 Welcome everybody. Good afternoon. Thank you for coming to our session. My name is Audrey Selly and I'll be serving as moderator of this discussion today and I am sharing the stage here with a group of esteemed colleagues who and many of us know each other already quite well over the years and today's discussion is going to focus a little bit on our experiences as active practitioners, as impact investors and we'll be looking at this from a little bit in the beginning of the discussion from a lifecycle perspective starting from those of us who look at angel and early stage opportunities on through the growth and more mature social enterprises that that that appear for us in the various markets in which we're active. So for those of us for those of you who know us you'll notice that we are sitting in order of in rough order of the our interest areas and I would like to start with just having each each each one of you say a little bit about where you're coming from the fund and so on to introduce to the audience and include please the rough the areas of interest geographical and otherwise and your ticket size at you know sort of ranges and what it is that you what it is that you look for. Excellent I'll point out we're in order and it's it's only fitting that it's only fitting that the person who moderates a network of different stages of investors is also our moderator so you are you're in the right place Audrey. My name is Ross Baird and I run an organization called Village Capital and we do we do educational capacity building programs as well as investment in seed stage entrepreneurs and I would define that specifically as entrepreneurs that have a product have a good or a service people are buying very much in and past the validation stage that we saw in the last session but typically haven't raised any money from anybody else. Typically maybe one to three people in the team we've gone as early as an idea on paper though I've done 24 investments in the last three and a half years and only one of them has been an idea on paper but we will typically invest before these other folks here will we can talk more about what we do later but that's that's where I am have done things all over the world but very focused on the specific stage of development of the venture. Thank you my name is Nikolas Hutter I'm the European director for Tonic. Tonic is a global network of impact investors we are 40 members across the globe about two-thirds in the US and one-third in Europe. We've been around for 18 month and those 18 month we've done 19 transactions ranging between 50,000 euros or dollars to about three million. The median size is 800,000 all stages slightly later stage I would say then than Ross not not the idea stage but also seed and startup I would say is the is the majority and we also invest in funds and if you put all the capital that our members have committed to investing into impact together it would be more than 100 million dollars. Good afternoon my name is Oliver Karius I represent LGT venture philanthropy sitting in the middle because we do early expansion stage funding in the range of 200,000 up to a million some call this the value of death or some call it sort of that kind of funding we do that on the global basis in Latin America Africa India Southeast Asia and China we're five years old average investment sizes around 500,000 we do grants debt and equity depending on the underlying need of the organization we have done 22 investments so far we haven't done an exit yet I mean in the sense that we can talk about financial returns and we are we are working with early earlier stage deals for the pipeline and we're also looking to work with other investors to where we can hand over our deals later on for follow-up investments and I'm Paul Dale of Voxstra we have a fund that we established in November last year to invest in agribusinesses in East Africa that enable poor smolder farmers to increase their productivity and incomes and we invest typically around a million to one and a half dollars our bracket is half a million up to two million we can do anything from debt to equity we have a private equity like setup but with slightly longer time horizons and slightly more flexibility in the way we deploy capital so we will invest in about ten companies over the coming years we expect some of them to be early growth stage and that's an overlap with Oliver while some of them will be a bit more mature companies where we'll join forces with others and invest slightly larger amounts we also have a technical assistance facility which is one of the tools that we use to be able to support enterprises that still have some hurdles to cross in terms of making it in terms of financial mobility and laying the foundations for growth thank you I should also mention that I worked for a family office called Rianta Capital and as a part of that as a part of the mandate of the impact investment initiative that they started in 2007 I would probably be sitting somewhere between Nicholas and Oliver actually so we were truly sitting in order if I wasn't moderating and we look at but very small deal flow in terms of ticket size so anywhere between 50 and 500 and early growth stage companies we've only done a handful of investments we're on our eighth at the moment so it's I think on some level we are representative of an opportunity area where there are a vast number of family offices and private wealth funds attempting to find ways and entrees into how to deploy capital alongside the more established the networks the and the proper sort of venture philanthropy teams and and organizations out there so I mean that this this I think as soon as you put a panel of us together this begs the question of well how are we able to work together if at all I thought it'd be interesting that maybe we have we share a little bit about examples where successful examples of co-invests of syndication and perhaps Ross can start with that sure thanks thanks a lot Audrey I think that that one of the things that we have seen is is that it's absolutely critical and I think your your your executor I like it's absolutely critical for your family office or a foundation or a very small fund like us syndication collaboration is critical because there's just not enough money to go around otherwise of the 24 investments we have gotten other investors involved either at the same time that we invested or later in 21 of them two of the three remaining are no longer in business and I don't think that that's a coincidence and and I think from our standpoint it comes with it comes from from two perspectives why that's really important number one is different investors add value in different ways we actually briefly how our how our investment is done we run accelerator programs for entrepreneurs at the end of each program the entrepreneurs actually rank one another and we pre-commit capital to the top ranked as picked by their peers it's a bit of a different investment model we can go into it later if you're interested but what it really means is we're we do a high volume of investments at a pretty light engagement per investment which means that if we co-invest with other investors there are two pairs of hands on a company rather than one so we just wrapped up a program in Brazil where we pre-committed half of the capital to the pool we committed a hundred thousand dollars to two companies we put in fifty thousand of that Vox capital and impact investment fund committed fifty thousand of that and we are now invested alongside Vox capital and two companies we can bring a bit of a global network help with fundraising help with basic business documents they can help a lot more operationally since they're located in Sao Paulo next to where the companies are and and we're not so that would be one bit of collaboration I think a second bit of collaboration is we will come in before these guys but we are always talking to these guys about what we have in our portfolio that they may be interested in six nine twelve months down the line so I just spoke with one of Oliver's colleagues in India said look I know you go six to twelve months to analyze a company sometime I have a company that is definitely not ready for investment from you now but you should maybe put them on your radar so that by the time you're comfortable investing in the company they're ready for the the money so we think ahead when we have a company or portfolio who here would be interested