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Friday, Dec. 14, 2012
Earlier this week the Center was delighted to host a holiday reception to celebrate the accomplishments of the last year, like the graduation of several GSBI Online cohorts, and the first year of our GSB Fellowship program.
The main event of the evening was John Kohler's presentation of his new research proposal for a demand-dividend investment vehicle for impact investing.
The Demand-Dividend project work will include final financing model design, a regression analysis on existing enterprises, and the creation of flexible term sheets. The Argidius grant will fund the field-oriented phase - preparing to test the new financing model with between four and six enterprises beginning in early 2013. Planning and initial diligence visits will occur in the autumn of this year.
Two years ago we launched a dedicated Impact Capital initiative with the aim of preparing social enterprises to move beyond philanthropic grants to attract private investment capital. Early work culminated with the release of a white paper, Coordinating Impact Capital
in the summer of 2011.
You can read more about the demand-dividend project in our press release
Thursday, Oct. 18, 2012
Team of SCU Students and Silicon Valley industry veterans among five winners of the Argidius-ANDE Finance Challenge
SANTA CLARA, Calif., Oct. 17, 2012 – A team of Silicon Valley industry veterans and students at Santa Clara University’s Center for Science, Technology, and Society (CSTS) has been selected to design and implement a new investment tool with the potential to aid thousands of small and growing businesses in emerging economies.
This two-year project is one of five winners of the Argidius-ANDE Finance Challenge, a highly competitive international competition administered by the Aspen Institute Network of Development Entrepreneurs (ANDE). The Santa Clara team will receive a €200,000 grant to support the design, analysis, and field-testing of the new investment vehicle.
The Problem: Angels but not Investors
Financing for small and growing businesses in developing economies is constrained by the low level of return from investments already made to date. Most “impact investors” have seen their investment holding period lengthen from 3-5 years to 7-10 years. Without more understanding and confidence in the ability of social enterprises to provide return, equity investors are hesitant or unable to commit new funds.
Achieving reliable and repeated returns would make not only existing dollars available to new investments, but it would also improve investor confidence to commit new capital to what are now seen as difficult or ‘frontier’ markets. So far, debt and equity mechanisms have failed to offset the risks inherent in developing markets with enough reward to encourage new investors.
For small enterprises promising moderate (7% - 14%) returns from moderate ($25K - $250K) investment amounts, a new solution is needed. CSTS believes a risk-capital investment vehicle that is a hybrid between low-return debt and high-return equity is needed – and could encourage significant funding currently sitting on the sidelines to jump into emerging markets.
The Solution: Demand-Dividend Investment Vehicle
Responding to interest in a new model, CSTS Impact Capitalprogram director John Kohler has begun work on a financing concept. The Demand-Dividend project work will include final financing model design, a regression analysis on existing enterprises, and the creation of flexible term sheets. The Argidius grant will fund the field-oriented phase - preparing to test the new financing model with between four and six enterprises beginning in early 2013. Planning and initial diligence visits will occur in the autumn of this year.
CSTS is uniquely positioned to receive this grant. They launched a dedicated Impact Capital initiative in 2010 with the aim of preparing social enterprises to move beyond philanthropic grants to attract private investment capital. Early work culminated with the release of a white paper, Coordinating Impact Capital in the summer of 2011.
John Kohler recently presented on the Demand Dividend concept at SOCAP12 in San Francisco on October 3, 2012. Visit John's SOCAP12profile for more information.
Taking the VC out of the Valley
Successful demonstration of a Demand Dividend investment vehicle will create ‘economic pull’ by delivering what impact investors do not readily achieve today: moderate to high return with a more-rapid capital cycle.
CSTS has received expressions of interest from 11 impact funding sources and, with demonstrated success, will encourage these funds, as well as its many fund contacts through ANDE, Toniic, Oxfam and its Silicon Valley network, to use the Demand Dividend. The Center also will be co-leading an examination on alternative investment being conducted at the University of Michigan Law School, which will be instructive to the Argidius-ANDE Finance Challenge results.
