Social Venture Capital - A means to alleviate poverty

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  • Hi ihoward,

    you researched the collaboration topic (between non-profits and for-profits) in depth in my university thesis.
    You can find a presentation about my thesis here and an executive summary here, respectivly.
    http://www.slideshare.net/simonJ/sap-presentationmanagement-of-crosssector-collaborations-csc-in-bopmarkets6-case-studies/

    You might also be interested in my presentation where I compare the internationalization process of Grameen Bank with ACCION international (in German though).
    http://www.slideshare.net/simonJ/uppsala-internationalization-model-for-nongovernmental-oragnization/

    http://bop-collaboration.blogspot.com/2008/05/executive-summary-of-my-thesis.html

    Regards,
    Simon
    http://bop-manager.blogspot.com/
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  • Guest, I tried to contact you, but couldn't find your contact details. Please send me a message via slideshare.
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Social Venture Capital - A means to alleviate poverty

  1. 1. PROJECT PYRAMID SUSTAINABLE CO-LEARNING IN ACTION CATALYST Consulting: Matthew Cohen, Ian Howard, Simon MacMahon, Bob Mann, Alexis Morgan
  2. 2. The Challenge <ul><ul><li>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 </li></ul></ul>
  3. 3. Our Development Philosophy <ul><li>Development from Below </li></ul><ul><li>Needs-oriented </li></ul><ul><li>Endogenous </li></ul><ul><li>Self-reliant </li></ul><ul><li>Ecologically sound </li></ul><ul><li>Fosters participative decision-making </li></ul>
  4. 4. 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)
  5. 5. Capability and Resource Assessment Project Pyramid must work to: 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)
  6. 6. Project Pyramid Alternatives BOP Philosophy Strengths - Bus. Acumen - Partnerships Scalable Impact 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
  7. 7. Project Pyramid Alternatives BOP Philosophy Strengths - Bus. Acumen - Partnerships Scalable Impact 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
  8. 8. Project Pyramid Alternatives   BOP Philosophy Strengths - Bus. Acumen - Partnerships Scalable Impact 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
  9. 9. Project Pyramid Alternatives     BOP Philosophy Strengths - Bus. Acumen - Partnerships Scalable Impact 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
  10. 10. Project Pyramid Alternatives        BOP Philosophy Strengths - Bus. Acumen - Partnerships Scalable Impact 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
  11. 11. Project Pyramid Alternatives            BOP Philosophy Strengths - Bus. Acumen - Partnerships Scalable Impact 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
  12. 12. Social Venture Capital – Why? NGO/Micro-entrepreneurs Investment Range: $100-$5,000 Financing: Microcredit, special funds Small Social Enterprise Investment Range: $5,000 - $50,000 Financing: Local Banks? Large Social Enterprise Investment Range: $50,000 - $500,000 Financing: Local Banks SME Investment Range: > $500,000 Financing: Commercial Investments Commercial Investment (SME Financing) Grant Funding Degree of Self-reliance & type of capital input Aid/Microcredit Market Source of capital Commercial Banks <ul><li>Range: $100-$5,000 </li></ul><ul><li>NGO </li></ul><ul><li>Micro-entrepreneurs </li></ul><ul><li>Microcredit </li></ul><ul><li>Range: $5,000 - $50,000 </li></ul><ul><li>Small Social Enterprise </li></ul><ul><li>Local Banks? </li></ul><ul><li>Range: $50,000 - $500,000 </li></ul><ul><li>Large Social Enterprise </li></ul><ul><li>Investment </li></ul><ul><li>Local Banks </li></ul><ul><li>Range: > $500,000 </li></ul><ul><li>SME Investment </li></ul><ul><li>Commercial Investments </li></ul> Gap 
