NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Abby Callard over at Beyond Profit reported the buzz word at this year’s Sankalp Conference was ’ecosystem’, and she’s right. Sankalp, run by Intellecap, is one of the primary forums for social entrepreneurs and investors to meet in India. I moved to India last year in time to attend Sankalp and this year’s conference felt very familiar, like an extended family reunion showing how close knit the relationships are despite how rapidly the space is growing in India.

I was encouraged to hear a similar set of core challenges from both the entrepreneurs and the investors. However, I also found myself feeling frustrated. The challenges expressed are the same ones identified at Sankalp a year ago; enterprises struggling with access to debt financing, skilled talent and gaps in market information. The challenges faced by intermediaries span primarily regulatory roadblocks like heavy (legacy) restrictions on foreign debt, access to local capital and flexibility around how that capital is deployed.

Conclusion: we know which changes need to occur to spur continued growth in the sector, and yet we’ve still not figured out how to go about making them happen. Amplifying the problem is the term ’ecosystem’, which is bandied about as an obvious solution: our combined strength must be more powerful than any individual or single organization can hope to impact. But beyond “collaboration”, “shared intelligence” and other buzzwords, what does ’ecosystem’ really mean? What does it look like, how does it work, who gets included, who drives it, and how do we wrestle a list of objectives and prioritize them in ways acceptable to everyone?

A hotbed of social innovation, India has the opportunity to leapfrog developed countries paths and put best practices in place to accelerate growth and drive long-term social impact. We hear this often but I’m not sure we really know what it means or looks like. But having watched the emergence of an ecosystem around social enterprise and impact investing in the US (think GIIN, IRIS and GIIRS and ANDE, which is working to launch a chapter in India) here’s what we do know:

1. Networks are made up of relationships

2. Relationships take time and most of all trust

3. Strong relationships lead to good partnerships

4. Excellent examples of partnerships are the best blueprints for future and broader collaboration

There were a number of side sessions and conversations at Sankalp circling around this question of what should the network look like, what should its objectives be, do non-profits (grant-funded) need a different network from small and growing businesses (SGBs – for-profit enterprises fueled by returnable investment capital). Finding answers to all of these questions are secondary to forging real relationships and creating a few partnerships that can be examples to guide a broader set of opportunities and objectives that can be addressed collectively.

The creation of standards for measuring and reporting social impact has been identified as a core objective of the ecosystem, but not without debate. The debate centers around two key questions: are we measuring to better report impact or as Mayank Sekhsaria from Greenlight Planet asked, to amplify our social impact? Is what we’re measuring really helping me as an entrepreneur to manage my business more effectively? Secondly, as Vineet Rai, founder of Avishkaar, Intellecap and Intellecash eloquently pondered, is measuring to compare impact really the right focus? Sure, we want to understand which investments and interventions create real and lasting impact, but does it matter if, for example, we can’t compare liters of clean water to safe births? Extremely valid questions and there are few ways to think about the answers that can in turn help us ask the larger question of what role a broader ecosystem would play in creating the right standards and solving collective challenges.

As patient capital investors, we should only request metrics from entrepreneurs that help them better manage this businesses and impact more lives. As entrepreneurs, we should only measure what helps us better serve our customers. What about as an ecosystem?

We should implement standards around measurement that allow us to see which models best serve customers. But there’s an added element here. The recent collapse of micro-finance in Andhra Pradesh put a spotlight on regulations and reporting standards. Some MFIs did not adequately assess the credit worthiness of their customers. Likewise the government did not step in and create regulations that enabled them to assess the effectiveness of MFIs. This is the government’s opportunity, where the term leapfrog becomes more than just a buzzword but a real opportunity. The drive behind creating common standards for metrics comes from a desire of entrepreneurs to better manage their businesses (and by extension, amplify their impact) and from investors to more accurately report their impact. As investors we need to be thinking about two things: firstly how do we work with our investees to measure KPIs that speak to the growth of both financial and social returns. And how do we use this evidence of outsized social impact to guide the government toward opportunities to show leadership to enable policies allowing the growth of a thriving social sector and point the way for other industries to conduct business in a more inclusive and socially minded way?

This will take real partnerships. Start with one. Who is one person, one organization that you trust and that shares your vision and priorities? Talk to them, work with them. Then share with all of us what’s working in that partnership – and what’s not. The multiplier effect will happen. But parallel conversations around ’how to build’ an ecosystem without putting yourself and your organization out there is not going to produce examples and blue prints that we can all learn from. My hope is at next year’s conference, there are no conversations about how to start a network. Rather, I hope there is a buzz around the most creative and impactful partnerships of the year, and the only “how” is how to learn from and leverage these examples.