Rob Katz

Social Capital Markets: Venture Philanthropy and International Government Investment

Aden Van NoppenAden Van Noppen is a senior at Brown University where she studies International Development. She is also an intern for Acumen Fund, where she works to develop programs that teach college students about private sector solutions to poverty. Aden was formerly an intern for Dalberg Global Development Advisors, where she worked on the development of the Aspen Network of Development Entrepreneurs.

By Aden Van Noppen

Government and non-government investors in private sector development are both redefining poverty alleviation, but this compelling panel demonstrated some key differences between the two players. NextBillion’s own Rob Katz moderated the panel.? Representing the social venture capital side of the equation was his colleague at Acumen Fund, Sasha Dichter, and Stuart Davidson, Managing Partner at Labrador Ventures.? On the government side were Rob Schneider from the Global Development Alliance of USAID and Jim Polan from the SME Finance Department of the Overseas Private Investment Corporation (OPIC).

It was clear from the panel that the government and non-government players have different strengths and weaknesses, causing them to play unique roles in enterprise development, but perhaps also limiting their ability to collaborate. Even though we are seeing more public-private partnerships on the ground, the government and non-government investors work under very different constraints and have different priorities. For example, USAID and OPIC expressed that they are limited by government mandates, yet they have a wide geographical reach and historical significance. Acumen Fund and Labrador said that they generally have strong expertise and relative flexibility, yet they are much smaller in size and scope. According to the panelists, these differences seem to translate into little collaboration between the two types of investors.Sasha Dichter expressed his desire for government agencies to address their constraints and start administering discretionary funding to private investors. His reasoning? The amount of money in private social venture capital funds is tiny compared to the budgets of government agencies, yet they have expertise and infrastructure what could be leveraged. Dichter believes that increased support from government agencies for the industry that is already built around execution would greatly increase the impact of the sector as a whole. His argument was quite compelling.

However, before this collaboration can take place, the panelists expressed that there are still hurdles to overcome, not least of which is common metrics. The panelists agreed on the need to create a shared language and measurements of impact that are easily understood by both insiders and outsiders. This seems to have arisen as a major theme of the conference. Jim Polan mentioned the Aspen Network of Development Entrepreneurs (ANDE), a coalition of intermediaries and funders attempting to set standards, as a first step in that direction.

There was agreement across the panel that while they would like to see more collaboration between government and non-government investment funds, the verdict is still out on whether it is feasible. Rob Schneider summarized the challenge of collaboration when he said that they all do similar things but in different ways, and as a result, they ?have different hurdles to jump over.? But regardless of whether they collaborate, it is clear that each is playing an essential role in enterprise development and doing their part to accelerate the rate of poverty alleviation.