My bleeps know I am not long on patience, particularly when it comes to metrics. Not so long ago, I ranted a bit about how incredibly bored I am with this topic. Since then, I have been to two conferences, where, unfortunately, it reared its head. The most recent of these, this past Friday, was entitled "Change that Counts" and had a definite metrics and measurement tilt.
Sunday, November 22, 2009
Don't worry. I am not going to rant some more about metrics.
Instead, I am going to poke at the issue of "patient capital." This seems to be an emerging thread in a lot of conversations I have with young entrepreneurs. In part, I think, because of the good work of folks at Investors Circle, Acumen Fund and others. But I am a bit worried about the concept.
See, it is the nature of capital to be impatient. It seeks a return, just as salmon swim upstream or birds migrate. To ask it to be patient is to change its nature. Now, if I wanted to fit in, I would start to wax about how this transformation will lead to great environmental and social change. Indeed, to transform capitalism and our world. Cue tweeting birds and global peace. More offers to get me to sit on panels at conferences. Yup, there are many advantages to transforming capitalism.
But no. I don't want to fit in. I want to fix stuff. To get stuff done. And I think that impatient capital is more likely to change the world. I believe that time is of the essence, and I want impatience. When you go to the emergency room, are you a patient patient? No, you want to see things happen, stat! Worried about poverty, environmental degradation, infectious disease, climate change? Want to be a social entrepreneur? Then get going. And hire capital that will help you get going.
And hiring capital is the way you should think about it. Whether human, social or financial capital, look for common purposes, and one of those purposes should be impatience. I want to hire impatient people. I want impatient investors. To be mission focused DOES NOT mean you can't be impatient. In fact, I believe all triple bottom line focused organizations should be MUCH MORE IMPATIENT than their more traditional competitors. Entrepreneurs throughout history have won on hustle, not patience. Persistence, not pondering.
An example of a social enterprise based on respecting the impatience of capital? Kiva. Some believe it's key innovation was connecting microloan borrowers directly to lenders. Important for sure. But they are built on the idea that you get paid back by the person you help. I think that is the core innovation. Kiva scratches my charitable itch, but it also lets me reuse my capital by reinvesting it in another venture. This is harnessing the nature of my capital better than a more traditional non-profit. My capital pushes for better reporting, more transparency, better entrepreneurs. And more capital is coming into this system. I doubt this would be the case if the default rate were 50% and I was really "giving away" 50% of my capital.
To be clear, if an investor wants to advertise that they offer patient capital, that's fine. Let them compete for deal flow. But for the entrepreneurs, be careful. Be sure "patient capital" doesn't make you patient. Don't think that taking patient capital relieves you from the obligation to think about the things that are important to capital: returns, time horizon, exit strategies, milestones. These are the things that will drive your team to think about impact, sustainability and scale... and to get going about changing things.
Don't believe what your parents and teachers told you. For entrepreneurs, impatience is a virtue.
Update 11/23: Yasmina Zaidman from Acumen blogged today on "Patient Capital- A Bridge Over Troubled Waters." I commented that investors need to emphasize that patient capital does not mean complacent capital.
Update 11/27: Yasmina's reply was typically thoughtful: "If there’s one thing we look for in our entrepreneurs and our colleagues it’s impatience. But Patient Capital now stands as an alternative to the “get rich quick” approach that has gutted our economy and our planet, leaving massive inequality in its wake. So, we envision a patience that enables market forces to play a role even when the dividends take longer to materialize, and are as much social as they are financial. And we aim to get there are quickly as possible, but not so fast that we continue to leave two thirds of the world behind. It’s a daily conversation to explain that this approach requires even more rigor, urgency and commitment to sheer excellence than EITHER straight business or straight charity, but it’s a conversation worth having."