About the Center for Science, Technology, and Society
The mission of the Center for Science, Technology, and Society is to accelerate global, innovation-based entrepreneurship in service to humanity. Through an array of programs including its signature Global Social Benefit Incubator (GSBI™), the Center engages an international network of business, investment capital, and technical resources to build the capacity of social enterprises around the world. As a Center of Distinction at Santa Clara University, the Center leverages its programs to inspire faculty and students with real-world case studies, distinctive curricula, and unique research opportunities, advancing the University's vision of creating a more just, humane, and sustainable world. More information atwww.scu.edu/socialbenefit
Deborah Lohse | SCU Media Relations | firstname.lastname@example.org |
Erin Berkenmeier | CSTS | email@example.com |
Thursday, Aug. 2, 2012
This article was originally posted in the Forbes Blog. You can view the original article here.
The following guest post is by Al Bruno, cofounder of the Global Social Benefit Incubator and the William T. Cleary Professor in Santa Clara University’s Leavey School of Business. He is also the founder of the school’s Center for Innovation and Entrepreneurship.
For the past decade, my colleagues and I have helped more than 150 social entrepreneurs from all over the world hone their business plans, which they are able to pitch for 15 exhilarating minutes to Silicon Valley financiers and executives. Through our ten years running this mentoring program, called the Global Social Benefit Incubator, we’ve culled some top tips for anyone looking to develop their business plan and pitch it to potential funders or partners:
1. Prove that you know how your customers make decisions. Virtually every social venture we counsel asks its customers to change entrenched behaviors and make a different decision for spending their precious dollars: to pay for clean water instead of making do with dirty water; pay a few pennies for sanitary pads rather than stay home five days a month; invest in clean solar lights that initially cost more than toxic kerosene. Understanding how such customers or beneficiaries decide to spend – or not spend – can be one of the biggest challenges for any kind of venture. What will prove persuasive to get them to change? What evidence do you have that they will change?
2. Understand how your product or service works on a per-unit basis. To grow and thrive, you need to be able to “scale up” the value you bring to your current customers or beneficiaries. This requires a clear understanding of your marginal costs – how much it will cost to produce the next unit – and the prices that your customers are willing to pay. Typically this means adding in costs to expand production and distribution (which many entrepreneurs forget to factor in) in a way that grows the bottom line.
3. Document your key assumptions and provide a plan for testing them. Experienced funders and partners will want to test the assumptions that you make about customer buying behavior, markets, financing, etc. Do the work for them by setting metrics that can be tracked. India-based Naandi Foundation projected it could sell clean drinking water to 40 percent of its target market. To test that, Naandi employees who educate consumers on clean water’s benefits were enlisted for market research. They learned that customers wouldn’t travel to far-away water kiosks, so they added a bicycle delivery service – enabling them to exceed rather than miss their target.
4. Don’t overlook the “packaging” of your presentation, and be strategic with story-telling. Of course, the content of your business plan and presentation matters most, but packaging is more important than you think. Your audience is human, and you must use persuasion to get them on board. Utilizing video clips, “neat” graphics and a compelling – though not overdramatized – story of one beneficiary or group can grab the audience far better than a dry recitation of facts.
5. Be honest— even if you see opportunity slip away as a result. The starting point to being successful is to be brutally honest with yourself and with the stakeholders in your venture. While hyping the size of your target market to epic proportions may seem necessary to catch a funder’s attention, failing to live up to that hype during the diligence period can burn that bridge and many more. Be restrained and conservative in your projections — such as by overstating your expected costs and expenses, and understating your expected revenues — rather than the opposite.
6. Target and time your requests for funding to significant milestones in the evolution of your organization. A recent report indicates that one major “social impact” investing fund, the Acumen Fund, looked at more than 5,000 opportunities in the past 10 years and invested in only 65 of them. Why? The social entrepreneurs did not understand the business stage and maturity that Acumen seeks before it makes an investment. Do your research to pick the right prospective funders — be they grant-makers, equity investors, or lenders – and time your request at the appropriate stage of your corporate growth. And remember that what you have accomplished to date is history. What you hope to accomplish with the contributed capital is what is important to your funder.
7. Emphasize that you’ve built a strong team and organizational infrastructure—or show how you plan to achieve that vital goal. Funders and partners know that having capable people in key roles is critical to your success. Unfortunately, developing countries often can’t supply the key team members or qualified employees you need to scale. India-based Husk Power Systems (a GSBI alumni company) has addressed this problem by forming its own training entity— Husk Power University— to train the workers it needs to staff the 75 + power plants it currently operates, and to provide employees for future needs such as its move into Africa.
