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Social good incubator2


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A vision for a model that marries the benefits of incubation space with a systemic view of resource allocation with a view to solving the chronic underfunding of early stage social ventures.

Published in: Economy & Finance, Business
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Social good incubator2

  1. 1. Social Good EcosystemIncubatorSupporting Pre-Proof ofConcept Social Ventures byRethinking the ResourceAllocation Paradigm
  2. 2. What Is The Opportunity? Develop a prototype for a solution thatwill solve a systemic problem!... Tototally change the game… to make adifference at a global level… Ramp up capacity for the movement forchange in our local area
  3. 3. The Paradigm Shift1. Systemic View of ResourceAllocation… from funding one projectat a time to funding one ecosystemat a time!2. Combining two resource allocationconcepts into oneEarly stage seed funding… cashIncubators… in-kindDifferentforms ofvalue
  4. 4. What We Will Cover Social Finance concepts and articulation of thesystemic problem Present concept for prototype of the SocialGood Ecosystem Incubator Present initial sketch of Social GoodEcosystem Pooled Fund Scalability: how we can make the model goviral!
  5. 5. What is a Social Venture?There are many definitions. I am offering thefollowing…‘Projects, the objective of which is to bringabout positive social change’Note that, there is no reference to said projectsnecessarily having to make money in thisdefinition
  6. 6. Why this definition?I will start with the following assumptions… The world needs fixing We need more social innovators We must provide social innovators maximumflexibility to innovateHence, we cannot allow the requirement tomake money to be a constraint on thedevelopment of innovative models.
  7. 7. First... A rough picture of the currentFunding landscapereturnsNOTHING!!Charities/Not ForProfitsFor ProfitCompanies-100% rate ofreturnTraditionalmarket rateNOTHING!!SociallyMotivatedFinanciallyMotivatedNOTHING!!
  8. 8. So what is needed is...Charities/Not ForProfitsFor ProfitCompanies-100% rate ofreturnTraditionalmarket ratereturnsSocialVentures-for profit-not for profitSociallyMotivatedFinanciallyMotivatedSocial Investorslooking for SocialAND FinancialReturnsSocially andFinanciallyMotivated
  9. 9. What is the Problem BeingSolved? Lack of resources (cash and in-kind) forpre-proof of concept social innovators…which is a systemic problem… why is this a systemic problem?
  10. 10. The Systemic Problem Seed stage social innovation projects (asdefined) carry very high risk and verylittle financial return potential (bydefinition) This is to be contrasted with financialinnovation which behaves like…
  11. 11. ‘Financial Driven’ AngelInvestments… return distributionsSocially motivatedinvestments don’thave this returnpotentialSeed stage Socialinvestments havehigh risk andmoderate returnpotentialAll seed stage projects are risky butsome that are profit motivated do reallywell!... This compensates for all thosethat do poorly…
  12. 12. Guess where the bottleneck is?Pre Proof of ConceptProof of ConceptMid StageLateStageNo $Small $Volume of VenturesSome $Huge $!EnterpriseCentric Model
  13. 13. Where is the money going?High Financial Return/LowSocial Return- traditional investments…served by existing capitalmarkets infrastructureHigh Financial/High SocialReturn- traditional ‘social ventures’…served by current socialfinanciers… at least to someextentLow Financial Return/LowSocial Return- badly designed projects…deserve no external capitalLow Financial Return/HighSocial Return-No financial support fromsocial investors!
  14. 14. Taking a System Approach…from One To MANY!
  15. 15. Traditional Funding Mindset…scale one projectScalability: support the one project that has thehighest probability of doing extraordinarily well.Problem… Ignores 9/10 projects Reinforces survival of the fittestUnderlying Perspective Competition versus cooperation
  16. 16. Social Change and Cultural Change…proliferating social entrepreneurshipThe Problem with the One Project Scalability model…Is it better to fund 1 * $200,000 into a great project thatwill scale… or 10 * $20,000 into smaller unprovenprojects?Not clear from a financial perspectiveA definite NO from a cultural change perspective
  17. 17. The Cultural MixIs it better to have?...HighlyScalable ProjectsModeratelyScalable ProjectsFrom the perspective of thesystem... The world!... How dowe scale the entire system?
