Derek Newberry

Bridging the Finance Gap for a Generation of “Philanthropreneurs”

LightcomLate last month, Dr. Nachiket Mor, Deputy Managing Director of the ICICI Bank and Chairman of the New Ventures India Steering Committee announced that his bank would be launching a 100 crore fund for green businesses in emerging markets with a focus on SMEs. 100 crore is a serious commitment, nearly $25 million USD. I thought of the significance of such a high profile vote of confidence for the green business sector when I ran across an article yesterday that I was somewhat surprised to find in the New York Times.

In the article, the Times described a trend that has been discussed and linked to and pondered thoroughly on the development-oriented blogs for awhile. Call them philanthropreneurs, social entrepreneurs, or now the “fourth sector;” a new class of non-profit, for-profit hybrid models is forming in the croplands of Costa Rica and the R&D facilities of General Electric that sees economic, social, and environmental gains as indistinguishable parts of a blended value proposition.

The Times story discusses how more and more enterprising individuals, be they experienced entrepreneurs or “young MBAs” interested in pursuing goals beyond profits are creating this fourth sector of organizations that will shatter the lines of business and philanthropy that we so strictly draw now. These unclassifiable organizations can be a result of a shift in the mentality of a corporation’s directors, such as in the example of GE’s Ecomagination initiative, which pursues profits by creating new lines of sustainable products. These models can also be the outgrowth of a NGO looking to scale up through adopting profitable business models, such as the Costa Rica-based Solar Trade Corp, a project of the Mesoamerican Institute to create solar-dryers for coffee farmers that has become a business in its own right.

So how does this 100 crore ICICI fund come into play? One of the main obstacles to growth cited by these fourth sector organizations in the NYT article is long-term, committed finance. Interesting that this is a problem common to the developing and developed worlds – it is one of the primary challenges faced by the entrepreneurs we at New Ventures work with, and capital infused in the SME sector on this level can have a huge ripple effect. A $100,000 investment here or there is great for a single company, but real transformation of the financial sector will occur when we start seeing these $25 million fund launches begin to spread. This is an interesting time for global financial markets, one in which more and more firms are stepping up to fill the finance gap for the SME and green sectors. I hope to see the trickle of startup capital we’re seeing now turn into a flood within the next five years.