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Social Venture Investment Bank


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  • 1. Open Infrastructure Model To Support Early Stage Social Ventures
    Social Venture Investment Bank
  • 2. Objectives
    Provide vision and model for a social venture investment bank to support early stage social ventures
    Incorporate current context
    Open infrastructures
    Information technology landscape
    Introduce notion of ecosystems and describe how ecosystems can form the basis for understanding the investment landscape
    Provide suggestions on how to rollout the model
    Advance specific proposal for consideration for funding
  • 3. Vision
    Openness: utilize open models whenever possible
    Collaborative: develop collaborative models whenever possible
    Focus on ‘emerging’ spaces; I will focus on spaces that are evolving around open architectures
  • 4. Function, Context and Timing
    Infrastructure and Investment Banking
  • 5. What is an investment bank?
    Add value in the capital allocation process
    Develop industry segments by judiciously deploying capital in a risk adjusted way
    Provide intermediary services between capital providers and those that require capital
    Provide advisory services
  • 6. Investment Banks: some history
    JP Morgan: financed the railroads based on a vision for an integrated Railroad Structure
    Goldman Sachs: pioneered IPO market
    Barclay’s: involved in precious metals trading in the 1600’s
    Drexel Burnham: pioneered high yield debt market
    Investment Banks satisfied a particular need for capital by creating innovative financial structures
  • 7. Why Does The Investment Banking Model Work?
    Market Intelligence!
    Traditional investment banks have very strong research processes and therefore understand the industry context better than most of the companies in the space.
    Market Intelligence is based on a top-down view of the space
  • 8. Why Does The Investment Banking Model Work?
    Industry Relationships!
    Traditional investment banks invest a lot of time and energy as a part of their research process to get to know the companies in a particular industry segment
    There is no shortcut to relationship development...
  • 9. Developing Infrastructure in the SV Space: function and context
    What is the function of SV finance infrastructure? To support the evolution and development of the SV space.
    Therefore: IF we have an evolved SV space, we need many things that would parallel the traditional SV space:
    However, We DO NOT have an evolved SV Space
  • 10. What is the single biggest reason that we don’t have an evolved SV landscape?
    We do not have a sufficient infrastructure to support new entrants into the space!
    No seed funding for pre-proof of concept social ventures
    No support infrastructure for pre-proof of concept social ventures
    Developing Infrastructure in the SV Space: the current problem
    Creating infrastructure to support new entrants into the space should be the single biggest priority from an SV infrastructure standpoint
  • 11. Why is there a lack of infrastructure to support early stage social ventures?
    Projects are high risk and, in many cases, do not carry sufficiently visible financial return (in contrast to traditional early stage markets)
  • 12. The Solution...Mitigate Risk!
    This can be accomplished by:
    Developing information and increasing understanding of space
    Developing relationships to drive transactions; acquisitions, partnerships etc.
    Driving collaboration between projects and funding the collaboratively (see Ecosystem Pooled Fund)
    Driving collaboration amongst SV ecosystem to share risk on deals, better enhance due diligence methods etc.
    One Final Thought...
  • 13. The Creation of Primary Markets Infrastructure
    Should Precede the Creation of Secondary Markets Infrastructure
  • 14. Project Mapping and Relationship Development
    Developing Early Stage Ecosystems
  • 15. What is an ecosystem?
    A natural set of relationships between a group of projects that makes it possible that they collaborate!
    Share common goals: ‘Solve climate change problem!’
    Are a part of a value chain: supplier manufacturer, distributor
    Share common team members
    Share common customers or markets
  • 16. Why Ecosystems? The Evolution in the Communications Infrastructure
    Internet connectivity penetration rates are increasing
    Bandwith limitations are being reduced
    The cost of communication is dropping (thank you Skype!)
    Interoperability protocols, applications etc. are evolving
    Social networking platforms (Facebook...) are changing the culture of communication
    Processing power is being pushed to the edge of the network (Smartphones etc.)
    The real time infrastructure is evolving (Twitter)
  • 17. Why Ecosystems? Changing Patterns of Interaction
    Information flows freely across organizational boundaries
    Geographic constraints are less meaningful
    Structural limitations on information management don’t constrain participation (thousands of people can work on projects!)
    Meetings can be run virtually
    Projects can be managed asynchronously
    Projects can be scaled to involve many people with minimal incremental cost
    Your communications infrastructure can be scaled to include many people with minimal incremental cost
    Real Time Connectivity Across Boundaries Makes a Systems View Natural
  • 18. Sectors/Verticals/Ecosystems...
    All of the above are ‘ecosystems’. Open ecosystems are a new phenomenon
  • 19. The TimingIs Right for A Systems Approach To Understanding the Investment Landscape
  • 20. A Specific Example
    The Open Manufacturing Ecosystem
  • 21.
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  • 23.
  • 24. Developing an Ecosystem InvolvesBoth Developing Information on the Projects in the Ecosystem and Making it Visible to all Stakeholders in the Ecosystem, for example...
  • 25.
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  • 28. From Visibility Into the Ecosystem, opportunities will emerge
  • 29. Rollout Strategy: the phases
  • 30. Potential Business Models
    Support Associated Fund: management fees
    Align with Funders (Buy side): provide deal flow and to manage investments in the ecosystem
    Sell Side Funding Mandates
  • 31. Project Proposal
  • 32. Develop Single Ecosystem: any ecosystem of your choice
    Develop Ecosystem Map
    Develop Ecosystem Information Model
    Identify collaborative funding candidates (see Ecosystem Pooled Fund)
    Identify individual funding candidates
    Identify ecosystem partner from within ecosystem
    Draft ecosystem Summary Report
    Timeline: 6 months
    Budget: $25,000
    Build foundation to prove model in one ecosystem