Social Venture Capital - A means to alleviate poverty
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Transcript of Social Venture Capital - A means to alleviate poverty
PROJECT PYRAMIDSUSTAINABLE CO-LEARNING IN ACTION
CATALYST Consulting:Matthew Cohen, Ian Howard, Simon MacMahon, Bob Mann, Alexis Morgan
The Challenge
Create an organization that stimulates and supports sustainable development (economic, social and environmental) at the base of the pyramid that utilizes Project Pyramid’s scarce resources
Our Development Philosophy
Development from Below Needs-oriented Endogenous Self-reliant Ecologically sound Fosters participative
decision-making
Poverty Alleviation Through Empowerment
“Poverty will end as it has ended everywhere else, by homegrown political, economic, and social reformers and entrepreneurs that unleash the power of democracy and free markets.”
- William Easterly in response to How Aid Can Work (December 21, 2006)
Capability and Resource Assessment
Strengths Weaknesses
Dedicated Volunteer Base Lack of Onsite/Local Expertise
Business Acumen Lack of Site Specific Infrastructure
Access to Capital and External Expertise
High Turnover (Institutional Memory)
Partnerships (Divinity) Finite Volunteer Hours
Leverage Minimize
Business Acumen Lack of Local Expertise
Partnerships (Divinity)
Project Pyramid must work to:
Project Pyramid Alternatives
BOP Philosophy
Strengths - Bus. Acumen- Partnerships
ScalableImpact
3 Pillars- Education- Collaboration- Action
Project Constraints - Time- Lack of Local Expertise- Limited Funds
Single Business Model
Consulting Services
Micro-credit
Social Venture Capital
Development Intervention
Project Pyramid Alternatives
BOP Philosophy
Strengths - Bus. Acumen- Partnerships
ScalableImpact
3 Pillars- Education- Collaboration- Action
Project Constraints - Time- Lack of Local Expertise- Limited Funds
Single Business Model
Consulting Services
Micro-credit
Social Venture Capital
Development Intervention
Project Pyramid Alternatives
BOP Philosophy
Strengths - Bus. Acumen- Partnerships
ScalableImpact
3 Pillars- Education- Collaboration- Action
Project Constraints - Time- Lack of Local Expertise- Limited Funds
Single Business Model
Consulting Services
Micro-credit
Social Venture Capital
Development Intervention
Project Pyramid Alternatives
BOP Philosophy
Strengths - Bus. Acumen- Partnerships
ScalableImpact
3 Pillars- Education- Collaboration- Action
Project Constraints - Time- Lack of Local Expertise- Limited Funds
Single Business Model
Consulting Services
Micro-credit
Social Venture Capital
Development Intervention
Project Pyramid Alternatives
BOP Philosophy
Strengths - Bus. Acumen- Partnerships
ScalableImpact
3 Pillars- Education- Collaboration- Action
Project Constraints - Time- Lack of Local Expertise- Limited Funds
Single Business Model
Consulting Services
Micro-credit
Social Venture Capital
Development Intervention
Project Pyramid Alternatives
BOP Philosophy
Strengths - Bus. Acumen- Partnerships
ScalableImpact
3 Pillars- Education- Collaboration- Action
Project Constraints - Time- Lack of Local Expertise- Limited Funds
Single Business Model
Consulting Services
Micro-credit
Social Venture Capital
Development Intervention
NGO/Micro-entrepreneursInvestment Range: $100-$5,000Financing: Microcredit, special funds
Small Social EnterpriseInvestment Range: $5,000 - $50,000Financing: Local Banks?
Large Social EnterpriseInvestment Range: $50,000 - $500,000Financing: Local Banks
SMEInvestment Range: > $500,000Financing: Commercial Investments
Social Venture Capital – Why?
Commercial Investment (SME Financing)
Grant Funding
Deg
ree o
f S
elf
-relian
ce
& t
yp
e o
f cap
ital in
pu
t
Aid/Microcredit Market
Source of capital
Commercial Banks
Range: $100-$5,000•NGO•Micro-entrepreneurs•Microcredit
Range: $5,000 - $50,000•Small Social Enterprise•Local Banks?