  18. 18. How Can We Solve the Problemof Lack of Resources?In principle there are three ways1. Convince social innovators to focus on makingmoney2. Convince investors to assume reduced financialreturn3. Structure transactions to mitigate financial risk4. Structure the relationship between projects(and the community) to flow non-financial valueto the project … think in terms of ecosystems…and provide resources to the entire system
  19. 19. What is an Incubator? Co-location space Provide support services…• Infrastructure• Advisory Connect projects to mentoring support For profit: equity stake in projects
  20. 20. What is a Social GoodIncubator? Internal Ecosystem located in a Co-location space Provide in-kind support services…• Infrastructure• Advisory Connect projects to mentoring support Offsets financial cost
  21. 21. How Can An Incubator MitigateFinancial Risk?What is the primary financial obligation forprojects situated in an incubator?...Lease payments (and other costs ofbeing in incubator)So, the question is…
  22. 22. How Can You Reduce the Burden ofLease Payments for Seed Projects?
  23. 23. View the Incubator As AnEcosystem!Hmm… what does this mean?
  24. 24. Distribution of Lease Payments(costs)… sufficient inaggregateOrganization Type Lease Payment CapacityFor Profit Service Profit ServiceProvidersStrong cash flow… and abilityto cover lease paymentsEstablished Social BusinessService ProvidersReasonable cash flow… andability to cover lease paymentsEarly Stage (post proof ofconcept) Service providersSome cash flow… can managereduced lease paymentsPre Proof of Concept ServiceProvidersNo cash flow… no ability tocover lease payments
  25. 25. Hypothetical Project MixSERVICETYPEFor Profit SocialVentureNot-for-ProfitTechnology Technologyinfrastructure/webdevelopmentStrategy Business/strategicplanningMedia Film, video,contentdevelopmentCrowdfunding Anti PipelineActivists
  26. 26. Why would sustainable organizations ‘cover’lease payments for early stage projects? Be a good community citizen Provide in-kind support for socialenterprises Receive in kind-support from otherorganizations in ‘ecosystem’ Receive financing from EcosystemPooled Fund
  27. 27. Hypothetical Financial ModelREVENUEFor Profit $9,000Social Venture (cash positive) $1,000Not-for-Profit $300COSTSLease $10,000Internet $100Insurance $200
  28. 28. But Projects Need More ThanTheir Costs Being Reduced…So extend the ecosystem beyond theboundaries of the Social GoodIncubator…… and build a Value Exchange mechanismwithin the ecosystem… a Social GoodCurrency
  29. 29. Social Change EcosystemSOCIAL GOODINCUBATORSocial ChangeEcosystem
  30. 30. EcosystemsSome technology/ openarchitecture concepts
  31. 31. What is an Ecosystem?“An ecosystem is acommunity of livingorganisms…”“…ecosystems aredefined by thenetwork ofinteractions amongorganisms, andbetween organismsand theirenvironment…”“While the resourceinputs are generallycontrolled by externalprocesses like climateand parent material, theavailability of theseresources within theecosystem is controlledby internal factors…”
  32. 32. Why Ecosystems Now?... Theconnectivity networkInternet connectivity penetration rates are increasingBandwith limitations are being reducedThe cost of communication is dropping (thank you Skype!)Interoperability protocols, applications etc. are evolvingSocial networking platforms (Facebook...) are changing the culture ofcommunicationProcessing power is being pushed to the edge of the network (Smartphones etc.)The real time infrastructure is evolving (Twitter)We are connected like atno other time in history!
