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  • Responsibilities of an (Impact) Investor

    3:02 pm on December 6, 2012 | 0 comments Permalink | Reply
    Tags: , , , , investing, social finance, venture capital

    For the past few months, I have been reflect­ing a lot on my role as an investor. Busi­ness plans and pro­pos­als come across my desk and as I shift through them, it really struck me on how large a respon­si­bil­ity investors play in accel­er­at­ing trends, shap­ing a com­mu­nity or even country’s econ­omy, but yet how lit­tle this respon­si­bil­ity is spo­ken about in the invest­ing cir­cles. We place so much empha­sis on find­ing the right busi­ness, the right man­age­ment team, the right social impact, that some­times we get lost in our own capac­ity to rec­og­nize what really is inno­v­a­tive and what truly deserves to be funded. So, from my expe­ri­ences, here’s what I think an investor’s respon­si­bil­i­ties are on top of the typ­i­cal invest­ment work:

    1) Investors need to live in the future. 

    This is a point I feel very strongly about. If you’re an investor: VC/PE and par­tic­u­larly if you play in the startup and impact invest­ing work, (as Fred Wil­son pointed today in his blog post and what Paul Gra­ham said):  you should live in the future and see what is miss­ing. So well said. I’m cur­rently in an envi­ron­ment (yes, I rec­og­nize that I am in Africa — so feel free to shower stereo­types), where I know investors who are still using yahoo mail, inter­net explorer and Win­dows 2003 (true story!). Not to say that there are any­thing wrong with the prod­ucts, but more so — I think it’s so impor­tant to be keep­ing up with the trends in the world, tech­nol­ogy being one of them. How can you expect to iden­tify an invest­ment that is ‘ground-breaking’ if you’re not even fol­low­ing the newest trends in your sec­tor? Tak­ing this a step fur­ther, if you are fol­low­ing these global trends vs. local trends, it is then our respon­si­bil­ity to seek out entre­pre­neurs who can close this gap and fur­ther ele­vate the devel­op­ing world, or the devel­op­ing world would for­ever be play­ing ‘catch up’.

    2) Don’t be a sheep. 

    This respon­si­bil­ity is par­tic­u­larly impor­tant in the impact invest­ing space. Given that we’re play­ing in a field that is largely uncharted, risk is high and typ­i­cally, most investors are unable to size up a new mar­ket and end up rely­ing on the opin­ions of other investors. aka. I’ll invest if some­one else will too aka. a sheep. Impact investors say that they are risk tol­er­ant, but few trans­late this tol­er­ance into sign­ing along the dot­ted line. A very chicken and egg sit­u­a­tion. Hence, I have to con­stantly push myself to under­stand what is the right bal­ance of being a mar­ket leader but also not be a reck­less investor. Bal­ance is key.

    3) The need to close and dis­burse faster

    There are a lot of delays that occur in [impact] invest­ing. The court­ing of investors and [social] entre­pre­neurs, the dance between find­ing the right termsheet, the issue of mak­ing sure that the social impact actu­ally has an impact, and [insert your tra­di­tional delays in invest­ing here]. This is the norm. This is my chal­lenge to investors: rec­og­nize that the longer the delay, the big­ger the strain on the business/organization. From an entre­pre­neur per­spec­tive, you’re con­stantly watch­ing your ‘run­way’ aka. how much money do I have before I run out, and a delayed clos­ing round and dis­burse­ment is to the [social] entrepreneur’s dis­ad­van­tage as well as to their cus­tomers. If we’re really stand­ing with the poor, then deals need to close quicker with clear and sim­ple terms, as the longer the delay, the more peo­ple are miss­ing out on poten­tially expe­ri­enc­ing the product/service.

    This is by no means sup­posed to be an exhaus­tive list of respon­si­bil­i­ties, but instead ones that I feel are most impor­tant given my expe­ri­ence. As investors, we are in a priv­i­leged posi­tion to start/continue or end trends. I think it’s time that we started think­ing a lit­tle harder about where our respon­si­bil­i­ties lie.

