences won $3 million in funding from Unitus Seed Fund and Aarin Capital, and is now setting up local manufacturing in India.
It all started with a personal motivation for Shah, 38. When a family member of his was diagnosed with breast cancer, he realised that “we don’t have enough radiologists nor have the women and their families the ability to pay for expensive mammograms”.
Shah, who sees himself as a mobile-health entrepreneur, was an executive at Philadelphia-based company Infrascan, another medical devices startup, before starting iBreastExam. His engineering background—a graduate’s degree from Drexel University in the US—helped him think through the plan. “We didn’t know what kind of machine we would design when we started, but we knew that the core desire was to solve this problem of affordable and effective early detection.”
Shah co-founded his company in Philadelphia with Mathew Campisi, who is the company’s CTO. They wanted to start operations in India and build a replicable model, which would then help Shah expand into other markets—South-East Asia, the Middle East, Latin America and Africa—where there is a similar need to help large numbers of women. That India has the largest number of English-speaking physicians in one single market was significant. More women die due to breast cancer in India than anywhere in the world, Shah says. “I have roots in India. If you can help solve the problem here, then you can solve it elsewhere.”
Shah has a degree in computer science, but his fascination and journey with biomedical devices started when he won a business plan competition, which got him an incubation space that was co-located with the university’s technology commercialisation office. This allowed him interactions with the engineers and scientists there.
When he discovered that the biomedical engineering department had developed a non-invasive way to measure some of the health parameters of the human heart, he convinced them to lend it to him over a summer vacation to try it out in India. “My hook was, in less than a week of being in Mumbai, I was able to get appointments with some of the leading cardiologists of the city.”
Those meetings led to invitations to their operation theatres and over the next eight weeks, Shah got a ringside view of various kinds of heart surgeries. “The doctors embraced the non-invasive box, which was inherently harmless, without any kind of red tape,” Shah recalls. “That taught me that ‘non-invasive’ is good. I went back with 60 cases of people suffering with various heart problems in my hand, and the university was able to licence the technology to an established medical device company in the US.”
His second big realisation was that innovation can significantly improve upon what is available in emerging markets. Third was the sheer scale of the disease: Cancer affecting more people who don’t have the wherewithal to deal with it.
Shah went ahead “on a gut feel” and licensed the technology and some related patents from Drexel University, but didn’t really have the money to develop it further. Around that time, in 2012, the Pennsylvania department of health had announced a request for proposals in the area of cancer detection, offering something just shy of $1 million to six finalists to develop solutions with the intent to commercialise.
UE LifeSciences won a place in that list of finalists, and got around $875,000, which helped develop the iBreastExam device from the point where the university had created the proof of concept. The startup put together engineers, scientists, products and industrial design specialists and built the first model over the next three years.
In 2009, the company started out with a larger product, which they called NoTouch BreastScan, which was more amenable to installations in large hospitals and clinics. Cumulatively, UE LifeSciences has sold about $1.5 million worth of these devices at about $60,000 each. However, the portable version, now being commercialised, is the company’s flagship and central to its future.
UE LifeSciences gives out the devices to its customers and charges a fee of Rs 80-Rs 250 per scan. Customers include SRL Diagnostics, Portea, Medall and Metropolis Labs, who will then charge a fee—in the range of Rs 500-Rs 1,000—to the end consumers, Shah says.
The company is also in talks with non-profit foundations including Biocon Foundation, Empathy Foundation, Aastha Breast Cancer Support Group and NK Dhabhar Cancer Foundation to make iBreastExam available to poor people at very low- to no cost. The company has made presentations to the health authorities in the states of Delhi, Rajasthan and Andhra Pradesh as well, Shah says.
Let There Be Light
Mera Gao Power
Vertical: Energy—setting up solar-powered micro-grids
Business model: Tariff charged for off-grid solar power supply at Rs 30 per week per customer-household (MGP sets up the solar units and maintains them)
Investors include: Insitor Impact Fund, Engie and Interchurch Cooperative for Development Cooperation (Icco) with seed funding from USAID and support from National Geographic
Funds raised: About $3 million
Impact: 1.25 lakh people from 22,000 customer-households in 1,500 villages across eight districts in UP get night-time lighting and mobile charging
Status: Seeking $3 million in VC funding to expand operations; projected to be Ebitda positive in 2017 and profitable in 2018
(This story appears in the 08 July, 2016 issue of Forbes India. To visit our Archives, click here.)