Range: $50,000 - $500,000•Large Social EnterpriseInvestment•Local Banks
Range: > $500,000•SME Investment•Commercial Investments
Gap
Sustained Action
The Business Model – Identification
Screening Process
1.Identify local companies that fit our criteria. Company referrals will come from,
• Church network• Business associations• Ministries• NGOs
2.Screen down to 5-20 companies • Initial screening based on a simple process• Local advisory board suggests and assesses
Identification CollaboratingCo-Learning
Consultation Process:• Teams of 2 students per enterprise• Maximum 4 weeks• Collaborative development of initial business plan• Support from local advisors & Vanderbilt faculty
Sustained Action
Identification CollaboratingCo-Learning
The Business Model – Co-Learning
The Business Model – Co-Learning
Learning Elements – Students
• Learn: Local industries and enterprise models
• Adapt: Classroom theory to local circumstances
• Understand: Local culture
Learning Elements – Company
• Learn: Business reporting skills
•Adapt: North American business tools
• Understand: Foreign culture Sustained
ActionIdentification CollaboratingCo-Learning
The Business Model - Collaborating
Review and Assessment of Candidates
Score Sheet for: Anasset LPG
Criteria Score
Economic Impact 8
Social Impact 7
Environmental Impact 6
Fits Project Pyramid Capabilities
8
Capital Constraints 9
Openness to Collaboration 7
Viability of the Business Plan 7
Total 52 / 70 Sustained Action
Identification CollaboratingCo-Learning
Full business plan developed with students
Business plan reviewed by Investment Committee
Initial capitalinvested
The Investment Committeeis composed of local leaders, Owen facultyand key professionals
Plan submitted
Changes requested
Sustained Action
Identification CollaboratingCo-Learning
Plan approved
The Business Model - Collaborating
The Business Model - Sustained Action
Sustained Action
Identification CollaboratingCo-Learning
Further FundingContinued
Business Growth
Performance Monitoring
Strategic Adjustments
Consulting and Training
Ever Improving Processes
Potential Exit Strategies
Funds invested in subsequent
venture
Still has potential - Adjustments, Still has potential - Adjustments, continued investmentcontinued investment
Business is in good shape Business is in good shape but not ready for but not ready for divestmentdivestment
The Overall Business Model – Sustained Action
Sustained Action
Identification CollaboratingCo-Learning
Funding Model
5-year Goal: $1.6 Million Endowment Fundraising with Owen
assistance Target Segments:
Individuals: Regional (Baptist?) Congregations ($300K)
Major Gifts: Owen Alumni ($300K)
Corporations: Those with linkages to Owen/Site ($300K)
Aid Agencies: USAID ($700K)
Funding Scenarios
Fundraising Scenarios
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Year
Pri
nci
pal
Rai
sed
Aggressive
Moderate
Conservative
Note: There are consequences to each scenario in terms of spending
Country: Why Ghana? Criteria
Low conflict High need English speaking High investor protection High % of Christians Strong institutions Relatively good IT infrastructure
Investor Protection Index
Ease of Business Rank
Private Credit
South Africa
8 35 52.1%
Ghana 6 87 0%
Nigeria 5.7 108 0%
Namibia 5.3 43 59.9%
Botswana 4.3 51 58.3%
India 6 120 10.8%
Source: DoingBusiness.org, 2007
Source: WRI, 2007
Vanderbilt Implementation Plan
Action Steps: Year 1 – Get Plans and Positions in Place
1. Communicate/modify plan to Project Pyramid Team (Principal)
2. Catalyst Fundraising Coordinator (Project Developer): Work with Owen Fundraising Team to approach donors Apply for matching funds from USAID
3. Catalyst Ghana Mission Liaison (Divinity Liaison): Establish mission liaison (USA/Ghana); research;
4. Project Manager: Develop & deliver marketing materials
5. Talent Manager: Complete trip logistics
Year 2 (2008-2009) – Institutionalize Process
1. Continue fundraising efforts
2. Inspire incoming class with 2008 work & recruit new team
3. Plan & coordinate spring/summer 2009 trip
Goal: Catalyst Capacity Development
Jan.2008
May Sept. Jan. May Sept.2009
Year 1 Year 21 - 3 4 5 1 - 2 3
Ghanaian on-the-groundPlan
Jan.2008
May Sept. Jan. May Sept.2009
Year 1 Year 21 2 - 4 1 2 3 4
Action Steps: Year 1 – Lay the Foundation
1. Missions distribute Flyer (written or verbally) to identify suitable businesses in Ghana for Catalyst to explore
2. Principal: Recruit Local Ghanaian Advisory Board
3. Talent Manager: Recruit and Hire local coordinator
4. Teams engage potential companies, explore and lay foundation for Year 2
Year 2 – Formal Launch of Sustained Action
1. Liaise with local coordinator
2. Solicit & identify 2009 businesses (missions/marketing)
3. Local Advisory Board to review candidates
4. Sustained action: identification, co-learning, collaboration
1113
80
44
13771
8783
12157
Community Outreach
Christian Missions distributed over Ghana Clergy can act as eyes and ears in the field
as well as assist with local advisory board Leverages Partnerships (Divinity) to
overcome a lack of local knowledge
Source: www.ghanamissions.com
Missions in Ghana – Total 704
Risk Assessment/Mitigation
Risk MitigationPotential for misuse of funds/accountability by Co.