8. Show how you use or plan to use partnerships and alliances. Forming strategic relationships with other organizations can be a means to add complementary products or services, stretch scarce resources, or access markets through otherwise-inaccessible distribution channels. Another GSBI alumni company, Hapinoy, partners with the largest microfinancier in the Philippines to provide financing for its network of rural retailers, and teams up with local bus drivers to deliver essential goods to remote locations.
9. Build in governance and oversight into your plan. It is critical that you have strong oversight and governance to ensure appropriate and objective decision-making. Not only can external participants, such as board members, add useful insights to your thinking, but they also can reassure investors that there is an additional set of eyes and minds at work protecting their money from risk.
10. Be a feedback fiend. In addition to getting feedback from customers, expose your ideas and thinking to trusted advisors, mentors and investors to refine your pitch. Most importantly, listen to their comments, observations, and criticisms so you can address them in your next pitch. You must demonstrate that you have anticipated key concerns and have thought through the issues.
Want to see all this in action? Come hear about innovation that can change lives at the GSBI 2012 business plan presentations on August 23, 2012 in the Mayer Theatre at Santa Clara University. For more information, see http://www.scu.edu/socialbenefit/entrepreneurship/gsbi
Tuesday, Dec. 13, 2011
Kiva.org is the fruit of a philosopher who asked a practical question: what could I do to help very poor people improve their lives? Matt Flannery visited Africa and discovered that a very small amount of money could help people in big ways, and that people in existing communities of trust would ensure that a loan was repaid. With some friends and family members, Matt started making a few loans. Kiva.org is now one of the most visible micro-lending institutions in America. Matt visited Santa Clara on November 9, and told stories of how this came about.
Every time I hear news about the big banks, the ones too big to fail, I get a bit more cynical. The enormous salaries to men whose banks’ bad behavior brought the American economy to its knees, credit default swaps so complex their inventors could not understand them, secret loans made by the feds to banks, government bailouts used to fund lobbyists to fend of regulation...these stories prompt in me a question: is the whole banking industry a parasite on society? The occupy movement does have a point here.
Starting a bank was the farthest thing from Matt Flannery’s mind, but he found, as I have, that one cannot foster human flourishing for poor people without providing them access to some capital. Matt was a computer programmer at TiVo with a Masters degree in philosophy, so he came to banking through a nonconventional path. He didn’t get into this line of work to make money, but rather, to alleviate poverty. Perhaps it was the ethicist in him that perceived economic options where others saw nothing but risky loans. In the Ugandans he met he found people alive with hopes and dreams, and he activated his networks back in America to partner with them. To accommodate the compassion of micro-loaners like you and me, he created a website to share the stories of people who needed credit, and Kiva.org was born.
This form of economics has nothing to do with the predatory or parasitic practices that foster cynicism. Instead, it’s based on mutuality through the international sharing of stories. Micro-loaners here in America learn about the needs of the poor, working so hard -- but unable to escape the traps of poverty without credit--in poorer countries over there. By exchanging stories, Kiva.org fosters practical compassion. People do want to make a difference, and by making a micro-loan, they can. Kiva.org facilitates this exchange.
Matt clearly loves what he does, and he has apparently found his life’s work. He used his computer programming skills to help countless people. From another perspective, his is a very old solution. In response to interest rates of >40% during the late Middle Ages, members of my religious order, the Franciscans, devised and launched local credit unions to provide loans at a fraction of this rate. These were the forerunners of the modern banking system....and this from a religious order that takes its vow of poverty quite seriously!
Fostering practical justice means understanding the economic reality of people who are poor, and just might be able to make it out of their poverty trap with a loan. Cynicism of American banking may be warranted, and the occupy movement may decry greed, but understanding how well conceived economic interventions based on solidarity can make a huge difference in the lives of others seems highly appropriate for a Catholic university that prides itself on teaching conscience. It is my hope that the Global Social Benefit Fellowship can help some Santa Clara students learn this.
Keith Douglass Warner OFM is a Franciscan Friar and the CSTS director of education.
Watch the Video of Matt's Kiva talk from November 9th, here.
Posted by Keith Douglass Warner OFM |
Tuesday, Dec. 6, 2011
On behalf of the Center, we wish happy and healthy holidays to all of our GSBI alums, Tech laureates, partners, mentors, advisory board members, supporters, and other friends.
