The story of Promethean Power Systems, a technology start-up that is helping transform the dairy industry in India, illuminates the critical role that a coordinated “innovation ecosystem” supported by The Lemelson Foundation has played in nurturing emerging social enterprises.
Innovation has long been an essential part of philanthropy. But the process of searching for and supporting new approaches can be messy. The reality is that the path from idea to impact is often long, winding, and unpredictable, and there is no simple, step-by-step methodology for finding and funding new ideas.
That doesn’t mean, however, that philanthropic funders can’t be intentional about the approaches they use to seed and scale social innovation. In our 2014 Stanford Social Innovation Review (SSIR) article “The re-emerging art of funding innovation,”(1) we highlight the ways that the processes, strategies, and structures required to deliberately seek out and support early-stage, breakthrough ideas can be quite different from those used in more traditional grantmaking.
To further illustrate what it really takes to fund innovation in practice, we have developed five case studies that aim to capture the realities of the innovation funding process. Each looks at the process of supporting innovation from a different angle:
None of these cases alone tells the whole story of what funding innovation looks like; they explore a range of approaches that emphasize very different aspects of the process. But we believe that the collective set of case studies begin to paint a well-rounded picture of many of the processes and approaches that innovation funders can use to nurture and scale new ideas with transformative potential.
It’s important to recognize that these stories are not about the innovations themselves. They don’t explore whether Kiva should actually be considered a truly game-changing financial innovation, or whether the Gates Foundation’s Grand Challenges program should have hit a “home run” already after 10 years of operation. Those are questions for another time and place.
But each of the examples described in the cases is showing important signs of promise, and because creative funders were willing to embrace a different way of working, the innovations have been able to grow from the seeds of ideas to full-fledged experiments. It’s still too early to answer whether they will ultimately prove to be transformative—but it’s clear that if the funders involved had been wedded to more traditional grantmaking approaches, we might not even be able to ask the question.
The innovation processes described in the cases here are inherently complex, full of stops and starts, iterations, and failures. And one of the clearest takeaways looking across the stories is that there is simply no straightforward recipe for funding breakthrough ideas. But the cases do help to illustrate an emerging set of “innovation funding principles” that can allow funders to better identify and support early-stage, high-risk, high-reward projects:
Perhaps unsurprisingly, these principles mirror many of the key elements that were discussed in our 2014 SSIR article related to the sourcing, selecting, supporting, measuring, and scaling of innovation. As we explained in that piece, innovation funding shouldn’t be seen as an alternative to, or replacement for, strategic philanthropy; funding innovation is actually an integral part of good, strategic philanthropy. And we believe that embracing these innovation funding principles can help with virtually all aspects of a funder’s grantmaking.
For many funders though, taking risks on high-potential projects won’t be necessary or appropriate for all of their work. Instead, the principles are better applied to just a subset of their giving activities. And much as financial investors try to build a diversified portfolio—placing the majority of their assets in investments with safe and steady returns, but using a smaller percentage for higher-risk opportunities with the potential to produce outsized rewards—funders, too, should consider using a portion of their resources to support innovation alongside their investments in more consistent and proven approaches.
Eric Schmidt, the former CEO of Google, used to describe what he referred to as his 70/20/10 rule: 70 percent of management’s effort should be dedicated to core business tasks, 20 percent should be focused on projects related to or adjacent to that core, and 10 percent should be dedicated to unrelated but high-potential new businesses.(5) Using this type of portfolio approach allowed Google to focus the majority of its resources on proven strategies that formed the heart of its business while ensuring that it wasn’t missing out on important new opportunities and impact.
For funders, 70/20/10 may not be the right ratio. Each foundation and donor will need to think about its own unique risk-reward profile. But imagine the potential impact if all funders dedicated 10 percent of their giving to experiments that may have a high likelihood of failure but that, if they succeed, could transform a critical system. With so many more ideas being supported, if 1 in 10, or even 1 in 100, of the innovations could succeed, it could change the world.