in and get them in touch early and often I think rather than share examples I would say that collaboration and co-investment is deeply ingrained in the DNA of tonic because that's why we were why we're there so we even define a tonic deal as a deal where at least two or more members co-invest so those 19 deals are not all the deals that the tonic members made I give you one example one of the co-founders of tonic is Charlie Kleisner and together with his wife Lisa Kleisner they operate through Cale Felicitas Foundation and so Charlie and Lisa participated in five of those transactions of those 19 but in the same time they did 23 out of their foundation so it's just to that what to mirror what what Ross has said collaboration and syndication is really the key here because that's how you share resources and a lot of those deals are relatively early stage the transaction cost or ever are fixed almost it doesn't matter whether you invest 50,000 or 500,000 the effort is the same and and therefore if you can spread that that's great and this is what we're trying to do with tonic perhaps just to add since we're sitting here depending on the kind of stage of the venture I think it's also to bear in mind that it's not that's not just the stage but it's also the type of capital that is available so you could be providing like what Simon is doing with the Shell Foundation it's it really critical for grant funding but really sizable grant funding that comes into the early expansion stage so it's also at the stage looking at the different layers of capital that is available and that is absolutely critical and needed for venture just two examples perhaps quickly on how to reduce transaction costs we did a deal in East Africa called Bridge International Academy together with the Hilti Foundation with DOB and at that time another family foundation and in those first five months on doing due diligence we basically just shared everything that we saw because there's no there's very little added value everybody asking so what's your track record you know what do you impact numbers I mean that to try and then become very smart in reducing those transaction costs and that worked really well we saved over 50,000 legal costs because one of the group members had done fantastic legal due diligence with Clifford Chance and they just passed it around that would have been absolutely zero added value from our side if you would have to do the same thing and that that worked really well why did it work well because we all have the same kind of alignment and the same way of doing deals and I think that's a pretty important component and if you really want to move together and I think that's a great example that this space is still a very collaborative space with people who are genuinely focused on impact and therefore they're open open to sharing their work and working together so for all the talk about lack of investment opportunities you know that's not really what we're seeing if there was a lack of investment opportunities and too much capital chasing it at this stage people would probably behave a bit more competitively so although it's still difficult to find good deals it's not like people sort of have have changed over to that very competitive and commercial mindset we're still sort of having a lot of the culture of the more philanthropic side in the way we relate to each other I would not totally agree with that statement because I agree that the space is very collaborative but I wouldn't say that there isn't a lack of investment opportunities there's a lot of great projects but there's very few investable deals and the reason why the prices are not going up is not because there's too much capital chasing it's because the capital is actually not chasing and contrary to the private equity industry where you've got limited partners to say hey you're not deploying our capital either get it out there or give it back there's not much pressure in this industry for the capital to actually be deployed because it's it's patient in the sense that you know sitting in foundations there's not there's not an allocation pressure as you have in the in the more commercial investment space that's I would say is the reason why the prices are not going up because the capital is actually not chasing the deals and that actually underlies kind of the double-edged sword of what it is that we're dealing with in terms of this type of capital the fact that it's patient obviously differentiates it but at the same time there there is a remarkable lack of urgency around deployment at least you know internally within certain institutions I certainly wouldn't wouldn't want to generalize but the fact that we can sit as a consortium of three four five investors for nine months on a given on a deal just swapping back and forth and this is very much the reality in my experience I'm sure the more efficient organizations would find different would have different stories to tell but that creates yeah well that that actually that's a really good segue into the next one of the other topics that I think would be worth broaching as we sit here together there's and this was brought up by somebody in a previous session that that was asking about accountability on the part of investors now certainly as investors perhaps not as family offices but as investors who raise funds from from different entities and who then go on to deploy them there is obviously a lot of reporting a lot of a lot of system and a lot of infrastructure in place to support accountability we must also be accountable to those that we invest in you know what what do we have in place to ensure that when an entrepreneur entrusts us with his or her plan and with his or her baby effectively half the time they don't really necessarily know who they're dealing with are they dealing with a very experienced portfolio manager they may not be and so we've seen several instances where it's simply a matter of the lack of experience on the investor side on the investor consortium side where an entrepreneur may actually flounder in the process of waiting for sort of the you know things to come together on the money side so I was just wondering if any of you would speak to to that in any in any context yeah I'd say it's it's really I agree I think that investor consortiums move very slow very very slowly it's it's one of the reasons why we pre-commit capital because we're dealing with businesses that if they don't get 50 thousand dollars in two months they'll die now you know fortunately businesses at this stage where they're getting half a million to three million usually have enough cash to where they can wait through a nine month investor consortium so there's not the same sense of urgency but like I guess to put a spin on what you're saying what I have seen actually gets deals closed is usually one investor who is actually an advocate for the entrepreneur saying look we need to get this done by May 1st or this company won't be able to pay people on May 15th and I think that typically that in my experience has tended to be a person who's an entrepreneur themselves who has raised money and faced that time pressure themselves who says look I have been where this person is and I know that they are in big trouble if we don't get this done I think that one of the reasons why there isn't a lot of seed capital and also isn't a lot of urgency on the investor side is most it's rare for an impact investor to be someone who made their own money running a social enterprise because there aren't a lot of people who've made their own money running a social enterprise so in in contrast with the tech world where most of the people putting money and made it doing the exact same thing not very many people doing the investing have done the exact same thing on the other side so I don't know I think it's it's a it's a it's an accountability but it's also a shared experience a lot of us don't have haven't been you know trying to make payroll and a social enterprise facing the same impact accountability too but the question and the big the big elephant in the room right now is this generalization that it takes long it doesn't take long some deals you can do with the quickest that we've done is two months start to finish that was because a lot of the information was there already the longest deal we're sitting on is one year and it's not because we are slow or the deal is slow because things have changed so much in the