Echoing Green is a pioneering organization dedicated to creating positive systemic change by supporting innovative entrepreneurs. Echoing Green has long been a friend and partner to SOCAP. Our conference provides a space for members of the Echoing Green community to gather, share ideas, collaborate, and engage with members of their own community as well as a variety of other players within the impact space. We recently sat down to record a conversation between Cheryl Dorsey, President of Echoing Green, and Michael Wilkerson, 2014 Echoing Green Fellow and Co-Founder and CEO of the for-profit social venture Tugende. Both Cheryl and Michael will be speaking at SOCAP15.
Michael Wilkerson: What is unique about Echoing Green’s role in the world of social entrepreneurship, especially now that the field is experiencing such rapid growth?
Cheryl Dorsey: Echoing Green is all about talent. Our capital goes where the talent is, whereas a lot of investment dollars follow business plans or scale propositions. It is our belief that when we invest in next generation leaders, we are really making a bet on finding and supporting transformative and disruptive leaders who will fundamentally change the way we address and solve social issues. So I think our focus on talent, as well as the patience and risk tolerance of our capital, continue to be differentiating factors for us. Philanthropy in general is seen as a sort of risk capital to bring to bear against major social issues, but I’ve been shocked over the years that there is still not enough capital that invests early, patiently, and takes risks for potentially huge rewards. That is a piece of why I believe, now almost 30 years down the line, there continues to be a critical role for Echoing Green.
Michael Wilkerson: How do you view the apparent growth in interest in social entrepreneurship? I’m 28, so I guess I’m a “millennial.” I recall an increased interest in social entrepreneurship when I was at Stanford in 2007 and 2008 and it seems to me that some of the growth, especially on the for-profit side of social entrepreneurship, came out of the financial crisis and is in a way a repudiation of the notion that we should make as much money as possible by grinding out your 20s and then do something later that helps people.
Cheryl Dorsey: Yes I think that is absolutely right, Michael. We have seen this trend reflected in our applicant pool. Why don’t you describe Tugende for us in a little more detail so we can see that demonstrated through the power of your work. What were the financial tools and other things you looked to as you set out to build this social enterprise?
Michael Wilkerson: Motorcycle taxis, or boda-bodas, are the lifeblood of the economy in Uganda. They help people get through traffic, as there is pretty bad gridlock and underinvestment in public infrastructure, but they also help people get to and from rural areas where there is no public transportation or roads that a car or bus could navigate. I started taking motorcycle taxis in 2006, when I was 19 and working as a journalist here at the local newspaper The Daily Monitor. In talking to my taxi drivers I learned that the average motorcycle taxi driver does not own the vehicle and has to pay the owner a daily or weekly rate. I was fortunate enough to meet a talented boda-boda driver who was able to get help so he could own his own motorcycle. He was able to build a house for his mother with the proceeds and savings from owning his own motorcycle instead of paying a landlord every day. That rang a bell in my head that everyone should have this opportunity.
After finishing my undergraduate degree I came back to Uganda as a Fulbright Scholar to research media and public policy. I took part of my Fulbright check and then part of some stock that I used to own and bought a couple of motorcycles. I had an amazing experience doing my media work during my Fulbright year, but I also started investing in motorcycle taxi drivers. My founding partners and I decided to make Tugende a for-profit business because we couldn’t afford to give away the money we were buying motorcycles with. We hoped that if the money was repaid we would be able to recycle it and expand the offering.
For us, Tugende was always a for-profit business because we were working with business people at the very bottom of the pyramid who didn’t want or need a handout I often say that we are not really doing anything other than providing an opportunity. And our customers seize that opportunity and use it to move up the economic ladder. But in our absence they would still be hustling to improve their own lives. So it’s not thanks to us that they are improving their own lives, it’s thanks to us that they can do it on a faster trajectory.
Cheryl Dorsey: Other than Echoing Green where did you get a lot of your early stage investment for the company?
Michael Wilkerson: My first serious investors came through participation in the Unreasonable Institute in 2012, a community I’m looking forward to spending time with at SOCAP. I was fortunate to get a few angel investors on board through the Institute. Then I was more comfortable turning to some friends and family because I felt that I could sell it as an opportunity. We raised enough money for me to move back to Uganda with no exit date in October of 2012. We had about 30 active customers paying at that time and a waiting list of about 50. As of today we have 1300 paying, in 3 locations and more than 400 have already successfully paid off their motorcycles in addition to that. And now we are thinking how do we get to 10,000? How do we get to 100,000?
Cheryl Dorsey: When you look at your early funding was there an equal measure of grants and equity? How did that shake out for you?