We hope you enjoy the story of innovation funding that follows, and we hope that it illuminates some of the ways that your organization might embrace supporting breakthrough ideas as part of your funding portfolio in the future.
(1.) Gabriel Kasper and Justin Marcoux, “The re-emerging art of funding innovation,” Stanford Social Innovation Review, spring 2014, http://www.ssireview.org/articles/entry/the_re_emerging_art_of_funding_innovation.
(2.) For more information on this topic, see Gabriel Kasper and Justin Marcoux, “How to find breakthrough ideas,” forthcoming as a blog post in Stanford Social Innovation Review.
(3.) Kasper and Marcoux, “The re-emerging art of funding innovation.”
(5.) CNN Money, “The 70 percent solution,” December 1, 2005, http://money.cnn.com/magazines/business2/business2_archive/2005/12/01/8364616.
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Home to more than a billion people, India is both the largest producer and largest consumer of dairy products in the world.1 Yet when dairy farmers in rural India milk their cows each day, they know that their livelihood and the well-being of their families hinge on a very tight race against time. If milk doesn’t get chilled within four hours, it will likely spoil, and when it does, the milk loses its nutritional quality, drops in commercial value, and becomes a significant food safety threat.
Fixing this supply chain problem is a daunting task. Lacking the resources to build traditional storage facilities capable of cooling the milk at the source, farmers have to rush their fresh milk to a village collection point, from where it is then hurried by rickshaw or truck, often in India’s searing heat, to a distant cooling and processing facility. Repeat this process twice per day—once for the morning milking and once for the afternoon—for every farmer in each of India’s 300,000 milk-producing villages, and the scale of the problem quickly balloons to unmanageable proportions.2
So when Sorin Grama and Sam White saw this environment, they knew that they could help farmers and their families. The duo developed a new technology that could keep milk chilled, even in the unforgiving conditions of rural India. Their new refrigeration system uses a special, super-chilled coolant that can stay cold for an extended period to keep milk safe and cool despite the unpredictable and intermittent power supply from India’s electrical grid.
The story of Grama and White’s company, Promethean Power Systems, is a tale of how technological innovation is helping transform the dairy industry in India, helping more than 3,000 dairy farming families in the last two years to produce safer milk and improve their livelihoods.3
At the same time, for philanthropic funders, Promethean’s narrative is about more than just an individual breakthrough in refrigeration; it’s a testament to the power of investing in a coordinated “innovation ecosystem” that can help nurture and support many different innovators and entrepreneurs over time.
It is easy to view innovations like Grama and White’s as a single lightning strike of creative genius, followed by the tireless efforts of heroes or heroines to make the concept a reality. The insights and hard work of the Promethean team show that there is real truth in this narrative. But it’s an overly simplistic story. No matter how hard a social entrepreneur works, innovations like Promethean Power Systems can rarely succeed entirely on their own. Instead, they benefit from the existence of a supportive infrastructure that helps connect new entrepreneurs with the capital, mentorship, and assistance they need to succeed.
Out of this exploratory soup, the duo emerged with an idea to push forward.
Promethean Power Systems benefited from this kind of support on several occasions. White and Grama, in fact, met through a program run by VentureWell,4 a US nonprofit that focuses on stimulating science and technology invention, innovation, and entrepreneurship at universities and colleges.5 The two men were part of a larger student-led team at Massachusetts Institute of Technology (MIT) that used mentorship and exploratory capital from VentureWell to help investigate a range of solar solutions in the developing world. Out of this exploratory soup, the duo emerged with an idea to push forward.
Later in Promethean Power Systems’ journey, the pair connected with the Indian social enterprise incubator Villgro. Villgro’s in-country expertise helped non-natives Grama and White better understand the local Indian context. Villgro injected capital into the organization, allowing the team to build important prototypes after a major challenge required it to significantly shift direction, helped it negotiate investment terms, and provided local talent to expand the team.