business model that their capitalization needs are suddenly so different and we just need to invest a bit more time to really understand to do the series a closing now if you suddenly have a series a and you have a lead investor then that's very very quick right I mean so it depends really entirely on well it depends a lot on the kind of sector but on on the deal and I think to your question around what's important for us is it's I call it finance plus it's not about writing a check and I think the the onus is really on us to show the entrepreneur that we can collectively in the industry add more value by bringing experts by making the relevant introductions to networks to bringing other capital whatever it is because writing a check is really easy but it doesn't mean that you then allocating the right capital for the right purpose and you have to bring in all that additional value otherwise you know and entrepreneur goes shopping and he goes like same capital but you add you know five times more value I'll go with you because you might prefer partner and that's a really healthy thing I think that's that needs to happen well there's a there's a study it's a bit old but just to give you an order of magnitude that the best venture capital firms in the US they get a 14 discount on average on the deals because people would want to work with them because they know they add so much value yeah yeah I thought I would just mention while we're on the subject that the one of the projects that we've undertaken at Rianta has been to launch a platform dedicated to impact investors called ARTHA and this is basically a repository that allows us to capture in theory not yet in practice but to capture the due diligence information as we go along so that well Oliver I think we might beat you in terms of length of due diligence record ours was 18 months I mean took almost two years to deploy capital into one business because it was changing so much we just we couldn't get a handle on it and it finally did happen and it happened with two other investors but had we had the ability to I guess share the information more effectively unfortunately like the simplest exchanges where it just it could just be a matter of a couple of phone calls and a lot of emails everybody is willingly collaborative and very very open but the actual practice and the actual exchange of meaningful information is actually quite sparse and difficult to mainstream and so that's one of the challenges I think that the ARTHA platform is one tool one of many tools out there possibly as a virtual component of a more robust you know like a real network like like tonic does so I just I just thought I'd you know as you were speaking I was thinking if I was a so if I was an entrepreneur sitting in the audience now listening to us what would be running through my head and so I would like to ask you know all of you to weigh in on this idea of what's in the best interest of the entrepreneur to deal with a bunch of us as investors together or you know is it better one-on-one face-to-face in terms of value you know input you know inputs per output well I think you could view that from many different angles and I think Ross already said one important part of that is different funders add different types of value and therefore it can be highly beneficial to have several funders supporting an entrepreneur on the other hand that can create complexity also disagreements on the board and I know of entrepreneurs who have struggled when they've been facing a consortium where the investors are very close to each other and they sort of agree everything up front and then they come and present the entrepreneur with a feta complet so it all depends I guess on the situation and the setup and you know how the sort of deal and the investment plays out over time I want to stress one thing that I always say to entrepreneurs which is before you go to investors figure out exactly how much money you need and what you need it for there's an investor who I really enjoy working with and his big thing where he adds value and what he really cares about is human capital so if he says okay of your budget how many of that how much of that is dedicated to new hires how much do you need to pay them who would you hire etc and he works out if he wants to invest he'll say you know I will put in a hundred and nine thousand dollars because that will fund this position for two years at the current salary you've got and I'm going to get very involved in helping you find this person because he's got an executive search background so to say to that entrepreneur look like like if you didn't have this guy's hundred nine thousand would you still want to work with him in executive search and the answer is probably yes because he's really good at it so first of all you don't I don't think you need to raise as much money as you think get very clear about what it's for second of all look at who's going to add value in each of those areas that you really need I think say if the question if you weren't bringing money to the table would I still want you in the game is a really important one I just want to share when we started out we looked at what the entrepreneurs need and they said okay that's it's the right funding at that right stage in the right form the second is that we felt like a lot of entrepreneurs that we work with in this early expansion stage even if you would give them two million they wouldn't know to bring that capital to work because they don't have the structures and the processes to actually absorb that capital to then develop the impact so we set up a fellowship program it's called iCats where it's basically one of the design principles is that the our investee can upload job descriptions of people that they think they need in order to reach their next targets onto a platform and then we have people with relevant business expertise hopefully who apply on that platform we do the pre-screening and then the our investee actually chooses what the best person is to come work for them for 11 months so this is not my tie volunteering sitting on a beach having a great experience this is actually taking someone with relevant business expertise into the organization and working on something which is more structural rather than you know body leasing or painting the ceiling or whatever it is so that when they leave after 11 months they the venture actually has gained and improved structures etc and for us that's it's been one of the differentiating factors is this that the investees come to us and say yes we give you we interest in your capital but we're also really interesting to be part of the iCats program because we really struggle to find the engineer or that expert if you work in northern India and Bihar or in somewhere in Africa or in Latin America so that's been a really important component of of our of our approach I wonder if you could say a few words as well about your impact ventures accelerator program that's that's an example where in southeast Asia over the last four years we've had we haven't seen investable deals we've seen a lot of projects but not enough investable deals so we are working this year we started working with four social enterprise incubators in southeast Asia where we actually developing an accelerator program so we take the most promising ventures that they have put in an iCat fellow as management expertise provide some grant funding and hopefully over the next you know 18 to 24 months make them more investable for us to invest or for others to invest and then open that up to a local angel network so and that that's an example in a region where we're probably more leaning to this side because we need to do something to create that that pipeline it's not going to emerge from nowhere I wonder if if we could get in a little bit into a discussion around given that we we are each applying a slightly different lens never mind a slightly different probably diligence method or process I think in I've worked directly with funds who have very very soft touch diligence and others who are extremely stringent I wonder if you might all comment respectively on what it is that you think sort of differentiates your appraisal process as per the the sort of the target that you set sure well ours is ours is totally peer-based how I first got into investing was I worked actually for an enterprise and then went to go work for the investor who had invested in the enterprise he's a guy