Last year, we set an audacious goal to promote the use of science and technology to benefit the lives of 1 billion impoverished people around our planet by 2020. The Center sharpened its focus in 2011 on three social benefit programs that enable progress towards this vision: entrepreneurship, through our signature Global Social Benefit Incubator™; innovation, including the rapidly evolving frugal innovation initiative; and social capital. According to the United Nations, the global population reached 7 billion at the end of October this year. Fully 4 billion, or 57%, are living in poverty at the “base of the pyramid.” Andy Lieberman’s article in the San Jose Mercury News captures well the power and potential of social entrepreneurship and innovation to solve the pressing needs of the global poor.
Our sector focus on off-grid, sustainable energy continued, enabling a successful launch of our Energy Map
, which has won praise from numerous impact investors, foundations, and development agencies for its deep and thorough characterization of technology solutions and business models to meet the needs of the 1.5 billion people living without electricity and nearly 3 billion using wood fires or unsafe traditional stoves for cooking. Based on practical knowledge from GSBI applicants, we’ve started to explore “contextual” factors, such as government policies, that facilitate or inhibit adoption of appropriate technology solutions and business model innovations for off-grid, sustainable energy, including speaking at the OECD’s Better Innovation Policies for Better Lives
Forum. Because our knowledge continues to deepen, we plan to continue the energy sector focus, particularly relevant given the UN’s declaration of 2012 as the Year of Sustainable Energy for All.
Our amazing 2011 GSBI Class
included 11 social enterprises focused on off-grid energy, the highest number and percentage ever. We also made significant progress towards gender equality with 8 women entrepreneurs of 18 total, again the highest number and percentage. In concert with the rapid emergence of social entrepreneurship in Africa, 6 of this year’s class serve communities there, with the remainder including Cambodia, Guatemala, Haiti, India, Mexico, the Philippines, Slovakia, and Thailand.
With the enormous caveat that there are many forms of social benefit and no universal metric for assessing impact, analysis revealed that our 140 GSBI alums have collectively impacted the lives of 74 million people. Our strategy to positively impact the lives of 1 billion by 2020 is simple: help more social entrepreneurs help more people.
GSBI program extensions in development include GSBI Online and the GSBI Network. GSBI Online could potentially train hundreds or thousands of social entrepreneurs all over the world through proven core modules of our program. The GSBI Network leverages the International Association of Jesuit Business Schools to foster the development of GSBI-like programs that help social entrepreneurs build sustainable and scalable ventures. Towards this end, we have hosted a first working group at Santa Clara and have executed Memoranda of Understanding with Ateneo de Manila in the Philippines; the CK Prahalad Centre in Chennai, India; ESADE in Spain; and XLRI in Jamshedpur, India.
We also introduced substantial “capacity development” training for the 2011 Tech laureates
, helping them craft succinct elevator pitches, create 2-page innovation profiles useful for fundraising, and explore different sources of capital. We continue to manage the nominations, applications, and judging processes, and are pleased that the 2012 categories include Sustainable Energy and Young Innovators, the latter of particular interest given our blossoming partnership with The Spirit of Innovation Awards
A common need for all social entrepreneurs and innovators is access to appropriate forms of capital. Compared to the well-developed VC ecosystem, impact capital is poorly coordinated, creating higher costs for both investors and entrepreneurs. Under the leadership of John Kohler, we launched our Coordinating Impact Capital
report in July, and with an in-depth workshop hosted by World Bank in early November.
The newly funded Global Social Benefit Fellowship Program
will afford high potential juniors from all disciplines a comprehensive practical social justice experience conceived in memory of Fr. Paul Locatelli.
Together, these programs provide the Santa Clara community unique opportunities to create a more just, humane, and sustainable world in accord with our Jesuit tradition. In 2012, our signature Global Social Benefit Incubator
will enter its 10th
year. In many ways, it is the “center of the Center” and we hope that you’ll join us in celebrating the accomplishments of these incredible social entrepreneurs who are changing the world and creating significant impact. We invite you to consider a gift to the Center to help us accelerate progress towards positively impacting the lives of 1 billion by 2020.
Thane Kreiner is the Executive Director of the Center for Science, Technology, and Society at Santa Clara University