OpenKollab Pooled Fund

A unique strategy for the formation of a pooled fund to finance social ventures in the collaborative infrastructure space
OpenKollab Pooled Fund
Suresh Fernando
Founder
suresh@radical-inclusion.com

Vision and Context
Historical Inflection Point
Global challenges (climate change, economic inequity...)
Failure of existing institutional framework (unfettered capitalism, global institutions...)
Evolution of collaboration infrastructure (broadband penetration, P2P infrastructure...)
Something went wrong with the way that traditional organizations were formed.
We need to think outside the box about what types of organizations to build!

The Problem
Existing capital markets frameworks deploy capital only towards organizations that are purely financially motivated.

The Chain of Assumptions
Can you spot the false assumption?

The Solution
Deploy capital on organizations that are not only financially motivated... They also have a social mission!

But, that raises a problem...
How do investors make money?

The Solution... In principle...
Find projects that are both:
Financially sustainable
AND
Have a social mission
Find investors that:
Are seeking investments that have a social focus
Can tolerate non-market rate returns
Utilize an investment structure that mitigates risks for investors

First... A picture of the current landscape
-100% rate of return
Traditional market rate returns
NOTHING!!
Charities/ Not For Profits
For Profit Companies
NOTHING!!
NOTHING!!
Socially Motivated
Financially Motivated

So what is needed is...
Social Investors looking for Social AND Financial Returns
-100% rate of return
Traditional market rate returns
Charities/ Not For Profits
For Profit Companies
Social Ventures
Deliver Social AND Financial Returns
Socially Motivated
Financially Motivated

So what do social investors expect?
Clearly Defined Social Mission: first and foremost, social investors are looking for organizations that are lead by visionary entrepreneurs with a clear vision of how they want to transform the world for the better!
Measureable Social Mission: It is not enough just to have a vision of how you will change the world. You will also need to be able to clearly articulate the path in a way that is measurable!
Some Financial Return: We will be looking for investors who will provide loans at better rates than you could get at the bank. They will, however, expect these loans to be repaid!

One Specific Contribution – OK Pooled Fund!
A pool of capital that is managed by a third party – OK Pool Fund Management Team
Invest in social mission driven organizations that are financially sustainable
Investors contribute to the pool and own a `pro-rata` share of the pool
Certain unique characteristics differentiate fund from other pooled funds.

Investor 1
Investor 2
Investor 3
OpenKollab Pooled Fund
Project 1
Project 2
Project 3
Project 4
Project 5

So what makes this fund unique?
Investment Focus: Collaboration Infrastructure
Collaboration tools
Collaboration services
Projects that are collaborating
AND

So what makes this fund unique
Project Synergy: we will identify projects that have synergy in the following ways:
Common missions
Complementary needs or resources
Common markets or clients
Common technology infrastructure
Common processes
Mutual Accountability: we will develop mutual accountability mechanisms that parallel the Grameen Peer Lending model.
Specific Collaboration Processes

Pooled Fund Details
Overall Size: $2 million
Candidate Investments
Seed stage social ventures
Clearly defined social mission
Can achieve financial sustainability within 12 months
Two Investment Stages
Seed Stage: $50 - $100,000
2nd Stage: $250 - $350,000 depending on satisfaction of milestones

Pooled Fund Details
Investment Structure
Given the fact that our portfolio companies will not be strictly financially motivated, we do not expect that we will be able to raise funds for equity financing.
We expect to raise investment capital for the following:
Debt (below market rate)
Debt (below market rate) with option to convert to equity
Debt with royalty payments tied to profitability

So why will this workSocial cohesion between projects
Why does the Grameen Peer Lending Model work
Social cohesion within the Lending Circle – all part of the same community
OK Pooled Fund Investment Groups are, by definition, groups of projects that have synergy
We hope to identify projects that have existing relationships that give have given rise to social cohesion.

Execution Strategy
Identify Investment Candidates: The first step in the process is for us to identify 5 or 6 investable projects.
Solicit candidate investments – cast net widely
Develop shortlist of candidates
Identify initial Funding Group
Engage in collaborative processes, discussions etc to assess synergy amongst projects
Modify Funding Group as necessary.
Collaborate With Funders: Due to the nascent stage of the market as well as the innovative nature of the pooled fund that we are creating, we hope to engage prospective investors in the process as early as possible.

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OpenKollab Pooled Fund

by Suresh Fernando on Dec 15, 2009

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