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Sharing SOCAP

Before we launch into a roundup of things seen and heard at SOCAP17, I’d like to make a modest proposal: I think it’s time for the conference to leave home.

First I should say that I get it: If you want a successful conference, you need a draw, and few are more powerful than San Francisco. I’m sure many participants bring along a spouse or even kids to soak up such a beautiful, diverse and energizing destination. I personally love the Bay Area, and I look forward to SOCAP as a harbinger of fall. And of course there are other reasons the Bay Area is a prime location, from the presence of leading impact investing organizations like Omidyar Network, to the social business innovators at places like the Miller Center at Santa Clara University.

But as so many panelists noted, impact investing is now mainstream – and that means geographically as well as fiscally. And though San Francisco has long been a hotbed of social investing activity and discussion, I think it’s time for SOCAP organizers to throw off the moorings of the beautiful Marina District and consider other cities where the promise of impact investing is gaining steam. Not only would it broaden the perspectives under discussion, it would give a considerable economic boost to areas that – let’s face it – have greater challenges than San Francisco.

For instance, at a future SOCAP, I’d love to hear about how Baltimore or Minneapolis/St. Paul are advancing on the Ours To Own campaign launched by Calvert Social Investment Foundation and other organizations in 2016. Or how Houston is doing after the Michael and Susan Dell Foundation created the Rebuild Texas Fund to address a number of pressing concerns, including providing capital to businesses destroyed by Hurricane Harvey. Or maybe how Detroit (admittedly just 45 minutes from NextBillion’s home base) is harnessing investments from Goldman Sachs and JP Morgan, and the effect these are having on poverty in the inner city. These cities, or others like them, would make great hosts for a future SOCAP. What’s more, racial equity, which was one of the formal tracks at SOCAP this year, is a top-of-mind concern for all of the aforementioned cities, and they’d each bring a unique perspective to the topic that San Francisco may not fully share.

I also recognize that people come to San Francisco from all over the U.S. and the world, and SOCAP has made efforts to include discussions and speakers representing many diverse geographies (remember Devita Davison of FoodLab Detroit, who told the powerful story of Hot Chicken in 2016?) Nevertheless, I would argue that the physical location in which a conference takes place, infused with people who live there year round – the restaurateurs, the hotel room cleaners, or the Lyft drivers – gives a visitor a real feel for what’s happening in the community, and those interactions lead to a more meaningful gathering.

I know it’s easy for me to make pet suggestions. I’m not running the conference and don’t have to manage the mountain of logistics that would follow a venue change. But SOCAP’s brand as convener for the most vital discussions in social business is rock solid, and NextBillion’s coverage of those discussions is proof positive of that. I believe that the conference, just like the sectors it covers, is strong enough to take the next step, moving out of its comfort zone and into the broader world. It’s time to take this important show on the road.

– Scott Anderson

Blended Finance, Blended Capabilities

The role of government was an interesting thread running through the sessions and discussions at SOCAP this year. In the opening plenary, Laurie Spengler, president and CEO of Enclude shared some of the ways the UK government is entering the impact investing space, including mobilizing funds that are sitting in dormant bank accounts, pension funds and the deposits of “conscious savers.” She also highlighted the huge opportunity for governments to consider more deeply their ability to achieve impact through public sector procurement.

USAID played a highly visible role at the conference, and launched a new collaboration platform, “Invest.” The platform aims to more systematically engage the impact investing community and to understand how to match the right tool (guarantees, first loss positions, technical assistance) with the right context so that these resources can be used in the most catalytic way possible. The agency also moderated a discussion on blended financing models, focused on how public funding can help unlock private capital. However, it emphasized that such “smart subsidies” need to be targeted and outcomes-based to be effective. This is an evolving conversation, and there is room for more creativity in how public and private funding can be combined to increase capital flows. For example, Gerhard Pries, CEO and managing partner at Sarona Asset Management shared that they are working with USAID to develop new tools to mitigate foreign exchange risk for investors.

– Colm Fay

Leaving the ‘Kid Table’

In 2000, the Goliath Unilever purchased an earthy and crunchy David: Ben & Jerry’s. The Vermont ice cream maker was the type of business many people back then would have considered an archetypal B Corporation (or Benefit Corporation), well before any such formal designation was around.

At SOCAP17, Fran Seegull, executive director of the U.S. Impact Investing Alliance, cited the Ben & Jerry’s buy as an example of the way things used to be – but might not be for much longer. We’re starting to see an “impact turnaround” she said, in which social enterprises can be driving the agenda as opposed to being acquisition targets for larger firms seeking a socially conscious business in their portfolio. For instance, over the summer, Brazilian firm Natura Cosméticos SA purchased the Body Shop from non-B Corp L’Oreal in a deal estimated at $1.1 billion. Natura, was founded nearly 50 years ago but joined the now more than 2,300 certified B Corporations as a certified B Corp in 2014. It’s gained acclaim for sustainable business practices like considering ecological preservation and the lands of indigenous people in the Brazilian Rainforest, while also racking up $2.4 billion in sales for 2016.

