Updates from November, 2011

  • Invest2Innovate: Addressing the Disconnect in the Social Enterprise Space

    1:06 pm on November 26, 2011 | 0 comments Permalink | Reply
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    *The post below was orig­i­nally pub­lished on http://www.socialearth.org on Nov 25, 2011


    In the social enter­prise world, one key issue that con­stantly resur­faces, as it would in any grow­ing sec­tor, is one of fund­ing and iden­ti­fy­ing a proper invest­ment pipeline. The acces­si­bil­ity and  avail­abil­ity of start-up fund­ing is cru­cial to star­tups, and in the case of social enter­prises, a largely untapped mar­ket. Here’s whereInvest2Innovate (i2i) comes into the pic­ture. They are a social enter­prise inter­me­di­ary that sup­ports the growth of social entre­pre­neur­ship in new mar­kets, help­ing fun­ders and early stage entre­pre­neurs see eye to eye.

    I had the oppor­tu­nity to con­nect with Kalsoom Lakhani the founder and CEO of i2i to inter­view her about her recently launched social enter­prise. A trail­blazer and native to Pak­istan, Lakhani launched i2i’s pilot in Pak­istan in Sep­tem­ber 2011 with plans to expand oper­a­tions to other coun­tries post 2012. Here’s what she has to say about her startup and the space:

    1) What is most inter­est­ing to you right now in the social enter­prise space? 
    There are many inter­est­ing inno­va­tions tak­ing place right now – from ground­break­ing SMS crowd-mapping tools to agriculture-based inno­va­tions for small farm­ers. Inno­v­a­tive tools & approaches of engag­ing and empow­er­ing low-income com­mu­ni­ties are com­ing up con­stantly. But I’m also extremely inter­ested in the growth of the impact invest­ment space, and where we are right now in terms of the com­mu­nity as an emerg­ing asset class, whether or not this type of invest­ment breeds bet­ter social impact met­rics, and whether the cap­i­tal is flow­ing to the right places. There are still a lot of spaces we need to fill when it comes to con­nect­ing cap­i­tal to social enter­prises, par­tic­u­larly at the early-stage, and it’s inter­est­ing to see how crowd-funding and other inno­v­a­tive ways of rais­ing cap­i­tal are becom­ing poten­tial solu­tions to help fill that gap.

    2) Why start up i2i? Why is this the time to enter into the mar­ket? 
    i2i was launched in order to help address some of the dis­con­nects in the social entre­pre­neur­ship space. Prior to launch­ing the com­pany, I worked in ven­ture phil­an­thropy for over three years, pro­vid­ing seed fund­ing and sup­port to early-stage social enter­prises mainly in Pak­istan. I was first exposed to the “space” then, and quickly immersed myself in all things social entre­pre­neur­ship & inno­va­tion. It has been fas­ci­nat­ing and moti­vat­ing to see grow­ing ecosys­tems in mar­kets like India, Latin Amer­ica (Mex­ico, Brazil, Chile are good exam­ples), and East Africa. Beyond higher access to cap­i­tal (a lot of impact investors oper­ate in these coun­tries), we’ve seen the growth of other play­ers that fur­ther sup­port social enter­prise – incu­ba­tors, accel­er­a­tors, gov­ern­ment poli­cies (in some cases), inter­me­di­aries, etc.

    i2i was founded to take a sim­i­lar ecosys­tem approach in the “untapped” mar­kets – that’s a lot of jar­gon I know, but essen­tially we pro­vide tai­lored ser­vices to early-stage social enter­prises to grow their busi­nesses and con­nect them to cap­i­tal. Pak­istan, our pilot mar­ket, is a great exam­ple of a coun­try where there is a sig­nif­i­cant need for more inno­v­a­tive and market-based approaches to devel­op­ment – 66% of the pop­u­la­tion live on under $2 a day – but where the envi­ron­ment for social entre­pre­neur­ship is rel­a­tively new. Entre­pre­neurs often lack the tools & ser­vices to max­i­mize the poten­tial of their mod­els and attract cap­i­tal, espe­cially in mar­kets like Pak­istan, where the volatile polit­i­cal and secu­rity sit­u­a­tion hurt the investor envi­ron­ment. There is a lot oppor­tu­nity for i2i, as an inter­me­di­ary, along with other part­ner orga­ni­za­tions, to be the archi­tects of the ecosys­tem, fos­ter­ing the social entre­pre­neur­ship space both from the top-down and the bottom-up.

