Thursday, December 15, 2011
The next time you hear someone say this, confront them. Confront them with One Acre Fund, or Envirofit, or Root Capital, or Doctors Without Borders, or VisionSpring, or Aravind Eye Care.
Successful non-profits can scale, and some of them are doing it. It is time to study what they are doing right, and stop the silly talk.
Last year, there was good news about progress on maternal mortality. In the past few weeks, there has been good news about malaria mortality. Non- profits played a big role in both of these. Certainly, neither of these problems are past, and I am sure non-profits will continue to play a role in building on these gains.
Yes, there are unique challenges for non-profits, but some of these organizations are solving them. And yes, of course, we need for profit enterprises working in these fields as well. If you are working on a BOP start up, I still suggest you try to find a for profit business model first. But if that doesn't work (as it did not with Envirofit), you don't need to give up. Non profits can scale. The organizations listed above are a good place to start if you want to study how.
NOTE: this picture is from a recent article about One Acre Fund in Good Magazine.
Wednesday, December 14, 2011
I was fortunate to hear this talk at the Acumen Investor Gathering in November. Nice perspective on the hard work required to create markets in BOP- for the first time in their history, people are "buying something for the first time."
Monday, December 05, 2011
I was impressed by this open letter to Occupy Wall Street from the founder of Carrotmob which asks:
"Would you rather punish businesses and get the same old results, or show love to businesses and gain unprecedented power and influence over how our economy works?"
I think a similar approach could be helpful in getting companies to consider products and services to serve BOP markets. Altruistic arbitrage, if you will.
Saturday, December 03, 2011
This morning, I was looking through Time Magazine's recent list of the 50 Best Inventions (sorry, if you aren't a subscriber, you won't get much from this link). It was depressing. Only one, a malaria vaccine in late stage trials by GSK, was really targeted at the BOP and had a chance of making lives better for millions of people. A second invention, a solar charged rural information system housed in an oil drum and promoted by UNICEF had application to the BOP. But it seems to me that just providing a solar charger for mobile phones would probably be a lower cost approach.
Perhaps I live in a bubble (OK, not perhaps). But I know of many inventors working on technologies that are aimed squarely at the other 99% of the people who do not have iPads and Priae (my attempt at the plural of Prius).
Paul Polak has been working on "Design for the Other 90%" for decades. Groups like MIT's D-Lab, Catapult Design, International Development Enterprises, CSU's Engines Lab, Haddock Invention, Design that Matters, IDEO.org and D-Rev work in the field. Communities like Appropedia collect and test concepts. Companies like d.light, Envirofit, Vestergaard Frandsen and cell phone providers are bringing new products to these markets. And accelerators like the Unreasonable Institute and Village Capital are providing services to BOP inventors to help form companies to disseminate inventions that matter.
Am I am being too sensitive in my disappointment? I know inventions are the ideas, and innovations are what actually get used in the real world, and this list was of the former. But what I would like is for my readers to list the inventions that they are excited about in the comments below.
So... what are exciting inventions could make a difference for the other 6 billion people in the world that don't care about hummingbird drones or electric mood indicating bunny ears? What are the inventions that matter?
Saturday, November 05, 2011
Today, Seth Godin had an interesting post on "When Minimum Viable Product Doesn't Work"- suggesting that the MVP approach suggested by Lean Start Up proponents has some limits.
I am in the midst of reading Lean Start Up by Eric Ries, and agree with Seth that it is a cool idea, but that it works best in some industries. I don't think Eric buys that, as he argues for very broad applicability of the lean start up approach. Since meeting Steve Blank a few years ago (dare I say he is the father of the lean start up movment?) I have been working on applying these concepts to social enterprises and BOP businesses.
So... is MVP a good idea for social entrepreneurs or BOPreneurs?
To me, the issue is one of "who bears the risk"? Too often, well intentioned designers come up with a new product idea to help others, without a clear understanding of the context. In the well known example of the PlayPump, there was great excitement. However, the pumps, which had a habit of breaking down, often replaced more rudimentary (but longer lasting) hand pumps. In the end, some villages in Mozambique lost their source of drinking water. The company had put the risk of testing their product on the user, not the company.