Bart Houlahan, a co-founder of B Corporation, echoed Seegull, recalling that the “2008 financial crisis was a boon to our industry.” But now, what is sustaining the growth in B Corporations domestically and abroad appears to be the UN Sustainable Development Goals.

His organization, Houlahan said, is “now mapping our current assessments to the SDGs, which is a thread moving forward that we can use for a common platform.”

David Chen, chairman of Equilibrium Capital, proclaimed that every asset class has the opportunity and the demand behind it to move to a social/environmental impact mission. Equilibrium announced it recently closed a $550 million fund for investing in sustainable agriculture, in part, because it’s moved toward sectors with large institutional investors in real estate and sustainable land management, Chen said.

“We chose large categories that could have impact where there were known benchmarks that would attract institutional investors,” Chen said.

Whether they’re socially focused funds or environmental/sustainable types, impact investors are now solidly part of the capital markets, he said, gesturing to the audience: “You left the little kid table and went to the big person table.”

But entry to the adult table may require funds north of $50 million in total value, as the economics are getting tougher for the smaller funds, others noted.

– Scott Anderson

‘How vs. Why’ Isn’t ‘Either/Or’

While the high-level theme of the conference may have been focused on the transition from the “how” of impact investing to the “why,” with Jed Emerson’s talk being the highlight, the underlying point was that this isn’t an either/or question. Along with a blend of public and private financing, we also need a blend of financial and social impact capabilities. There were sessions on how foundations are thinking and operating like investors, and how investors are viewing gender inclusion and racial diversity as both competitive advantages, and the right thing to do. Speakers such as Morgan Simon, managing director of Candide Group urged investors and investees to think beyond their (at times) narrow definitions of impact and consider the experience of the communities they affect.

Speakers also urged attendees to consider how we can be more inclusive as an industry, particularly of women and people of color, which are underrepresented in this community. Indeed, intersecting this conversation about blending financial and social impact capabilities was an important reflection – the impact investing community does not represent the communities we seek to serve.

– Colm Fay

SMEs = The Heart of Global Commerce

While it’s clear to me that the big players are getting bigger, they shouldn’t overshadow the small and medium-sized businesses, which are the heart of commerce around the world.

Sam Parker, director of the Shell Foundation, said while it’s not very sexy, moves toward lean data and financial technology are going to help SMEs bring down costs and gain an edge in competitiveness. That will make SMEs more attractive investments as well. He referenced growing online credit platforms that can assess SME creditworthiness and provide turnaround on loans within 48 hours, instead of weeks.

“This business is not going to be transformed by one wacky solution,” he said, but by the quickening pace of business change.

Another theme I heard repeatedly was the notion of more walls breaking down between foundations, particularly among those providing grants or other types of support to SMEs working in aligned sectors.

“For the first time you’re seeing foundations collaborate,” said Philip Varnum, Chief Financial and Administrative Officer of the Lemelson Foundation. “We’re seeing players come together … we’re also seeing a lot of amazing entrepreneurs bringing tech solutions to the table.”

– Scott Anderson

Finding the Friendlies – Avoiding the ‘Horror Stories’

I heard a number of fairly refreshing, and frank, conversations around how social entrepreneurs should approach investors at this SOCAP. As co-founder of Copia Global, Tracey Turner knows this drill, having raised a total of $40 million for three companies focused on low-income people. She believes the level of due diligence that investors are requiring of early-stage enterprises these days “is totally inappropriate to the maturity of the business.”

“The CEO of Uber was given three board seats because (investors) had to – he held all the cards,” she said. “The power dynamics in our world are a bit more unequal because there isn’t enough capital.”

Nevertheless, Turner said social entrepreneurs need to be prepared to walk away when investment terms aren’t going to be in their company’s favor, something she has done on more than one occasion, including turning down a $1 million deal.

Shelley Saxena provided another nightmarish example. The founder and CEO of the health care-focused social enterprise Sevamob participated in the Indian Reality TV Show “The Real Deal.” The show pitted socially inclined businesses in a competition somewhere between “Shark Tank” and “The Apprentice.” Even though Sevamob was a finalist, Saxena said the experience didn’t turn out as he’d hoped.

“We won some money [note: $74,000, according to Forbes] but to date have not received that money,” he said. “That to me is a real horror story.”

– Scott Anderson

Photo credit: The Detroit skyline (hint hint). Mike Boening Photography via Flickr.

Scott Anderson is a contributing editor at NextBillion. Colm Fay leads the Scaling Impact Initiative at WDI, NextBillion’s parent organization.