In the slums of Nairobi, millions of inhabitants rely on makeshift sanitation facilities. Popular improvisations include the flying toilet and the hanging toilet: The former is a euphemism for a plastic bag, the latter a wood plank hanging over a pit. The World Health Organization estimates that 2.6 billion people worldwide lack access to hygienic toilets, causing the spread of disease.
David Auerbach thinks the private sector can help. Upon graduating from the MIT Sloan School of Management in May, the 30-year-old entrepreneur moved to Nairobi with a team of former classmates and launched Sanergy. The company works on a franchise model. It sells prefabricated concrete toilets to local entrepreneurs for about $500. The operators, who pay cash for the toilet or borrow from a Sanergy-recommended microlender, are responsible for keeping the single-stall facilities provisioned with toilet paper, soap, and water. Operators profit by charging about 5¢ per use.
The company, meanwhile, plans to make money by selling the waste to Kenya’s $300 million-a-year horticulture industry. Sanergy empties each of its toilets on a daily basis and hauls collection bins to a plant on the edge of the slums, where it processes waste into fertilizer for sale to Kenya’s flower growers. The technology itself isn’t new, but a business that finances waste removal—which most slum dwellers can’t afford—is. “Our innovation is to create a system to remove waste on a cost-effective basis,” says Auerbach.
Auerbach had his holy-crap moment with regards to Third World sanitation during a two-year fellowship teaching English in China’s Hunan province. On a visit to the province’s rural reaches, he visited a “horrifying” pit latrine and realized how quickly such facilities spread disease. He vowed to “never take a toilet for granted again.”
Sanergy was born three years later when Auerbach met Sloan classmates Ani Vallabhaneni and Lindsay Stradley in the fall of 2009. The trio wrote a business plan for a class on entrepreneurship in developing countries and won a grant from MIT to conduct studies in Nairobi in January 2010. The threesome moved to Kenya full-time after graduating in May and are currently working to select franchisees and streamline their model.
So far, the group has funded Sanergy with grants and competition prizes, including $20,000 from the Eleos Foundation, a nonprofit that makes venture capital-style investments in social businesses. “If Sanergy can harness the power of market forces to drive a sustainable and scalable sanitation system, we’ll have found a winning ticket,” say Jim Villanueva, an investment director at Eleos.
When potential funders ask Auerbach about his business plan, he has a simple answer: “We’re turning s— into gold,” he says.