named Bob Petillo who you may know of he founded a firm called Grey Ghost Ventures and he would be like out in that hallway in terms of like risk tolerance in here he's like the most risk tolerant person in the impact world and he he invests kind of like if he likes a person he go for it if you catch him on a good day you might hit the lottery and and we were thinking around okay can you get a little more scientific than that because if you because we were thinking okay Bob wants to do angel investments but you also want to create a model where other people might want to come in and how do you do it at scale you can't hire analysts if you're doing fifty thousand dollar investments and do thorough diligence because then you spend sixty thousand dollars to make a fifty thousand investment and the math just doesn't add up so the idea that came out of that was turned into the venture that I run called Village Capital which is if you have a baseline of qualifications which has evolved into post revenues somebody is buying something you have a strong management team which is which is again just kind of a baseline guess you have a basic financial plan we have fifteen companies that go into a program we actually say well what if what if what if the peers decided so we have a structured curriculum peer review process where over three months actually entrepreneurs themselves build one other's ventures but also assess each other and we invest in who the entrepreneurs pick we don't know if they do better or worse than analysts we know that the entrepreneur pick portfolio is outperforming the analyst pick portfolio right now I was on the team of analysts that picked the portfolio so maybe that has something to do with it but we do know it's way way cheaper so all this is to say if you're going with different types of investments which is earlier stage than the market can probably bear you need to do some innovation somewhere and peer selection is the big innovation that that we developed thinking that when you're when you're in the earlier stages it's really all about the caliber of the entrepreneur and team anyway because none of these businesses that in my portfolio if we took them to you for investment would look the same in six to twelve months so that's that's the bet that we've made and it's it's it's going along well but but again it's a total experiment I can't really comment because the approach that we have is so diverse it really depends on the on our members and we have a very diverse membership in the sense that LGT venture philanthropy is one of our members and they're probably one of the most sophisticated impact investors in the world and we also have people who are single individuals coming very new to the space and want to learn and this is also this mix of people in our network also allows for disseminating knowledge and best practices and we are also now we have a non-profit arm the tonic institute which serves to codify these processes and disseminate them make them public and open source them so we're writing one report now which is going to come out in the course of this year on how to run an angel network and we also did best practice dissemination among our members in terms of doing due diligence and so it really depends on who's doing it what the size of the deal is and it can be from very thorough to shoot from the hip like pop patello who's also a member we look at four things we have a fairly in-depth process it's just that we because we have to offer our investments to first we want to understand them but we also want to offer them to other clients so we're part of a bank and offering those investment opportunities to the clients of the bank as well so it's not just the money of the princely family that we can invest directly but other capital as well but we have four things one is of course business quality but i think the the important thing is let's link to this icats program is to really understand the internal capabilities of an organization and do that on a really in a really structured way and we use that as a tool to assess where the organization what way where they feel they need support and where we feel they should need should have support that's become a really interesting engagement tool so that's the inside out really understanding like a doctor does a 360 capabilities assessment and then the impact assessment and risk assessment and then in each we just in our investment process we just go deeper we drill deeper into each of these four areas as we progress so it means it's none of this is rocket science it's just you have to you know have to be able to ask the right kind of questions to assess the try to minimize the downside risks and on the impact side make sure that this this deal so meets the impact criteria it's not working so we have a an experienced venture capitalist on our investment committee heads that and we have a very experienced private equity person as our chairman so our due diligence methodologies very much you know from that world of course adapted to the reality that we're doing smaller deals and we can't you know commission consultants to do marketing studies etc but it's a fairly standard private equity type and due diligence process where we drill down into the most important parts of the business case and the underlying assumptions and trying to understand whether this can can fly and looking at the various dimensions that I think Oliver has already described quite well what we put on top of that of course is an assessment of the potential impact so our impact bottom line is increased incomes for farmers and so we have a a methodology that we developed together with a pro bono team from the Boston Consulting Group a few years ago for our venture philanthropy work that we were doing in our foundation back then about how to assess the effects and attribute various effects of an investment in terms of how how much will incomes increase and what sort of social return investment does that add up to compared to the investment that we're making before we turn over to the audience for questions and I'd like to actually ask you all to to participate we'd like to make this a little bit more interactive and you know give us yeah give us your best shot I think that's before we before we do that I just wanted to make a comment around the fact that there are there are gaps right between where each of us sit naturally the universe of of funding and donors is very wide and there's there's almost something out there for almost every kind of every kind of request but what have you seen out there that that helps us address these financing gaps people you know enterprises that may sit on every platform and on every you know that are on every radar and that somehow still it seems like there's like a tipping point in time over at which an enterprise is either pounced upon by six at a time funders or donors or just kind of is is out there but nobody's biting and so I would consider those the types that kind of fall through the cracks now what can we do as a community of donors and to to kind of help them along aside from of course the capacity building and ta that would probably help bring them to the point where they are palatable because not everybody's going to be investable right there are some things that just aren't good good deals so but any comments from my panelists yeah I would say I would say I can't echo enough just sitting in the world that I do the last panel on the role of philanthropy just because like on its face the investments that we are investing in today are not smart bets I would not put my kids retire or not put my own retire to my kids college into them our operations are paid for by philanthropy and scholarships our investment fund we do provide a return to investors but we raise program related investments we raise philanthropic capital and I would say I when when I was running village capital as an experiment working for gray ghost ventures and went out to explore if could turn into a separate thing I asked both commercial investors and philanthropists and there was kind of crickets and no no response from commercial investors and from philanthropists there was a few people there were a few people said this is great this is really interesting this would fill some gaps so I'd say and they came from very unusual places like we were able to fund a program in Atlanta because the city of Atlanta put up a third of the investment