December 21st, 2010Dear friends of Agora,2010 has been a great year for Agora Partnerships and I wanted to thank all of oursupporters, partners, investors, staff, volunteers, entrepreneurs, friends and family forhelping to make it so.As we look forward to 2011, we will continue our focus on helping the most important,forward-thinking, impact-focused small businesses in Central America reach their potential.In this letter, I want to reflect on how Agora sees the world, and in particular to discussthree global trends that will transform the international development industry in thecoming years. I’ll also present three key challenges we believe the impact investmentindustry will need to confront. Finally, I’ll discuss Agora’s response to these challenges,something that has been five years in the making.Agora 2010: Year in Review2010 was our busiest year to date. Here are just a few of the highlights. • The year started with the good news that I had been elected an Ashoka Fellow. We were very excited to receive this recognition and to contribute to building the Ashoka community; in particular to share our perspective on how for-profit business models can create social change. • In February, we wound down our four-year contract with USAID, and I am happy to announce that we exceeded nearly every goal. Given the global economic slowdown, however, we ended up raising less and investing less from the Agora Venture Fund than originally hoped. In the interest of transparency and with the hope of contributing to the field of early-stage impact investing, we plan to produce a white paper on every deal the Fund has made and make it available to the public next year. • In April, co-founder Ricardo Teran was selected as a Yale World Fellow, spending four months this fall at Yale and building a strong network of support and awareness for Agora and the field of impact investing and entrepreneurship. • In March, we co-hosted the first-ever Aspen Network of Development Entrepreneurs Latin American Conference in Granada, Nicaragua in order to help build the field among local practitioners. On an island in the middle of Lake Nicaragua, close to a hundred people from over a dozen countries signed the Granada Declaration, dedicating themselves to supporting sustainable small business creation across the region.
• With Mercy Corps, we launched the first-of-its-kind micro-mentoring program in Central America, which will connect over 100 entrepreneurs to Spanish-speaking mentors in the United States. • In July, for the second year, we ran the Responsible Business Leadership (LiderES) prize to recognize small businesses in Nicaragua that contributed the most to their community and the environment. The winners of the prize represent the very essence of impact entrepreneurship. • With innovative partners like the Arthur B. Schultz Foundation’s THRIIVE program, we invested $50,000 in 7 small companies with the requirement that they give back a similar amount of in-kind goods to the community. We hope to expand the program next year. • In September, we cemented a partnership with the AVINA Foundation, one of the leading philanthropic foundations focused on sustainable development in Latin America. • In October, we celebrated our five-year anniversary in New York City. Thank you to everyone who attended! • In November, we brought on two outstanding new Board members, Melissa Cheong and Holly Huffman – welcome! • And in December, we began the launch of the Agora Accelerator, our most ambitious initiative yet and the one that will define Agora in the coming years.Global TrendsThree well-recognized trends are converging to change the way we engage in developmentwork and I wanted to discuss them briefly. These trends will inform Agora’s approach todevelopment in the coming yearsFirst, there is an increasing realization that entrepreneurial business innovation iscritical to help solve our social and environmental problems. Businesses in poorcountries that take a multi-stakeholder view of their role in society and that generatepositive social, environmental, and financial impact represent the future of development.Not only are they sustainable – relying on customers, not donors – but they are run by anew generation of entrepreneurs deeply committed to using business as a force for good.We are on the cusp of a historic shift from a donor mentality focused on relieving sufferingto a partner mentality focused on working with the very best local entrepreneurs to createlong-term change.Second, social networks and technology are growing rapidly, enabling vast amounts ofinformation and resources to flow from a classroom or church group in one part of theworld to an entrepreneur in another. At some point – and hopefully soon – the power ofthis media will allow for multiple connections between investors, philanthropists,volunteers, customers, business school student – and impact entrepreneurs on the ground.Today, too many incredible impact entrepreneurs face nearly insurmountable barriers togrowth, toiling along in relative obscurity, their potential too often squandered. Tomorrow,
