Sailing startups to market: Q&A with Unreasonable Institute’s Daniel Epstein

Taking your company global is no small thing. For startups that want to conquer the international market, finding the best way to do that can be hard.

Eleven passionate tech entrepreneurs with great companies innovating in various areas decided to spend 100 days aboard a ship sailing around the world in order to do that… all made possible by Unreasonable at Sea.

The initiative, pioneered by Daniel Epstein, founder of entrepreneur accelerator programme Unreasonable Institute, is going to global markets in more ways than one.

Epstein, named of one Forbes’ Top 30 Impact Entrepreneurs, is a serial entrepreneur with a passion for startups and entrepreneurship. According Epstein this passion lead to the founding of the Unreasonable Institute.

“Our push is to create a collective family of companies that will, together, put the greatest challenges of our time where they belong — in a museum,” says Epstein.

Possibly the zaniest idea ever conceived, Epstein is on a mission to change the world with some like-minded tech entrepreneurs hoping to solve some of the world’s biggest problems. During the ship’s recent pit stop in Cape Town, we got to chat to the man behind this unreasonable journey about the concept of the venture, open source and the state of entrepreneurship in emerging markets.

Ventureburn: This is such an epic undertaking. One hundred days, more than 900 people onboard. Why do this?

Daniel Epstein: There are 11 technology companies, three learning partners (so SAP, Xbox and Girl Effect). Then we have 630 students from the Semester at Sea and about a 150 from the faculty of staff from the University. So its about a thousand people in total.

So why are we doing this? Well, at the end of the day empathy builds empires. If you are going to think about launching or scaling up technology companies you want to go international. You have to go international. There is no other “go to market” strategy other than actually going to market. And so for us we started to realise that we’re really an experimental transnational entrepreneurship programme. We are taking these solutions that are effective in one market and scaling them into new markets, and we had to go to those markets.

So there are two ways to do that. One is you can jump on aeroplane and fly around the world. That to me wasn’t interesting because it lost the kind of core community of the program’s element, and that’s part of the Unreasonable Institute.

The second one is getting on a ship and sailing around the world which sounded impossible. So I disregarded this whole idea of going to all these different ports with all these different companies, but then, we struck up a partnership with Semester at Sea, who already sails around the world with about 600 university students, and I think at the end of the day, any thriving innovation or startup ecosystem its almost always matched with an academic institution. And so for us it was such a natural fit. They let us have 50 rooms on the ship, kind of commandeer the ship and sail around the world with them. It was an opportunity I couldn’t really say no to, but it all comes down to empathy. Which is if you’re trying to go international, you have to go international.

VB: When you were picking the startups, what were some of the core things that drove you to decide? Almost a thousand companies applied from 100 countries, and you had to narrow that down to 11 companies?

DE: 10 but then we picked 11.

VB: Wow, how the hell do you do that?

DE: There are five things I really look for in a company and couple in terms of the teams. So with the companies, the first thing is impact first. All entrepreneurs solve problem sets — we want to work with the companies and entrepreneurs who are solving the hardest problem sets. The seemingly attractable social environmental [problem] — so using nano technology and bio technologies that are 100 times cheaper than what is currently in the market. Going to developing worlds whatever it might be — so impact first.

Secondly, they have to be poised to have globally relevant technology. This entire experience would be worthless if you are designing something that is locally intrinsic and couldn’t really move internationally. Which brings us to the third one where they are at this stage — a readiness to go global. Right now, eight of the 11 companies are profitable and they have hit a couple of markets already, and now they really want to scale internationally, rapidly. So its a much later stage accelerator and now we are trying to help them accelerate into new global markets, instead of just come up with the idea.

Fourthly, world class teams. The fifth was world class teams! That was so important it comes up twice. Because all of these companies have operational teams on the ground, some in multiple countries and they have their senior leadership, they have their CEOs on the ship with us for 100 days as we sail around the world. It doesn’t matter how good the internet is, that is a challenge for any team. Your team has to be incredibly trusting to the point where the CEO and the CTO can be on the ship be totally detached to the ground operations but trust that their teams can really make sure that company still thrives locally. So that’s most important.

VB: Do you feel that the pace of innovation is moving towards emerging markets and that more innovative technology is coming out of there than from developed markets?

DE: Yes. It’s not even a question. I don’t know many people who would argue otherwise. Entrepreneurs gravitate towards where the problem sets and opportunities are grandest and I think there is a lot of that in emerging markets because they are moving so quickly.

