Five Takeaways from Our Conversation with ecofiltro CEO Philip Wilson
Philip has some advice for social entrepreneurs: tell everyone you know.
If you’ve spent some time in Mexico or Central America, there’s a good chance you’ve come across an ecofiltro. The clay and colloidal silver water filtration units are popular among urban consumers looking to reduce plastic water bottle consumption, and rural populations that lack potable water access and struggle with water-borne illnesses.
Water sanitation and disease, at a glance: Overall, 93% of Guatemalans have access to improved water, which includes sources like public taps and protected wells. But in rural areas, that number dips down to 87%, with access to improved sanitation sitting even lower, at 63%. This plays a large role in the approximately 74 deaths per 1,000 children under the age of five that occur each year due to diarrhoeal disease.
Ecofiltro started over 20 years ago as a not-for-profit foundation called Familias de las Americas, where it delivered water filters to around 2,000 rural Guatemalan families each year. But according to the Guatemalan government, approximately one million rural Guatemalans lacked access to clean drinking water. So for Philip Wilson, ecofiltro’s current CEO and former Familias executive, 2,000 filters wasn’t going to cut it.
In 2009, Philip transitioned Familias from it’s donor dependent business model to ecofiltro’s current market-based strategy. The goal: to provide one million rural Guatemalan families with clean drinking water.
“When we started ecofiltro, we said, ‘let’s solve the whole problem. Not 5%, or 3%, or 7% - let’s go after the whole problem,’” Philip proudly notes.
Philip’s desire to provide safe drinking water to rural Guatemalans is only rivaled by his bold, entrepreneurial streak - what has thus far been a successful combination for ecofiltro’s bottom line and Guatemala’s drinking water problem.
To date, ecofiltro has reached 280,000 rural Guatemalan families, and in 2018 doubled filter production from its Antigua facility. The company recently secured a $225,000, seven-year loan from Beneficial Returns - a loan whose final installment will be forgiven if ecofiltro reaches its target of one million rural Guatemalan families.
Through it’s hybrid urban-rural sales model, ecofiltro is also providing clean drinking water to 170,000 homes in Guatemala’s urban centers - a figure that’s helped it expand to other countries across Latin America. Ceramic-encased filters are sold at a higher price point in urban areas to support the delivery of lower-cost plastic units in rural communities.
We had a virtual sit-down with Philip to discuss clean water, investment, and advice for aspiring social entrepreneurs. Here are our five top takeaways:
The Value Proposition Case
Teaching rural populations in developing countries about investment is difficult. In many communities that lack access to clean drinking water, you might still come across a big-screen TV and satellite dish. So, as an entrepreneur, how do you help people prioritize spending while maintaining your own financial sustainability?
In rural communities, Philip says to focus on your value proposition: the product must pay for itself within three months.
I mean it all comes down to unit economics, right? You have to reach these people in a way that’s not going to put you out of business. And to do that, let’s say at the rural area, you have to develop a value proposition. In our case it was, ‘OK they’re spending, let’s say $11 a month on firewood to boil water - OK how can we price it at $30 so that the payback is three months or less?’ And we found that in rural areas, if the payback is really quick, you’re gonna have customers - you’re gonna have thousands - you’re gonna have millions of customers. Because, you know, you’ve communicated the value proposition in such a way that they understand it, and then you have a product or service that’s attractive, and that they will purchase in order to solve that problem. So it’s a totally different approach then going there in a paternalistic fashion and saying, ‘hey you have a water problem, here’s your filter. You’re not too smart - you’re not smart enough to solve your own problem, so here (you go).’ And when you’re giving things away, there’s no way to, a lot of times these organizations, like NGOs and foundations, they don’t measure the outcomes, whereas if you’re transactional based like ecofiltro or a social enterprise, you know if people aren’t paying for the filter, it means you’ve got a product problem or a service problem or the value proposition is no longer great.
2. How to Get Consumers Excited About Your Product
OK, so maybe this is a bit of a no-brainer, but how do you get people excited about your product?
Apart from being a cut above the rest, you have to emphasize savings, according to Philip. The reason your grandmother cut coupons out of the Sears catalog is the same reason the rural poor decide to buy filters.
What works best is the savings. The savings seems to be what the rural poor really get excited about. Obviously, the health is awesome - but say, ‘hey this is what you’re spending right now on boiling water, and boy you could have all this extra money if you had a water filter and you didn’t have to collect all that firewood, or buy that firewood, etc.’ So yeah, I think savings is really, really important. And that’s what we see in urban areas as well. Number one characteristic of why people buy an ecofiltro or are happy with an ecofiltro is they save so much money on bottled water in urban areas and firewood in rural.
3. If You’re Not Profitable, You Can’t Help Anyone
This past summer, ecofiltro launched it’s “color” product line - a dressed-up version of the plain, five gallon buckets it was previously selling in rural communities. It was a response to what Philip observed in homes across Latin America - if people have sleek electronic devices in their homes, don’t they want the same from their water filter?