the best impact entrepreneurs will discover they are not alone – they have allies across theglobe who want to celebrate, support, invest, and do business with them.Third, the impact investing industry is experiencing incredible growth. Increasingly,investors and philanthropists alike are realizing that the right kind of investments in theright kind of companies can often do as much, if not more, for the world than a grant can.The impact investment trend is rapidly accelerating, backed now by major investmentbanks and governments. Whether it turns out to be a bubble, and whether it does in factcreate the social impact we hope for, is still to be determined. But impact investing as anapproach to investment and to development is very likely here to stay – in no small part dueto the fact that some of the best minds in our field are committed to making sure it trulydoes fulfill its enormous potential. And that is a very good thing.Key ChallengesFirst, can the impact investing community create financial structures that allowrelatively small amounts of capital to flow to the early stage businesses that need itmost? Right now, few impact investment funds being launched intend to do deals anysmaller than $1 million. The economics of funds make it difficult to invest between $50,000and $1 million in impact-driven companies, since it costs about as much to close a $500,000deal as it does a $5 million deal. This presents a challenge to the field precisely because thevast majority of entrepreneurs need between $50,000 and $1 million – and it’s the mostdifficult kind of capital to obtain. We need a new kind of development venture capital modelwhere large pools of money can be efficiently invested in hundreds of companies workingwith dozens of partners, angel investor networks, and trusted business service providers.Think of a $50 million impact focused fund co-investing in one hundred companiesalongside local angel investment groups, energizing an entire new generation of localimpact investors. Several attempts to create innovative models have sprung up; some arevery promising, but no model has yet emerged as a global standard.Second, where will the pipeline of investment-ready impact entrepreneurs for thenew impact funds be generated? How will we find and nurture the next generation ofimpact entrepreneurs so vital for the success of the industry? How will investors be able tolower their search and transaction costs so that those that do want to do smaller, earlierstage deals can do them efficiently? A market needs to be created, and a there are a numberof efforts afoot to create such a market.Third, how can we help build and support the impact entrepreneur movement? Withthe rise of the impact investing industry and new global standard like GIIRS, we have anincredible opportunity to help catalyze a whole movement of socially responsiblebusinesses, to remake what business leadership – especially small business leadership –means in the twenty-first century. This is incredibly important as we confrontunprecedented global threats like climate change. But culture change is one of the hardestkinds of change to affect. Investing is companies will be an important way to encourage anew way of doing business, but it won’t be enough. We also will need to work at the locallevel to create a supportive community with shared values and interests.At Agora we have been thinking about these trends and challenges for five years now. Oneof the major decisions we made in 2010 was to delay trying to raise a second fund – at leastfor a few years. This was a difficult decision given how far we had advanced on the funddesign and raising capital, but I am more convinced than ever it’s the right one.
Agora’s Response: The AcceleratorThere is currently an imbalance in the attention being paid to launching impact investmentfunds and the attention being paid to the impact entrepreneurs charged with putting thatcapital to use. It takes two to tango and, in the end, we forget at our peril that it’sentrepreneurs, not capital, who will determine whether the promise of impact investing canreach its true potential. The growth of the impact investing movement is due to theleadership of a few individuals, institutions, and investors groups. We hope to provideleadership to the impact entrepreneurship movement in Central America, much like groupslike B Lab and the Social Venture Network are doing in the U.S.More attention needs to be focused on helping high potential entrepreneurs attractexpertise and capital. Without this focus, the impact investment movement will encounterdifficulty reaching the vast majority of impact entrepreneurs, who run triple-bottom linecompanies that employ between 10 and 100 people and that are generating revenues ofunder $1 million.This group of entrepreneurs – so key to creating the new and innovative companies thatpoor countries need – will continue to be our focus at Agora. Helping them to access thesocial, human, and financial capital that already exists, that wants to help them but can’tfind them is a key part of our strategy. It is precisely to help this group – and pioneeringinvestors who want to invest in them – that we are launching the Agora Accelerator, a newinitiative to find and support the most important companies in Central America, defined bytheir potential to create social, environmental, and financial value, with revenues of under$1 million. With this program we will build on our previous experience working withentrepreneurs, but will focus our efforts on launching and growing a highly selectcommunity of impact entrepreneurs with enormous potential to solve social problemsthrough their business.An important strategy for making the accelerator work is bringing the right supporters intoit. I encourage you to get involved helping, mentoring, investing, or consulting toAccelerator companies. To learn more, please contact Lissette Cuadra, the AcceleratorPortfolio Manager, at email@example.com, or contact me directly.I hope this letter gives you a good idea of what we have achieved and where we hope to goin 2011 and beyond. From the very beginning Agora has been an organization supported byhundreds of individual donors and volunteers. The continuing support and engagement ofour community never ceases to amaze me. Thank you for being a part of our community.Your support to Agora helps us to support the entrepreneurs who will be key to helpingmake our planet more just, healthy, and prosperous.Happy holidays,Ben PowellFounder & Managing PartnerP.S. If you would like to meet an Agora Accelerator entrepreneur, check out this video of Aida Mayorga (4 min.)