So there is a lot of opportunity to come in and solve problems. I think that the second side to that is that there is an opportunity to do quite a bit of leap frogging, because its very obvious. You don’t need to build telephone wires and old communication systems that all of these industrial nations had to do. Here you have the opportunity to jump straight into mobile which is the most common example. But I think it’s all incredibly exciting.

I think that there is also a renaissance and new way of thinking for startups, which is that they want to solve harder problems. The smartest people in the world want to solve the biggest challenges, I think a lot of those challenges right now lie in emerging markets, which is why we will see such a gravitas of innovation in the markets. It’s because where other people see problems entrepreneurs see these huge opportunities to solve the problems.

So yes, I think there is a lot of innovation that is happening here that goes back. One of the companies onboard — EvoTech — have this device, now an end of stock device that costs 5% of what it would cost the traditional devices back in the US. And they developed it for emerging markets. Can they bring this back to the US? If it’s 5% of the cost, it works, it’s mobile and doesn’t use nearly as much energy, of course! So I think we are seeing a lot of reverse innovation already, that’s only going to move up and up.

VB: Do you think there is a real gap in a world where everyone seems to want to build something that will scale quickly because it is a clone of something else, where there isn’t enough momentum to move problem solving technology like nano tech, green energy and reusable energy?

DE: I think these entrepreneurs are on the edge of the edge, which is why it is so exciting to me. But they are on the edge and it’s bleeding into the future. So I think we are going to see way more people start to say ‘I don’t just want to create a company to flip it quickly and generate a couple of million dollars and make it on the cover of this magazine. I want to instead create a company that can bend history’. Who is that not exciting to?

I think the problem is, to date, the world has been pretty bifurcated and the for-profit sector has not really stepped into solving the hardest problems. We have left it up to aid and NGOs and non-profitable charities, and what we are seeing in a lot of ways are not nearly as effective as market-based solutions are. As we start to see more and more entrepreneurs launch these for-profit tech companies trying to solve the hardest problems, I think it’s just going to get more and more and more to come.

I think we need to start telling their stories more, because nobody hears the stories. The media covers the cool social. It makes your life a little bit more convenient instead of the company that’s bringing access to clean drinking water and medical technology that costs next to nothing. That’s insanely exciting as a young entrepreneur and people just don’t hear those stories. I think that as people start seeing that entrepreneurs can make a profit and can make a dent on history by solving these problems, they will start doing it.

VB: From what you have seen so far, what do you think the entrepreneurial culture is like in emerging markets? Do think it’s something that is being taken up with as much bravado as it has been taken up in Silicon Valley?

DE: It was a different way, that’s for certain. I travelled on Semester at Sea as a student and we went to all these different countries mostly in emerging markets. What I saw is that in most of these markets, entrepreneurship was everywhere — by necessity. So it’s unfortunate in a lot of circumstances. But you know, whether it’s the person running the chai stall on the street corner or the hair salon or they are cooking a quick meal, whatever it might be, there are entrepreneurs everywhere in emerging markets.

What hasn’t happened nearly as much as places like in Silicon Valley is that the startup community had to aggregate around it and you start to see all that kind of important components of an ecosystem. It’s the investment community mentorship of those who have already made it there. It’s really encouraging a culture of taking risk. A lot of the countries we go into, the biggest stifling factor (at least that I am hearing from the startup community) is that the culture doesn’t embrace taking risks and doing things that are off the track.

When you go to the Valley it’s a very different experience, where everybody is supporting that type of thinking. I think that’s probably the biggest hindrance, but it seems like it’s changing aggressively.

VB: Do you think there is a growing trend among emerging market entrepreneurs to build more open source technology?

DE: It’s a huge trend. So Aquaphytex is a profitable company. They made US$4-million in revenue last year, they operate in five countries. The founder realised that he is only reaching 300 000 people out of 900-million who need it. The whole reason he started the company is to get clean drinking water to these communities. He realised that there is no way he was going to do it as one company and if he did do it as one company, he is too impatient to wait the next 50 years to do it.

So he decided to open source it. He came back to the community, and said I have to open source it. I don’t know how. This company still needs to exist because they have 15 employees, so they have to have the profit making mechanism. The guys with the EvoTech are doing the same thing. They are going to do open source portable power biotechnologies for emerging markets, and they didn’t come in thinking that, their business model has changed. Then there is Protei, which is clearly open hardware too. I was surprised that they took a complete business model shift to go open source. We haven’t really seen that happen too much in the past and its really wicked awesome to see. And I am excited to see where it goes. Those are big business models pivots, especially Aquaphytex, because it has shareholders, its profitable.

VB: And do you think you’re going to do this again?

DE: Yes, I hope so. This is too good an opportunity to be a once in a life time event.