Entrepreneurs Bring Fresh Energy to South Pacific Seafood Sector

Posted by on April 25th, 2017

A SOCAP Guest Post by Monica Jain

Entrepreneurial interest in sustainable seafood is rising globally, as are the opportunities to succeed with new products and business models. The trend is clear in applications to the Fish 2.0 competition for sustainable seafood businesses: In 2013, 70 percent of Fish 2.0 applicants were from North America—and we wondered if we could persuade a significant number of entrepreneurs from areas such as the South Pacific Islands and Thailand to enter a North American business competition held in English on the Internet. We had our answer in 2015:  only about half the entries were from North America, with about one-third coming from Asia and the Pacific Islands.

This year, we expect even greater diversity: the competition has a new track structure designed to build seafood innovation networks in coastal regions around the world and create global networks around key opportunities in the seafood industry.

We’ve been holding workshops in the U.S. and internationally, and the promise is clear. In the seafood sector, small-scale businesses with an eye on global markets can make a difference in the local economy as well as the environment. The businesses participating our recent Pacific Islands workshop in Fiji are a great example of this potential—and of the value of providing seafood entrepreneurs with the kinds of training and investor networks that are commonplace in the tech sector.

The Power of the Pitch

“If you had the opportunity to generate income for a whole island, what would you do?”

That’s how Lili Kawaguchi opened her pitch during the closing session of Fish 2.0’s Pacific Islands business development workshop. The question grabbed attention, as did the rest of the Tongan entrepreneur’s pitch for her seaweed products start-up. But it’s a pitch she wouldn’t have made two days earlier, at the start of the workshop.

Lili was one of 25 entrepreneurs from across the Pacific—Fiji, Solomon Islands, Samoa, Vanuatu, Tonga, Marshall Islands, Papua New Guinea, Nauru, Cook Islands, Niue, and Kiribati—who attended the Nov. 8–10 workshop in Suva, Fiji.

They showed that there is plenty of entrepreneurial energy in the Pacific Islands, along with a growing sense of possibility. A number of workshop participants already operate successful businesses in other fields, and see compelling new opportunities in the seafood sector. Like entrepreneurs around the world, these people have business knowledge—what they need is coaching on how to talk to investors.

Learning to Speak Investor

None of the participants had ever pitched to investors—and that’s typical of seafood entrepreneurs around the world. Unless their business has been incubated in an accelerator (a rarity in the seafood industry), people don’t learn how to communicate effectively with investors.

The Pacific Islanders were quick learners.

Lili’s business, South Pacific Mozuku, harvests “a unique, naturally sourced seaweed that is used in high-end cosmetics that slow down the aging process,” her pitch continued. Islanders have been selling it for $3 a pound, but when it reaches the end of the supply chain it costs $3,000 a pound. “We want to ensure that the real value of the commodity flows back to the resource owner,” she said. “South Pacific Mozuku wants to bring value back to the community and start producing our own nutraceutical, health, and cosmetic products.”

Lili’s business creates a cycle of positive impact. Growing the seaweed off the Tonga coast allows Mozuku to develop local stewardship of the coastal and marine habitats, so as the business grows, both the people and the reefs of Tonga benefit.

David Main pitched his peers on South Pacific Sustainable Seafood, an aquaculture startup in Samoa whose ocean-raised sea cucumbers could meet a huge demand for sea cucumbers in China. Samoa banned wild sea cucumber fishing because the island’s reefs were declining along with the sea cucumber population, which plays an important role in reef health. David’s business could increase the population of this globally diminishing marine mammal species, as well as provide replacement income for islanders who depended on the fishery.

“We’re working with local village communities to repopulate our oceans with sea cucumbers and improve our ocean ecosystem while allowing them to earn regular income using sustainable harvesting of a 100 percent locally produced export product…with a premium size, texture, and taste,” David explained in his pitch.