  13. 13. The Business Model – Identification Sustained Action <ul><li>Screening Process </li></ul><ul><li>Identify local companies that fit our criteria. Company referrals will come from, </li></ul><ul><ul><li>Church network </li></ul></ul><ul><ul><li>Business associations </li></ul></ul><ul><ul><li>Ministries </li></ul></ul><ul><ul><li>NGOs </li></ul></ul><ul><li>Screen down to 5-20 companies </li></ul><ul><ul><li>Initial screening based on a simple process </li></ul></ul><ul><ul><li>Local advisory board suggests and assesses </li></ul></ul>Identification Collaborating Co-Learning
  14. 14. <ul><li>Consultation Process: </li></ul><ul><li>Teams of 2 students per enterprise </li></ul><ul><li>Maximum 4 weeks </li></ul><ul><li>Collaborative development of initial business plan </li></ul><ul><li>Support from local advisors & Vanderbilt faculty </li></ul>Sustained Action Identification Collaborating Co-Learning The Business Model – Co-Learning
  15. 15. The Business Model – Co-Learning <ul><li>Learning Elements – Students </li></ul><ul><li>Learn : Local industries and enterprise models </li></ul><ul><li>Adapt : Classroom theory to local circumstances </li></ul><ul><li>Understand : Local culture </li></ul><ul><li>Learning Elements – Company </li></ul><ul><li>Learn : Business reporting skills </li></ul><ul><li>Adapt : North American business tools </li></ul><ul><li>Understand : Foreign culture </li></ul>Sustained Action Identification Collaborating Co-Learning
  16. 16. The Business Model - Collaborating Review and Assessment of Candidates Sustained Action Identification Collaborating Co-Learning 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
  17. 17. Full business plan developed with students Business plan reviewed by Investment Committee Initial capital invested The Investment Committee is composed of local leaders, Owen faculty and key professionals Plan submitted Changes requested Sustained Action Identification Collaborating Co-Learning Plan approved The Business Model - Collaborating
  18. 18. The Business Model - Sustained Action Sustained Action Identification Collaborating Co-Learning Further Funding Continued Business Growth Performance Monitoring Strategic Adjustments Consulting and Training Ever Improving Processes
  19. 19. Potential Exit Strategies Funds invested in subsequent venture Still has potential - Adjustments, continued investment Business is in good shape but not ready for divestment
  20. 20. The Overall Business Model – Sustained Action Sustained Action Identification Collaborating Co-Learning
  21. 21. Funding Model <ul><li>5-year Goal: $1.6 Million Endowment </li></ul><ul><ul><li>Fundraising with Owen assistance </li></ul></ul><ul><li>Target Segments: </li></ul><ul><ul><li>Individuals : Regional (Baptist?) Congregations ($300K) </li></ul></ul><ul><ul><li>Major Gifts : Owen Alumni ($300K) </li></ul></ul><ul><ul><li>Corporations : Those with linkages to Owen/Site ($300K) </li></ul></ul><ul><ul><li>Aid Agencies : USAID ($700K) </li></ul></ul>
  22. 22. Funding Scenarios <ul><li>Note : There are consequences to each scenario in terms of spending </li></ul>
  23. 23. Country: Why Ghana? <ul><li>Criteria </li></ul><ul><ul><li>Low conflict </li></ul></ul><ul><ul><li>High need </li></ul></ul><ul><ul><li>English speaking </li></ul></ul><ul><ul><li>High investor protection </li></ul></ul><ul><ul><li>High % of Christians </li></ul></ul><ul><ul><li>Strong institutions </li></ul></ul><ul><ul><li>Relatively good IT infrastructure </li></ul></ul>Source: DoingBusiness.org, 2007 Source: WRI, 2007 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%
  24. 24. Vanderbilt Implementation Plan <ul><li>Action Steps: Year 1 – Get Plans and Positions in Place </li></ul><ul><li>Communicate /modify plan to Project Pyramid Team ( Principal ) </li></ul><ul><li>Catalyst Fundraising Coordinator ( Project Developer ): </li></ul><ul><ul><li>Work with Owen Fundraising Team to approach donors </li></ul></ul><ul><ul><li>Apply for matching funds from USAID </li></ul></ul><ul><li>Catalyst Ghana Mission Liaison ( Divinity Liaison ): </li></ul><ul><ul><li>Establish mission liaison (USA/Ghana); research; </li></ul></ul><ul><li>Project Manager : Develop & deliver marketing materials </li></ul><ul><li>Talent Manager : Complete trip logistics </li></ul><ul><li>Year 2 (2008-2009) – Institutionalize Process </li></ul><ul><li>Continue fundraising efforts </li></ul><ul><li>Inspire incoming class with 2008 work & recruit new team </li></ul><ul><li>Plan & coordinate spring/summer 2009 trip </li></ul>Goal: Catalyst Capacity Development Jan. 2008 May Sept. Jan. May Sept. 2009 Year 1 Year 2 1 - 3 4 5 1 - 2 3