The support of VentureWell and Villgro has been an important component of the success of Promethean Power Systems. But that assistance wasn’t in place just by chance. Both groups are part of a deliberate network of organizations that support invention and entrepreneurship around the world, funded in part by The Lemelson Foundation, a philanthropic organization established in the early 1990s by prolific inventor Jerome Lemelson and his wife Dorothy.6
Since its inception, The Lemelson Foundation has focused on expanding the pipeline of new ideas and supporting the ecosystem that helps entrepreneurs bring those ideas to fruition. As part of this work, the foundation has formed deep relationships with organizations such as VentureWell and Villgro: It seeded the creation of VentureWell in 1995 and has supported Villgro for more than 10 years.7 These investments highlight the foundation’s broader strategy to invest in organizations that inspire young people to solve problems through invention, provide inventors with knowledge and tools, and help launch and incubate invention-based businesses. The foundation believes that this “invention pathway” is what transforms nascent ideas into viable, tangible, life-improving products, and ultimately into successful businesses that stimulate the economy.
Without support organizations like VentureWell and Villgro, even the best ideas can fail to have impact. Carol Dahl, executive director of The Lemelson Foundation, gives an analogy: “Imagine a bridge. On one side is a solution to a problem worth solving, and on the other is a sustainable organization that is improving lives. A robust ecosystem for invention, innovation, and entrepreneurship are spans along that bridge and, without them, it’s impossible to get across.”8
By investing in those “spans,” the foundation is working to create a fertile ground from which innovations like Promethean Power Systems can grow.
The origins of Promethean Power Systems are actually quite different from where the company is today. In 2007, Sam White was working full time in Cambridge, Massachusetts, while helping a team of engineers from MIT, which included Sorin Grama, work on a new solar technology—unrelated to chilling milk. The team developed its invention with the needs of the developing world in mind: The product could be built out of common car parts and plumbing supplies,9 and the company’s early goal was to bring electricity to rural villages in India.10 To develop their solar idea further, a group that included White and Grama applied to VentureWell’s E-Team Program.
VentureWell has long supported invention, innovation, and entrepreneurship on college campuses around the country, and it helps rapidly move the strongest ideas that emerge forward to commercialization.11 Phil Weilerstein, president and CEO of VentureWell, notes that the organization’s work tends to revolve around two key themes: “The first is that the college or university can be a home for inventions and innovations that are economically sustainable. And if you think back to 1995, this was not a forgone conclusion. The second theme is about learning by doing. We believe that the best way for entrepreneurs to learn is to work together with professors and other mentors to try and create something new.”12
These themes are evident in how the organization builds its programing. VentureWell has helped cement the university’s role in innovation by supporting nearly 600 new collegiate courses and programs where students develop inventive ideas and gain the entrepreneurial skills they need to bring inventions to market. And to encourage “learning by doing,” the organization has funded over 500 student teams to kick-start their new ventures. More than half of these teams have gone on to form companies that are still operating today, raising an additional $620 million dollars in investment capital in aggregate.13 Alexander Nicholas, The Lemelson Foundation’s program officer who supports VentureWell, adds, “Beyond the numbers, VentureWell helped in creating a fundamental shift that recognizes that young inventor entrepreneurs can move great ideas from academia to industry.”14
One of these companies is Promethean Power Systems. Early support from VentureWell included funding as well as dedicated mentorship, entrepreneurial training, and faculty coaching. With this help, the team spent most of 2007 developing its business model and pitching its idea. Later that year, the team won second place at MIT’s $100,000 business plan competition. White quit his job, Grama finished his master’s degree, and the two traveled to India to explore where their new solar technology might have the best market fit.