capital as a as a as a soft loan so I'd say the the the usual suspects at this conference probably only do about five percent of the funding of the enterprises in my universe and probably get 95 percent of the asks so the most specific response to you is is go to people who have never heard of this you may have a place or a sector tied to what you're working on and just say hey I'm a really interesting business working in agriculture in Africa an ex you know person in in Nairobi maybe it may be interested that I've seen a lot more of that be successful because we are we're active but we have limited dollars maybe I can put that a bit into context there was this report from the Jin and JP Morgan which was cited in one of the panels before and those of you who've seen it may have noted that impact investing is a five billion industry now and it's expected to grow tenfold over the next two three years to 500 billion and that sounds really impressive but that's less than one percent of global financial assets so in the grand scheme of things although great that this is what we're doing and fun and laudable and and important it's hippie shit so the question is how can we get into those 99 percent and I think that we need to look at those big pools of money that really move the needle and I can just again support what you're saying that somebody has to blaze the trail and I would say this is mission driven money from philanthropic sources and also from the public money who should be blazing that trail the trouble is I mean for the philanthropic market it is very fragmented it's also very intransparent and also very often what I see in more traditional places where investment doesn't play a role like in Austria for instance or in Germany philanthropic donors they think that they're destroying the mission if they think in investor terms and actually ask for something in return because you're smothering the good intention that you have so there's I think there's some silo breaking down to be done there and then on the on the public side the development banks for instance they have a problem that their footprint is way too big I mean that's their mission but how do you break it down so that they can invest in in village capital you have to like 20, 50, 100,000 or even just one million the Austrian Development Bank can't do anything that is less than three million as one of the smallest players in the market and as Oliver has said before there's very few people out there who have that absorptive capacity yet so I think that's something how can we get into those 99 percent rather than even if if we grow tenfold over the next 10 years then we're one percent but that's not going to move the needle I said occupy so cap I think we are in a very interesting space right now in the sector because on the one hand the finance industry sometimes really does work like sheep so there's a great deal and everybody follows but we also have to remind ourselves that we are I mean we have to deploy risk capital into new deals that the mainstream doesn't actually look for and I'm sometimes very critical if we sort of say let's mainstream the sector what does mainstreaming mean it's sort of a run to the lowest common denominator that's mainstreaming in a way but I think for us as a sector and we see that a lot we using the local teams on the ground we want to support the local entrepreneurs and that you can only find those if you really go out and you have to do some digging and you have to go to the banks ask them because that's the traditional form of funding in most countries and saying what do you see because otherwise we we're always following the same kind of deals and we are not and then what happens is the kind of critical analysis of the deals also doesn't happen I mean some of the things that we have looked at you open the bonnet and there's no engine it's a wonderful car but there's nothing to fund there so saying oh my goodness we thought this enterprise actually was far far more advanced than it actually is so then we have to go back to base and actually okay what what do we now need to do to ramp this up so it's a it's a really exciting time and I think the the balance of mainstreaming absolutely to get more capital in while not losing the site that we actually need to support the innovative high-risk ventures that are creating new business models where there's no benchmark right but we need to have the appetite to actually support those yeah and that's that's probably the biggest funding gap it's it is in the early stage it is in developing new models just like the the panel that was in this room before us talked about but there are other gaps as well we've been discussing working capital why doesn't somebody put up a working capital facility that growing social enterprises can tap into it's a type of capital that's difficult to find another gap that we're seeing is you know where are the people who are gonna take some of us funds out of the deals so we can realize returns and get them back to investors and sort of prove that this works when we invest in say a million or two in a company and it grows for for five or six or seven years mo are most likely exodus to sell back to the entrepreneur and the there are some private equity funds out there that could be interested in in buying these companies but most of the capital that's put into that space today is from the development finance institutions and they want to be additional they don't want to take anybody out so that's also a sort of missing link that would be important in getting more capital in because then you could prove that exits are possible make it easier to to attract investors I agree I mean there's a lot exit is going to be huge issue and two things that you mentioned just triggered my response here one is that working capital fund there is actually such a product out there it's an east coast based firm I forgot the name and they have a factoring fund actually and that is quite interesting also in terms of finding new ways because you don't have an exit issue there so that's one thing to think about new ways of exiting and I know this problem I used to work as a VC in a very immature market in Central and Eastern Europe and Austria and buyback was the second most if you look at the VC statistics in Austria after bankruptcy buyback is the biggest exit path if you like and so for me the conclusion there is if you if it's you just use the you should use a debt instrument rather than an equity instrument if it's likely to be a buyback yeah you know Oliver and Paul if we send you an enterprise that you really like and you want to buy out our shares we're all ears so I'd like to I'd like to open this up to to all of you I know we had a question here and then we had a question from Tony and over there when I listen to the panel I hear a lot of okay capacity building workshop fellowship and it reminds a bit of school and my question a little bit is is in your opinion frankly the quality of the entrepreneurs just not up to par to the challenge yeah that could be a reason that we have to really you know go all through these lengthy programs that that's that could be a reason or is it is it something else what is it is it that the process is too complicated no it's not that I think I think it's familiarity with the process of growth businesses and raising finance for growth businesses if you go to a place or places where this is very common like the the west coast and the silicon valley or even in India you don't need that much capacity building but in places where the general economy of the mainstream economy is not very familiar with growth businesses and raising finance for growth businesses and therefore you don't have these skills in the available yeah either directly within the team or or through advisors who can sort of inject that sort of frame and and these concepts into the team then this is what you need to do and the I keep I keep putting it this way need for cash is not an investment case and there's a big difference between I need cash and qualified demand for investment capital and it not only sounds more complicated it also is more complicated because what is the difference between need and demand demand is need plus willingness and ability to pay and how do you pay for capital you pay with a return promise and how what is a return promise it is the credible projection of delivering on your plan and this is between I need cash and qualified