Fijian Filipe Rogers pitched his business processing and packaging cold-smoked tuna, a novel high-value product that tastes like sashimi. FIRUS Marina Investment pays local tuna fishers a premium price and operates the only cold-smoked fish processing plant in the South Pacific. Cold smoking is rare because it’s much harder to do than hot smoking: FIRUS starts the process as fresh tuna comes off the boat. The result is a preserved fish that’s in demand from export and local buyers. The workshop helped Felipe figure out how to negotiate with buyers and develop a growth strategy for his business.

Seeing the Business Value of a Positive Impact

As these pitches demonstrate, many of the workshop participants are making a positive social and environmental impact—they just hadn’t thought about it, or weren’t aware how much investors might value that impact.

The workshop taught them that by thinking about impact, they can go deeper and be more specific about the challenges they want to address. And they can integrate impact into their pitches. Once they started doing so, they quickly saw how important it is to presenting a compelling business model.

Workshop participants gained clarity about their strategies and goals generally. They also connected with each other and with supporters from workshop partners, including the U.S. State Department, the Pacific Islands Forum Fisheries Agency, Pacific Islands Trade and Invest, and the Pacific Islands Forum Secretariat. Connections like those are an important part of Fish 2.0’s mission—if you participate in Fish 2.0, you get business help and you build a network that can open up new opportunities for collaboration and growth.

Applications are open for the Fish 2.0 2017 competition through April 29. Sign up on the Fish 2.0 website. We also encourage investors, business leaders, and sustainability experts who want to participate in the competition to sign up now. Those who serve as judges and advisors receive priority access to the invitation-only final event.

SOCAP Conversations: Jane Reisman and Veronica Olazabal on the State of the Field of Impact Measurement and Evaluation

Posted by on April 18th, 2017

What should robust evaluation and measurement of impact investing look like? Last year The Rockefeller Foundation partnered with SOCAP to explore that question through a series of five SOCAP16 conference sessions focused on measurement and evaluation in impact investing and social enterprise. The series brought together diverse leaders from the impact community and outside experts on data, measurement, and evaluation, to share their expertise. It was clear from these discussions that there is a groundswell of interest in measurement and evaluation.

Following the conference, a report supported by The Rockefeller Foundation and co-authored by two designers of those sessions, Jane Reisman and Veronica Olazabal, was released. “Situating the Next Generation of Impact Measurement and Evaluation for Impact Investing explores various ways the impact investment field, and market-based approaches in general, can establish evidence of social and environmental impacts. We recently spoke with Reisman, the founder of ORS Impact and measurement and evaluation advisor for The Rockefeller Foundation and Olazabal, the director of measurement, evaluation, and organizational performance at the Foundation.

SOCAP: Please describe your journey to understanding the impact measurement and evaluation state of the field.

Jane Reisman: I’ve been on this journey with Veronica and her colleague Nancy MacPherson, the managing director for evaluation, who have been spearheading this at The Rockefeller Foundation. They are attempting to strengthen the evidence base for impact investing and other market solutions because the Foundation has such a strong interest in how to best leverage all forms of capital, including the private sector, to achieve ambitious goals around poverty and resiliency. The evidence base for these approaches really hasn’t kept pace with the growth of impact investing.

Veronica Olazabal: Over the last few years, we have observed tensions between the state of the field and the growth in the evidence base around impact. Part of what happened last year—a large focus of the SOCAP series as well as other discussions anchored by the Rockefeller Philanthropy Advisors, Social Value International, and American Evaluation Association—was confirming demand from the investment community. From that standpoint, last year was a big year for testing this question: Is there demand for strengthening the evidence base? Resoundingly the answer was “yes.”

What are the main headlines in the report?

Veronica Olazabal: The report begins with a review of the current state of impact investing measurement and the social sector and provides a rationale for why this topic continues to be both relevant and critical to addressing global issues. One of the main messages of the paper is that not all social sector investors are the same and thus, they do not need the same level of evidence to make decisions nor do they need to contribute to the impact dialogue in the same way. We believe that, as with financial impact, the risk-return spectrum also holds for social sector impact. Others have also made this observation. So we lay out some propositions: that measurement practices need to evolve and that new practices have to borrow from the strengths of both business and social sectors. The social sector has been working on measuring impact for over 65 years. While working under different assumptions and likely at a different part of the risk-return spectrum than impact investing, “how” to go about measuring social and environmental outcomes and impacts is likely similar enough to provide cross-learning.