    3) What is the biggest mis­con­cep­tion you see in the world of social enter­prise and where do you stand on the issue? 
    I think the biggest mis­con­cep­tion in social enter­prise is that it’s ok to stop at the “warm & fuzzy” and throw the term around irre­spon­si­bly. It dri­ves me crazy. Social enter­prise ulti­mately com­bines the best of the busi­ness and the char­ity world – it begs the ques­tion, “Could we mag­nify social impact if we take a busi­ness approach to devel­op­ment?” Social entre­pre­neur­ship is not the solu­tion to every­thing, but in some cases, it can be really effec­tive. For instance, if rural low-income com­mu­ni­ties that are off the elec­tric­ity grid use kerosene as their light and heat source, not only is it a costly prod­uct, but it poses ter­ri­ble health and envi­ron­men­tal ram­i­fi­ca­tions. Dis­plac­ing this demand for kerosene with clean energy solu­tions pro­vides these low-income com­mu­ni­ties with bet­ter alter­na­tives at com­pa­ra­ble prices, ulti­mately con­tribut­ing to poverty alle­vi­a­tion. Social enter­prises need to demon­strate social and/or envi­ron­men­tal impact – that is what tends to qual­ify the “social” in the equa­tion, but at the end of the day, they are busi­nesses that need to have strong mod­els and be sus­tain­able in the long-term. Some­times that gets lost in the “warm & fuzzy” sto­ries we hear in the space, which are great in com­mu­ni­cat­ing an organization’s vision and build­ing a com­mu­nity of sup­port­ers, but there needs to be sub­stance behind that story.

    4) What is one action would like peo­ple to take once they know if i2i? 
    If you are a social enter­prise, espe­cially in Pak­istan (since that is our pilot), get in touch with us to get an assess­ment of your busi­ness and how i2i can pro­vide ser­vices (from busi­ness devel­op­ment to communications/marketing) to help your orga­ni­za­tion grow. If you are a poten­tial investor (both for i2i and/or inter­ested in early-stage enter­prises in new mar­kets), we’d love to talk to you! And finally, if you are just a sup­porter, we are always excited to hear your feed­back and make our model better.

    ***
    Kalsoom is a the founder of invest2innovate based in Wash­ing­ton, D.C. She is a co-ambassador for Sand­box, a global net­work of inno­va­tors under 30, and is also a mem­ber of the World Eco­nomic Forum’s Global Shapers.  She has writ­ten for the Wash­ing­ton Post, the Huff­in­g­ton Post, For­eign Pol­icy, and Pakistan’s Dawn News­pa­per. Get in touch: klakhani@invest2innovate.com.
     
  • An Interview with Antony Bugg-Levine: Embracing Impact Investing

    10:08 pm on September 26, 2011 | 0 comments Permalink | Reply
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    *This post was orig­i­nally pub­lished on http://www.socialfinance.ca on Aug 26, 2011

    I had the priv­i­lege to speak with Antony Bugg-Levine, Man­ag­ing Direc­tor of the Rock­e­feller Foun­da­tion, Board mem­ber of the Global Impact Invest­ing Net­work and one of the thought lead­ers and influ­encers in impact invest­ing. He leads the Foundation’s impact invest­ing team that works to har­ness the cap­i­tal and exper­tise of investors mak­ing “impact invest­ments” that gen­er­ate a social and finan­cial return. This in an insider inter­view to his book, Impact Invest­ing: Trans­form­ing How We Make Money While Mak­ing a Dif­fer­ence. This book was co-authored with Jed Emer­son, an exec­u­tive atImpactAs­sets, Senior Advi­sor with the Ster­ling Group (Hong Kong) and a senior fel­low with the Cen­ter for Social Invest­ing at Hei­del­berg Uni­ver­sity. In our con­ver­sa­tion, he shared key high­lights in the book as well as his hopes for the book. Note: This inter­view is being posted in three parts; stay tuned for Part II and Part III over the next few days.