  33. 33. The Collaborative ContextInformation flows freely across organizational boundariesGeographic constraints are less meaningfulStructural limitations on information management don’t constrain participation(thousands of people can work on projects!)Meetings can be run virtuallyProjects can be managed asynchronouslyProjects can be scaled to involve many people with minimal incremental costYour communications infrastructure can be scaled to include many people withminimal incremental costCollaboration makessense!
  34. 34. Build a Technology Layer Across theEcosystem of ProjectsSocial ChangeEcosystemSGEIWhy?
  35. 35. Emergence, Presence, Visibility andthe Fluidity of Early Stage ProjectsEarly stage projects are… Basically concepts… … residing in the head of one or two people … lacking in resources … lacking moral support … they can go in many directions … depending on people… money… opportunity…If only we, as social entrepreneurs, had a sense of thebigger picture (the Ecosystem)… and others thatwere working on similar things!Build a shared virtualspace!
  36. 36. Systemic Visibility… an example
  37. 37. Systemic Visibility… an exampleEarly stage projectsare fluid… what if we couldsee what others were doingand where they wanted to go?
  38. 38. Governance andScalability
  39. 39. OK… but how does this modelscale?What do we mean by scale?... Rememberthe goal is to proliferate the world withmore social entrepreneurs!To Scale we need to…1. Ramp up the number of federatedSocial Good Incubators2. Ramp up Ecosystem Pooled Fund
  40. 40. What about Governance?...CooperativeOperate as a cooperative Democratically governed One vote per member organization Membership classes can be defined,however if necessary
  41. 41. A Few Principles and ProcessesTo Drive Scalability of Model Develop and document Prototype Develop Open Source platform todisseminate prototype Develop Federated Open CollaborationPlatform to connaect incubators Develop an emotionally compelling story Utilize video Utilize social media channels
  42. 42. Federating the Social GoodIncubators with Open ArchitectureSG IncubatorSG Incubator SG IncubatorSG IncubatorSG IncubatorOpen Source Best Practice Repositoryand Communication System(Embrace P2P/SharingEconomy Principles)SG Incubator
  43. 43. In Principle an ‘incubator’ is just anecosystem with a physical footprintSG Incubator 1SG ‘Incubator’ Ecovillage 2Social HousingComplexEcovillage 1Open Source Best Practice Repositoryand Communication System(Embrace P2P/SharingEconomy Principles)SG ‘Incubator’
  44. 44. The Social GoodEcosystem Pooled FundDeveloping EcosystemFocused FundingStructures
  45. 45. But Projects Need Real HardCash As Well!... Introducing theEcosystem Pooled Fund CapitalDistribution Models!
  46. 46. The Paradigm ShiftConstruct the funding structures in amanner that is targeted at the uniquefeatures of the SGI Model, inparticular…1. The SGI is based in a physical location2. The SGI provides capital to high riskprojects
  47. 47. Traditional Pooled FinancialCapital Distribution ModelsManagerCompany Company Company Company CompanyFinancial Capital PoolInvestor Investor Investor Investor
  48. 48. Ecosystem Pooled Fund CapitalDistribution ModelsProject Project Project Project ProjectSocial Good Ecosystem Pooled FundInvestor Investor Investor InvestorCooperativeCrowdfunded CreativeStructures Targeted atFinancing EcosystemSocial Good EcosystemIncubator
  49. 49. Zero Coupon Principle GuaranteedSocial Good Bond… an example Raise $1,000,000 via Social Good Bond Invest $930,700 in a 5 year zero couponbond guaranteeing investors their principleback Invest $69,300 in ….. A project… a poolthat can invest in other projects…
  50. 50. Traditional Bond Payments
  51. 51. Ecosystem Pooled Fund$1,000,000 – Principle Guaranteed!Ecosystem of ProjectsInvestor Investor Investor Investor InvestorFund EntireEcosystemGoverned As A CooperativeTargetedat High NetWorthIndividuals… that aresociallyconsciousTargets Another Problem: how do we unlock private sector capital?