Additional questions we dive into are related to what is the state of the art right now? The report does not go through all the specific examples—there have been tons of inventories of who is doing what. What we tried to do is categorize the measurement practices that are shared publicly because so many of them are proprietary—essentially segmenting approaches by purpose and needs. What we found is that the majority of investors are concentrated on standards, such as the IRIS (Impact Reporting and Investment Standards) catalog of metrics produced by the Global Impact Investing Network (GIIN) and others, such as environmental, social, and governance (ESG) approaches. We believe this is a sign that impact investors are using standard metrics as a way of saying we are going to document our impact.

Interestingly, the GIIN has been publicly stating that IRIS was never intended as the be-all and end-all, but that it was an important starting point. Building on this work, the GIIN today is going deeper and looking closely at how to align investments with impact goals—for example, through expansion of their Navigating Impact Initiative with support from The Rockefeller Foundation.

Jane Reisman: Standards are a great start, but there are also other ways of measuring and more specific ideas about measurement that go deeper toward building an evidence base—for example, performance monitoring. A great example of performance monitoring is the Lean Data approach that the Acumen Fund has popularized. It goes beyond outputs to consider social performance outcomes. Social performance is becoming very popular. Many funds are starting to develop performance monitoring and management approaches that move beyond metrics, and into “how” to measure, that is, how to collect the necessary data. We believe this is a good sign, especially since social and environmental metrics are not as straightforward to capture as financial metrics.

These are positive signs, but they are more along the lines of management and monitoring for understanding whether a fund is reaching its intended goals. These approaches do not provide deeper analysis of the whys and external factors, which are important for investors to consider. Often a distinction between monitoring and evaluation is that evaluation asks additional layers of questions to understand how things work and what’s in the way of things working and what are the unintended consequences. Evaluation uses a variety of methods to produce Rigorous Outcome and Impact Evaluations Studies. That stands in contrast to the lean data approach, which is very important for social performance monitoring and a real step forward from using metrics alone.

We also discuss the importance of understanding a market system and system factors if you want to have impact. That has not been talked about much. Looking at the service, resource, or the product alone won’t help you understand whether you’re having impact, or what’s in the way of impact. You must also look at the system factors that surround the intended impact. I recently read a great example of that in a report about internet connectivity. Even though internet technology has reached 80 percent of the globe, only 40 percent of the people it reaches are using an internet connection because factors in the market them from using it. That is when you really need to start looking at systems approaches.

We are suggesting that there is another level of evaluation beyond the business model for most individual impact investment organizations and funds. As a collective, and in many other ways, that is something that needs to be understood. This systems approach has been used quite a bit in multilateral work and as the private sector and impact investors continue to get into impact work, grounding their thinking in a systems mindset and measuring system factors will be important for producing the impact.

What reaction do you hope to see in response to this report?

Jane Reisman: This paper hopes to catalyze a convergence of methods—not looking at any one method as the be-all and end-all, but assessing the situation and determining which method will be most effective in a particular situation. We are suggesting different situations will call for different methodologies and not just a single standard. It is important to look deeper and consider the measurement approach that is being used and the goals you are trying to reach. That will help you determine what method makes the most sense.

It is really a good time for the impact investing industry and the social sector to begin working more collaboratively. They’ve been working in parallel streams and haven’t really connected very much. But over the past year, cross-fertilization has started to happen. The evaluation community is a good partner for the impact investment community in this endeavor. Instead of reinventing the wheel in the social capital markets there are lots of good ideas, tools, and methods that can be built upon and adapted to the new field. Everyone must innovate and create something new in this space.

Looking forward, are there any resources that you would point the SOCAP community to look to?

