For three years we’ve been telling you that the social capital market, the market at the intersection of money and meaning, the place between giving and investing is real, it’s big and it’s growing.
I think you’ve gotten the message; in October of last year we convened 1,500 people from 40 countries for the largest and most diverse social enterprise investing conference in the world. We’ve recently come back from gathering 750 people from 50 countries in Amsterdam at SOCAP/Europe, our first international conference.
The market at the intersection of money and meaning is big and it’s growing. Got it. Now it’s time to make sense of the social capital market. If you’ve been overwhelmed by SOCAP, we are going to make it easier this year. We are limiting the number of panels, finding fewer, but more representative or distinctive stories. That will make it easier to navigate the abundant, life giving landscape that comes together at SOCAP to work on investing and creating businesses in new ways to meet a world in need of change. We will also try to make it easy for newbies to find their way, while letting the experts go as deep as they need to, talking to each other and figuring out next steps.
We are also trying to vet a few corporations who are transforming their supply chains and their relationship to their impact on people and the environment. These corporations realize that we live on a finite planet undergoing climate change, where local people are less willing to let multinationals come in and extract their resources without paying the full cost.
Because we think it’s time to focus in order to get clearer, we are also designing in the chance that we are wrong in some of the ways we frame things. We know that other people in the room often have a better idea. So this year, after being many people’s favorite part of the conference for the last three years, open space is infiltrating the structured two days of panels, speakers and content.
What does that mean for you, the attendee? Say you didn’t like how that last session shaped up. And, you know there are better people in the room or down the hall who could tell a richer and more relevant story. We will give you time to make that happen, in open space, later that same day. Because of the way the SOCAP community has enjoyed coming together in user-created sessions for the last three years, we are going to link co-creation and revised on the fly mash-ups into our content plan. We work hard on content all year long, but we also let you make the conference with us.
We have imitators cropping up everywhere, which is a good sign of a growing market. Some try to mix money and meaning, but others are just about the money. They will attract people who view things that way, who want to save the world at no discount. They pick the easy impact investing route, most completely return focused. They may not be willing to pay a price for investing in the world’s toughest problems, but it’s good they’ve joined the party at this intersection. It takes all kinds, the right people and the people some consider wrong to make a market, barbarian and the Byzantine, finding the value that each other has to bring. The Byzantine’s don’t invite the barbarians into their protocol-laden courts and the barbarians don’t invite Byzantines to a party by the fire with goats, wine skins, and wild dancing. But, they are both able to share multicultural value in the market, in a way that makes sense to each.
Finally, what sets SOCAP apart is that we create intersections where you meet valuable strangers that you would not run into in your normal path of doing business. Put aside your preconceived notions of who can be your ally. We consciously bridge silos to make the market more renewably vital. This year, our track on Green 2.0 will bring in environmentalists and green investors. Those who want to cover all of the environmental and social costs of building their green products onto the balance sheet, who want to do it right this time. Those strangers often become partners, co investors or investors and investees. SOCAP is about making connections, putting things in context, and getting things done.
Vibrant sprouting diversity across sectors and across investor size is driving the rapid growth of the social capital market. Growth is happening at the top end, return first end of the spectrum, but there is even more energy and catalytic potential at the mission first, early seed stage end of the spectrum. Seeing both early stage and later stage companies and funds flourish at once gives a picture of a healthy and resilient market ecosystem that is both emerging and maturing.
The social capital market is thriving using investing to change the world. While the regular market is mired in trying to prop up a status quo that has outlived its usefulness on this planet. Impact investing is both an asset class and a lens, a new way of thinking about your money, what’s mine and what we share.
We are not just moving money in new ways; we are moving minds, our own and the other people who join the movement. One thing that makes moving minds possible is the growing collective realization that we are changing the myth of capital. In Amsterdam, on the very spot where the stock market was born, the message was that the market is not a force of nature, but a tool that we created and can use to build the world we all want.
At SOCAP11, in early September, we will put the meaning question on the table in every panel and every follow-up discussion. The graphics for every session will contain a brief summary of its meaning issues. If meaning matters, if you are getting some positive impact in exchange for there being a discount to market rate on most deals, then meaning has to have a place at the table. Meaning has to be something that counts in every investment that is made. That’s the reason investors measure impact.
While investors will both discover and benefit from landmark research in new, investable sectors like renewable, locally produced energy in the developing world, in medical technology and agroecology, we are focusing on lifting up the entrepreneur this year
That’s because there is a glut of investors who think it’s time to put their money where their mouth is. The imbalance that needs to be addressed is that there is a shortage of entrepreneurs who can build a social purpose business that grows beyond the founder. That means the power is flowing inexorably away from capital and toward the entrepreneur. Entrepreneurs may soon be rating impact funds on what they provide more than money.
To meet the investor demand, we need more and better, more seasoned entrepreneurs. There’s an even greater shortage of operators who can corral the visionary and turn the vision into an economically viable reality.