A product that captures heat from the sun to make electricity had many potential uses, and the two met with representatives from a wide range of industries. But they had overlooked the dairy trade. By chance, they met with one of the largest dairy producers in Bangalore to learn about the industry and the problems that plagued it, especially in the rural supply chain. The Bangalore dairy producer explained how much milk spoiled before it reached the dairy because of improper refrigeration, and that traditional approaches to cooling didn’t work. The villages were too small to install commercial-grade milk chillers, and, even if they could, the power supply was so unpredictable that the chillers couldn’t operate reliably. After the visit, White and Grama agreed that India’s $10 billion milk market offered a great business opportunity and returned to MIT to iterate upon their idea.15
Back in Cambridge, White and Grama tested a number of different tweaks to the technology to best convert solar energy into a reliable system to keep milk chilled. In 2008, the team tried to utilize the Peltier effect, where electrical current passes through a special substance and creates heat and cold, but couldn’t make the system cold enough to keep the milk from spoiling.16 In 2009, the team explored the possibility of delivering ice to the villages and using a solar pump and advanced insulation to chill the milk, but the logistics of delivering ice quickly became untenable. In 2010, after two years of promising ideas and unsuccessful attempts, the team got a big break: The largest private dairy in India, seeing the potential of this technology, placed an order for a prototype of its latest solar-powered milk chiller.
The team was ecstatic and spent the rest of the year perfecting the design. In February 2011, White and Grama traveled to the village of Karumapuram, in the Indian state of Tamil Nadu, to install the solar-powered chiller. As they were finishing the installation, R. G. Chandramogan, founder and chairman of the company that owned the dairy, entered the room, inspected the machine, and told the team that the system, as designed, would not meet his needs. The contraption was far too large for the sheds that would house the system, and it was twice as expensive as the dairy could afford for large-scale implementation.
But Chandramogan left the team with a sliver of hope. He encouraged the team not to give up and to continue exploring ways to reduce cost and increase capacity. If White and Grama could alter their design, Chandramogan and other dairy owners like him might again be interested.
After the meeting with Chandramogan, White and Grama sat on a curb until the wee hours of the morning pondering their next move.17 They were devastated. They had spent years developing their invention only to be rejected before they had installed the first unit. Now, with only three months’ worth of cash reserves remaining, they faced nothing but hard decisions in front of them.
White and Grama spent the next few weeks exploring an idea that some of their colleagues had been pondering: If utilizing solar power made the system prohibitively large and expensive, could the team just use India’s electrical grid instead? While working in the country, they saw that rural India did have electrical power; it just wasn’t very reliable. And as the team spoke with potential customers and investors, it slowly realized that an electric-powered, rather than solar-powered, option would make the most sense if it could solve the challenge of how to keep the milk cold with no solar power to back up the unreliable grid.
The cofounders struggled with the shift. The new idea was far from their original concept of generating electricity from the heat of the sun’s flames. This vision was at the core of the company, and even inspired its name. After all, Prometheus was the Greek Titan who dared to steal fire from the gods, not to chill their milk.
And, as a social enterprise, the team struggled with questions about clean energy. Promethean Power Systems’ original solar design was engineered to be a green solution that didn’t consume any carbon-based energy. Now that it was considering connecting the machines to India’s electrical grid, it could expect nearly 60 percent of the power to be generated by coal.18 “We were this close from just giving up. We just didn’t think it was worth the effort if it wasn’t going to be solar,” explained White.19 Grama added, “I had to ask myself: Am I going to be as passionate about this business if it is not about renewable energy?”20
Ultimately, they decided that solving the milk spoilage problem was their priority—and that meant figuring out how to handle the unreliable power grid.
The solution, as it turned out, was already embedded in the earlier iterations of the product.
The solution, as it turned out, was already embedded in the earlier iterations of their product. Solar power itself can be unreliable at times, since it’s only available during the day and can be extremely spotty during monsoon season. So any solution would require some way to store energy. By necessity, the team had already designed this type of storage system for its solar-powered milk-chilling system. Grama and White didn’t think much about it. It was just a necessary component of their earlier concept. But the same energy storage system required to back up the unreliable solar system might also be used to supplement grid power as well.