Jane Reisman: Tremendous work is happening across the globe, across disciplinary teams, and across industry teams—large investors, institutional investors, high net worth individuals, asset managers, asset owners, and evaluators and impact analysts. There are far more conversations happening in allied fields, including the microfinance community. There are five major initiatives that the SOCAP community should be aware of:

  • The Navigating Impact work being led by the GIIN;
  • The Impact Management Project facilitated by Bridges Ventures;
  • The Global Steering Committee that is a follow up from the G8 Task Force;
  • A new World Economic Forum initiative related to impact investing that was discussed in a session at the World Economic Forum in January and is the subject of an action agenda; and
  • The Social Performance Task Force, which is focusing on inclusive economies and financial service providers with social goals and that brings to the table a robust history of learning around impact measurement and evaluation.

Veronica Olazabal: Most importantly, I would say, keep your eyes open for a new generation of measurement and management. Management is as important as measurement. The GIIN created the business case for why measurement helps to manage investments for impact better. Clearly there is lots of demand and lots of commitment to strengthening the process for generating evidence and this is a real game changer.

CASE Smart Impact Capital: Online Tools for Entrepreneurs

Posted by on April 11th, 2017

A SOCAP Guest Post By Jason H. Parker

Based at the Fuqua School of Business at Duke University, The Center for the Advancement of Social Entrepreneurship (CASE) is a leading research and education center for social entrepreneurship. The program’s mission is to promote the entrepreneurial pursuit of social impact through the thoughtful adaptation of business expertise, and to help leaders leap the chasm between a good idea and sustainable impact at scale. CASE is a SOCAP Network partner.

81% of SOCAP Fellows Using Online Tools to Improve Fundraising Strategy Recommend Them to Others

Attracting sufficient capital to bring ideas to scale is often the most significant challenge social entrepreneurs face while establishing and growing their ventures.

Many first time entrepreneurs approach capital raising only to discover there are few guideposts to help them along in their journeys. And more experienced entrepreneurs can find the social capital markets, with lots of new jargon and players, confusing. The team at CASE has been following entrepreneurs as they make their way through this process for almost 15 years, including a deeper dive in the last few years as part of a global accelerator program for mid-stage entrepreneurs they have been running in partnership with USAID’s Global Development Lab. After watching too many innovators take wrong turns and suffer major setbacks, they began asking how they could empower impact entrepreneurs to better navigate the process for raising investment capital.

In 2015, CASE began collecting lessons from hundreds of entrepreneurs and investors and started to build a set of online training materials covering subjects like: preparing to talk to investors, analyzing the amount and kind of capital needed, building scenarios for different funding, understanding the array of specialized impact capital vehicles, and developing tactics to engage in great relationships with investors. CASE calls the tools Smart Impact Capital because they are designed to help entrepreneurs be smarter about their fundraising process, and avoid the common pitfalls of raising outside capital to fuel impact and growth.

Unlike timebound online courses, Smart Impact Capital was designed to allow busy entrepreneurs and their teams to engage from anywhere at their own pace with the content, including interviews with entrepreneurs and investors, short videos, toolkits for immediate implementation, and shortcut guides.

According to Cathy Clark, Faculty Director of CASE and the CASE i3 Initiative on Impact Investing who is also lead author of the modules, “We saw a real gap in the marketplace, and wanted to fill it. The materials are designed to reduce the dizzying array of information and advice available online and in reports into shortcuts and useful tools crafted and vetted by leading investors, funders, CEOs and CFOs. It’s practical, tightly edited, and it brings together information that is hard to integrate across the subfields of impact investing. Very few people are experts on pay for success contracts, program-related investments, AND crowdfunding, for example. Very few have access to expert advice on these topics from investors like Acumen, Elevar, Investors’ Circle, the MacArthur Foundation, and USAID. These modules can truly give you a leg up.”