  25. 25. Ghanaian on-the-ground Plan <ul><li>Action Steps: Year 1 – Lay the Foundation </li></ul><ul><li>Missions distribute Flyer (written or verbally) to identify suitable businesses in Ghana for Catalyst to explore </li></ul><ul><li>Principal : Recruit Local Ghanaian Advisory Board </li></ul><ul><li>Talent Manager : Recruit and Hire local coordinator </li></ul><ul><li>Teams engage potential companies, explore and lay foundation for Year 2 </li></ul><ul><li>Year 2 – Formal Launch of Sustained Action </li></ul><ul><li>Liaise with local coordinator </li></ul><ul><li>Solicit & identify 2009 businesses (missions/marketing) </li></ul><ul><li>Local Advisory Board to review candidates </li></ul><ul><li>Sustained action : identification, co-learning, collaboration </li></ul>Jan. 2008 May Sept. Jan. May Sept. 2009 Year 1 Year 2 1 2 - 4 1 2 3 4
  26. 26. Community Outreach <ul><li>Christian Missions distributed over Ghana </li></ul><ul><li>Clergy can act as eyes and ears in the field as well as assist with local advisory board </li></ul><ul><li>Leverages Partnerships (Divinity) to overcome a lack of local knowledge </li></ul>Source: www.ghanamissions.com Missions in Ghana – Total 704 11 13 80 44 137 71 87 83 121 57
  27. 27. Risk Assessment/Mitigation Risk Mitigation Potential for misuse of funds/accountability by Co. - Phased funding - Mandatory reporting structure High student turnover <ul><li>- Faculty involvement </li></ul><ul><li>Creation of various boards to stabilize governance </li></ul>Student’s safety <ul><li>- Local Advisory Board will advise & develop emergency plan </li></ul><ul><li>Local support from clergy </li></ul>Proposed funding targets are not met and anticipated perpetuity is not established <ul><li>Operate via annual fundraising </li></ul><ul><li>Decrease equity amount </li></ul><ul><li>Remove travel bursary </li></ul>
  28. 28. Case 1: Anasset LPG <ul><li>Business Plan - provides liquefied petroleum gas </li></ul><ul><li>Opportunity - Expansion </li></ul><ul><li>Constraint - Lack of financial resources </li></ul><ul><li>Need - $38,000 over 4 years </li></ul><ul><li>Triple benefit: </li></ul><ul><ul><li>Economic – Business growth a sustained profit of 40% </li></ul></ul><ul><ul><li>Social – lower costs for cooking, less smoke inhalation </li></ul></ul><ul><ul><li>Environmental – reduced use of wood for cooking fuel </li></ul></ul><ul><ul><ul><li>Reference: Areed (UNEP)‏ </li></ul></ul></ul>
  29. 29. Case 2: Gladymanuel Trading <ul><li>Business Plan - Solar energy lighting company </li></ul><ul><li>Opportunity - Significant growth due to power shortages (water shortage for dams)* </li></ul><ul><li>Constraint - Lack of financial resources </li></ul><ul><li>Need - $70,000 over 3 years </li></ul><ul><li>Triple Benefit </li></ul><ul><ul><li>Economic - Returned funds at 7.5% </li></ul></ul><ul><ul><li>Social - Lighting to 9000 families, fewer shortages </li></ul></ul><ul><ul><li>Environmental - Provided green energy </li></ul></ul><ul><li>* Source: Areed (UNEP) </li></ul>
  30. 30. Impact - Economic Revenue s
  31. 31. Impact - Social
  32. 32. Impact - Environmental
  33. 33. Conclusion <ul><li>Identification </li></ul><ul><ul><li>Opportunities to empower local knowledge to fight poverty </li></ul></ul><ul><li>Co-learning </li></ul><ul><ul><li>Equity VC = Longer term commitment, shared growth and learning </li></ul></ul><ul><li>Collaboration </li></ul><ul><ul><li>Missions, Congregations, Divinity school & local advisory board </li></ul></ul>Sustained Action
  34. 34. Questions
