cookclean investor 10 pager
TRANSCRIPT
8/2/2019 CookClean Investor 10 Pager
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D a n a B l e c h , J o h n C o o g a n , F r a n k M a r i n o , T h i b a u t M e n t h e , A l e x a T e s t e r m a n
InvestorProposal
CookClean
AnAlternativeSolutiontoEradicatingHazardousCook
StovesandPromotingGlobalHealth
February29
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2 INVESTORPROPOSAL
BusinessSummary
CookCleanIncorporated:
Ourmainofferingisaservice:rentalofcleaner,healthier,fasterandmoreefficientcook
stoves.PeoplelivinginruralvillagesandtownsinIndiadonotenjoyaccesstotheelectric
grid. Those who can afford cook stoves spend a significant portion of their income on
solutionsthatareexpensiveanddamagingtousers’health,suchasbiomass.Ourbusiness
model allows customers to rent technologically advance Envirofit stoves from local
entrepreneurs and pay for the stoves per night. Our target customers cannot afford the
costsinvolvedinswitchingfromkerosenetohigh-efficiencyEnvirofitstovesdirectly.They
can afford smalldailyorweekly amounts,and therefore needabusinessmodelthat fits
theirspendingpatterns.
TheCookCleanFoundation:
TocomplimenttheCookCleanforprofitsocialenterprise,wehavea501cnon-profitarm
that, in addition to accepting tax-deductible donations, also receives a percentage of
CookClean'sprofits.Ourfoundationtrainscommunityambassadorstospreadinformation
promoting global health awareness, specifically regarding the negative health effects of
hazardouscookingmethodsinlow-incomecommunities.Weaccomplishthisthroughthe
provisionofclearanddigestibleeducationalresourcesaswellasopportunitiesforthese
ambassadorstobecomemicroentrepreneurs.
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INVESTORPROPOSAL 3
MarketAnalysis
EnergyPovertyandHazardousCookingPractices
For nearly half the world, cooking over an open fire is an every day reality and
struggle. Aside from the devastating environmental effects of deforestation and toxic
emissions,thepoorbearthehighlydisproportionateburdenofdiseaseanddeathdueto
respiratoryfailure,tuberculosis,lowbirthweightfornewborns,andsevereburns.These
problems also disproportionately effect women and children, as they primarily cook,
collectbiomassusedasfuel,andinhalesmokeandtoxicemissionsinthehousehold1.Ina
study conducted by the World Health Organization (WHO), fuel stoves can be held
accountablefor800,000to2.4millionprematuredeathsannually.Astaggering6.3%of
newbornsdiebeforetheageoffivewithindoorairpollutioncitedasthenumberonefactor,
afactorthatispreventablemerelywiththeuseofacleancookingstove.
RegionofFocus:India
InIndiaalone,120millionhouseholdscooktheirmealseverydaybyburningbiomassfuel
such as kerosene, wood, animal manure, or agricultural waste. TheWHO estimate that
indoorairpollutionkillsoverhalfamillionpeopleinIndiaeachyear,with56%ofthese
deathoccurringinchildrenunder5.Basedonthesestatistics,wecanconcludethatIndia
alone accounts for around or greater than half of all premature death annually due to
indoor pollution and fuel cook stoves. For this reason, thefirst market that CookClean
intendstotargetistheruralpoorinIndialivingonlessthan$5perday.
1Source:www.inforse.dk/asia
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4 INVESTORPROPOSAL
TargetedIndianStates:
WithinIndia,weplanontargetingUttaranchal,MadhyaPradeshandUttarPradeshbecause
thesestatessufferfromextremecasesofbothlowincomeandinadequateaccesstoenergy.
Thesethreestateshaveacombinedpopulationofapproximately279millionpeopleandan
averageyearlyincomeof$500USDor$1.40perday.
Wealth(GDPperCapita) EnergyAccess(kWhperCapita)
CriticalRegions:Statesinboldsufferfrombothlowincomeandenergyaccess.
• Uttaranchal
• JammuandKashmir
• MadhyaPradesh
• Bihar
• UttarPradesh
• Uttaranchal
• Chhattisgarh
• MadhyaPradesh
• Assam
• UttarPradesh
Pleasevisit:http://jacoogan.com/indiaformoreinformation.
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INVESTORPROPOSAL 5
ProductOffering
Envirofit
LaunchedinIndia,May2008,EnvirofitInternationalmanufacturesandsellsclean-burning
cooking stoves. They have an excellent track-record of customer adoption and reached
60,000customersintheirfirstyearofoperation.Theirsolutionhasthepotentialtoreduce
CO2 emissions by over 400,000 tons and prevent over 85,000 kg of black carbon from
enteringtheatmosphere,allwhilegeneratingsavingsof$18million.Weplantopurchase
theirG-Seriesstove,whichisacheapanddurablemodelandrentittopoorfamiliesinthe
developingworld.
