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Friday, March 27, 2009

Skoll World Forum 2009: Challenges of Expansion Finance for Social Entrepreneurs

By Vinay Nagaraju

Panelists during "Expansion Finance for Social Impact"

Editor's note: Guest Blogger Vinay Nagaraju sent us the following post from a session at the Skoll World Forum titled "Expansion Finance for Social Impact". It was moderated by John Goldstein, Managing Director, Imprint Capital Advisors. Speakers in the panel were George Overholser, Founder and Managing Director of NFF Capital Partners, Jean-Philippe De Schrevel, Founder of Bamboo Finance and Blue Orchard, and Ashish Karamchanndani, CEO of Monitor Group.      

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    Philanthropy has too often remained trapped in the 'small is beautiful' world of social innovation - while for-profit-investors have striven to avoid any taint of compromising returns for social goals. A growing set of trailblazers is mobilizing significant pools of capital to deploy for social impact. In the process they are reinventing the way philanthropic and for-profit capital is used for social and environmental benefit.

    While speaking of stages in fund raising, Jean-Philippe asked social entrepreneurs to look for angel investors that believe in the ideas and are willing to invest 'small sums' of money - use the initial successes and then leverage to make larger claims. He asked people to speak to private banks and private investors after reaching a scale that can attract investments - that is how you get access to large pools of capital. He said growth by franchising was an option to scale enterprises, a plausible business model social enterprises should consider.

    George, from NFF Capital Partners, raises money from a for-profit pool for investments in the non-profit world. He resonated on the challenges social entrepreneurs face and asked the audience to look for funders that can stay for long term and incrementally support ventures. He emphasized that the scale of impact is more important than the scale of the organization. Social Entrepreneurs need to not just have a programme but an enterprise around it.

    Ashish, from Monitor Group, said that helping organizations in the non-profit space was a challenge, and could not stress less that the fundamental element of social enterprises was the business model. That is, a model for revenue generation that can cover all the costs to begin with. Speaking of the benefits of micro-finance he said it was fundamentally a different business model to deliver the same product - a personal loan. Commercial viability, robustness  and replicatability were attributes of such a model. He also said that a paradox is that sometimes the organizations may need to be small to build viable models in the low income groups.

    In recent times, there are growing number of investors who want to diversify their portfolios and be connected to projects that make grassroots impact. This change has come about with a sudden interest in the well-being of the world given the current financial crisis.

    In summary John reminded the audience that there's often great payback for those who take on risks early, in the absence of clarity.

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