Since our goal is help build the market by convening the market, we are focusing more on the entrepreneurs this year. Focusing on the entrepreneur means more than the usual hand wringing questions about where the money to fund raw startups is. That’s because there is finally a surge in lower cost, smarter, more networked and more democratic seed stage investing that’s giving them the funding to let their ideas take flight.
The money is just, at the end of the day, money. Impact investors are important for being capital sources with a little more patience or tolerance for risk because of alignment with the mission. But their main value is to provide the fuel for the people who are using the market to meet the challenges of the world and help us all build a world where we all can thrive. In some cases, funders help substantially. But what the critical need, is more good, experienced entrepreneurs. That means being willing to take on the risk of seed stage investing.
Putting mission focused dollars into early, risky investments that help these entrepreneurs get the seasoning the world needs them to have is getting easier to do. Because of collective intelligence producing networks emerging among both entrepreneurs and investors, seed stage in the social capital market is evolving rapidly and getting smarter, too.
Living with high failure rates, compensated for by knowing there will be some huge individual investable social enterprise successes and an even greater furthering of the field is what it takes for investors to play in this growing seed stage space. It’s philanthropically motivated impact investing, but with real money at risk, not just charity dollars.
Seed stage is an emerging sector where a network of mission first impact investors can make a huge difference. Some promising lower cost models gaining traction, like the Village Capital model, give a local cohort of entrepreneurs the power of doing due diligence on each other. Those startups will also be among the many groups of investable companies who will be telling their story in investor pitch sessions at SOCAP11. Deal sizes will be from $75,000 to $10 million, brought by our trusted network of partners, from Slow Money Norcal to Watershed Capital, Toniic, Investors Circle, Village Capital itself, Hub Ventures, powered by the Village Capital model, and others.
The action is not all happening at seed stage. Some of the most important activity is at the top end of the market. SOCAP11 will have funds of funds and institutional multi-fund platforms. They will be telling their important, evolving story of building the necessary infrastructure as the market at the intersection of money and meaning comes together. Layer cake deals that mix grants, subsidies, and debt with fast moving equity players for a mix of financial and social return will be explained; it takes all kinds of capital, from philanthropy to public dollars to venture capital to make this market work.
We also embrace this year the idea of “institutional” interest in social capital markets. Of course this includes the systems, processes, relationships, tools, and policy frameworks developed precisely to support the entrepreneurs we will be lifting up. But more importantly, it speaks to the shared interest that you, me, our local communities, and our species has in the real social value and public good that we are creating. In addition to responding to the enormous challenge of transforming financial markets in our capacities as individuals, we must, and will respond collectively through the governments, pension funds and other ‘institutions’ that speak and invest on our behalf. After all, these are our institutions. We own them. But they too often speak a different language. Well, its translation time.
Let’s decipher where our work meets each others, and build bridges at the intersection of money and meaning. We will connect government leaders to venture capitalists and philanthropists in the private sector. From policy to business deals, we generate social capital. And after all, the “social” in social capital speaks to the greater good – for you, me, our local communities, our world. That value lives in the commons and government is an important, but far from the only player there. Impact investing creates positive social impact at a cost to investors and company’s profit margins, to create benefit in communities, and for groups in need. We talk a lot about metrics – and we will continue to – but you don’t have to look far to see that we have already put a price on impact.
An important new book by Rockefeller Foundation’s Antony Bugg Levine and Blended Value’s Jed Emerson, titled, simply, Impact Investing, will provide a roadmap and guide to the investors at SOCAP11. The book is launching at SOCAP11, and will be promoted heavily by our online, mission focused e-commerce partner Better World Books.
Institutional capital will be put in context, but for many people the most exciting part of SOCAP11 may be at the people-powered, movement-focused end. People-powered capital puts financial tools of change in the hands of everyday people–online platforms and tools like Microplace, Kiva, HoopFund and others–enabling individuals and crowd-sourced collectives to make a difference with as little as $25 in their wallet. Collaborative commerce focused, shareable companies, also go here.
This people powered capital is a mix of a movement and a subset of an asset class, with the movement side in charge. We are going to try to define that market, or make a stab at it at SOCAP11. Sizing comes later.
All of us have more power and money to put to work than any small group of us. We can vote with our dollars for the world we want. The mix of democratic seed stage investing with crowd funded, people powered capital is the part of the market that can most quickly give young entrepreneurs the money to make their ideas happen. It’s the near term fuel visionary entrepreneurs need.
If you want to see what’s emerging, as well what’s established, maturing and evolving into something bigger. If you want to be part of the movement that’s using the market to change the world, come to SOCAP11.
We’ve proved that the social capital market is real, big and growing, and this year, the market at the intersection of money and meaning is going to become clear and more deals are going to get done.
**Thanks to Ben Thornley for counsel and the policy and institutional investor sections.
SOCAP11 Message from the Convener, Kevin Jones
SOCAP June 23, 2011