Thestoveweplantosell(seeattachedproductbrochure)ismadeoutofmetal,whichis
stronger and cheaper to produce than traditional ceramic stoves, and burns the same
materials (likewood) that peopleare already using. The difference is that the Envirofit
stovehasauniqueandinnovativecombustionchamberthatusesupto60%lessfuelthan
otherstovesandslashestoxicemissionsbyupto80%.
Envirofit'sG-Seriescanbepurchasedfor$25and,althoughit'sexpensiveformanyfamilies
who survive on $2 to $5 a day, CookClean’s rental servicemakes them accessible and
affordable. The stoves also offer households fuel cost savings and drastic reductions in
toxicindoorairpollution.
EnvirofithasbeenprovenintheIndianmarketandhashadsuccessfulcustomeradoption.
Theyarerapidlyexpandingtootherdevelopingnations(inAfricaspecifically)andwehope
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6 INVESTORPROPOSAL
tohelpthemachievescaleasquicklyaspossibletomaximizetotalsocialimpactandhelp
solvetheindoorcookingcrisisglobally.
CompetitiveAnalysis:
In addition to Envirofit, other organizations, such as First Energy and the Aprovecho
Research Center, have succeeded in creating cost effective, clean and convenient cook
stoves.Theseserve asbothvalidationofourassumptions that technologycan solvethis
problem and examples of potential suppliers as our rental service business scales. Our
businessmodelhasbeenvalidatedbyLumaLight,anMIT$100Kcompetitorthatprovides
rechargeablelightsinSierraLeonthroughasimilarrentalmodel.
TheCookCleanSocialEnterprise
Description&Design
CookClean is a for-profit social enterprise established with the mission of educating
impoverished communities about the advantages of investing into and adapting to
widespread use of cleaner stoves for cooking. CookClean aims to connect the poor to
cleanerstovesbypartneringwithEnvirofitandpromotingthecompany’senvironmental
andhealthfriendlystovetechnology.EnvirofitiscurrentlyworkingwithEco-Securitiesto
providecarbonfinanceinIndia.Oncecarbonfinanceisimplementedintheirmodel,itwill
offsetthecostofmanufacturingstovesandraisingawareness.Whilenewrevolutionary
technologieshavebeendevelopedandarefinanciallysustainable,theylacksolidstrategies
toadapttothepoorestareassustainablyinthelong-term.Communityengagementisthe
keytothismodel,whichothercleanenergyprogramsinIndiahaveemphasized.According
toINFORSEAsia,12villageslaunchedtheRuralEnergyandEcologicalVolunteersCorps
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INVESTORPROPOSAL 7
(REEVOC)thatplayed akey role inimplementingandmanagingrenewableenergy (RE)
programs in these communities. In their analysis, they state, “the last 4 ½ years of
experiencesinthe‘ecovillagedevelopmentproject’hasshownthatunlessacommunity
has ownership of a program and is involved at all levels from planning, implementing,
monitoringandevaluating,longtermsustainabilityisnotpossible.”CookCleanproposesa
similar model that mimics the REEVOC approach. A group of four volunteers will be
selectedfromeachvillage,twomenandtwowomenmakingatotalof48volunteergroups.
Thisgroupgoesthrougha training/educationseminarwhere theylearnhowtobecome
ambassadorsandmicroentrepreneurs.Theymeetatleastonceamonthtolearnaboutthe
necessity of eliminating indoor pollution and the economic, environmental, and health
benefitsthisaffordstheentirecommunity.Thegoalistotargetall-importantgroupsinthe
village,thereforevolunteersintheinitialambassadorgroupareresponsibleforpromoting
and organizing, in their villages, women’s groups and youth groups to motivate and
empower women to become involved in the transformation and betterment of the
communityasawhole.Thisisachievedbyworkingwithteachers,communityleadersand
elected officials who educate and explain the benefits and importance of clean cook
technologytothepeopletheyrepresent.
ImpactMeasurement
The impact of CookClean will bemeasured in several ways: the number of households
equipped,theamountofmoneysavedbyfamiliesusingthecleanerstove,andthefuture
positiveeffectsonhealth.ForourfirstinstallmentofCookCleanwewillchoosetodefine
impact as high frequency of use of the stove and recruitment of new stove micro
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8 INVESTORPROPOSAL
entrepreneurs. Tomeasure this impact, wewill have our micro entrepreneurs conduct
simpleinterviewswitheachoftheirclientswhentheycollecttheirpaymentsandrecord
theclient’susage.SimilartotheGrameenmodel,communityambassadors/entrepreneurs
will serve as the lenders. This does not simply imply selling stoves, but rather going
through trainingto effectively impact the communitiesand their ‘clients.’ Weekly visits
shouldensurethatanyquestionsareanswered,sanitaryconditionsareimproved,andthe
stoveisbeingadaptedintocomfortabledailylife.Microentrepreneurswillalsochronicle
theirclients likesand dislikesof the new stove, and howmuchoftheirmoneytheyare
spendingonfueltotracksavings.Recruitmentofnewstovemicroentrepreneurswillbea
key indicator of this program’s impact, as growing numbers of ambassadors increase
impact, access, and education to more neighborhoods and communities. It also
demonstratesindividuals’andcommunities’stakeinimprovingthehealthandconditions
oftheirowncommunity,andthisvalueontheproductandinvestmentintocleancookingis
essentialtotheCookCleanmodel.Ourfirstimpactgoalwillbeachievedwhenwehave
successfullytransitioned5%ofthehouseholdswithinourdesignatedregions(Uttaranchal,
Madhya PradeshandUttarPradesh)fromusingbiomasscookstoves toclean, safe,eco-
friendlycookstoveswhichshouldoccurwithinfiveyears.Ourultimategoalistoeradicate
theuseofhazardousstovesentirely.