I think MVP is still a good concept for BOPreneurs, as long as they pay close attention to "minimal" in their design. Don't make it so minimal that you have shifted risks of failure to your users or their communities. Too often, we fall in love with our ideas and only picture how much better off people will be with our new technology. But you must ask- "if this doesn't work, will our users be worse off than before?" Don't proceed until you can answer this question in the negative.
What happens if your solar powered light stops working? Does someone end up stepping on a cobra in the middle of the night? That is so much worse than a bad web link, isn't it? What happens if someone has spent a week's income on the light? Where do they exchange if for a new one (assuming they side stepped the cobra)? At Envirofit, we bought motorcycles from our early testers before doing retrofits. Did we distort the price signal a little? Probably, but if their bikes didn't work, the risk needed to be on us.
Unfortunately, you may also be working in a place that has had other well intentioned visitors trying things out on them. The cumulative impact of broken technologies should be understood; what can you do to minimize or eliminate the mistrust that results? And what about the reputation of any local partners that are helping you out? When you fly off, they still live there. What can you do to leave things better than you found them, not worse? I'd encourage you to look at Amy Smith's work on creative capacity building, which involves the community in the design of products and their dissemination. It is human nature to look at the benefits, but it is the entrepreneur's responsibility to look at the costs.
The insight behind MVP is validated learning, and using innovation accounting to measure what you learn. The motivation of the lean startup approach is to avoid "achieving failure," as Eric puts it, "successfully, faithfully and rigorously executing a plan that turned out to be utterly flawed." I believe the lean start up approach can be applied to social enterprises, as long as the venture has a deep understanding of, and undertaking to bear, the risks that the product is not viable.
Thursday, November 03, 2011
Yesterday, our GSSE MBA students were fortunate to have Anne Marie Burgoyne do a guest workshop on governance and capacity building. I had some lame title for her talk, but what I should have called it (and what this post is about) is: "What Boards Do and Why it's Important." The subtitle might be, as Anne Marie put it, "The Art and Science of Building a Board."It is one of those under-taught and under-thought areas of new ventures.
Sunday, October 30, 2011
Guest blogger Teju (and his partners Tyler and Daniel) live, eat and breath social entrepreneurship in their tireless work for the Unreasonable Institute. I think they are completely unreasonable... and a very special part of Colorado's start up scene.
[Dinner- fellows from Netherlands, Canada, India & China]
Thursday, October 06, 2011
There is a lot of attention now on #occupywallstreet - and I find it interesting to see a movement grow, and try to frame a meaningful goal from its "lets start something and see where it goes" genesis. To me, they have identified a "what sucks" but haven't articulated "what we are going to do about it." It is one thing to sit in, and another to stand up and take action. It is also interesting that some movements build, and some attack. The nature of movements is it is hard to define who is in and who is out. Yesterday, the infamous hackers at Anonymous targeted Wall Street for cyber attack- have they joined the movement? is their offer of "help" helpful? I offer this post as an alternative. I see entrepreneurs as society's hackers (in a good way, I hope).
This post is about some thoughts and conversations I have been having about the early steps of impact investing's journey. My concern? That the impact investing field is borrowing heavily from traditional start up finance- private equity (PE), venture capital (VC), angels, and yes, even Wall St. Will packing up these established concepts help impact investing speed towards its destination, or will they instead be a heavy load, or a false destination? Will they be useful, useless or harmful?
The basis of my concern is twofold: 1) this financial system got us to where we are, and has created some of the problems that entrepreneurs, activists and communities now must solve; and 2) the assumptions underlying the processes of this financial system may be antithetical to, or at least misaligned with, the goals of impact investing. Let me try to explain.
At the core of this concern is that financial capital relentlessly seeks returns. And we have built (or evolved) a finance system that satisfies financial capital's needs. The way private investors source deals, negotiate terms, conduct due diligence and monitor their investments is all premised on the idea that the entrepreneur will build a venture that creates (and captures) financial value. This is done through reducing risk, scaling the venture, and pursuing profits. Social and environmental impacts are largely external, in either positive or negative ways.*
But impact investing turns that on its head. And, I believe, calls into question the entire system of financing start ups. At each step, impact investors need to ask "why?" If maximizing social and environmental impact (rather than financial return) is what you want your capital to relentlessly pursue, then how does that happen? If instead it is financial return that is "largely external, in either positive or negative ways," then what needs to change?