demand for investment capital lies one thing and that's called capacity building we had a question from tawny in the middle here and then over there in the corner oh sorry go ahead Jeff go ahead that's fine no okay um this is really interesting for someone who doesn't spend a lot of time dealing with impact fund managers to hear you you know running the gamut from all the issues you deal with and what's particularly interesting and maybe even a little disappointing is that at no point did I hear any of the impact investment fund managers talk about impact measurement it didn't fit into any of the calculations of you know from the issues talking about it on the funding side and what I'm what I'm asking about is whether or not that's a takeaway message that really it's not really quite on your radar on this level because particularly with um Stephanie Nieman from b corp is here introducing gears as an industry standard or maybe another standard that you're using somewhere where the actual impact measurement just fits into your calculations so in a way it's perhaps what Audrey said I mean we are all in we are certainly impact first the impact is the most important thing that we look for in a deal in terms of a an attractive solution that can be scaled that reaches people we look at impact on two axes one is called reach for us um it's direct number of beneficiaries and the second is to what extent that the business model actually improved the quality of life of less advantage people and we we have developed our own metric because that's our own mission do we use pulse yes do we use gears yes we look at that how are we on um working with the gin on standardizing iris criteria yes we use them but at the end of the day they need to make sense from your own investment process but also they need to make sense for the investee now I can dump a whole list of criteria and impact criteria on the investee and if they're not linked to the value drive of the underlying uh business then a lot of times I might run the risk of actually you know using a lot of resources or make the life much more complicated so this whole impact measurement is to be for oneself really specify very clearly at what kind of investor you are and then educate the investee as well what you're looking for and what kind of criteria you have would be wonderful to standardize it but just as we have a financial accounting it took how many years to to come up with a common agreed standard in the financial accounting and in this space we want to have you know in five years we want to have globally agreed criteria and definitions and and I think we just need to be patient and we also need to learn as a sector what really works in and adds value ultimate to the to the investee question from tony um Oliver um I have to say that I agree with you absolutely and I think our our um shared background um in Zurich kind of helps that but my question was basic it was kind of a follow on with that is that what I'm hearing actually is that impact investing from from all the things that actually I've heard my last couple of days impact investing is impact how it's defined by the people that give money or that invest and I hear very rarely how that how impact how it's understood by the people that actually receive the money are measuring it for themselves is getting is that feedback loop so it's it's not for the investees saying here's we are impacting by x y and z it's how the investors are are measuring it themselves so it's their definition not the definition from the other side would you say that was a fair statement and could you comment on that the best example I can give is like in the traditional sort of grant-based world if you want to support an education deal we would have a beautiful fundraiser here in Malmo we fly down to Africa we open a school that school will be full because we're offering something for free and guarantee in the year's time we're going to be back in Malmo doing another fundraiser because the roof is leaking and we need books so we are ultimately responsible I'm just trying to really draw a very extreme picture here just to give that that to your question so we would be accountable to the donors in Malmo that we've actually you know used the money and set up a lovely school now what's interesting in if you start investing into organizations is that there are very interesting entrepreneurs out there who say look I like to receive I see that child as a client because they're paying for that service as soon as they start paying for that service as an example I need to know exactly what kind of impact I'm creating with that beneficiary and that beneficiary will will leave my school if I'm not adding any value so suddenly you have you start having that loop and I think that's it's really important to look at the deals that we're supporting where is that possible of course we need to have impact how we define it back to our donors but we also need to make sure that the ventures that we support know what impact they're creating and develop an interesting criteria or important KPIs or criteria that they can build into their day to day operations so that they actually know that they're generating the impact so it's it's and it's the interesting deals are those that that can actually do both I would I would just add one small thing to that in terms of some of the the filtering processes pre-diligence for some of these types of impact investors include actually a sense of understanding well you know what is it about this deal that makes it social what is it about the steel that makes it high impact and in questioning that you already are asking the entrepreneurs well what are you measuring and what is your ultimate output and target from the re-enter perspective that's very much the first stage and it's also part of our mea culpa that we're not coming in with you know drop down list of 500 variables to pick from we're just asking the entrepreneur and saying well what do you measure by way of impact please yeah actually also to your question I think it's it is the investors who are also driving the codification and the and demanding to have a quantification of the impact which very often is simply assumed you know we work with children so that's good and yeah but what's what's the difference that you make well you know we do this and that and then okay then you can say well and I've seen that in capacity building programs that we're running in central and eastern europe that's the assumption because you do something that is worthy that it is good but you don't know whether it's something else is better and you can break that down and and the impact measurement or the taxonomy like iris etc helps quite a lot and at tonic i mean the two eyes is because we are a sister organization to jinn and that's also the joke and so we work very closely and we're implementing both gears and iris depending on the stage of the venture and are encouraging meaning cajoling or arm wrestling or the ventures that our investors invested in to to report on this and collect that data just the final thought perhaps the way we impact for us means it's always on a systemic level so when we look at a deal we basically have done we do impact maps where we say what are the resources that this organization need what are the activities that this organization does and that leads to an output in most cases it's a very three or four outputs which you can measure and then we say okay what is this output how does this output actually improve the quality of life of an individual and for us that's outcome and there we then start mapping against you know the five areas of improved social well-being financial well-being material well-being freedom and security as defined by the those five were defined by the millennium ecosystem assessment 2002 was a global survey of what is quality of life mean for us and if we would just do a survey here we probably end up with a similar set of criteria and then that outcome is then sort of mapped okay how does that actually improve the system by educating children or saving mothers lives or what it might be how does that impact the system and just by going through that structure in for us for an investor manager articulate what is it that the venture does what's the actual output to take that that kind of mental process map it out and then sit down with the venture and say this is how we understand what you do is they're saying just