FinancialModelQualitativeAnalysis
Our solution generates revenue by selling stoves using a microfinance model that
empowers micro entrepreneurs to create businesses renting stoves to end-users.
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INVESTORPROPOSAL 9
Individualspurchasestovesthroughusbypaying$25over30weeks,brokeninto$1per
week installments. We feel that 30 weeks is an appropriate time-span because the
purchaserwillownthestovefreeoffinancialobligationafterlessthan8months,whilethe
stovehasanaveragelifeof 5years.Naturally,oncewebegin selling thesestoves inour
targetmarket,wewilladjustfinancingschedulestomaximizeourimpactandoptimizeour
profit.Regardlessofhowlongweallowforrepayment,wewilleventuallyreceiveatotalof
$30on our initial $25 investment. This equates to a20%rate of return,whichwe feel
representsasafeandsustainablereasontopursuefundingfroma socialimpactinvesting
firm.
TheaddedbenefitofpurchasingaCookCleanstovecomesintheformofanopportunityto
become a micro entrepreneur. Because they are portable, stove owners can rent their
stoveswithintheirlocalcommunitywhentheydonotneedthem.Tobreakevenentirely,a
stoveownercouldrentthestove5timesaweekfor20centsperdayandcompletelyfund
theirobligations tous. Once the ownerhas become anentrepreneur and iscomfortable
renting their single stove, they can easily buy more from us under the same original
financing terms to scale their rental business. Additionally, we would happily share
revenuewithstoveownersshouldtheywanttoactasambassadorsinencouragingtheir
peerstopurchaseCleanCookstovesoftheirown.
QuantitativeProjections
Ofthenearly300millionpeoplewithinourtargetmarket(Uttaranchal,MadhyaPradesh
andUttarPradesh)wehopetogain5%marketshareoverthenext5years,meaningtotal
stovesalesof15millionunits.After5years,userswillbeforcedtoreplacetheirstovesand
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10 INVESTORPROPOSAL
hopefullywillreturntous.Thismeansthat,onceourbusinessismatureandstable,wewill
seeanaverageof3millionstovessoldperyear.Atatotalpriceof$30perstove,thesesales
willearnCookClean$90millioninrevenue.Eachstovecosts$25,meaningthatourannual
costofgoodssoldwillequal$75million.Thisleavesus$15milliondollarsinoperating
profitthatwillbeusedtofundfuturegrowththroughmarketing(sellingexpenses)aswell
as cover our general and administrative (G&A) costs. Assuming $5 million in selling
expensesandanother$5millionto run the company(G&A), CookCleanwillgenerate$5
millioninnetincomeperyear.
Naturally,scalingto3millionunitswillbenoeasy taskbutthe tablebelowsummarizes
whatwefeelarereasonablegrowthprojectionsoverthenext5years.
Year 2012 2013 2014 2015 2016
TargetMarket(Pop) 300,000,000 300,000,000 300,000,000 300,000,000 300,000,000
MarketShare 0.01% 0.05% 0.10% 0.25% 1.00%
Sales(Units) 30,000 150,000 300,000 750,000 3,000,000
Revenue $900,000 $4,500,000 $9,000,000 $22,500,000 $90,000,000
CostofGoodsSold ($750,000) ($3,750,000) ($7,500,000) ($18,750,000) ($75,000,000)OperatingIncome $150,000 $750,000 $1,500,000 $3,750,000 $15,000,000
SellingExpenses ($50,000) ($250,000) ($500,000) ($1,250,000) ($5,000,000)
G&AExpenses ($50,000) ($250,000) ($500,000) ($1,250,000) ($5,000,000)
NetIncome $50,000 $250,000 $500,000 $1,250,000 $5,000,000
Inordertobenchmarkourfinancialperformance,wecomparedouroperatingandprofit
margindriverstothefinancialperformancemetricsofRoom2Readinthetablebelow.
CookClean Margins Room2Read2 Metrics
CoGS/Revenue 83.3% ProgramExpenses 84.5%
G&A/Revenue 5.6% AdministrativeExpenses 6.9%
Selling/Revenue 5.6% FundraisingExpenses 8.5%
ProfitMargin 5.6% ProfitMargin 0.0%
2Source:http://www.charitynavigator.org/