    1) The premise of the book is on impact invest­ing. How do you intend for peo­ple to read this book? What mind­set should peo­ple be in?

    Firstly, this book is not a ‘How-to’ guide for prac­ti­tion­ers or investors who are look­ing for sim­ple guide­lines on how to con­struct an impact invest­ing port­fo­lio. There are other guide­lines or resources that are avail­able for that. We step back from the day-to-day work of con­struct­ing a port­fo­lio of impact invest­ments, but instead ask the more fun­da­men­tal ques­tions about how impact invest­ing, as a new approach to address­ing social prob­lems and deploy­ing cap­i­tal, is dis­rupt­ing our exist­ing sys­tems. The book is con­structed in two parts.

    Part 1, The Ter­rain of impact invest­ing, takes a quick overview of impact investing’s his­toric and cur­rent role in the fol­low­ing sectors

    1. Accel­er­at­ing the growth of microfinance
    2. Sup­port­ing the inter­na­tional devel­op­ment agenda
    3. Help­ing to build the social enter­prise sector

    In each of these cases, we exam­ine how impact invest­ing is gen­er­at­ing oppor­tu­ni­ties as well as a set of chal­lenges and questions.

    In Part 2: The Impli­ca­tions of impact invest­ing, we exam­ine the fun­da­men­tal sys­tems around which our soci­ety is orga­nized and how, one after another, they are going to need to change to accom­mo­date the aspi­ra­tions of impact invest­ing and to take advan­tage of the poten­tial that this field offers.

    This is really the core of the book: In our soci­ety, espe­cially in the West in the past 50 years, we have orga­nized our soci­ety around two fun­da­men­tal pil­lars that sup­port our cur­rent systems:

    1. The only way to solve a social prob­lem is through phil­an­thropy and the government
    2. The only pur­pose of invest­ing is to make money

    If you accept these two fun­da­men­tal pil­lars, then the sys­tem we cur­rently have makes sense, and will sup­port your activ­ity. How­ever, if you believe in the fun­da­men­tal premise of impact invest­ing, that we can inte­grate our invest­ment and our social pur­pose, then these sys­tems do not work. So in the book we high­light how impact invest­ing is chal­leng­ing var­i­ous sys­tems to change: the legal sys­tem, the phil­an­thropic sys­tem, the sys­tem by which we develop lead­ers, our cap­i­tal mar­kets and our sys­tems for mea­sur­ing value.

    We pro­vide a frame­work for think­ing about the new sys­tems we will need to build. We think what is really excit­ing about impact investors is the oppor­tu­nity to build a new set of sys­tems to real­ize the great poten­tial of impact investing.

    How­ever, we are not overly pre­scrip­tive partly because we don’t claim to have all the answers. We do not know, between Jed and myself, exactly what these sys­tems need to be, but there are clear guide­lines on how as a com­mu­nity, we have to engage on this.

    2) What do you hope this book would inspire peo­ple to do? What is the next step? Spread the word? Become action­able? Start build­ing systems?

    ABL JE Book

    Every­one has a dif­fer­ent role to play. Every human sys­tem in which we live is the result of both inten­tional deci­sions we make and unin­ten­tional actions we take. We believe that any­one read­ing the book has the abil­ity to participate.

    If you are a stu­dent, you could chal­lenge insti­tu­tions in which you are learn­ing to not fall back on easy stereo­types, but rather rec­og­nize the great poten­tial in com­bin­ing social impact and invest­ing.
    If you are for­tu­nate to be a holder of wealth, you could read the book and chal­lenge your wealth advi­sor to not give an easy answer that rejects how you can put your invest­ments to work towards a social pur­pose.
    If you work in the finan­cial ser­vices sec­tor, we hope you con­sider putting your skills to work to build a more effi­cient social cap­i­tal market.

    At the same time, we are not so naïve as to think that read­ing this book would inspire many peo­ple to change their cur­rent life path — and we don’t think you need to. In the book, we pro­file some inspir­ing heroes who have stepped out of main­stream work to pio­neer new insti­tu­tions and approaches, includ­ing Cana­dian based Sarona Asset Man­age­ment and Social Cap­i­tal Part­ners. How­ever, we don’t believe that impact invest­ing is a domain only for radicals.

