1. Changing the Guard
Entrepreneurial Solutions for Prosperity
TBN Conference
May 25, 2012
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2. The Executive Summary
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3. Business-As-Usual Isn‟t Working…
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4. …Prompting Some Paranoia…
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5. …And Some Serious Soul-Searching
“The figures for the last quarter are in.
We made significant gains in the 15-26 year-old age group…
But we lost our immortal souls.”
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6. Impact Investing Bursts On the Scene
Danook shows off his Swiss Army Rock.
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7. Everyone Is Now Talking BIG
“We have two offices throughout the world.”
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8. But Lasting Impact Is Not Yet Known
„Uh oh…‟
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9. Where’s The Beef?
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10. Questioning the Post-War Aid Model
Economists’ Adventures
and Misadventures
in the Tropics
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11. Aid Does Not Deliver Development
♦ Fosters dependency
Aid and Income Growth in Africa
(10-year moving average) ♦ Distorts markets
20 2.5
♦ Misaligns incentives
Growth GDP/Capita (%)
18
16
2.0 ♦ Rarely yields scalable, sustainable
impact
Aid/GNI (%)
14 1.5
12 1.0
10
8 0.5 ♦ Fuels donors’ need to be needed
6 0.0
4
♦ Undermines accountability
-0.5
2 between government and its
0 -1.0
citizens
70
73
76
79
82
85
88
91
94
97
00
19
19
19
19
19
19
19
19
19
19
20
Aid/GNI Growth GDP/Capita
♦ Encourages the best and brightest
in recipient countries to work for
Source: ECIPE Analysis of World Development Indicators Online government or NGOs
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12. Impact Investing Defined
“ Investments intended to generate
a positive social impact
”
beyond financial return
♦ Investments: debt or equity capital.
♦ Intentional about positive social and/or environmental
impact (not just negatively screened).
♦ Social/environmental impact is therefore measured.
♦ Financial return is expected.
Source: JP Morgan & GIIN, Impact Investments: An Emerging Asset Class,
November 2010.
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13. Investing in Primary Education
State School System
♦ 3rd percentile pupil achievement ♦ For-profit schools @ $4 per month
♦ Universal “free” education is NOT free ♦ Pupils outperforming peers by 30-
($2-5/month) 150%
♦ 30-50% of instruction time lost due to ♦ 75 schools serving > 18,000 students
teacher absenteeism & neglect at end April; 1,250 employees
♦ No accountability to parents ♦ Opening a new school every 3 - 5 days
♦ Target: 10 million students
♦ Attracted significant equity investment
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14. Investing in Mobile Information Access
“Google & Craigslist”
(Addis Ababa)
♦ < 5% Internet penetration ♦ Information/content portal on the mobile
♦ Lost time ♦ Built and launched multiple applications:
♦ Information asymmetry e.g., health info, job search, news
♦ Yet there are > 500 million mobile ♦ 4.5 million users in 8 months & rising fast
phones in Africa ♦ 26% market penetration
♦ Mobile phone is the computing ♦ Cash flow positive; targeting expansion
platform of choice
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15. Investing in Energy Efficient Stoves
Traditional Stove
♦ 20-30% of income spent on wood or ♦ 50% saving on fuel (time & money)
charcoal ♦ Reduce smoke & toxins by 75%
♦ Respiratory ailments ♦ Local (Kenya) contract manufacturing
♦ Fire hazard ♦ Target sales: > 1 million stoves; first
♦ Deforestation/environmental damage year sales 2x plan
♦ Pre-sold carbon offset
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16. Impact Investing: The Promise
♦ Up to $1 trillion impact ♦ Catalyze private capital to solve
investments in < 10 years. entrenched social problems
❖ 5-10% of portfolio assets ♦ Harness entrepreneurial talent
❖ 52 investors deploying $3.8 & innovation
billion in the next year
♦ Drive sustainable & scalable
♦ 199 impact investing funds solutions
today.
♦ Nurture dignity & equality
Sources: JP Morgan & GIIN, Impact Investments: An Emerging Asset Class, November 2010; and Insights into the
Impact Investment Market, December 2011. ANDE.
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17. A Growing Field...
Investors Managers
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18. With Different Priorities
Impact Floor
High
Financial-first
investors with an
impact floor
Financial Return
Impact-first
investors with
a financial
floor
Financial
Floor
0
0 High
Social Impact
Adapted from Solutions for Impact Investors: From Strategy to Implementation, RPA 2009.
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19. ON – “Flexible Capital”
Foundation LLC
$266m $225m
Equity &
Grants PRIs
“
Debt
Omidyar Network is structured to support the notion that philanthropy is more
than a type of funding. In its truest sense, philanthropy is about improving the
lives of others, independent of the mechanism …our investing style transcends
typical boundaries that separate for-profit investing and traditional philanthropy.
We believe using both grants and for-profit investments
can be powerfully complementary.
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20. Reality Check: Too Good to Be True?
♦ Green-washed:
❖ Any investment in emerging markets is impact
investing.
♦ Quixotic:
❖ Too few investment opportunities
❖ “Forget it – you’re not going to make any money.”
♦ Detrimental:
❖ Drive organizations off mission
❖ Substitute needed philanthropic funds
♦ Unproven:
❖ Missing track record
Sources: “The Trouble with Impact Investing,” by Kevin Starr, Stanford Social Innovation Review, January 24, 2012. “The
Case for Philanthropy in Impact Investing,” Monitor Company, April 2012.
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21. Or A Predictable Evolution?
Uncoordinated Marketplace
Value Capture Maturity
Innovation Building
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22. It‟s Just Early Days…
Uncoordinated Marketplace
Value Capture Maturity
Innovation Building
 Disparate entrepreneurial  Developing  Growth as mainstream  Activities reach a
activities in response to centers of activity players enter a functioning relatively steady
market need or policy market state
 Building enabling
incentives  Entities leverage fixed  Growth rates slow
 Disruptive innovators
infrastructure that costs with higher volumes  Industry consolidates
pursue new business reduces  Organizations become
models transaction costs more specialized
 Lack of competition except  Unlocking latent
at top of market supply of capital
by building
intermediation
 Developing the
absorptive
capacity for
investment
Source: Monitor Institute.
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23. Summary and Concluding Thoughts…
♦ The intentional transforming impact of business
is now well recognized.
♦ The impact investing field is developing rapidly
and becoming more professional.
♦ But these are still early days with more talk than
walk.
♦ The opportunity is there:
❖ For innovative entrepreneurs to tackle new markets
❖ For investors to be more integrated and intentional
❖ For intermediaries to prove the thesis
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24. Thank You
www.springhillequity.com
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