- Phased funding - Mandatory reporting structure
High student turnover
- Faculty involvement- Creation of various boards to stabilize governance
Student’s safety
- Local Advisory Board will advise & develop emergency plan - Local support from clergy
Proposed funding targets are not met and anticipated perpetuity is not established
- Operate via annual fundraising- Decrease equity amount - Remove travel bursary
Case 1: Anasset LPG
Business Plan - provides liquefied petroleum gas
Opportunity - Expansion Constraint - Lack of financial
resources Need - $38,000 over 4 years
Triple benefit: Economic – Business growth a sustained profit of 40% Social – lower costs for cooking, less smoke inhalation Environmental – reduced use of wood for cooking fuel
Reference: Areed (UNEP)
Case 2: Gladymanuel Trading
Business Plan - Solar energy lighting company Opportunity - Significant growth due to power
shortages (water shortage for dams)* Constraint - Lack of financial resources Need - $70,000 over 3 years
Triple Benefit Economic - Returned funds at 7.5% Social - Lighting to 9000 families, fewer shortages Environmental - Provided green energy
* Source: Areed (UNEP)
Impact - Economic
Revenues
Impact - Social
Impact - Environmental
Conclusion
Identification Opportunities to empower
local knowledge to fight poverty
Co-learning Equity VC = Longer term
commitment, shared growth and learning
Collaboration Missions, Congregations,
Divinity school & local advisory board
SustainedAction
Questions
Funding Scenarios
Aggressive Scenario: Quick, Large Donations and Matching
Equity Funding
Local (Ghanaian) Coordinator
Student Travel Bursaries
Project Admin / Marketing
Total Costs
Year Starting Funds
Additions to Endowment Principal
Additions to Endowment Interest
Year End Balance
2008 $0 $6,000 $20,000 $10,000 $36,000 $75,000 $450,000 $1,950 $490,950
2009 $20,000 $6,120 $20,400 $10,200 $56,720 $490,950 $1,200,000 $21,712 $1,655,942
2010 $20,000 $6,242 $20,808 $10,404 $57,454 $1,655,942 $0 $79,924 $1,678,411
2011 $20,000 $6,367 $21,224 $10,612 $58,203 $1,678,411 $0 $81,010 $1,701,218
2012 $20,000 $6,495 $21,649 $10,824 $58,968 $1,701,218 $0 $82,113 $1,724,363
2013 $20,000 $6,624 $22,082 $11,041 $59,747 $1,724,363 $0 $83,231 $1,747,847
2014 $40,000 $6,757 $22,523 $11,262 $80,542 $1,747,847 $0 $83,365 $1,750,671
2015 $40,000 $6,892 $22,974 $11,487 $81,353 $1,750,671 $0 $83,466 $1,752,784
2016 $40,000 $7,030 $23,433 $11,717 $82,180 $1,752,784 $0 $83,530 $1,754,134
2017 $40,000 $7,171 $23,902 $11,951 $83,023 $1,754,134 $0 $83,556 $1,754,667
Funding Scenarios
Moderate Scenario: Steady, Large Donations
Equity Funding
Local (Ghanaian) Coordinator
Student Travel Bursaries
Project Admin / Marketing
Total Costs
Year Starting Funds
Additions to Endowment Principal
Additions to Endowment Interest
Year End Balance
2008 $0 $6,000 $10,000 $10,000 $26,000 $75,000 $60,000 $2,450 $111,450
2009 $20,000 $6,120 $10,200 $10,200 $46,520 $111,450 $200,000 $3,247 $268,177
2010 $20,000 $6,242 $10,404 $10,404 $47,050 $268,177 $400,000 $11,056 $632,182
2011 $20,000 $6,367 $10,612 $10,612 $47,591 $632,182 $800,000 $29,230 $1,413,821
2012 $20,000 $6,495 $10,824 $10,824 $48,143 $1,413,821 $200,000 $68,284 $1,633,961
2013 $20,000 $6,624 $11,041 $11,041 $48,706 $1,633,961 $60,000 $79,263 $1,724,518
2014 $40,000 $6,757 $11,262 $11,262 $69,280 $1,724,518 $0 $82,762 $1,737,999
2015 $40,000 $6,892 $11,487 $11,487 $69,866 $1,737,999 $0 $83,407 $1,751,540
2016 $40,000 $7,030 $11,717 $11,717 $70,463 $1,751,540 $0 $84,054 $1,765,131
2017 $40,000 $7,171 $11,951 $11,951 $71,072 $1,765,131 $0 $84,703 $1,778,762
Funding Scenarios
Conservative Scenario: Few/No Large Donations (Continual Fundraising)
Equity Funding
Local (Ghanaian) Coordinator
Student Travel Bursaries
Project Admin / Marketing
Total Costs
Year Starting Funds
Additions to Endowment Principal
Additions to Endowment Interest
Year End Balance
2008 $0 $6,000 $0 $5,000 $11,000 $75,000 $20,000 $3,200 $87,200