This was the final breakthrough that allowed them to see the answer to their problem: a thermal battery for backup during times when grid power is not available. In some ways, the team had been blinded by its dedication to renewable energy. Only when it dropped the solar element and took a more pragmatic approach was it able to see the answer to the larger problem.
The team quickly decided to modify the design and reengineer the system to work off the electrical grid using the thermal battery as a backup. Even if it wasn’t solar, the new product could have a huge impact on the livelihood of India’s dairy farmers.
But first White and Grama needed to get the company off the ground. To make the finances work, Promethean Power Systems cut its two US-based engineers (White and Grama helped both find new jobs) and refocused its engineering efforts on the new thermal battery idea. Fortunately, the team received a grant from the National Science Foundation to further research and improve on the new technology. Within six months, it had a new prototype and was ready to test it in the field. And with their first misread of the Indian market still fresh in their minds, White and Grama knew they needed more on-the-ground local help.
The first time that the Promethean team reached out to Villgro back in 2010, it didn’t go so well. PR “Guns” Ganapathy, the president of Villgro, explained, “Sam and Sorin came to us with a solar-powered milk chiller, and we told them that the idea wasn’t a good one. We simply didn’t think that dairy owners needed solar.”21 The prediction turned out to be true.
Villgro is an India-based nonprofit whose mission is to enable innovations to impact the poor through social enterprise. It works with early-stage businesses before they have a developed product, enterprises that are not yet earning revenue, and growing companies that are looking to achieve scale. To help these firms, Villgro provides experienced mentors, successful entrepreneurs that know the Indian market. And it provides access to Villgro’s robust network of local talent, suppliers, and investors. But perhaps most importantly, Villgro offers an invaluable understanding of the rural Indian market. Ganapathy explains, “Entrepreneurs wishing to serve the bottom of the pyramid in India need to be grounded in reality.”22
With White and Grama now officially grounded in reality from their early experiences, Promethean Power Systems was accepted into Villgro’s program, and Ganapathy became their mentor. Ganapathy helped White and Grama build an Indian team, interviewing potential candidates and vetting them by checking references through his network to help avoid bad hires and missteps. Villgro also helped Promethean evaluate and select Indian manufacturers, as well as work through thorny issues such as intellectual property rights and quality assurance, while conducting site visits to ensure that the manufacturer could deliver as promised. And Villgro provided the company with capital and connected the team to other investors to help finance its operations.
With Villgro’s help, continued technological and manufacturing improvements between 2010 and 2012 allowed the team to create a system that could chill twice as much milk and fit in a smaller space, all while cutting the cost in half to $9,000 per unit.23
In February 2012, White and Grama brought their newly improved system back to Chandramogan, the dairy owner who had rejected their earlier model. He gave them four months to prove their design could work in rural villages. It did, and nine months later, Chandramogan placed an order for 50 Promethean Power Systems milk chillers. Other dairy owners soon followed. To date, Promethean has installed almost 100 chillers across India (each serving about 20–30 farming families), helping to reduce milk spoilage, create a safer product for consumers, and empower dairy farmers to earn more income for their higher-quality milk.
White and Grama recognized that they needed to pivot away from their original ideas about solar power, and, in the process, they developed a new, cost-effective system that could keep goods cold even with unreliable power. Promethean is now looking to utilize this technology in other industries, including agriculture (to reduce food spoilage) and health care (to keep vaccines chilled). And with remarkable advances in solar power over the past few years, White and Grama are still exploring ways to incorporate solar energy in future versions of their product.
The story of Promethean Power Systems and the ecosystem of supports that The Lemelson Foundation helped develop offer a number of important lessons for philanthropic funders looking to support more innovative projects.
