Improving the World While Making a Healthy Profit

An increasing number of Israeli startups are looking to use their high-tech know-how to make the world a better place and make money in the process.

Not every startup is bent on developing the next mobile application craze. Some aim at injecting technology into social or ecological initiatives and bring about some positive change in the world.

One entrepreneur exemplifying this growing trend is Dr. Jonah Mink, who started out by volunteering at the Tel Aviv Refugee Clinic. Along with Dr. Yossi Bahagon and Tomer Weinstein, he cofounded MigrantHealth after seeing the need for an interface between the health system and Israel's migrant population.

The idea is to equip community health workers serving as translators with tablet computers to manage all the bureaucratic paperwork.

MigrantHealth is a community-assistance program but equally also a business initiative. It views the migrant population as a consumer force, a market that can generate profit. "The idea is to approach health-care providers as a group 60,000 people strong in order to leverage the size of the group in negotiating coverage and the price," says Weinstein, adding, "It's a large purchasing group."

If the initiative goes well, the founders see a possibility of expanding it to other countries with large migrant communities.

An expert on corporate responsibility and sustainable development, John Elkington coined the term "triple bottom line" - in his 1997 book “Cannibals with Forks” - to describe organizations with three sets of goals: financial, social and ecological. His concept centers around three factors in a state of structural friction: Profits, people and the planet.

One prominent approach among such organizations is recognizing the importance of aiming technological development at fast-growing emerging markets where demand for energy, food and water infrastructures is expanding at a rapid pace.

To illustrate, six developing countries - China, Brazil, Russia, India, Mexico and South Africa - now account for about one-third of the world's energy consumption. Use of solar energy in these countries, and their demand for electricity, are outpacing those in the rest of the world.

Global food consumption is expected to double within 20 to 50 years, driven mainly by developing nations that will provide another 2 billion to 2.5 billion mouths to feed by 2050, according to a study by the Pears Program for Innovation and International Development at Tel Aviv University's Hartog School of Government and Policy.

Another key process taking place in developing countries is rapid urbanization, bringing in its wake higher demand for water, energy, industrialized agriculture and food, along with growth in spending on security and health services.

Personal consumption in developing nations is also experiencing unprecedented growth. For example, the study's authors point out that the global fleet of cars will likely grow from 800 million today to between 2 billion and 3 billion by 2050. Most of this growth will occur in developing and emerging countries.

The rapid growth of Third World countries presents Israeli companies with business opportunities, but the conventional business models of developed countries aren’t always suited for these markets. In some fields Israel is already a center for knowledge, but most companies don't target these regions.

"More and more charitable organizations are looking for ways out of the constant chase for donations and toward finding alternative channels of income that will allow them to focus more on action," according to Daniel Ben Yehuda, head of community building at the Pears Program.

"This trend is growing in light of the shrunken worldwide supply of philanthropic donations following the global economic crisis,” he says. “In addition, contributors themselves are starting to demand this out of a desire to accomplish more with the money at their disposal. If they receive a return on their investment or donation, they can reinvest the money again.

"It is actually due to the lack of resources at the disposal of the world's poor that they are astute consumers ready to spend much more on a quality product needed to improve their lives," adds Ben Yehuda. Companies interested in entering these markets face many challenges, including coming up with a sustainable business model appropriate for poor populations with limited means of payment that, in most cases, lack credit cards.

One company that found a way around this problem is Nova Lumos. The Israeli firm developed a solar panel system for producing energy in developing markets. After an initial $20 to $30 payment, users pay - via text messaging - 50 cents a day or $3 a week to activate the system. The company thereby overcame the problem faced by consumers of paying a large lump sum for the expensive system as well as getting around the need for a credit card.

Another interesting example of Israeli enterprise developing a product for use in developing countries in the field of medical equipment is PrePex. The company developed a bloodless procedure for circumcising males with no need for surgery, an anesthetic or physician, aimed at curtailing the spread of AIDS. PrePex sees itself as pursuing a double bottom line – economic and social – but its clients aren't the end users, but rather governments or national security services.

Another challenge facing companies is finding the right partners in new markets. In order to penetrate markets in Africa, PrePex has forged strategic alliances with the World Health Organization and philanthropic foundations.

Moral obligation

"We believe Israel should become a center for innovative solutions to Third World challenges in the areas of water, agriculture, renewable energy, health care and education, aiming to improve conditions for the world's poor as well as turning a profit," says Ben Yehuda, who is also a founder of DevTech Hub, a social initiative for helping harness Israeli industry toward meeting Third World challenges. "In my view, it is a moral obligation,” he says. “It isn't fitting that the best creative minds in Israel are producing unnecessary applications and advertisements on YouTube rather than using their time to confront the world's great challenges."

Ben Yehuda also sees Israel as a young nation having a unique advantage. "We are one of the few countries in the world that successfully underwent accelerated growth over recent decades and within a short time frame," he says. "Only recently we were considered a developing country, and in less than 65 years of existence we joined the OECD."

He estimates that a few dozen Israeli startups are active in developing markets. Investor groups are starting to recognize the potential, too, and several impact-investing funds, including Impact First and Vital Capital, are backing Israeli companies targeting these markets.

The government has also discovered the potential in agricultural developments - particularly for developing countries - and sponsors a program for encouraging companies in this field. "In the National Economic Council we are talking about Israel needing to do more than just ICT (information and communications technology)," says NEC economist Netanel Oded, who headed a committee to promote agricultural research and development. "Industry is focused on a narrow technological area where profitability could take a dramatic turn in the next few years. Therefore, there is a need to find areas where innovative capabilities can be taken to new places."

In recent years, the NEC has also handled programs in the fields of energy, transportation and water.

"Israel has a glorious history in agricultural technology, in creating agriculture using little labor, land and water," says Oded. "This is a field encompassing advanced technologies - from seed biology and fertilizers to underground sensors that monitor when to irrigate and how to fertilize. Israel has interesting advantages in this field along with a government research facility: the Volcani Institute.

Despite the environmental importance of companies engaged in green energy, the field hasn't succeeded in generating the returns anticipated by investors. "The average period for an exit in cleantech is eight to 10 years – longer than the venture capital fund cycle," according to Barak Goldstein, a partner in cleanup fund Terra Venture Partners. He claims most cleantech funds pulled out of the field in 2009. Since 2011, a new approach has been unfolding to address the industry's financial hurdles.

Cleanweb - a term coined by the Indian-American entrepreneur Paul Sunil - is the new incarnation of cleantech. This involves companies using, for example, cloud technology - meaning the storage of information on a remote computer - to streamline and reduce waste in the area of natural resources. The principles guiding projects in this field are high-capital efficiency, speedy release onto the market, and information technology-based solutions permitting more efficient use of energy, along with maintaining a sharing economy, rapid implementation of clean technologies and dissemination of sustainability behavior around the world.

Goldstein points to Waze as an example of a cleanweb company, because it helps save on gas consumption and reducing pollution by optimizing driver navigation. Similarly, companies that develop algorithms for lowering energy consumption are also included in this definition. Others within this category are those operating in the so-called “sharing economy,” such as Airbnb, which enables people to rent out rooms or apartments when they aren't being occupied.

Reuters