And so, Philip refers to the “color” line as ecofiltro’s aspirational product.
No one’s made more mistakes than I have in rural areas, in urban areas. I mean, every business has its kind of formula for success. And in rural areas, we really took a long time to build aspirational into the product mix. We always had this 20 liter paint bucket with a filter in it that’s not attractive, and I was always focused on cost, cost, cost. And I’m seeing these flat panel TVs, cell phones, cable services, and then I’m continuing with that really dull, ugly-looking filter…(now) we have a real aspirational product and the demand is much greater.
Along the same lines, Philip defends the importance of transactional relationships in creating change - If you’re not profitable, you can’t help anyone. So what does a transactional relationship mean to him?
Well I think first, dignity. Because when someone pays you for a product or service, they feel good about solving their own problem. When it’s a client relationship as opposed to a beneficiary of a donation, you’re protecting the dignity of the person, and they appreciate the fact that they’re being able to solve their own problem. So number one is dignity, and I would say number two is you know, you need the transaction or you’re not going to be able to help anyone.If you’re not profitable, you can’t help anyone. And it’s hard to serve two Gods - if you’re having to fundraise all the time, you can’t really develop an effective sales strategy in rural areas of third world countries, developing countries. So you have to be really good at understanding the end consumer because you have to receive money from that person, and you have to be really good at providing that product or service and they have to be happy with it, or you’re going to find out pretty soon. So dignity, and it makes you sustainable having that transactional relationship with rural families.
4. How and When Should I Take on Debt?
This is a question probably every entrepreneur - not just social - has asked him or herself: when should I take on debt, and how much?
The truth is, the answer will vary between entrepreneurs, products, and services. But for Philip, the bottom line is: you need validation. It’s not a particularly surprising response, but one that is often overlooked by aspiring entrepreneurs. Of course, you think your product or service is valuable - but do others?
According to Philip, your best early stage investors are friends and family. Before you think about raising capital or taking on investment, think about how those within your circle can validate your product or service. Ask them to provide feedback. And use this as a litmus test for seeking future investment.
I think in the beginning you have to do it with equity because you don’t have the revenue to support a big loan. So, in the beginning you try to find investors that have a long time horizon that really want to help you solve a problem and scale. And then as your model is working and you have financial sustainability, then you can take on loans and be able to pay them.
And then you start proving the model and, there’s a lot of people out there that want to support social enterprises - obviously they want their money but - but they’ll give you a loan if you have a history of scaling and transacting with the poor in a way that’s profitable…at the beginning I think it’s kind of family and friends as you’re validating because at the beginning the entrepreneur doesn’t even know if it’s going to work, right? So you bring in family and friends, and a lot of your time. It’s hard to attract any institutional money or bank loans if you don’t have a product or service that’s been validated by the market. Does that make sense? It’s all about validation, right? And the validation as a social enterprise has to be financial sustainability and impact, right? The impact investors out there don’t only want to see that they’re going to get their money back but, ‘OK, what kind of outcome are you creating and is it measurable?’ And I think that if you can prove that you’re creating an impact and you can measure it, there’s a lot of funds out there that are trying to find those social entrepreneurs.
5. Tell Everyone You Know
Moses shouted it from a mountaintop, and so should you. According to Philip, entrepreneurs tend to hold their cards close to the vest. Whether it’s because they’re afraid someone might scoop up their idea, or they’re searching for the courage to put their product or service out in the world, it’s a strategy that pays little dividends. If you want to know whether you have a good business, or just a good idea, there’s only one way to find out.
I don’t believe in - sometimes you have entrepreneurs that have this great idea and they’re like, ‘I can’t tell anyone or someone is going to steal the idea.’ Tell everyone, OK? If you really have a great idea, tell everyone. And that’s your kind of first filter in validating the product or service, right?
And then you’re going to have to bootstrap, and you’re going to have to test your product or your service with the target population - hopefully it will be, let’s say a rural family in Guatemala, or Nicaragua, or Kenya, or Sudan. So get some validation, and then with that validation then you can talk to people and start raising a little more money if you need that money to start expanding. But really start telling everyone about what you’re trying to do - just, before you spend a lot of money and time, see if it’s actually a good business or just a good idea.
Bonus: The Importance of Sharing Successes and Failures
We’re all afraid to fail. This isn’t limited to entrepreneurial endeavors - we’re afraid of falling short in our relationships, our diets, our sleeping routines, and in the court of public opinion. But the only way that we learn, both individually and collectively, is to fail, and share our failures with others.
I think it’s important for all social entrepreneurs to share what their doing with everyone. And I think the more we share, probably, the more we’re going to help guide future social entrepreneurs not to make the same mistakes we made. And so I’m always here for sharing - I think it’s important that we really share with this community all the pros and cons, and all the successes and failures, and hopefully shorten their time of validating their product or service before they start scaling impact.
The more social entrepreneurs learn from one another, the greater the chances of affecting change in the world.