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. Work Responsibilities <ul><li>Leadership Positions </li></ul><ul><ul><li>Principal : overall coordination and Ghanaian advisory board recruitment </li></ul></ul><ul><ul><li>Talent Manager : Ghanaian coordinator hire </li></ul></ul><ul><ul><li>Project Manager : Marketing materials & travel logistics </li></ul></ul><ul><ul><li>Divinity Liaison : Mission linkages & information management </li></ul></ul><ul><ul><li>Project Developer : Fundraising & USAID application </li></ul></ul><ul><li>Catalyst Team Member </li></ul><ul><ul><li>Pre-Departure </li></ul></ul><ul><ul><ul><li>Fundraise travel costs </li></ul></ul></ul><ul><ul><ul><li>Research Ghana </li></ul></ul></ul><ul><ul><ul><li>Obtain travel requirements & immunizations </li></ul></ul></ul><ul><ul><ul><li>Prepare business plan templates </li></ul></ul></ul><ul><ul><li>Post-Departure (On-site) </li></ul></ul><ul><ul><ul><li>Visit identified companies, learn & share </li></ul></ul></ul><ul><ul><ul><li>Select business & collaborate to develop plan </li></ul></ul></ul><ul><ul><ul><li>Present plan to Local Advisory Board </li></ul></ul></ul><ul><ul><li>Upon return </li></ul></ul><ul><ul><ul><li>Sustain follow-up </li></ul></ul></ul>
  39. 39. Social Venture Capital <ul><li>Our model is based on: </li></ul><ul><li>Funding companies with high growth potential that are presently constrained by inefficient capital markets and/or human capital constraints </li></ul><ul><li>Target companies that have the opportunity most positively local communities – poverty reductions </li></ul><ul><li>Model – the company owner will buy back their shares in 5 years  </li></ul><ul><li>We will buy no more than 25% </li></ul><ul><li>Start with one company per year, and grow from there. </li></ul><ul><li>Two to stage funding </li></ul><ul><li>Operating expenses in the company will be covered by our operations in the country </li></ul><ul><li>Our costs to send our staff will not be covered by operation, must be fund raised </li></ul><ul><li>This is a one country model </li></ul><ul><li>Capital market is inefficient and underperforming </li></ul><ul><li>We need to address what is failure, not getting our money is not failure. </li></ul><ul><li>What success is to us </li></ul><ul><li>We will use NPV and discount rate would be - real difference between us and another </li></ul><ul><li>Metrics </li></ul><ul><li>Impact </li></ul><ul><li>Staged Funding </li></ul>
  40. 40. Community Outreach <ul><li>Establish Local partnerships </li></ul><ul><li>Grassroots Publicity via word of mouth, local press releases </li></ul><ul><li>Limited Marketing Initiatives </li></ul>
  41. 41. The Business Model - Collaboration A Phased Investment Approach Sustained Action Identify Collaborating Co-Learning Amount of Capital Invested . Step 1: Planning An acquisition plan is drafted Legal/Structural changes begin Output: Initial Plan Step 2: Consulting Plan is further developed, performance changes Output: Plan & Structural Changes Step 3: Initial Capital Investment Investment in capital to achieve business goals Output: Output: Acquisition Plan
  42. 42. Environmental Impact 58.95 58,949 50 1,179 10 118 48.23 48,231 50 965 9 107 38.97 38,974 50 779 8 97 31.00 31,002 50 620 7 89 24.16 24,158 50 483 6 81 18.30 18,301 50 366 5 73 13.31 13,310 50 266 4 67 9.08 9,075 50 182 3 61 5.50 5,500 50 110 2 55 2.50 2,500 50 50 1 50 Tons Total Pound Lbs Solar panels   Solar panels installed
  43. 43. Ensuring Positive Impact - Metrics 2,546,584 1,414,769 472 10 47 35,369 58,949 47,159 106,108 141,477 2017 2,083,568 1,157,538 386 9 43 32,154 53,590 42,872 96,461 128,615 2016 1,683,692 935,384 312 8 39 29,231 48,718 38,974 87,692 116,923 2015 1,339,300 744,056 248 7 35 26,573 44,289 35,431 79,720 106,294 2014 1,043,610 579,784 193 6 32 24,158 40,263 32,210 72,473 96,631 2013 790,614 439,230 146 5 29 21,962 36,603 29,282 65,885 87,846 2012 574,992 319,440 106 4 27 19,965 33,275 26,620 59,895 79,860 2011 392,040 217,800 73 3 24 18,150 30,250 24,200 54,450 72,600 2010 237,600 132,000 44 2 22 16,500 27,500 22,000 49,500 66,000 2009 108,000 60,000 20 1 20 15,000 25,000 20,000 45,000 60,000 2008 With fiscal Muliplier Gross Revenues # employess working for our companies Number of Companies Employees Profit Fixed Wages Costs Revenue Year

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