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Mark sayer

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  • 1. Preparing Social Enterprises for Investment Mark Sayer - Director, IIX October 16, 2013 Aldaba Theater, University of the Philippines Quezon City, Philippines
  • 2. Outline  Evolution of a Social Enterprise  Challenges/barriers to growth  Overcoming the barriers     Preparing SE’s for investment A Case Study Investment Facilitation The IIX approach Page 2
  • 3. Evolution of a Social Enterprise Stage of SE evolution Idea/pilot Emerging start up SEs at idea and pilot stage Small scale operation Growth stage: raising capital Many successfully launch and achieve impact on a small scale, proving the concept Relatively few successfully raise capital and scale up Page 3
  • 4. Challenges exist at each stage Stage of SE evolution Idea/pilot Emerging start-ups - at idea and pilot stage barrier Small scale operation barrier Successfully launch and achieve impact on a small scale, proving the concept Pre-investment Raising capital ready barrier Decide to pursue a strategy for growth and scale-up Secure investment Many SEs reach small scale operation and are not pursuing further growth Page 4
  • 5. Barriers can be overcome - with support Stage of SE evolution Idea/pilot High risk of success barrier Small scale operation barrier Pre-investment Raising capital ready barrier Can operational business survive and grow? How to I prepare? Prepare: Support needs • Robust business plan & financial projections • Appropriate strategy for approaching investors • Clear evidence of social impact • Strong investor pitch Page 5 Secure investment
  • 6. IIX’s structured pathway Operational Start Up Establish basic operations & strategy 3+ months Investment facilitation Technical Assistance (in the pre-investment stage) Develop robust business plan Financial model Clarify impact 2-3 months Page 6 Develop investment terms Prepare pitch Pitch to Investors Investor Due Diligence 3-6 months Investment facilitation
  • 7. Key elements for investment readiness Business plan Financial model Draft Terms & valuation Investor info. Key areas to be covered Key areas to be covered Key areas to be covered Key areas to be covered Executive summary Business overview Product/service description Pricing and sales Business model Consolidate historicals (includes P&L, Balance Sheet and Cash Flow Statement) Assumptions Organization structure Operations Industry overview Competitor landscape Develop projections (includes P&L, Balance Sheet and Cash Flow Statement) Overview of capital needs and uses of funds Proposed terms: - If equity: valuation; proposed equity share - If debt: proposed interest rates and terms - If convertible note: proposed interest rate, term and conversion rights Professional pitch Due diligence information Transaction documents Risk assessment Implementation plan Management team overview Financial overview Social & environmental impact Investment terms Cashflow is most important Consider various options Uses and sources of funds Page 7 Be prepared
  • 8. Case Study: Technical Assistance for East Bali Cashews East Bali Cashews (EBC) is a Bali based social enterprise which uses sustainable, eco-friendly business practices to process unshelled cashews, package and sell them to the domestic and international markets. It creates social impact by providing jobs especially to women who otherwise had no income. IIX’s Assessment  Small scale operations with strong business case and proof of concept completed  Technical assistance required to engage with investors  Develop business plan to better reflect target market, market opportunity, business overview, implementation plan, and management  Create financial model that reflects consolidated historical financials, current performance, realistic assumptions, projections and capital structure  Conduct social impact assessment  Develop investment terms
  • 9. Case Study: How it worked Collaboration with a KKR & IIX’s sister entity, Shujog Social impact assessment  Overall structure √ Overlay transaction structure √ Shujog EBC IIX Lead √ √ √ Personnel √ Key partners & network √ √ Page 9 Review existing documents √ √ Develop theory of change √ Validate model with SE √ √ Develop summary √ Implementation plan Social impact assessment tasks Input data; run projections √ SWOT √ Develop projections Competitive landscape √ Validate assumptions √ Product description Financial overview Lead Consolidate historicals √ Business overview & market opportunity Industry fundamentals Financial model drafting tasks KKR Lead EBC Business plan drafting tasks Validation of draft model during field visit KKR KKR led on drafting the model with EBC & IIX Shujog led the process with EBC   Included 3-day field visit IIX  IIX led the overall process for developing the business plan KKR  Financial model √ EBC Business plan
  • 10. Investment Facilitation Stage of SE evolution Idea/pilot barrier Successfully launch and achieve impact on a small scale, proving the concept Pre-investment Raising capital ready barrier Decide to pursue a strategy for growth and scale-up Secure investment Investment facilitation Support needs Emerging start up SEs at idea and pilot stage barrier Small scale operation • Introductions / access to investors • Negotiation strategy • Professional advice on structuring the deal • Executing and moving forward Page 10
  • 11. Case Study: Investment Facilitation for East Bali Cashews  The Technical Assistance team outlined a range of financing options  Final structure: Stapled security  Equity investment coupled with a loan  The company required $300,000 of equity and $600,000 of debt  Post Technical Assistance, EBC has received commitments from 4 investors  Technical assistance team helped EBC in facilitating the transaction Page 11
  • 12. IIX provides an end-to-end solution Provide Technical Assistance Stage Identify & Screen SEs • Source and screen SE investment opportunities IIX services Shujog services Transaction management • Provide technical assistance : o • Evaluate SE investor o readiness • Provide feedback on gaps Investor Engagement o o Execute deal Posttransaction monitoring • Arrange showcases • Guide on appropriate • Facilitate deal for exposure to larger deal structure execution: investor base Clear business plan • Facilitate information o Term sheet • Identify and introduce sharing between negotiation Concrete expansion SE to Tier I investors investors plan with supporting o Subscription with financial, social financial model • Assist due diligence agreement and strategic Concise and appealing alignment • Help ensure mission o Funding vehicle investor presentation / protection is achieved • Facilitate meetings elevator pitch through agreements with target investors Groom for Investor • Engage ecosystem Engagement partners (e.g., lawyers) • Remain engaged to provide advise and guidance on Social Impact and reporting to SE and Investors • Set up Impact Framework to structure social and environmental performance management • Perform Impact Assessment to quantify on-going impact • Prepare impact projections for the SE to showcase to investors • Shujog ACTS facility to fund technical assistance Page 12 • Assist in raising next round of capital
  • 13. Success in Raising Capital for SEs – examples • Country: Philippines • Sector: Vocational training for disadvantaged youth • Country: India • Sector: Safe affordable drinking water • Country: India • Sector: Lending to micro & small enterprises • Country: Cambodia • Sector: Clean energy for rural areas Page 13
  • 14. Concluding remarks  Most SE’s require support to scale their business and impact   Business plan, financial model and investment terms Need for more intermediaries to provide technical assistance  and facilitate access to capital  External funding is often required to support technical assistance and investment readiness  There are investors out there who want to invest in businesses with a social mission Page 14
  • 15. w: www.asiaiix.com p: +65 6221 7051 f: +65 6535 3622 a: Hui Seng Building, 38 Carpenter Street #2-01, Singapore 059917 This document contains proprietary information of IIX and Shujog and is strictly confidential. It shall not be taken to constitute an offer for sale of securities in any jurisdiction. It is intended for your exclusive use to advance your discussions with IIX and Shujog regarding the content contained herein. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity, without IIX and Shujog’s prior written permission unless required by law.