Understand that innovation can follow a long and winding path. Even with a talented team, promising technology, and support from organizations such as MIT, VentureWell, and Villgro, Promethean Power Systems took seven years from conception to its first major order. Because White and Grama were creating a new physical (as opposed to digital) product, they had to source materials, build prototypes, test them in the field, collect customer feedback, and refine the product. Each iteration meant new materials, technologies, and constructions—elements that take time to procure and put into place.
As a result, funding this type of innovation can be unpredictable and often takes an extremely long time, which is why it’s so important for the boards, senior leadership, and staff of innovation funders to have a clear understanding of, and tolerance for, these realities. Promethean’s seven-year path included a number of failed attempts and ultimately required the team to pivot dramatically from its original plan. It shifted from designing a low-cost system for generating solar power to an electric-powered milk chiller. A funder with a more narrow focus might have balked at such a pivot, and funders with fixed milestones, a lower tolerance for risk, or a shorter time horizon probably would have pulled the plug on Promethean’s work.
Support proof of concept. Many new social entrepreneurs don’t necessarily have the existing evidence and track record required to pass through the financial and due diligence processes of a traditional funder. So innovation funders often need to look for different types of “proof”: Does the company have a viable design? Are customers and users lined up? For White and Grama, funding from Villgro had a very clear objective—to build and install six early prototypes for customers. In this way, Villgro served as a sort of “proxy customer” that gave Promethean the initial capital it needed to move from drawings on paper to actually paying fabricators to design and build parts that could be tested. According to Grama, “Villgro didn’t treat it like a traditional funding exercise. They didn’t ask us to supply endless financial statements and due diligence documents. [It was] more like investing in an experiment or supporting proof of concept.”24
Give more than money. Throughout the evolution of Promethean Power Systems, its funders provided not only money but also a number of other key supports. Early in its life cycle, VentureWell connected the organization to critical mentorship, training, and coaching. Later, when Promethean Power Systems moved to India, it leveraged the in-country expertise of Villgro to build better prototypes, hire the right team, and share the new product with potential customers.
Funders generally agree that this kind of support is essential. But few philanthropic organizations have the capability in-house to offer these services, which can be extremely expensive and time-consuming to provide. Instead, funders have begun to explore relationships with dedicated labs, incubators, and accelerators that are better equipped and positioned to provide all of the nonfinancial assistance that grantees require. Working with VentureWell and Villgro has allowed The Lemelson Foundation to build organizations that are able to provide the necessary technical expertise to support emerging inventors and entrepreneurs as well as their own path to sustainability.
Consider the innovation ecosystem. Knowing the best way to support innovation isn’t always easy. The Lemelson Foundation, for example, focused more heavily on direct funding of individual, early-stage innovations but adjusted its strategy over time. Dahl notes, “We saw that it requires very deep pockets and is a much more staff-intensive approach to help bring a new invention to scale, and, over time, we realized that wasn’t the best role for us. We realized we could have greater impact by building enduring organizations that would make these capacities available for a broader range of companies over time.”25
Instead, The Lemelson Foundation now focuses on deliberately building a network that could provide the different types of help that new innovations need over time. At various points, Promethean Power Systems required assistance in testing new technologies, understanding the local marketplace, connecting with leaders in the Indian dairy industries, and contracting with local manufacturers. Recognizing that these sorts of gaps weren’t being filled, the foundation intentionally chose to support organizations like VentureWell and Villgro in order to build the supportive infrastructure that is critical to the success of a wide array of social entrepreneurs.
This “ecosystem” approach won’t be right for all funders, as many will still want to support individual organizations and innovations. To borrow an analogy from botany: Some funders will focus on growing individual “plants,” while others will invest in building the “greenhouse” that can help many plants thrive. But regardless of which approach a funder primarily uses, it is important to realize that innovation doesn’t happen in a vacuum. By paying special attention to the ecosystem of support that new ideas need to grow, funders can help a whole range of innovations like Promethean Power Systems reach their full potential.