Isabel Medem, CEO of X-Runner, a Peruvian waterless sanitation system used in the slums of Lima, is the first social entrepreneur to be interviewed by LAVCA about the impact of its efforts on the local community. X-Runner is supported by NESsT, an organization that develops sustainable social enterprises that solve critical social problems in emerging market economies.

LAVCA: Please summarize your business. Where is X-Runner headquartered?

Medem: X-Runner provides a waterless sanitation system for the households located in the slums in Lima, Peru. Launched just over three years ago, the sanitation system reaches a market that is otherwise using traditional pit latrines which can create dangerous health and environmental concerns for the local community. X-Runner’s system combines a unique waterless toilet, equipped to eliminate odors and deter insects, and a regular collection service. Once the waste has been removed from the home it is transformed into compost at an offsite X-Runner facility. We currently serve more than 200 customers with our service, with monthly revenues of about USD 2.600, and a total team of 15 people.

LAVCA: Please describe the need for X-Runner in Peru. How have the services/products offered made an impact? Was there any resistance by the local community initially?

Medem: The local community welcomed the idea of X-Runner. Pit latrines were traditionally used out of necessity, and without running water – most of the households had no other option for sanitation. X-Runner’s toilets are practical, require little to no maintenance on the part of the home owner, and drastically improves living conditions.

The service incurs a monthly fee which can be challenging for some, but overall once the case is made, X-Runner has a very high customer satisfaction and retention rate. In our experience, customers don’t return for two very specific reasons: either they have moved to a different neighborhood with running water or they have encountered a personal situation that prevents them from paying.

LAVCA: Please describe the various equipment used by X-Runner to facilitate the waterless sanitation system. Was this system created by X-Runner?

Medem: The waterless toilets used by X-Runner were originally created in Sweden and we import the toilets as a part of our service. We also employ biodegradable bags which we purchase from a supplier in Chile. The value add that X-Runner specifically conceived and executed was combining the toilet with a high-quality, working collection service and on the back end, an offsite facility to create compost.

We invest a lot of our efforts in building relationships with our customers, including access to X-Runner via a mobile app, payment through bank agents and a point system with prizes. Our branding is also very important and something that we actively promote in our target areas via a jingle.

LAVCA: What is the expansion rate of X-Runner thus far? Do you have plans to grow to other cities or regions?

Medem: Since starting the business three years ago, there has been a huge demand and we do our best to keep up. Our ability to expand geographically depends on funding. Right now we are focused on Lima and fulfilling the need of this market, but there is definitely an opportunity to grow into other parts of Peru and ultimately Latin America. One interesting opportunity is the influx of requests from remote areas to purchase the toilets but to personally maintain the infrastructure, so we have considered this model as well.

LAVCA: Have you received any financing to start or grow the business?

Medem: All-in, we have received somewhere in the ballpark of US$300,000 from a combination of angel investors, private donations, foundations, and others (including SwissRE’s foundation, the Avinda Stiftung, Grand Challenges Canada, and NESsT). As a social entrepreneur it can be incredibly challenging to raise money. Funding from foundations often requires a lengthy and intensive application process and ultimately necessitates an incredible (and proven) impact. In addition we have to focus on making the business sustainable and profitable.

NESsT has been a great partner in this process, as they really understand and can help us mitigate the challenges of running a social business. They leverage their expertise and network and give us access to workshops and mentors. Their hands on investment approach makes them a very accessible resource and we often look to them for practical advice on growing the business.

Currently we are looking for access to more capital and have plans to start a crowdfunding campaign next month. Our goal (through a combination of traditional investors and crowdfunding) would be to raise an additional US$150,000 – US$200,000.

LAVCA: How have you/do you plan to use the financing from NESsT and others?

Medem: In the past we have focused our efforts and funding on purchasing more equipment and acquiring customers. While this is still important to the success of the business, it is even more important at this stage that we concentrate on retaining and hiring the right talent. The funding we seek this time around (to be used in the next 12-18 months) will largely go toward salaries and materials.

LAVCA: Does X-Runner actively collaborate with the government in Peru? How?

Medem: Not yet. However, we see the value in collaborating with the government in Peru (specifically the water and sanitation departments) and are actively in touch with the appropriate parties. Our short term focus is on the local municipalities. We think a strategy of engaging the most local governing bodies could lead to a higher and more rapid adoption rate given their access and influence with our customer base.

LAVCA: What do the long term opportunities created by X-Runner’s growth mean for the local community and the environment?

Medem: Urban sanitation has been a long-term issue that has resulted in a higher rate of disease and poorer living conditions for low income residents. X-Runner presents a simple solution that takes very little effort on the part of the home owner. Our biggest impact will be to educate these communities and organize health campaigns about the dangers of disease brought on by pit latrines to help prevent illness and improve living conditions. However, a large adoption rate is key in making this a success. If only 50% of the population adopts the waterless sanitation system, the entire community is still exposed to 50% of the waste that still remains.

Another long-term opportunity is the idea that the waste could be turned into viable compost that could be used to create much needed green space in the city of Lima. We are in the middle of testing a system that could sanitize the compost completely, removing any bacteria or disease that would make the compost unhealthy. This would be a huge step in the right direction of making the system sustainable.

Our customer base is very important to us, so wherever possible we also try to create jobs for the local community. These individuals have the best insight and in fact, one of our top salespeople is the daughter of a current customer.

LAVCA: What has been the best non-monetary support/advice you have received while starting/growing the business?

Medem: Starting a business is a long journey and I have received some great advice along the way. I actively lean on my mentors and one recent piece of advice that sticks out to me because it reinforces the original business concept is to keep focusing on the customer. Not just what the existing customer needs, but what past customers have to say about why or why not they are using the service. It is incredibly important to be in tune with and analyze why someone is saying yes or no.

LAVCA: In your experience, what are the biggest opportunities and challenges for creating and growing a social business in Peru/Latin America?

Medem: Latin America (and Peru in particular) offers an unbelievable opportunity for those that want to start a business and make an impact. Lima has a great entrepreneurial spirit and most young people I meet are actively pursuing their dreams to create or work at an enterprise of their choosing. In my experience and something that I think is unique to the region, Latin Americans are not afraid to leverage their network and I am frequently introduced to significant business contacts through the people in my circle.

However, with any opportunity comes challenges. We have encountered some issues with finding a legal framework that protects our business. Waste treatment in Peru has a lot of gray area and our priority is to do everything by the book which can often incur a long process and a significant cost.