While we hope to send out the Good Capitalist on a somewhat regular basis, to be honest, I usually put an issue together when I have something that has caught my attention that I feel our impact investing community needs to be aware of.
We focused a bit on the sharing economy at SOCAP13, but it has begun to gather speed in a way that the investment possibilities are growing. (To read more about these investment opportunities see Jeremiah Owyang’s great report ). My perspective here is a bit more philosophical because I believe the people doing impact investing and those working in the sharing economy have more in common than they imagine.
At SOCAP, we believe the millions of people involved in the sharing economy can be very valuable strangers for impact investors to begin to make common cause with. Enlisting them as retail investors or pooled in a targeted donor advised fund are two immediate ways that I think could be productive. Despite the flood of capital from huge sources like Google, and funds like Andreesen Horowitz, Benchmark and super angel Ron Conway’s ecosystem, there are people who are saying venture capital, which has to be, by nature, extractive, will not work in an economy where the buyers and sellers are empowered and own the means of production.
Janelle Orsi, a respected thinker, is suggesting T Corporations – a rebranding of cooperatives without 70’s hippy era cultural baggage. It is clear that the people should own these sharing economy businesses, rather than having them be vehicles for investors to extract extraordinary value. It is clear, that is, because this is the post-barista economy; the people providing the services are owners – of cars, apartments, etc. They will react even more drastically than the 9,500 crowdfunders of Oculus did over giving money to the company and seeing them sell a year or so later to Facebook. If people buy in to build the company, you can’t sell out, or the brand risk, the risk that they will take their cars, apartments or talents to another service, is huge. Keeping trust of your empowered providers of stuff and services is competitive advantage and brand equity in the sharing economy
These T Corporations will still need growth capital within this new social paradigm. Impact investors could have an edge in engaging with this group. And, as investors who know how to handle the trust of a community, impact investors are better suited, by their DNA, to do that than traditional Sand Hill VC’s who are all about extracting as much cash as they can as fast as they can.
As these T corporations arise, and they will arise because community/seller/service provider ownership is the best vehicle to encapsulate the economic value in these trust-dependent companies in the sharing economy, there will be opportunities for impact investors to attract the best entrepreneurs. And there will be, I predict, an opportunity for an impact investor led institutional venture fund that could invest in cooperatives. Impact investors could understand the goals of freedom and empowerment that are behind the sharing economy and engage well with those cooperatives as they arise, providing the network support, capacity and investment to help them reach their goals, working with the people powered networks of the sharing companies.
To deploy capital well here would require a lot of movement building, community organizing skills, engaging well between grass roots efforts and social media, and collective ownership of the brand. Impact investors POSSIBLY understand that landscape better than traditional investors. They have been investing alongside communities for decades.
Impact investors, as they become more culturally literate, could handle the power dynamic the sharing economy investees would want. They would want to be part of reengineering the economy, using growth capital to build what they want. It might be the people are in charge and the growth capital fuels the group’s goals. That’s one scenario, anyway.
The relationships that could occur between these two groups, would lead to a mutually satisfying alignment of values that could cause investment to go toward things impact investors want to get done. It would be a collaborative relationship between investor and investee that most institutional investors have not experienced. The possibility for mutual value creation between the people at the heart of the sharing economy, the peers, and impact investors is huge.
P.S. There is as lot more to be said about this, and a lot more thinking to be done, and we are kicking this conversation off in real time at the SHARE Conference in San Francisco May 13-14. Come be part of engaging with what could be the most valuable group of strangers the SOCAP team has brought you yet.