by reaching children you don't know whether you're actually having a measurable impact or outcome on on that child's life so that process for us helps tremendously our process but also the investees to try and break down we're all using impact very differently right it's like sustainable development I mean everybody has their little kind of meaning attached to it so that at least that structure helps to to define and sit down with the investee and articulate that that kind of chain your question over here and then up front here hi this is uh James Halliday from uh Istanbul this goes to what Nicholas was talking about about getting into bigger pools of capital and I wanted to ask what's the approach to like mutual funds or pension funds to tap into that world and then also in terms of um we've been talking a lot about concessionary returns which is essentially below market and I think talking more broadly in terms of those bigger pools of money about how you can shape a portfolio with sort of higher returns and concessionary returns talk sort of a bit more broadly about filling that picture to share an example what what's been happening is you find a lot of sort of layered structures because a lot of the times you have every investor has sort of a specific risk profile and what we've seen like what the development agencies are doing is like you have a first loss tranche and then you have a senior junior debt senior debt etc and that then enables them to attract different two pools of capital which normally would not just go in enough into a fund so that's one way of doing it I think it would be fantastic to go to a pension fund and tell them look why don't you just allocate one percent of your overall portfolio into the space and let it run unfortunately what what we've seen is they they need track record uh they need in certain times liquidity and you know a pension fund will never be able to invest in the fund which has you know less than three years track record in the normal sense you don't even need to pitch to them if you're under three years they get started get really excited when they see five years and I think in our world the the kind of a lot of those institutional investors are not ready yet or cannot do either their fiduciary duty to invest in that although it would make sense because it's long term it's creating impact absolutely and I think that's something that we as a sector would need to work on creatively to find these structures that would able to attract and allow that institutional capital to actually come in exactly and coming back to my point before I think this is where a role of the trailblazers both the public money and the philanthropic capital comes in to help maybe take out some of the risk that these pension funds and the big pots of money cannot take through underwriting or just lost pieces and similar things um on the low and I think we also have to think about different ways of aggregating assets than funds because as soon as you stick the label fund on a portfolio it falls into that box and says yeah track record oh no track record okay so it goes out so we need to think about ways to pool capital in different ways than the the ways that we have now because you fall into those boxes you follow those processes and if you look at the amount of capital that the average pension fund manager needs to deploy in a year it's just crazy I once sat next to the guy who's doing private equity for pension plan Canada and asked him yeah would you be interested to invest in our 50 million target Austrian venture fund and he said no it doesn't move the needle I have three people we need to get out six billion per year and my venture allocation is 1.2 billion I gave that to a manager and they take care of that so how inspiring um question here just first first to comment Roz I think the most valuable um advice I heard uh all this whole time was was you saying you're not investable not to me directly but I say in general meaning meaning um social entrepreneurs evaluate yourself and don't waste your time chasing investors funders etc until you really really know what you want I think that's extremely valuable and as a social entrepreneur we really have to take that too hard and and take that back to the operation um secondly I I've heard that the market in itself does not have enough investable businesses therefore it's not moving so the uh in the conventional market we have businesses knowing very well what to communicate to potential investors except during the the dot com area right so what do we as the social entrepreneurs have to do in order to make your job easier beside the here's the impact on society because I hear whenever I hear investors of funders saying we love uh that you social entrepreneurs have these great impacts and we and we want the same thing that to me is a very scary thing because I think it's a little bit of false marketing and false hope for for us so I rather hear a potential investors funders saying these are the hard stuff that you need to tell me that you can out that that we can do in order for me to look at you and that won't waste your time won't waste our time because we do not have the human resource to keep going to all these soak up events I that that's the most popular comment in the room huh um except for with the soak up team um no I I have two comments that because I think that's um probably the most relevant uh comment to outline the the real tension that we're feeling so I agree that um investors don't think that there are enough investable things out there um I also think that investors and and I'm and I you know I'll talk about our experience building village capital programs I'm one of them investors um often myself having done this uh take a build it and they will come approach saying look we're doing this program we're in this place there are a lot of entrepreneurs here we're going to announce the program and we've got money on the table and sure all these people who come out of the woodwork and they will want money and then you know we've had programs in very entrepreneurial places and we see the applications and we say there've got to be more people out there than that um and the answer is that there is but if investors spent as one tenth the time recruiting entrepreneurs as they do recruiting money which is the same as fundraising the the deal flow would be a whole up better our best program ever was in brazil where we um we've shaped our recruitment strategy off of how this has worked and it's worked well in china kenya and and in the u.s since then where we said okay we're gonna learn everything we need to know about the health education and financial services sector in brazil those are the three sectors that we picked and we did what oliver is saying we went to the banks and said who's applying for loans that you're rejecting and we went to the industry associations we said who looks kind of like this and is dealing with poor customers and we got 10 companies and nine of them got funded by investors in the three months of the program um six of those got funded by non self-described five of them got funded by non self-described impact investors they got funded by rich people that we invited to our events and said that's a great company you guys are doing well um and we've we've replicated that over and over again so we've spent a lot less time in program management and a lot more time in recruiting so part of the answer is it's our job to get more fundable companies the bit of advice i would give to you is uh the best fundraising advice i ever got is uh to to keep as a mantra know is my second favorite answer um be like look i love yes know is my second favorite answer but then followed up with what are the conditions under which you would say yes and if the conditions are in no world would i invest in your business then you just stop talking to that person and you have you would save some time um but i have i mean i i i'm fundraising for village capital programs and i say you know people say well if you can bring me 20 companies through this recruitment strategy and i'm interested in 10 of them then i would put 25 000 into this and so we had a benchmark to shoot for we got 20 companies the people put in the 25 000 into the program and and it worked it's not always that easy but but um if your investor is your customer as part of the fundraise figuring out what the customer wants by putting them on the spot is something