     
  • My Week's Discoveries

    3:37 pm on March 9, 2012 | 0 comments Permalink | Reply
    Tags: , , , , social finance, ,

    1) Amer­i­can Booty — The story of Sara Blakely, the youngest self-made bil­lion­aire as founder of Spanx

    A hugely inspi­ra­tional story on the qual­ity of per­se­ver­ance. Sara only had $5,000 to cre­ate Spanx, and she cre­ated a com­pany, self-wrote her patent and devel­oped a pro­to­typed. She under­stood what women wanted. This is a quick 13min video on her story. Love the fact that she believed in her prod­uct so much that she never took no for an answer.

    2) Why ‘Shared Value’ Can’t Fix Cap­i­tal­ism - Forbes

    Thought-provoking com­men­tary to counter Michael Porter’s and Mark Kramer’s idea of ‘Shared Value’. Worth a read to get you think­ing about what aspects of cap­i­tal­ism needs ‘fix­ing’ and what doesn’t.

    3) Launch of Women INvest­ing in Women INi­tia­tive (WIN-WIN)Calvert Foun­da­tion 

    A highly encour­ag­ing piece of news that I cel­e­brated for Inter­na­tional Women’s Day. Calvert Foun­da­tion launched WIN-WIN with $20mm to be invested in high impact orga­ni­za­tions and global projects to cre­ate financ­ing oppor­tu­ni­ties for women.

    4) Where did social enter­prise come from, any­way? - GOOD Magazine

    Use­ful sum­mary of the sec­tor, includ­ing the legal aspects of social enter­prises. Not sure if the found­ing of Ashoka started carv­ing out the space — my per­sonal take is that Dray­ton was one of the first that pop­u­lar­ized the concept/language. Then again, does under­stand­ing of the space come with under­stand­ing of lan­guage. hm…

    5) Tools and Resources for Assess­ing Social Impact - Foun­da­tion Centre

    Toolk­its and reports galore. From BACO by Acu­men Fund to FSG’s Guide to engag­ing stake­hold­ers. Seri­ously great database.

     
  • Invest2Innovate: Addressing the Disconnect in the Social Enterprise Space

    1:06 pm on November 26, 2011 | 0 comments Permalink | Reply
    Tags: , , , , social finance

    *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.
     
  • VANCOUVER+acumen Presentation - Making an Impact through Social Finance

    3:54 pm on November 8, 2011 | 0 comments Permalink | Reply
    Tags: , , social finance,

    For the past year and a half or so, I have been involved with an incred­i­ble group, VANCOUVER+acumen. We’re a vol­un­teer chap­ter sup­port­ing Acu­men Fund by actively cham­pi­oning Acumen’s inno­v­a­tive model of patient cap­i­tal to ele­vate global poverty. We achieve this by engag­ing in com­mu­nity, rang­ing from infor­ma­tional work­shops, monthly salons and our annual case com­pe­ti­tion. As one of the found­ing mem­bers, it has been a great priv­i­lege to work along­side such pas­sion­ate indi­vid­u­als in this space and to con­tinue to cre­ate a world beyond poverty.

    I’m really excited to announce that I will be speak­ing at the inau­gural Cana­dian Global Impact Invest­ing meetup in Van­cou­ver on behalf of the group — shar­ing the acu­men model (both on a global and chap­ter level) to the impact invest­ing com­mu­nity in Van­cou­ver. The event will be held on Wednes­day, Nov 23rd from 6:30pm — 9pm at SFU Segal Grad­u­ate School of Busi­ness in down­town Van­cou­ver. You can check out more details about the event here.

    Three other orga­ni­za­tions will also be pre­sent­ing at the event: Vancity, Global Cat­a­lyst Ini­tia­tive and Oppor­tu­nity Inter­na­tional Canada. Also, at the event, they will be giv­ing away door prizes ( 2 books I couldn’t rec­om­mend highly enough): Impact invest­ing: Trans­form­ing How We make Money While Mak­ing a Dif­fer­ence – Jed Emer­son, Antony Bugg-Levine and Banker to the Poor – Muham­mad Yunus.

    See you on the 23rd. Look­ing for­ward to con­nect­ing with other fel­low impact investing/social enter­prise champions.

     
  • An Interview with Antony Bugg-Levine: Embracing Impact Investing

    10:08 pm on September 26, 2011 | 0 comments Permalink | Reply
    Tags: , , , social finance

    *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

     
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