After a year of beta testing with about 250 entrepreneurs in 13 countries, Smart Impact Capital formally launched in 2016 with several pilot partners, including SOCAP, which shared the online tools with the entrepreneurs receiving the SOCAP Social Entrepreneur Scholarship in 2016. The pilot partners are all organizations working directly with entrepreneurs, including accelerators, networks, and universities. According to Sarah Sterling, SOCAP’s Scholarship Entrepreneur Coordinator, “We were excited to be able to provide our scholarship entrepreneurs the chance to be connected with the Smart Impact Capital module as part of our Impact Accelerator. We have seen a huge gap for entrepreneurs, especially those that are in the earlier stages, in terms of knowledge and access to resources surrounding fundraising. The Smart Impact Capital session at the Accelerator, coupled with access to the online platform after the end of the conference, allowed many of our scholarship recipients to become part of a network that still supports them with resources and knowledge-sharing surrounding raising capital.”

The entrepreneurs in the SOCAP pilot  had access to the tools for three months between October 2016 and January 2017. As part of the pilot, CASE wanted to know how useful the modules were, and conducted pre- and post- project surveys as well as collecting feedback inside the tools.

SOCAP Pilot Partnership Findings

“95% of entrepreneurs reported improvement in their overall ability to raise investment capital.”

“We were so excited to see these results,” says Clark. Of those surveyed, 81% reported they would recommend Smart Impact Capital to other friends and colleagues working on social ventures. “The final net promoter score for users of the tools was 75, compared to common scores for software around 40, which shows that our users recommend this more than most brands, on a level with Apple and Amazon,” according to Clark. Users also reported:

Gained Confidence

Many of the entrepreneurs that were a part of the pilot project were internationally based and hoped to attract capital from foreign investors or partners.

  • 95% of entrepreneurs reported improvement in their overall ability to raise investment capital, with
  • 40% of entrepreneurs reporting a lot of improvement in this regard.
  • 85% indicated that Smart Impact Capital helped increase confidence in naming and justifying the amount and type of capital needed to adequately fund their company’s expansion, and
  • 35% of respondents indicating that participation in the pilot increased their confidence by a wide margin.

“I feel more comfortable speaking out in an international forum and engaging with international partners or investors because I can provide a more coherent story than before,” said Sam Gwer, Executive Director of Afya Research Africa.

Increased Ability to Articulate Strategy for Investors

“85% of entrepreneurs reported an increased level of confidence in responding to investor questions about revenues, projections, and costs.”

Another goal of Smart Impact Capital is to help entrepreneurs increase their familiarity with the way investors like to receive information, so that they can more confidently relay their company’s story, impact, and financing needs in conversations with philanthropic funders and other financial investors.

  • 85% of entrepreneurs reported an increased level of confidence in responding to investor questions about revenues, projections, and costs,
  • 80% of entrepreneurs reported an increased level of confidence demonstrating the costs and time to profitability,
  • 80% reported an increased level of confidence articulating their venture’s stage of growth, and
  • 75% reported increased confidence in articulating the key business growth areas that require funding to support.

Saw Gwer of Afya Research Africa noted that participating in Smart Impact Capital helped him craft a better story for investors, reporting that his team now feels “better able to articulate our impact and financial outcomes narrative.”

Increased Sophistication in Both Impact Theories and Cash Projections

Another goal of the tools was to integrate traditional investment thinking with cutting edge work about how enterprises create and communicate their impact. User comments showed that they found the lessons on how to develop your mission and impact theories equally useful to those on building better cash projections.

One of the modules lays out 5 types of evidence impact investors want to see, and 3 paths to meet their goals, as described recently in Forbes. “We revamped our mission statement and are in the process of updating our theory of change as a result of Smart Impact Capital,” said Andrew Foote, CEO and Co-Founder of Sanivation. Andrew also reported that his team most benefited from the third module, Calculating Your Funding Gap, which provides clear instructions and a template for creating a robust financial model. “It was one of the most clear and comprehensive lessons,” reported Andrew.

“A lot of thought has gone into packaging the information provided in the Smart Impact Capital modules,” reported Sam Gwer of Afya Research Africa, who trained as a medical doctor before founding his venture in Kenya. “The simplicity and yet effectiveness of the knowledge sharing process demonstrates deliberate hard and smart work to make things understandable, even for someone from a different professional background like me.”

