Monday, April 18, 2011

When Users = Funders

If there’s a bug in EpiSurveyor, our paying users will email us until it’s fixed, sometimes several times.  Or more. 
A few months ago, I met Joel Selanikio, founder of DataDyne, a non-profit "social business" that creates mobile data and communication tools, primarily for public health.  Joel is a practicing pediatrician and former CDC epidemiologist who has seen the power of good data in improving health and saving lives.  Yet poor data collection leaves huge gaps in health care, especially in developing countries.  Instead of just accepting these gaps as a fact of life, Joel did what entrepreneurs do: he set out to do something about it.  

Like many social entrepreneurs, Joel has had his challenges with funding from fickle foundations.  Though DataDyne's basic product is free to promote wide dissemination, Joel was forced to introduce fees for higher-end tools to help cover costs.  Datadyne has generated some revenue from these premium tools, but maybe even more important has been the customer feedback the company is now getting.

I asked Joel to describe the unexpected outcome of his fees, and here is what he told me:

From Joel Selanikio, CEO of DataDyne
At DataDyne, we create software to support public health and international development. Our mobile data collection product, EpiSurveyor, is the most widely used such software in international development, with users in more than 170 countries. 
 Making them pay  
We got this far with funding from great organizations like the United Nations Foundation and the Vodafone Foundation, but at a certain point we realized that we needed to diversity our funding in order to make sure we were truly sustainable (it can be pretty precarious depending on one or two grants to survive!). After much thought, about a year ago we decided to start using the “freemium” pay model, where you give away a basic version of the software and charge for a higher-end version. 
This approach is controversial in international development: many foundations only fund tech projects if the software is given away for free – even though the mobile phone, the most successful technology of all time in poor countries, is itself sold to the poorest people on earth, not given away. And even though many organizations using our technology have millions of dollars in funding. 
Our results are promising:  within 2-3 years our sales revenue will be enough to sustain us completely. After that, we’ll be able to provide excellent and affordable mobile data collection software to every single organization in the world that wants it (EpiSurveyor is a web application, so it scales really well). Without more grants. 
Who’s the boss?  
Revenue and sustainability turn out to be only part of the benefits of the charge-the-user model: since we started charging some of our users, our user feedback has increased tremendously. It turns out that if someone is paying for something, they feel they have the right to criticize (and we agree). 
If there’s a bug in EpiSurveyor, our paying users will email us until it’s fixed, sometimes several times.  Or more. 
If there’s a feature they want, we hear about that, too. And because we get more and more of our revenue from users, rather than foundations, our very survival as an organization is now dependent on responding to the needs of those users. As they say in business: “if you don’t please the customer, someone else will.” 
The bad proxy  
This is all very different from being supported by grants, because when your money comes from a foundation your survival depends on pleasing the foundation – not necessarily the users.  And people at foundations, who are as motivated and well meaning as I like to think I am, are nonetheless a poor proxy for what health workers on the ground in sub-Saharan Africa want or need (for example).   The organizations that are now our customers, and that use EpiSurveyor to collect their critical data, are likely to be a better proxy because they’re our users and funders, not just our funders.  Not a perfect proxy, but better: they use the software themselves, and they know when it needs improvement. 
The educated-consumer model  
As our funding model changes, and we take our marching orders directly from users, it’s made me think about how the source of funding can affect the quality of a development project.  Foundation grants surely have a role to play: we never would have gotten to the revenue-from-users stage without seed grant money. Long-term, though, I believe it is better for sustainability and quality if at least a subset of the users pay for the services provided. 
After all, that is exactly what the mobile phone companies are doing – in what may be the most important new technological rollout since the invention of the printing press – and the competition for customers’ money is forcing tremendous innovation and price reductions. Maybe we could use some of that in international development, too.