Michael Wilkerson: It was almost entirely convertible debt. I think I actually missed the boat on some grant opportunities that were out there simply because I was very focused on the question of “How do I make this an investable opportunity?” We were fortunate enough to have a couple of key grants early on in the range of ten to twenty thousand dollars that helped us invest in things like teaching me accounting. That made us more investable once I had good financial records. It’s interesting though because Echoing Green definitely focuses on trying to invest in a way that can help draw future funding for the organization. I wouldn’t say it’s been easier, but my fundraising since receiving the Echoing Green award has been higher velocity and higher impact, partly because of Echoing Green’s cachet and track record.
We’re poised to start growing really fast but we’re struggling to raise enough money to stop fundraising, and yet we’ve more or less proved the model. There’s no operational barrier to doing it, it’s that we’re starting to be too big for some of the early stage funding but too small for some of the multimillion dollar development financing institutions and other large scale social fundraisers. Is that something you are seeing with other organizations?
Cheryl Dorsey: Absolutely – Tugende is not alone in that challenge. Starting in 2006, we started to see about 15% of our applicant pool proposing for-profit or hybrid social enterprises and that number has only continued to grow. About 40-50% of our applicant pool is now comprised of those proposing for-profits or hybrids. Because we get in excess of 3000 proposals for our Fellowship from 150 plus countries around the world, we have thousands of data points about early stage social enterprise. For the past couple of years we’ve been working with USAID and a couple of other partners to help build out our pipeline for early stage social innovators in emerging markets around the world.
We are about to release, in partnership with USAID, a white paper called Deviation from the Standard: Funding and Supporting Emerging Social Entrepreneurs. (For more information on the whitepaper visit the impact investing page of the Echoing Green website.) It looks at some of the data from our Fellowship applicant pool to codify and analyze what we are seeing. In the earlier stage and even as you are starting to get traction it is just so hard for you guys to access capital. There’s this low risk tolerance among funders, a diversity of funding sources and there being no one hub, or easy hub, to access it. Investors have trouble understanding the risk profile of social enterprises. There is a lack of transparency about where you as an entrepreneur should go for your particular business model, and it’s improtant to be in the right network and have the right connections to get to the right investor at the stage you need it when you need it. The data from Deviation from the Standard underscores these points.
Michael Wilkerson: My experience with social impact investors has been that there are a lot of great people out there looking for ways to deploy money but that they are often constrained in various ways that actually makes them less risk tolerant and slower moving than pure private funding.
Cheryl Dorsey: Yes. In most ways, what we do is in response to the support that we think you all need as best in class, next generation social entrepreneurs. We must educate not only social entrepreneurs, but also the broader field about what impact investing means for the business as well as the investor. I think that there is also the opportunity for supporting ecosystems that bring entrepreneurs and investors together and also leveraging Echoing Green networks, because I do think networks are key drivers of seed funding. We’re also working on figuring out how we can facilitate seamless connections and hand offs to next space funders when entrepreneurs like you finish an experience like Echoing Green or Unreasonable Institute. We’re asking ourselves, how are we codifying this marketplace in a way that VCs and more traditional for-profit actors have done?
Michael Wilkerson: That’s great. So thank you again on behalf of the whole Tugende team which is now 26 people. It was six or seven, fifteen months ago when we were awarded the fellowship. We hope to keep growing and are so thrilled and honored to have Echoing Green with us on that journey. And thank you for spending the time talking to me today. I can’t wait to see you at SOCAP.
Cheryl Dorsey: We’ll have a great time in San Francisco. Cannot wait for SOCAP!
Cheryl Dorsey is the President of Echoing Green and a pioneer in the social entrepreneurship movement. Prior to leading Echoing Green, Cheryl was a social entrepreneur herself and received an Echoing Green Fellowship in 1992 to help launch The Family Van, a community-based mobile health unit in Boston. Cheryl has served in two presidential administrations as a White House Fellow and Special Assistant to the U.S. Secretary of Labor (1997-98); Special Assistant to the Director of the Women’s Bureau of the U.S. Labor Department (1998-99); and Vice Chair for the President’s Commission on White House Fellowships (2009-present). She has a medical degree from Harvard Medical School and her Master’s in Public Policy from Harvard Kennedy School and received her Bachelor’s degree in History and Science magna cum laude with highest honors from Harvard-Radcliffe Colleges.
Michael Wilkerson is Co-Founder and CEO of Tugende. Michael holds a BA with honors and University Distinction from Stanford and an MPhil from Oxford. Michael is 2014 Echoing Green Fellow and a 2012 Unreasonable Fellow.
Cheryl Dorsey will appear as part of the SOCAP15 plenary session Wednesday 10/07 at 8:30am.
Watch Michael Wilkerson present, More than Motorcycles: Small Asset Ownership and a Bottom Up Economic Revolution, at the SOCAPTV Funding session Thursday 10/08 at 4pm.
Read about all the Echoing Green Fellows who will be at SOCAP15 here.