    We rec­og­nize that in order to be truly pow­er­ful, impact invest­ing needs to be acces­si­ble to reg­u­lar peo­ple as well. We empha­size in the book that we don’t want to per­pet­u­ate the idea that only the most rev­o­lu­tion­ary or entre­pre­neur­ial peo­ple have a right to be part of impact invest­ing. Lead­er­ship is going to come in many forms, and not only from the charis­matic indi­vid­u­als who start new enter­prises or quit their jobs. Instead, we antic­i­pate it will come from the many more thou­sands of peo­ple who can embrace impact invest­ing at what­ever scale they are able to.

    3) What do you think this field is pick­ing up momen­tum only now, given that it has been around for years? Why do you think peo­ple are real­iz­ing the impor­tance of this space so late?

    Impact invest­ing has been going on for decades — but the coin­ing of the phrase “impact invest­ing” around four years ago has allowed dif­fer­ent com­mu­ni­ties to share their aspi­ra­tions under a com­mon lan­guage and to come together more visibly.

    In the book, we talk about this phe­nom­e­non. Many peo­ple are increas­ingly frus­trated with business-as-usual approaches. There is a grow­ing num­ber who do not think that the model of phil­an­thropy their par­ents adopted is enough.  At the same time, we talk about a new gen­er­a­tion of peo­ple who have been raised within the social enter­prise move­ment and seek to inte­grate busi­ness and social pur­pose through­out their career, not in sequence.

    In addi­tion, the recent finan­cial cri­sis has shaken people’s con­fi­dence in old approaches. Gov­ern­ments, also, are increas­ingly intent on fig­ur­ing out how to do more with less, and are mobi­liz­ing impact invest­ing cap­i­tal to com­ple­ment gov­ern­ment spending.

    4) If you had one mes­sage for this com­mu­nity, what would it be?

    Let us all go from rhetoric to action. We need to see real deals pro­lif­er­ate that gen­er­ate social impact and finan­cial return. We also need to rec­og­nize that we are part of a longer-term move­ment to change the fun­da­men­tal sys­tems and mind­sets that cur­rently limit us.

    5) What was your favorite aspect in work­ing on this book?

    It has been a great honor and intel­lec­tual priv­i­lege to work with my co-author, Jed. He’s a real vision­ary. By its nature, impact invest­ing will be best when it brings together peo­ple from dif­fer­ent per­spec­tives, even if that is not always the eas­i­est and most com­fort­able way to work. For me, work­ing with Jed was a real-world man­i­fes­ta­tion of this idea—we brought dif­fer­ent per­spec­tives and expe­ri­ences to the process and chal­lenged each other to both broaden and sharpen our ideas. I hope the result is more inter­est­ing and insight­ful for our readers.

    Antony Bugg-Levine is the co-author, with Jed Emer­son, ofImpact Invest­ing: Trans­form­ing How We Make Money While Mak­ing a Dif­fer­ence (Wiley, 2011) which will be released in early Sep­tem­ber and is avail­able now for down­load as an e-book. The opin­ions expressed in this arti­cle do not rep­re­sent the offi­cial views of any insti­tu­tion with which he is affiliated.

    Photo credit: Jai Catalano

     
  • An Interview with SOCAP co-founder: Kevin Jones

    6:22 pm on July 2, 2011 | 0 comments Permalink | Reply
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    In the impact invest­ing space, one of my biggest areas of inter­est has been look­ing into ways on how to increase the momen­tum and main­stream inter­est in this area. What I have been dis­cov­er­ing is that the knowl­edge gap between social and finan­cial is alot wider than I ini­tially antic­i­pated it to be. On one end, we have peo­ple with huge hearts who are will­ing to give all their time and money for great causes, but not nec­es­sar­ily thor­oughly under­stand­ing what social finance/patient capital/impact invest­ing really is. I’ve had count­less of con­ver­sa­tions with indi­vid­u­als, par­tic­u­larly stu­dents, who want to gain expe­ri­ence in this area but unfor­tu­nately, demand is greater than sup­ply at the moment. On the other end, we have peo­ple who are focused on the profit ( and I’m not say­ing there is any­thing wrong with this) end of a busi­ness and strug­gle to take into account the social impact of their work because at the end of the day — it sim­ply takes away from the bot­tom line.