At this point, I don't have answers, but I want to encourage founders and funders to think about it.
Let me provide two examples to illustrate my quandary:
1) Liquidity & Exit- early stage financing is premised on repayment. A funder provides money to a start up with an expectation of repayment of a greater amount in the future. This return on investment is, in the end, how success is measured. The longer the start up keeps the money, the greater the expected return. Investors have many opportunities, and an entire system has evolved to track and evaluate investment performance. But why does an impact investor seek liquidity? What if you find the perfect enterprise- one that is flawlessly executing a plan of scaling a solution to a global challenge? Then it seems to me that you wouldn't want to exit until the global challenge was solved. It would be inconsistent to take money from this enterprise to reinvest in a less effective (by definition) enterprise. So the reasons an impact investor would seek exit would be for investments in the less effective enterprises, where they felt they could redeploy their funds to achieve higher impact elsewhere. But it seems to me they should let investments in successful enterprises ride indefinitely, as liquidity would be counter productive for both the funder and the enterprise. Wouldn't this drive a different approach to portfolio design, evaluation and management? (Leslie Christensen and RSF have asked another set of provocative questions on portfolios, as well as provided a suggested approach.)
2) Crowdfunding- one challenge for the impact investing space is its emergent nature. As I wrote a few weeks ago, things that are emergent are "small, weak and hard to predict." There is a tension between many early stage enterprises seeking funding, and impact investors who are looking to help scale proven approaches to achieve impact. Our very own "valley of death". And no established bridges over that valley. The way traditional start up funding has dealt with this challenge has been through keeping investments local, working in syndicates to spread risk early, and tying funding to milestones. But the costs of doing financial deals for funders are often too high for small, dispersed, emergent companies, so these deals are left to universities, angel investors and government agencies (for instance, NIH and NSF research funding, or SBIR/STTR programs). This drives a "funnel-triage" approach. Investors screen hundreds of opportunities to fund a deal. Because they are looking for financial returns, they are looking for the best deals and want to concentrate on obtaining a significant percentage of ownership in order to capture these high returns. But I ask the same question as above- why would an impact investor seek a high percentage of ownership to capture high impact? The only answer I have come up with is ego. And that seems like a bad answer. Ego (and greed) are tolerated by the traditional financial system, because they are aligned with the systemic objectives of financial return. But if the goal is maximizing impact, it seems to me that the funders need to figure out how to efficiently source deals and do more smaller deals initially, until we get through the emergent phase and a more robust system evolves. This is where crowdfunding appears to offer some real benefit, and be more aligned with the goals of an impact investing system. Both founders and funders may become more comfortable with broad risk sharing and evaluation offered by crowdfunds, such as Kickstarter, Village Capital, Kiva, Inventure, Solar Mosaic and Hoop Fund.**
Well, I have written enough. But I'd encourage you to think about many of the "givens" of investment: relative founder/funder ownership percentages, board composition, preferences for equity (anti-dilution, liquidation), metrics. I see a lot of opportunity for change and redesign, but few people talking about it, much less doing it. In a recent deal by a leading impact investor, the Series A documents had one small change from a typical Series A deal. One small change.
So, what do you think? A journey of a thousand miles first starts with a single... question- "where are we going?" I think we need to hack the financial system to do impact investing well and build an alternative... an impact system. What do you think? Who are the pioneers, scouts and guides?
* This is key. I am not saying there aren't enterprises that don't create financial value through creating social and environmental value. I am saying that the primary objective of their investors is financial value, and social and environmental values are secondary. I am also saying that in the financial system, as long as one stays within societal rules/norms, negative impacts are allowed. The second hand smoke of our financial system, so to speak.
** I recommend Alex Goldmark's recent GOOD article on crowdfunding and Bruce Campbell's good post as well.
Sunday, September 11, 2011
At the last minute, I was asked to sit in on a SoCap panel on Thursday, along with Will and Arjuna from Omidyar Network and Kelly from Potencia Ventures. The ring master was John Goldstein from Imprint Capital.
