4/19/2010

HAAS SCHOOL
OF

BUSINESS

BLUEDROP SAVING LIVES THROUGH SAFE DRINKING WATER

P2, Block B Lake Town Calcutta 700 089 India Tel: +91 98305 82422

Berkeley Business Plan Competition 2010

Executive Summary BlueDrop is a for-profit organization that has developed the ApurvaJal (meaning wonderful water in Hindi) low-cost water chlorination system. Our product, the ApurvaJal system, has been designed to provide safe drinking water to people who live on less than $2 per day. The global market for safe water services is estimated to be $20.1 billion. To leverage our strong partnerships and the opportunity from limited local competition, we have chosen the state of West Bengal in eastern India for market entry. We estimate there are 6.5 million households in West Bengal (or 35 million people) with a potential annual income of $239 million (at 0.5 cent per liter). We will assist microentrepreneurs in setting up water kiosks as micro-franchises that purify water with the ApurvaJal system. We plan to first test the ApurvaJal system and franchise model during our pilot projects that we will conduct through partnerships with NGOs and governmental agencies. These partners will serve as our liaisons and also help us in identifying appropriate communities. Our Year 5 revenue is estimated at $3.24 million, and we will have saved over 17,000 lives by providing safe water for 3.47 million people. Current Status: The venture is in an early stage and we are currently starting a pilot project, refining the product design, building and solidifying partnerships with NGOs, securing the patent rights, and seeking incorporation in the US. The Market Opportunity The Challenge: One-sixth of the worlds population (approximately 1.1 billion people) does not have access to safe drinking water. Diarrheal diseases - primarily caused by dirty water - result in 2 million deaths each year, 90% of which are children.1 Improving water safety could reduce these deaths by 21%.2 Chlorine is one of the most effective methods of treating biologically-contaminated water because it continues to disinfect after the initial treatment. The residual effectiveness of chlorine is critical since 40% of water collected from improved sources is recontaminated after collection during transport, storage, or use.3 Chlorination programs have met difficulties, including: (i) breaks in the chlorine supply chains that reduce availability, (ii) user errors in dosing leading to under-chlorinated water not fully disinfected, or over-chlorinated water that is sufficiently unpalatable to discourage continued use of chlorine, and (iii) the cost of chlorine which can deter regular use or lead to dilution by users. The BlueDrop Solution BlueDrop addresses these problems with the ApurvaJal system, which includes a chlorine producer and a chlorine doser. The chlorine producer and doser may be used together or
WHO, 2004. Facts and Figures: Water, Sanitation and Hygiene Links to Health. World Health Organization. WHO, 2000. Global water supply and sanitation assessment 2000 report. WHO and UNICEF Joint Monitoring Programme for Water Supply and Sanitation 3 Gundry, S.W., e t.al. (2006) Contamination of drinking water b etween source and point-of-use i n rural households of South Africa and Zimbabwe: implications for monitoring the Millennium Development Goal for water. Water Practice and Technology, 1, (2).
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separately from one another. The micro-franchise starter kit also includes training and marketing materials, as well as a filter for areas where the water supply contains suspended solids. 1) ApurvaJal Producer: This device creates chlorine by the electrolysis of regular salt and water. One unique aspect of the ApurvaJal producer is that the required electricity is generated via human-power (e.g., pedaling to power a dynamo). Other commerciallyavailable chlorine producers are not suitable for rural areas as they are expensive, require solar panels or grid electricity, and depend on spare parts only available in industrialized countries. The ApurvaJal producer has been designed specifically for off-grid villages. Rather than maximizing technical efficiency, we focus on maximizing affordability, accessibility, and robustness. 2) ApurvaJal Doser: The ApurvaJal doser uses principles of pressure and gravity (no electricity needed) to automatically dispense the correct amount of chlorine into any volume of water to optimize disinfection and drinkability. Other chlorine dosers dispense the same amount of chlorine every time, assuming that communities will use containers of a single size. Since our target users commonly have water containers of varying sizes and studies have shown that human error leads to under-chlorination or over-chlorination, our ApurvaJal Doser addresses the chlorine-dosing problem much more effectively than competitors. Competitive Analysis WaterHealth Wind International Waterpot BlueDrop Energy requirement Solar (expensive) Horse Solar (expensive) Human powered Human powered Protects against Automatic doser? recontamination? NO N/A YES (chlorine) NO YES (chlorine) YES (chlorine) NO YES