    What all these con­ver­sa­tions have given me though, is firstly an under­stand­ing that in order to con­tribute to the impact invest­ing space, I would have to know my own goals bet­ter, know my areas of inter­est and most of all, know what I have to give and gain by being in this space. It is sim­ply not enough to have the heart for this. I have to be hon­est — with myself and with what we are able to accom­plish. I have to know my lim­its and be hum­ble enough to admit what I actu­ally do and don’t know and do my best to learn what that social cap­i­tal con­tin­uum looks like. I want my ide­al­ism to be prac­ti­cal and actionable.

    All that being said, I believe that one of the biggest ways to advance this space is to be as open as pos­si­ble about dis­cov­er­ies that we know. From per­for­mance met­rics to new ini­tia­tives. The impact invest­ing space needs to reach a mass tip­ping point before it can truly hit main­stream and although we are pick­ing up momen­tum, we’re not there yet. One of the forums that I admire and has pro­vided a great plat­form for this shar­ing of ideas is Social Cap­i­tal Mar­kets — an annual con­fer­ence in San Fran that con­nects global inno­va­tors, investors and entre­pre­neurs. They recently expanded into Europe this year and I had the priv­i­lege of cov­er­ing some pre-conference sto­ries for them. Below is an inter­view I had with SOCAP co-founder Kevin Jones for SOCAP Europe orig­i­nally writ­ten for socialearth.org a cou­ple weeks ago. I do hope to meet him in per­son one day and really admire his tenac­ity and pas­sion for this space. You can view the orig­i­nal post here. Also, Check out the move­ment that SOCAP has been cre­at­ing here.

    Register here!

    ***

    In my last post on SOCAP Europe, I wrote about the space, the need and the move­ment for social cap­i­tal mar­kets. Since, I had the oppor­tu­nity to inter­view Kevin Jones, the co-founder and con­vener of SOCAP Mar­kets. A remark­able vision­ary, here is what he has to say about his take on SOCAP, a 10 year vision and his number-one advice to social entrepreneurs:

    Q: I love the fact that SOCAP is tak­ing on a more inter­na­tional scene by hav­ing one in Europe this year. Can you shed some light on the devel­op­ment trends that you are start­ing to see on an inter­na­tional scale and how this would impact us here in North America?

    A: The biggest trend is toward impact invest­ing being taken seri­ously by main­stream finance.  At SOCAP Europe, we will have large $100 mil­lion plus fund of funds announc­ing they are inte­grat­ing impact invest­ing into their port­fo­lios, two banks, one large and main­stream, abn amro, and one deeply mis­sion aligned, tri­o­dos are on board as spon­sors. Pen­sion funds are also at the table. The issue for impact invest­ing is going main­stream and avoid­ing los­ing their mis­sion, what I call avoid­ing mis­sion risk, the ben and jerry’s prob­lem. Avoid­ing a micro­fi­nance scenario.

    Another big thing is that renew­able energy in the devel­op­ing world is becom­ing a clearly investable sec­tor. A new, not pub­lished yet report by McK­in­sey com­mis­sioned by mid-year pegs that poten­tial at $6.5 bil­lion. The upside to renew­able energy is that it is a pub­lic good, in places like rural Africa and rural India; you are remov­ing kerosene lamps that kill 1.5 mil­lion peo­ple a year through indoor air pol­lu­tion, cut­ting power costs by around 1/3 and doing it at high mar­gin.  Unlike micro­fi­nance which became a deriv­a­tive and allowed investors to demand an unrea­son­able return on their equity to the point that it exploited the poor in some places, there is no chance to sat­u­rate the rural African vil­lage mar­ket with life sav­ing elec­tric­ity that enhances a family’s abil­ity to be pro­duc­tive. The report pegs that mar­ket size at $6.5 bil­lion, but it will be a week before we can use that figure.

    Q: You’ve been in the social investing/enterprise space for a while now, and noted in one of your more recent inter­views on how the space is con­tin­u­ing to grow on both ends of the spec­trum. What do you believe is the biggest barrier/challenge for this environment?