2009 $20,000 $6,120 $0 $5,100 $31,220 $87,200 $30,000 $2,799 $88,779
2010 $20,000 $6,242 $0 $5,202 $31,444 $88,779 $40,000 $2,867 $100,201
2011 $20,000 $6,367 $0 $5,306 $31,673 $100,201 $40,000 $3,426 $111,954
2012 $20,000 $6,495 $0 $5,412 $31,907 $111,954 $40,000 $4,002 $124,050
2013 $20,000 $6,624 $0 $5,520 $32,145 $124,050 $40,000 $4,595 $136,500
2014 $40,000 $6,757 $0 $5,631 $52,388 $136,500 $50,000 $4,206 $138,318
2015 $40,000 $6,892 $0 $5,743 $52,636 $138,318 $50,000 $4,284 $139,967
2016 $40,000 $7,030 $0 $5,858 $52,888 $139,967 $50,000 $4,354 $141,433
2017 $40,000 $7,171 $0 $5,975 $53,146 $141,433 $50,000 $4,414 $142,701
Work Responsibilities
Leadership Positions Principal: overall
coordination and Ghanaian advisory board recruitment
Talent Manager: Ghanaian coordinator hire
Project Manager: Marketing materials & travel logistics
Divinity Liaison: Mission linkages & information management
Project Developer: Fundraising & USAID application
Catalyst Team Member Pre-Departure
Fundraise travel costs Research Ghana Obtain travel requirements
& immunizations Prepare business plan
templates Post-Departure (On-
site) Visit identified companies,
learn & share Select business &
collaborate to develop plan
Present plan to Local Advisory Board
Upon return Sustain follow-up
Social Venture Capital Our model is based on:
Funding companies with high growth potential that are presently constrained by inefficient capital markets and/or human capital constraints
Target companies that have the opportunity most positively local communities – poverty reductions
Model – the company owner will buy back their shares in 5 years
We will buy no more than 25%
Start with one company per year, and grow from there.
Two to stage funding
Operating expenses in the company will be covered by our operations in the country
Our costs to send our staff will not be covered by operation, must be fund raised
This is a one country model
Capital market is inefficient and underperforming
We need to address what is failure, not getting our money is not failure.
What success is to us
We will use NPV and discount rate would be - real difference between us and another
Metrics
Impact
Staged Funding
Community Outreach
1. Establish Local partnerships
2. Grassroots Publicity via word of mouth, local press releases
3. Limited Marketing Initiatives
.
The Business Model - Collaboration
A Phased Investment Approach
Sustained Action
Identify CollaboratingCo-Learning
Step 1: PlanningAn acquisition plan is drafted
Legal/Structural changes beginOutput: Initial Plan
Step 2: ConsultingPlan is further developed, performance changes
Output: Plan & Structural Changes
Step 3: Initial Capital InvestmentInvestment in capital to achieve business goals
Output:
Output: Acquisition Plan
Amount of Capital Invested
Environmental Impact
Solar panels installed Solar panels Pound Lbs Total Tons
50 1 50 50 2,500 2.50
55 2 110 50 5,500 5.50
61 3 182 50 9,075 9.08
67 4 266 50 13,310 13.31
73 5 366 50 18,301 18.30
81 6 483 50 24,158 24.16
89 7 620 50 31,002 31.00
97 8 779 50 38,974 38.97
107 9 965 50 48,231 48.23
118 10 1,179 50 58,949 58.95
Ensuring Positive Impact - Metrics
Year Revenue Costs Wages Fixed Profit Employe
esNumber of Companies
# employess working for our
companiesGross
Revenues
With fiscal Mulipli
er
2008 60,000
45,000
20,000
25,000
15,000 20
1
20
60,000
108,000
2009 66,000
49,500
22,000
27,500
16,500 22
2
44
132,000
237,600
2010 72,600
54,450
24,200
30,250
18,150 24
3
73
217,800
392,040
2011 79,860
59,895
26,620
33,275
19,965 27
4
106
319,440
574,992
2012 87,846
65,885
29,282
36,603
21,962 29
5
146
439,230
790,614
2013 96,631
72,473
32,210
40,263
24,158 32
6
193
579,784
1,043,610
2014 106,294
79,720
35,431
44,289
26,573 35
7
248
744,056
1,339,300
2015 116,923
87,692
38,974
48,718
29,231 39
8
312
935,384
1,683,692
2016 128,615
96,461
42,872
53,590
32,154 43
9
386
1,157,538
2,083,568
2017 141,477
106,108
47,159
58,949
35,369 47
10
472
1,414,769
2,546,584