You may have missed SOCAP10, but the video plays on!
Thank You!
Posted by admin on September 29th, 2010
SOCAP10 was a resounding success! Over 1200 people gathered at the intersection of money and meaning to answer the question “What’s Next?” One last time, we ask you that same question. How can we bring the intersection of money and meaning to our street corners, communities, and the lives of those around us for the lives of those who need it most? We look forward to seeing you again next year. Until then, check out our videos, pictures, and community site!
RECAP SOCAP at the SOCAP Community Site!
Posted by admin on September 29th, 2010
Don’t let the conversation stop! The SOCAP Community is the place to learn about new announcements and opportunities for funding, employment, partnership and idea creation!
Whether you attended or not, you’re invited to the market atthe intersection of money and meaning!
Join here
Adin Miller Profiles SOCAP10 Impact Challenge Winning Post
Posted by Cameron Campbell on September 29th, 2010
Can the Social Innovation Fund Tap into the Impact Investment Market?
Last week the SOCAP10 producers announced the winner of the SOCAP10 Impact Challenge, a competition launched in July. The competition, designed by SOCAP, Triple Pundit and Myoo Create, challenged competitors to address the “Money for Good” report (PDF) by Hope Consulting and “explore what’s next in social enterprise” in 500 words. Kyle Westaway’s post was selected by the SOCAP10 producers as the winner for which he was awarded a complementary pass to the conference.
Kyle’s post suggested that there is an opportunity tap into the $120 billion impact investment market by directing individual investments into social enterprises. Specifically, he proposed leveraging Low Profit Limited Liability companies (LC3s) that would offer two avenues for capital: one targeting philanthropic institutions and the other targeting the individual investors at the heart of the Money for Good report. For the philanthropic avenue, he recommended scaling up the Social Innovation Fund (SIF) through additional government funding and philanthropic donations. That scaling up would provide the SIF with an additional $200 million from the federal budget and another $250 million from private donors who have taken the Billionaire Pledge.
In total, the SIF would then have $500 million to allocate in a given year. Instead of distributing the funds through grantmaking intermediaries as grants, which would in turn fund local nonprofits through subgrants, the SIF would morph into a program that would focus on making social impact investments with an expectation of a financial return.
It’s a fascinating idea, but I question whether the SIF is the appropriate home. The SIF has generated $123 million in a combination of public and private funds. By its nature as a federal government program, though, the SIF is not a conducive means for taking risk. Much of the criticism directed at it by me and others has focused on its inability to take high risks with its funding resources. But in some sense, it’s in the business of minimizing risk exposure with public funds. For example, the results from its first round of funding awarded grants to organizations that have demonstrated effectiveness instead of high-risk entities with innovative and potentially disruptive ideas that do not have significant track records of success.
Nor is the SIF agile and flexible enough to take advantage quickly of emerging opportunities in order to fund them. Instead, it has to publicize drafts of guidelines for future funding opportunities, solicit public feedback and comments, revise, and then publish the final guidelines before it can even get to the point of reviewing possible ideas to fund. That’s not a process designed to move quickly.
The first SIF round of funding started in December 2009 when the draft guidelines were published for feedback; the intermediary grantees were announced in July and some are still in the process of soliciting subgrant applications. In other words – it takes a long time to get federal funds out into the community.
Last, until the SIF could recoup its investments through the Presumed Abundance model of funding it forward outlined by Kyle, it would need to generate additional investor support on a yearly basis in order to maintain its investment position. Otherwise, it might simply revert back to a $50 – 250 million federal budget. Ideally, individual investors would be willing to participate in multiple years of investments, although I suspect that might be a challenge.
Kyle’s post presented a really creative idea worthy of winning the SOCAP10 Impact Challenge. The funding it forward idea resonated strongly with the readers that commented on his post. Leveraging the LC3 structure also received strong support. At this point, I’d love to see the idea pushed further along, but with either a private or nonprofit replacement for the SIF. Expanding on a comment by Stacy Caldwell, president of Dallas Social Venture Partners, this would be a great discussion during the open space day at SOCAP10.
-By Adin Miller (Cross Post from Adin Miller Consulting)
KYLE WESTAWAY: SOCAP10 IMPACT CHALLENGE WINNER!
Posted by Cameron Campbell on September 29th, 2010
Congratulations to Kyle Westaway, who won the SOCAP10 Impact Challenge. He received his $1195 pass to all three days of SOCAP10. Here’s the submission that addressed how to unlock the $120 billion dollar market opportunity in individual impact investment. The top 5 are being featured on Triple Pundit.
“I am a New York-based social entrepreneur, attorney and blogger. I believe in the power of the market to affect social change. I serve as the Director of Operations and Business Development for Biographe – a sustainable style brand that employs, empowers and restores survivors of the commercial sex trade in Southeast Asia. I also founded Westaway Law – an innovative boutique law firm that serves activists, entrepreneurs and artists who have a dream to create something that will shape culture. I blog about the legal side of the social enterprise movement at www.socentlaw.com.” (Bio from blog.goodness500.org)
Here’s the winning post.
2 SIMPLE KEYS TO UNLOCK $120 BILLION
By Kyle Westaway
A combination of innovative legal and financial structures must be engaged In order to tap into the $120 billion market of individual impact investors.
Legal Structure:
The Low Profit Limited Liability Company or L3C, is a new type of LLC designed to attract private investments and philanthropic capital in ventures designed to provide a social benefit. An L3C may offer two tranches of capital. The first tranche could be offered to foundations (greater risk). The second to tranche offered to socially conscious individual investors (lowered risk). This new hybrid legal structure could incentivize investment in social enterprise by allowing socially-minded institutional money to absorb the biggest risks, thereby offering a low risk high return opportunity to the individual investor.
Financial Structure:
The L3C structure creates interesting opportunity for funding, but the question remains, who are these socially-minded institutional investors that are willing to assume a potion of high risk and low financial return?
The answer: scale up The Social Innovation Fund (SIF) and match it with Philanthropic money. Currently the SIF is $50 million. My proposal is to increase it to $500 million total. $250 million granted by the Office of Social Innovation and the other $250 million is donated from private individuals as a part of the Billionaire Pledge.
Public grants and traditional philanthropy’s aim is to create the highest social impact, with no expectation for financial return. In contrast, investing in social enterprise (rather than merely donating) achieves social impact with a potential financial return to SIF. That return will be used to make new investments in future social enterprises, thereby exponentially increasing the social impact of the original investment.
The SIF could select and invest in social enterprises by taking a high risk tranche of equity in the selected social enterprise (if structured as an L3C as outlined above). Then the enterprises can raise the additional capital requirements from individual investors, where consumer investors can take a lower risk position, with a higher rate of return. Thus, SIF serves three functions: 1) taking the least desirable tranche of capital, 2) sweetening the deal for individual impact investors, 3) vetting potential impact investment opportunities for the individual impact investor.
Furthermore, the SIF should also follow the Presumed Abundance model of model of funding it forward. When the venture has a liquidation event (goes public, or is bought out, etc.) the SIF and the successful social entrepreneur together choose how to reinvest the SIF’s share of the profits into new enterprises under the same terms as the original agreement. So, the social entrepreneur that received the original investment, now gets to be a part of the decision-making team to choose the social enterprise that will be funded with her profits, and thus the next generation of social enterprise is funded.
Thus, by scaling up and tweaking the SIF and using the multiple tranche mechanism in the L3C, the $120 billion of individual impact investment will start to flow into social enterprises that will change the world for generations to come.