This week, the largest gathering of social impact entrepreneurs, nonprofits, investors and philanthropists met in San Francisco. In its seventh year, SoCap is now 2,500 strong. Normally, we’re publishing our Social Impact Update the first week of the month, but the discussion at SOCAP has been so vibrant, so optimistic, so solution oriented and so filled with possibility, that I couldn’t resist sharing it now.
(This is just a snippet of all the discussions going on at SOCAP, which you can follow and stream online. As a mere mortal, I could only attend one of their 12 simultaneous tracks.)
The conference opened with two standouts from a panel on building the impact ecosystem through investor-entrepreneur partnership: Bill Draper of Draper Richards Kaplan Foundation and Susan Robles of the Multilateral Investment Fund and WeExchange who said:
- Instead of “social entrepreneur,” pitch as a “business with a community impact.” We all know that you can do well and do good, but this helps engage investors who may be more skeptical. Use language that speaks, first, to their business interest.
- Gender opportunity is relevant. Ana Barrera of Aflore shared her experience of moving from Colombia as a coffee trader to London, where she was shocked to learn she’d moved thousands of miles to be the only woman (this time on the trading floor).
- Government funding plays a critical role in developing the ecosystem for social entrepreneurism. Several examples were shared from South America.
- Teams are critically important to the success of any entrepreneurial venture. In this panel and others, investors said the team’s skill, agility and resiliency translates directly into confidence from funders.
- There is no “right time” to get funding. Bill Draper said he’ll fund a good entrepreneur who may just be in the concept phase; others said they like to see market traction first.
- Diversity includes gender … among other things. All panelists discussed the critical need for investors and entrepreneurs to seek out individuals who may not look, sound or seem anything like them. Susana summarized investors’ perspective of gender inclusion: “It’s not all men or all women. It’s both. The world is both.”
- “It’s like a marriage. You need to be open and transparent.” An apt description from Taryn Goodman of NatureServe and RSF Social Finance.
I hadn’t thought how unusual it is to be at a conference where the gender balance reflects the larger world until Bill Draper commented on the audience: half of SOCAP attendees are women.
Judith Rodin, President of Rockefeller Foundation:
- Of $212 trillion in private capital, only 4% is from foundations and individuals. The biggest investor? Pension funds with 48% of the pie. (And thanks to Scott Anderson of Next Billion for the pic.)
- $46 billion is currently invested in impact investments, according to a survey of the top 125 impact funds.
- Judith offered to promote new ideas of social enterprise as a critical component of Rockefeller’s commitment to bring new mechanisms and models to the field.
Ben Thornley of ICAP Partners:
- Millennials say the top role of business is “to improve society” (36%), followed by “to make profit” (35%). Thanks to the many retweets of our post on this.
Willy Foote of Root Capital:
- “You can’t decode everything upfront. You need license to iterate and adapt.” on the need for investors, donors and social entrepreneurs to set clear expectations in the beginning of their funding relationship.
- Impact investing is much more specialized now, with many theories of change (e.g., ROI expectations, multiple vs. single lever for change). Investors and entrepreneurs need to align themselves conceptually and practically.
- As a restauranteur, she thought the best thing she could do was buy and prepare sustainable produce, meat and ingredients. Not anymore. “There is no such thing as one sustainable business. We can only be part of a system.” She should know—her sourcing practices at White Dog built a revolution of locovore activists and helped launch the now 50,000-strong Business Alliance for Local Living Economies.
- Local ownership shifts economic power to our communities. “Chain stores and national brands are like invasive species.”
- “It’s not about belongings, but a sense of belonging” that builds vibrant communities.
Sir Ronald Cohen, hailed as the Father of British VC and social innovation on the evolution in investment thinking:
- 19th century focus = return
- 20th century focus = return + risk
- 21st century focus = return + risk + impact
- Impact is in the eye of the beholder and the language is still evolving. ImpactAssets only invests in private funds that measure impact. Sonen combines intentionality and ROI, working with private investors in public markets.
- Women and Millennials are key. This is the demographic leading the charge of impact investing and sustainability, and most of the upcoming $40 trillion wealth transfer will go to them.
I enjoyed Fran’s description of the surprising roots of impact investing. The first “sin stocks” were actively excluded by Quaker and Methodist investors in the 19th century. World conflict further refined exclusion: 1960s Vietnam and 1980s Apartheid South Africa. Microfinance and “social entrepreneurs” appeared in the 70s. In the 1980s Calvert and Parnassus launched the first impact mutual funds. And in the 1990s momentum built: Jed Emerson coined “blended values,” GIIN was born at a Rockefeller Foundation gathering, and Ebay founders launched Skoll Foundation and Omidyar Network to build an ecosystem.
Real stories from impact investors due diligence, moderated by Kristin Hull of Nia Global Solutions:
- The team is key. Does the team understand the problem they are trying to solve? Is it a problem that needs solving? Does it represent the community your business serves? (If not, investors can help you fill the gaps.)
- Be resilient and flexible. Can the team pivot and respond to changes in the market?
- The best risk management is constant communication between investors and entrepreneurs. Everyone has crisis or gets overwhelmed at times, but dropping off the radar to deal with it could be the end of your investor’s confidence. Keep each other in the loop.
- “It’s like a marriage: you need to be open and transparent.” An apt description by Taryn Goodman of the soon-to-launch NatureServe and RSF Social Finance.
- Risk is real for both parties. Andy Lower of ADAP Capital offered a perspective we don’t often hear: the entrepreneur is the real risk-taker. If you don’t produce returns, you lose investors, hurt your career and may be out on the street.
- “If all I’m bringing is a check, it’s not the right deal for me—or you.” Kristin added that the ideal investor-entrepreneur match includes experience, connections and mentoring.
I hope others at the SOCAP water cooler will share in comments below. As for me, it’s back to the firehose!