The Future of Smart Impact Capital

The partnership between SOCAP and Smart Impact Capital is just one example of how organizations that support and train entrepreneurs can engage with Smart Impact Capital to increase knowledge and capacity in the entrepreneurial sector.

As the rest of the nine module series is finalized and released in 2017, CASE is working to establish additional partnerships with organizations that support mid-stage social  and mission-driven enterprises. The materials are particularly well-suited to enterprises that already possess a revenue model, are considering seeking investment capital, and have begun to gain traction with their customers, though earlier stage ventures can use the tools to consider what they can do now to get ready for investment later.
Interested in learning more about Smart Impact Capital or getting involved? Complete the very brief signup form on the Smart Impact Capital webpage.  And check out the sample video below that uses a simply butterfly analogy to illustrates how the supply and demand sides of the impact capital market interact.

The Social Capital Markets Conference is now accepting applications for the 2017 SOCAP Entrepreneur Scholarship. Apply here. The deadline to apply is June 1st for international applicants who need an early decision and June 30, 2017 for all applicants.


Jason H. Parker is a writer, reporter, and organizer for the startup community. Follow him @jasonhparker.

Momentum is Growing for the GCP

Posted by on April 10th, 2017

We are very excited about the energy and excitement surrounding the Good Capital Project and the way the impact community is coming together since word first went out about the GCP.

Last week, we announced our first list of committed partners and participants. The Good Capital Project is proud to have already received support from members of the development, Wall Street, academic, and impact communities. New participants continue to join the GCP every day.

If you want to hear why leaders of these communities are excited to be involved, please follow our Why GCP blog series. Prominent GCP collaborators from across the spectrum are sharing their valuable insights, hopes, and recommendations for the Good Capital Project with us now. In the coming weeks, we will share these interviews with you. You can now read our Why GCP: Interview with John Kohler from Miller Center for Social Entrepreneurship. Over the next ten weeks leading up to our launch event, we plan to talk to members of all of the different communities that support and are involved in the impact investing and social enterprise ecosystem.

GCP Schedule and Updates Coming Soon

Over the next few weeks, we will be sharing more details about our launch event in New York City on June 19, and about the future of the Good Capital Project over the next two years. Register for our newsletter to receive these and other critical updates.

GCP tickets are available at a special discounted rate now. Make sure to buy your tickets before the price increases on April 14th if you have yet to secure your spot!

Scholarships Now Available

We want the Good Capital Project to include all constituents so that this initiative will be informed by the learnings, best practices, successes and failures of our collective efforts. To help make sure that as many sectors as possible are represented, we are offering both full and partial scholarships for individual entrepreneurs, nonprofits, and others to be a valuable voice in this conversation.

Get Your GCP Tickets Here

Why the Good Capital Project: Interview with John Kohler from Miller Center for Social Entrepreneurship

Posted by on April 5th, 2017

The Good Capital Project will convene for the first time this June in New York City. This new SOCAP initiative will bring together a cross-sector collection of experts, practitioners, industry leaders and other stakeholders to drive greater collaboration and accelerate capital flows into purpose driven investments. In the months leading up that event we will be interviewing key pioneers and leaders in the impact space who have partnered with SOCAP to help make the Good Capital Project a success.

John Kohler serves as Executive Fellow and Sr. Director of Impact Capital at Miller Center for Social Entrepreneurship. He is co-founder and Director of Toniic. He is an active impact investor and leads impact manager training for ANDE.  Kohler brings his experience with technology companies, start-ups, and 15 years in venture capital to his role at the Miller Center.  He recently published a report through Miller Center entitled: “Total Portfolio Activation for Impact: A Strategy to Move Beyond ESG” and has several previous publications on impact investing.

What led you to become involved in The Good Capital Project?