    A: What is the biggest chal­lenge? It’s still mind­set, the inher­ited cul­tural frame in which peo­ple think about invest­ing. They feel jus­ti­fied think­ing only about finan­cial return on their money and then they do good in giv­ing. On the other hand, I am really encour­aged by new research from NESTA that says 39% of folks in the U.K. would take a lower finan­cial return if they could invest along­side what they believe, for causes they care about. and that the per­cent­age goes up dra­mat­i­cally for peo­ple under 40.

    That said, there will be fail­ures, and peo­ple should be ready for them. Not just scams like three cups of tea seems to be, but things go wrong. So hopes could be dashed, etc. if peo­ple are naive. We are work­ing on the tough­est prob­lems of the world. In new ways, with new tools, but they are still the things that put us all at risk.

    Q: SOCAP is a con­fer­ence that brings together the inter­sec­tion of money and mean­ing. How does this con­fer­ence fit into the pic­ture of bridg­ing the gap between for-profit and non­profit and where do you see the ideal form of col­lab­o­ra­tion between these two groups?

    A: SOCAP is about bring­ing all the resources into the mar­ket and using what’s appro­pri­ate to get the job done. Many if not most social enter­prises often start out need­ing dona­tions or sub­si­dies, or as a non profit work­ing on a prob­lem, a way to pay for the mis­sion with­out rely­ing only on pro­gram money from a foun­da­tion cre­ates the need for earned income that then grows into a social enter­prise that could be investable as they work out the model.  But the mar­ket does not solve all prob­lems. Take malaria: the young moth­ers and chil­dren one to five who com­prise 80% of the nearly 3 mil­lion who die every year in Sub-Saharan Africa (some say 1 mil­lion) do not have and are  not likely soon to have the money to buy insec­ti­cide treated nets. So they need to be subsidized.

    SOCAP is about using gifts and grants where they are appro­pri­ate and when they are appro­pri­ate and sub­si­dies that go away over time when that is the way to go, soft debt from mis­sion focused, often non profit lenders like a Root Cap­i­tal or E+Co when its appro­pri­ate and fast mov­ing, cat­alytic ven­ture cap­i­tal like equity from an impact invest­ment fund where it is the answer. SOCAP is a big tent event where peo­ple who work in silos come together to get more done than they could alone or work­ing with the peo­ple they already know or run into in their reg­u­lar course of work. It’s the gath­er­ing that incor­po­rates giv­ing and invest­ing as twin forces for good for a world that needs all the help it can get.

    Q: What is your 10 year vision for the social enterprise/impact invest­ing space?

    A: What is my 10-year vision… that mix­ing your money with your mean­ing will be the way most peo­ple think about invest­ing. That a mind­shift has taken place. That boomers will con­tribute to the efforts of mil­len­ni­als who want to change the world they have inher­ited from us.

    Q: What is your #1 advice to social entrepreneurs/enterprises?

    Start. Do it now. Fail fast, and fail smart. If you are not relent­less, you will not make it. this needs to be not just your peace corps stint. This has to be the way you approach the world. When I started good cap­i­tal six years ago, I went to the smartest investor in this space that I knew. He told me and Tim, my partner:

    - Our idea was wrong
    – Our plan was flawed
    – We were the wrong guys
    – Our chances for fail­ure were high
    – And he did not want his name asso­ci­ated with us.

    Peo­ple tell you that all the time when you are an entre­pre­neur, the more dis­rup­tive your approach the more likely smart guys will give you that reac­tion. and they may be right. Your idea may be wrong, your plan flawed, you might be the wrong guy. But if you need to do this, if its baked into who you are that this is the way you approach the world, and what needs to be done, you will do it any­way. Not every­one should be an entre­pre­neur. Most peo­ple should be employ­ees or help the vision­ary reach her goals. It takes a cer­tain level of insan­ity to go against the com­mon wis­dom. If you are afflicted with too much san­ity you won’t sur­vive as an entrepreneur.

    Q: And just for fun: What is your favorite quote?

    A: Prob­a­bly one from Dirty Harry, “A man has to know his limitations.”

    ***

    For more infor­ma­tion about Kevin and SOCAP Europe, visit europe.socialcapitalmarkets.net.

     

     
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