Weekly Review April 18 – 22


Every week at ID, we read about what we do and what we like. Continuing with the theme from our last post, we read a lot about the industry buzz in social enterprise and impact investment.
Dare To Be A Social Enterprise!” Tree Hugger Guest Post by Erica Grigg, Founder & CMO at  Carbon Outreach 
As we discussed in our last post, everyone is talking about “social” entrepreneurs and all the business models that come along with it. Behind every social enterprise lies a good story. A true entrepreneur takes chances and feels like the highest highs and the lowest lows when taking on a new endeavor, similar to a parent raising a child.  Grigg says that social enterprise is forcing economists to redefine and rethink capitalism. Now add to the list of new terms, we have the development of “conscious capitalism.” Americans are highly curious about these new trends (citing 90K+ hits on Google) and want their businesses to care and work for a cause. Social enterprise is the way to do achieve profit and good simultaneously. .
“In developing economies, equity beats microfinance” by Alan Patricof via Fortune Magazine    
The US State Department has launched the Global Entrepreneurship Program, a new, professional effort to advance entrepreneurship in emerging markets through investments.  Although “an estimated $300 million has been invested” in microfinance institutions in the past three years, investment in small and medium sized for-profit businesses produces longer, sustainable economic change and development. For-profit social enterprises (like the ones in our portfolio) create jobs and provide affordable goods and services, which ultimately sustains economic development in emerging market. In turn, sustainable development improves life for those at the base of the pyramid. However, for-profit social enterprises need angel investors and venture capitalists. Funds such as the Grassroots Business Fund, SONG Advisors, and the Small Enterprise Assistance Fund (SEAF) seek to invest patient capital in emerging market enterprises to create wealth that “lifts people sustainably out of poverty.” Add the BSP Fund to the list, because here at ID, we’re also committed to providing equity capital to seed-stages businesses that work in emerging markets. Microfinance works, but equity works better.  
How a Donor Mixes Investments and Grants by Caroline Preston via The Chronicle of Philanthropy
Ron Cordes started the Cordes Family Foundation in 2006. Mr. Cordes’ fund is different than most typical family funds as it seeks to invest 20% of its assets into for-profit social enterprises rather than making grants. Americans donate $300 billion to charity a year, but invest $41 trillion in the stock market in one year. To encourage impact investment, Mr. Cordes is working to create “Impact Assets.” Traditionally, businesses exist to maximize shareholder profits, but Mr. Cordes agrees that this should be re evaluated. It’s likely that benefit corporations, which incorporate social goals into shareholder bylaws, will help businesses fulfill all of their responsibilities to their shareholders.
Principal partner of Alitheia Capital, Mrs. Tokunboh Ishmael reports that impact investing may “exceed $500 billion over the next decade.” Impact investors working in emerging markets, like those throughout Africa, have the power to create sustainable economic development and ultimately eradicate extreme poverty for those at the BoP. The money is there and the ideas are there, the missing piece is connecting impact investors and social entrepreneurs to reach the real potential that exists in emerging markets.