I received an invitation from Kevin Jones whom I’ve worked with to generate content and thought leadership for SOCAP. The Good Capital Project will be an expansion of the scope and perhaps leadership that SOCAP provides to the sector. The connection of money and meaning has been the byword for everything that SOCAP has done. It has been localized to a major event on the west coast. They’ve had some SOCAP sessions in Europe in year’s past and some convenings on the East Coast through the Impact Hub. I think that the idea of Good Capital is really an evolutionary jump, saying look, let’s bring the key stakeholders not only from capital deployment, but also from measurement and from capacity development, and include a strong international voice. From a practice standpoint, let’s talk through how we move beyond the wonderful, but siloed efforts into more coordinated efforts in the impact sector.

Why is collaboration in this industry so important?

The practice I’ve seen within venture capital, involves a more uniform approach in terms of the capital deployment to support start-ups, the objective to create significant value and become rewarded for undertaking the associated risks. There is also more homogeneity with the investment tools employed, which is primarily equity, and the single minded nature of portfolio assembly. In other words big markets, disruptive technology, and global expansion.

In contrast, the impact investing sector is comprised of a much more heterogenous group of stakeholders, some coming from government development programs, such as DFID and USAID, and some program related support coming from foundations and corporations which address stubborn problems of poverty such as eradication of diseases, or providing maternal care, education, food security, and so on. Some of the participants want to help small businesses grow in certain communities as a different approach to solving poverty. And some  are motivated by the fact that the next two billion people on our planet will be added in base of pyramid markets-and they see that as a huge opportunity. So there are many different stakeholders here. The wide variety of actors, intentions, desired outcomes, and forms of capital, amplifies the need for collaboration.

In terms of capital tools that can be used, we have many different forms that reflect the nature of each impact sector participant.  These include grant capital or concessionary loans, program related investments (PRI), and traditional investment capital. The actors and the form of investment they employ need to learn how to ‘play’ together nicely. Because we are usually working in less than fully developed economies, we often have less than fully developed efficiencies of scale. There are any number of issues affecting start-up success, such as bad monetary policy or regulatory mishandling or sudden changes in import/export bonds or currency devaluation…etc. which can make it more difficult rather than easier for small businesses to develop. Consequently, social enterprises need a longer gestation period than might be expected in New York or London. They need more hand holding, or what we would term business support, and all of these stakeholders are playing a role in ultimately determining what could be successful. This is another reason why I think that collaboration is needed.

What are the three biggest challenges facing the space?

We need to identify the appropriate capital to support an investment-ready enterprise. We need to recruit both or help develop both. That is the first challenge. That marriage is still rough. We often have a lot of mishandling with expectations held by both the entrepreneur and investor.   This results in skittish investors and a longer fund-raising cycle for entrepreneurs.  I often ask our entrepreneurs this question:  “Is the promise you are making to your prospective investor one that your business model will allow you to keep?”  The answer is often “no”.

The second big issue is to get reliable return of capital. If the thesis with impact investing is to used business and market building mechanisms to create prosperity from within underserved communities and solve some of these problems like access to water, electricity, or food security, then we have to demonstrate a ‘round-trip’ of that invested capital.  At this juncture, reliability of return is more important than absolute return.  Developing more investment-ready start-up businesses and utilizing more appropriate investment tools like risk debt or variable payment obligation (VPO) structured exits will help increase the success ratio of impact investing.

A third challenge is that we need a simple set of consistent metrics for the impact being earned. I think a related challenge is to not allow impact to become green-washed. The way we get meaning with a “capital M” is to measure it with a “capital M” in a way that is very easy to do verifiable, and with a distinct outcome that stands above lighter definitions of “impact” that we sometimes encounter.

What are the three biggest opportunities?

First, we need to invite in, or shepherd in, new actors who are already showing signs of interest, including people from the INGO community and people from mission based organizations (from Pope Francis on down) who want to move beyond ESG and take a direct role in helping create beneficial outcomes through impact investments. Additionally, more traditional financial advisors who are coaching high net worth clients or asset owners who are running a family foundation and want to understand how they might organize a portfolio of 100% impactful investments need to be invited in. So that is an opportunity to bring in people who might have used a different tool in the past (philanthropy), but in their hearts and in their actions, they have the same objective and now they want to embrace impact investing.