Our ApurvaJal System is the only current solution that has a low capital cost, protects against recontamination, and automatically doses water containers of varying sizes. The ApurvaJal system also uses unique novel mechanisms for passively controlling chlorine production and dosing, making it more reliable and easier to use and maintain than competing technologies. Implementation Plan and Business Model BlueDrop has partnered with the Indian NGO Aqua Welfare Society (AWS) to pilot test our business model and technological robustness in a rural area near Kolkata. AWS has already constructed modern dugwells in several villages, and has offered to help us with our pilots in Year 1. The first phase of our pilot will be more technical, where we will test variations of our design and assessing the effectiveness of the technology, and finalizing the product so that it is easy to use and meets the needs of the community. The second phase will be a business pilot where the aim will be to structure a micro-franchise model

in accordance with the end-users willingness to pay, education requirements, and relationships with local partners. By selling our ApurvaJal system (producer, doser, and filter) to a micro-entrepreneur, BlueDrop will enter into a revenue sharing contract. The cost of the ApurvaJal system is $55, and it will be sold for $100. Additional materials include technical and business training materials to provide the franchisee with basic business skills and the ability to leverage BlueDrops brand name as it continues to grow. BlueDrop will receive 10% of revenues. As part of the revenue sharing agreement, we will replace the systems every 3 years at no additional cost to accommodate for wear and tear. We will also regularly monitor water quality in areas of operation to make sure the systems are properly calibrated and working as effectively as possible. Financial and Social Impact Summary We estimate our total funding needs to be $375,000 over the first five years. The summary of the investments, expected operating cash flow and number of end users reached is presented below: Year 1 Year 2 Year 3 Year 4 Operating Cash Flow ($) -164,517 -9,317 390,214 784,842 Cash Flow from Investing ($) -50,000 -100,000 0 -200,000 Cash Flow from Financing ($) 225,000 150,000 0 0 Total Cash Flow 10,483 40,683 390,214 584,842 Number of end users reached (cumulative) 12,500 600,000 1,392,000 2,202,000 The initial investment will be used for manufacturing, initial inventory, legal and R&D costs while investments thereafter will primarily be used to scale up production capacity. We plan to operate profitably beginning in Year 3 and to recover up-front investment by Year 4. As our business unfolds through Year 5, we will reach just over three million end users. Social Impact: A microentrepreneur will generate an additional income stream of an estimated $1,209 per year. BlueDrop helps arrange for a microloan of $100 from a microfinance instruction. A micro-entrepreneur will earn enough to recover the cost of the ApurvaJal system after l month of operating at full capacity and will continue to generate profits afterwards. Funding Request: We need a total of $375,000 over the next fifteen months to i) get the pilot projects started, and ii) starting sales in Year 2. Out of this money $225,000 will be used to cover i) finalizing the doser design, ii) Legal costs, iii) getting 50 dosers manufactured to be used in the pilot projects, iv) salaries and travel expenses, v) developing training materials during the pilot. The remaining $150,000 will be used to i) manufacture and distribute systems to our first 35 communities, ii) Starting sales and operations which includes building the sales team. After this point, we aim to scale up, and be a sustainable business. We have secured $20,000 from National Collegiate Inventors and Innovators Alliance (NCIIA) and will use the money for designing the doser. The prize money from the Global Social Venture Competition would go towards Year 5 1,500,218 -100,000 0 1,400,218 3,467,500

getting the final design manufactured. The remaining requirement will be raised through foundations and angel investors. The discounted cash flow valuation of the company is $8.24 million. Our value proposition to the initial investor would thus be to invest $375,000 which is expected to be worth 40% (company share) * $8.25 million = $ 3.3 million a return of nearly nine times. Management Team, Board of Advisors, and Partners Every member of the BlueDrop team is passionate about benefiting underserved communities. Our team spans a diverse breadth of disciplines (Engineering, Product Design, Business, and Public Policy), institutional affiliations (UC Berkeley, MIT, Cambridge, Brunel, and Masdar), culture, and ethnicities. All of our members are leveraging their local resources (faculty expertise, partnerships with NGOs, access to target community) to move the project forward. The team is advised by an interdisciplinary panel of faculty and industry leaders with extensive experience in technology design and refinement, as well as development work and social enterprise in Asia, Africa and Latin America. The inventor, Suprio Das, is a social entrepreneur working in India who serves as BlueDrops CEO.