We are lucky to have participants from all over the world. As the facilitator, whil I’m in the U.S., I hope the conversation will continue while I’m offline tonight. There is a lot that is exciting going on in the social enterprise and social investing worlds in India, Africa, and Asia, as well as Europe.

To those of you in the eastern hemisphere, please don’t let my need for sleep stop you from keeping the discussion going! We very much hope to wake up tomorrow to your questions, ideas, comments, and insights.

Best
Jessica.

Dear Jessica

Greetings from the Institute of Hazrat Mohammad (SAW). This colloquium is getting very interesting and raising pertinent issues. From our experience specifically in developing countries as well as developed countries the ‘social enterprise’ is investment with a value tag – Image Building.

The social enterpruener has a for-profit arm that more often than not mobilizes this channel for image marketing. Therefore, they seek organization/s having a track record or has substantial visibility amongst the target audience/consumers of the for-profit or commercial arm.

Except for pure charity or philanthrophy the other forms of social investment does look for return albeit, in kind. I would definitely want to hear more about organizations starting from scratch and getting attention and grants from large social enterprueners.

Cordially,

Habiba Tasneem
Chief Coordinator

I wanted to take the opportunity to clarify the difference, for us, between “social investment” and SRI, or socially responsible investment. Both are exciting fields but we’re only focusing on one in this discussion.

“Socially responsible investing (SRI)”, to my understanding, is a commercial form of investing in which investors screen out ethically “negative” investments (perhaps arms or tobacco) and/or screen in investments that will have a positive social return (perhaps a very “green” company.

What we’re focused on here is capital that is available to social enterprises (mainly young, growing ventures that are set up with the explicit intent of generating significant social value). The providers of this capital, the “social investors”, use an investment mindset and focus on capacity building and long-term prospects and growth. Some social enterprises are highly profitable, or have the potential to be, and therefore might attract the attention of SRI investors as they grow. But many social enterprises, in our definition, will be able to offer investors no or at least below-market financial returns. Thus the new category of “social investors” has emerged to apply investment thinking to an area in which financial returns are low but social impact is high.

I’ll re-post the definition we used for “social investor” at the start of this discussion:

“Social investor : A funder that uses elements of mainstream investment thinking to provide capacity-building and growth capital for social enterprises. Note that social investors are not a single group: Some provide capital with expectation of high financial return, some focus on social impact but hope to make some money, and still others expect no financial return but use investment thinking to increase the impact of their grant capital.”

Hi Jessica,

Apologies for picking up on an old post, but I've just joined this network and wanted to start pulling my weight! I hope this is still a useful topic for the discussions.

We are a small start up social enterprise, comprised of two young social entrepreneurs. If you're interested you can out more about the details of our business on our website (http://www.shambatechnologies.com) but basically we are re-designing useful technologies so that they become affordable for the poor. So far we have had very little trouble in raising investment and we were quickly able to raise sufficient funding to move into the first phases of our product research and development. So hopefully my answers to your two questions are relevant:

1. We've found that a solid business case has merit in its own right, and it does not rely on the track record of the entrepreneur who created it - ours was non-existent! We didn't even have a prototype, just a few ideas and a convincing argument for why the consumer would want to buy our as-of-yet-unbuilt product. When selling to the poor, creating this convincing argument on a day-to-day basis isn't always easy and sometimes you need to use special tools to enable this (see my recent post on another blog: http://unltdworld.com/blog/view.php?id=181). But if you can pull this off - a lucrative business plan to excite any investor is can't be far behind.

2. On the outset, we believed that we would have to put all sorts of caveats into the shareholder's agreements and mems & arts of our company to make sure that investors wouldn't suck it try and pervert its social aims in favour of profitability. In the end however, we decided that for our business at least, long-term profitability coincided every time with maximising your social impact. So it came down to simply making sure that your investors have a motivation to make money in the long-term, and not necessarily in the short term. To ensure this, you basically have to choose your investors carefully and consider putting extra terms into the shareholders agreement for anyone you don't trust (we don't feel like we've had to do this yet...). However, in order to maximise the fraction of profits that are ploughed back into the company - and so maximise its social impact - the onus is on the directors to find good investment opportunities to reinvest the money into. Otherwise investors might start getting itchy watching all that cash just sit in the corporate account.

Anyway, hope that's of interest. Best of luck to anyone looking for investment!

Regards,

Edward Matos
http://www.shambatechnologies.com