The second opportunity is to concentrate on some of the game changing or leap-frog technology developments. These are technology innovations that allow poorer communities to avoid large infrastructure investments that have been holding up progress such as implementing electrification, water distribution, last mile health services…etc. How do we use some of these technologies to put in micro grids for electrification or micro-insurance for income protection against crop and climate disasters?  We’ve seen that already happen with mobile money services where we’ve been able to skip having banks build brick and mortar branch offices and instead jump right to the ability to have depository services to cell phone accounts and later to be able to have credit access in those same accounts and institute a form of banking that heretofore hasn’t existed. So, there is an opportunity there to keep on that innovation path because very many revolutionary developments are being thought of that can help poor communities jump into being included in the global economy.

The third opportunity is making sure that, in our own efforts, we don’t forget there are a lot of young people who are starting from a values orientation versus from a “how do I make a lot of money and build my career” orientation. Today’s students are really well prepared. They are amazing young people and they begin their careers with a values orientation. They want to vote their values first before they vote their income. Income is secondary to the type of job they choose. If we cater to, or at least include, this current generation then I think we will see a lot of motivated young adults who have bright ideas that will help the other two opportunities come to fruition.

What would you most like to see come out of The Good Capital Project ?

Well, it is very ambitious endeavor which is great because incrementalism isn’t going to move the needle here. So what I would like to initially see out of the Good Capital Project is a discussion where we rethink a coordinated approach to existing problems in a way that gets the actors working together.

There could be emphasis on best practices and there could be an identification of six or seven key initiatives which Good Capital would start working on. My hope would be that rapid progress is then achieved through formation of sub groups of interested and motivated parties.

Have the foundation of Good Capital be organizations that can fund or lend effort or talent to take the best of what we are doing today, rethink it and try to create much more efficacy. Whether it is achieving greater, more reliable capital or inventing new instruments or deciding on and really promoting a simple but effective and accurate measurement tools, the goal should be an evolutionary blueprint that we can all buy-in to. Whether we are looking at new instruments to allow for better capital or layered capital to allow different investment capital that have different objectives some might be development directives some might be return objectives to participate at the same time. Whether we have simple but effective measurement space on Sustainable Development Goals (SDGs) or derivative works on the SDGs and ways of gathering that in the lean data way, such as Acumen is talking about. Whether we tackle how do we have a shift of the deal generation and support for impact investments come from the global south as opposed to driven by the global north. Any number of conversations that we have could flip the game in our favor so that is what I am hoping for.

As a key leader in this space, is there anything you are working on that you are particularly proud or excited about?

At Miller Center, for the past many years, we’ve taken an integrated approach–we’ve had a social entrepreneur facing aspect to our work and an investor facing body of work. We also enrich the educational experience of the students that are at our university through our programming, but the work is all very practiced based. So what we’ve learned with our entrepreneurs we feed to the investors and what we’ve learned from investors we feedback to our entrepreneurs. We’ve been very active in this way and I think it positively informs our perspective in terms of the true needs and nature of entrepreneurship around the world.  We have paid particular attention to achieving investment readiness for the enterprises that come through our programming.

The second development is that we’ve pioneered different forms of investment other than equity. We love equity in Silicon Valley. We love using equity as a tool. But it is not always the best tool with social enterprises. One of the topics we’ve been presenting at SOCAP over the past couple of years has been how to rethink capital formation for social entrepreneurship, where risk capital can be more widely available while increasing the likelihood of successful investment return.  We also like to promote impact capital as ‘continuous flow’, from philanthropy to investment return.  Too often we see investor mind set rooted in one or the other pocket and not imagining that there is investment opportunity that lies in-between.  This can restrict the amount of impact capital that participates with our entrepreneurs.  Developing confidence building ways of investing such as new tools or impact across asset classes will help the interested but hesitant capital that sits on the sidelines today.

Finally, I think there is always a rapid and innovative set of ideas that come up every year.  We are happy to have Miller Center participating in the Good Capital effort.


 

Learn more about The Good Capital Project here.

Join the Good Capital Project Launch Event on Monday, June 19, 2017 at Convene in NYC.

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