that is always productive i wonder if there are any other do's and don'ts um from from your experience through your respective experiences that should be shared with um perspective um applicants applicants for funding i mean the one that i the one that comes to mind most quickly for me is um it's really important to have clarity on what it is your but what exactly what it is you need and in what form and by what time and so when asked the question how much what is your investment requirement um the preferred response is not well how much is your average ticket size um which has happened several times um so that's from from our experience um i'm also involved in the capacity building program for social entrepreneurship center in eastern europe what we do there to facilitate the initial discussion is to say here is your not like elevator pitch but your 10-second pitch uh to say this is what i do now give me your reaction and then i will tailor everything that comes after that the more detailed uh stuff to what you're actually looking for so like you give 10 10 seconds this is what we do and you can do that even in a formal presentation where you have a one page summary and and then use the rest of the presentation the deck more as a smorgasbord and you say look this is what we do this is what i have in my agenda and and so tell me what you're interested in and very often um like the investor will hone in on one particular thing whatever they're interested in and then you can spend most time on that and it's really good good selling and good customer um trying to find out what your customer is looking for because one thing that every company has in common even a no product company is every company needs to sell if you if you have a product you sell that if you don't have a product you sell shares in your company or you sell your assets but you always have to sell something yeah and the person to whom you're selling that's your customer and and in a way to to have a very be able to articulate where you would like to go with your business forward-looking um in the sense of saying where you are now and what your ambition is and what kind of other resources you need as well and not just just funding but be as specific as possible on on that because a lot of times the business plans that we've looked at if you look at the numbers i mean there they are extremely ambitious most always always always that's um but that's good because we want ambitious entrepreneurs right so that's a that's a great starting point but then is to actually engage and you will see when you interact with the investor what kind of questions the investor is also asking you whether this is someone that you want to work with together because a lot of times you actually enter a long-term sort of engagement five years or so you want to make sure that the chemistry is right that there's trust there that you can also go to the entrepreneur sorry to the investor and say look my cfo just fell off a horse please help me right that you feel that that you can be that open about what doesn't work what works i mean once you get beyond that stage of selling the where you want to go the great picture is that over time to really feel whether that's an investor that you want to work with because we're not here to just write checks and you can go to bank and say i need a loan thanks very much no more questions asked and i just use that loan but we're talking about a much more engaged form of investing we have one last question here on the front thanks christof from the hub i have one question i think it was the idea was very appealing not to go for the usual suspects whom everybody is approaching in terms of impact investors but what are the new ideas and and maybe different maybe a little bit also structured approaches of how do we find the non-usual suspects of course telling everyone on a conference who you are and not going to a kind of conventional impact investor conference is one but i'm sure you have some ideas of how to find high net worth individuals that haven't been in the sectors investors that don't know about social entrepreneurship what are there the ideas that you have ask the usual suspects is one is his one response yeah there i mean we are probably this is such a especially on the family office side and looking for these you know these individuals who happen to have interests and deep pockets they're so difficult they're not they're not searchable anywhere they're very difficult to find chances are that a couple of us know somebody who knows somebody which unfortunately is not a good answer i mean i think i think i think um figure out the world that the people you do know play in for specific be as specific as possible about what your ask is so for example um the advice i always give to hubs is there are a lot more real estate investors in the world than there are social enterprise investors and in atlanta if i were going to raise money for some real estate boondoggle it's it's way easier than trying to explain oh but we make impact whatever and then you can get meetings with 20 real estate investors and you'll find one of the 20 might might might click with you on mission um you know gray ghost is essentially a family office audrey's investor is essentially a family office the family office world is very very tight so you know you know i advise entrepreneurs to to talk to family office managers and say who is interested in doing innovative things in local agriculture we had a company in new Orleans raised five hundred thousand dollars from family offices interested in agriculture i think i think um figure out what slice of what you do is understandable someone to someone that's never heard of socap and then ask who you know who does a lot of that maybe not a straight answer to your question but something more general um like accuing what you said before writing a check is really easy uh what entrepreneurs do uh investing their energy investing their life saving sometimes and their life into uh a venture is is much more difficult than just investing the cash uh and so i think uh there is nothing wrong with you projecting that first second investors raison d'etre is to invest so the default option is to invest and then you start looking for reasons to not invest and if you don't find any you go back to default so if you have something that uh fits this investor's mission you're doing her a favor by offering this yeah this is a partnership and um i mean i'm i'm opening the secret books of the investor perspective here but but you should you should approach an investor with that with that offer you have something to sell that this person possibly wants to buy yeah and and it's a it's a partnership of equals yeah but um it's very very seldomly is it approached from the entrepreneur side in this way because we assume that the that the that the power relationship is is different because somebody has the money and somebody wants the money but in any fact it's not yeah because what we want is good deals and um and and we're that that's out that's what we do we're looking for good deals and if you are one and the fit is there then here we go i would just um then add one final note and and and then to to echo my my thanks to all my peer panelists here um this has been a great session i hope it's been interesting for you all i would just add one one final thought is that um as important and tantamount to the substance of what it is that's being presented is the doorway through which you walk and so investing the time and resource in finding the right way to be introduced or connected to somebody particularly for these types of smaller smaller outfits is probably an important piece because i've seen so many situations where it's um it's so relationship driven in this um it's unfortunate that it's so relationship driven because um it's just a tighter net it's harder to penetrate but um all the more uh i guess um all the more um rewarding it is yeah for the entrepreneur that does actually get through these nets and does get the right introductions um but i would say uh just ask a lot of questions and go up to people and talk to talk to as many of you know these types of investors as you see uh and the doors will open um thank you all very much it was a really interesting conversation as follow-ups i'm sure uh we're all available uh for for further discussion and questions whether online or offline and thank you to our hosts here at SoCAP