Tuesday, September 06, 2011
Andy Hargadon's idea that building a start up is about building a network is one of those "duh" ideas. You read it, you say "yeah that makes sense"... yet, from then on, it changes the way you think about start ups.
Not a serial entrepreneur? As a founder, this approach also biases you toward a posture of humility, ambiguity and curiosity. It takes you out of "sell mode" and keeps you in "design/build" mode. Think: "I am building an experimental network, to see if there is a significant market, and a business model to address it efficiently and effectively."*
Spend more time on your business search than on your business plan. And let the search drive the network which drives the business model, which are then all described in the plan.
Note: I wrote this post in July, and it mysteriously showed up when I tried the new blogger interface this morning. So I hit "publish."
*Channeling Peter Drucker's super marvelous comment: "Efficiency is doing things right. Effectiveness is doing the right things."
Sunday, September 04, 2011
This is a follow up post to my SoCap zoo post from last year. While it doesn't have anything to do with zoos (that is SO 2010...), it does have to do with Socap. Let's start with a story, shall we?
NOTE: Greg, you are right. I should have written more about crowd sourced capital. Kevin, you are right, there is much hybrid vigor in Green 2.0, which I hope to witness this week from a safe distance.
Tuesday, August 16, 2011
"There are no easy answers, but there are simple answers." Ronald Reagan
Monday, August 15, 2011
Monday, August 01, 2011
Thursday, July 14, 2011
Entrepreneurship is hard work. So entrepreneurs should focus on problems that matter. If they ask me, I suggest BHAWGs and focusing on "What sucks?". It all gets down to "what you are doing here?" How are you using your time and talent?
Monday, July 11, 2011
It is easy to be cynical. "That will never work."
Thursday, June 30, 2011
Is it OK to start a company with your best friend? This topic seems to come up a lot, as though it is a litmus test for whether a company will be successful.
Saturday, June 11, 2011
I had been working on a post about building companies vs. "getting funded." Entrepreneurs sometimes get confused about which is the goal, and which is a side-benefit. They confuse correlation with causation. When I ask "what do you need?" or "what are you working on?"... I often hear about funding.*
Thursday, June 02, 2011
Wow. I just realized on Monday that my blog is now 5 years old (not all blogs have this staying power). To celebrate, I have actually gone back and separated out the posts in the early years (blogger in the early years didn't do this easily), so that it is easier to find old posts (though I should have started this blog on wordpress, which would have been more user friendly*). I also reread a number of my old posts as I did this.
Saturday, April 16, 2011
As promised in last week's post, here are my slides from the Enterprise Solutions session at the Global Health & Innovation Conference at Yale this afternoon. My hope is that it will help my bleeps design business models that are focused on "ounces of prevention" rather than "pounds of cure." I tried to share some of my thinking on how ideas from "lean start up" folks can be applied to social ventures working on global health challenges.
Saturday, April 09, 2011
Note: a mini-rant follows.
Monday, April 04, 2011
Monday, March 28, 2011
Wanted to make sure my bleeps were checking in on the following conversation on the needs for technical disciplines vs. liberal arts as they impact innovation and job creation: Engineering vs. Liberal Arts- Who's right Bill or Steve? and What Bill Gates Could Learn from Chris Rock
Tuesday, February 01, 2011
I run into a lot of "well meaning" people in my work. I run into fewer "well doing" people. They are rarer, and more important. Here are a few observations:
Both are inspired, but I find the "well doing" to be inspirational (this has not always been the case- I have fallen for the siren song of the elegant concept... and probably will again).
In the fields of social entrepreneurship and impact investing, where impact is the ultimate goal, it is important not to confuse intention with impact.
Most well doing people are also well meaning, but the converse is not always the case.
Paul Graham urges entrepreneurs to "always produce" and Seth Godin asks "what have you shipped?" A good operating principle, and a good test of that principle. Complicated, of course, by the law of unintended consequences in this field where the desire to help others does not always translate into actually helping others. Right Professor Easterly?
The best "well doing" people are motivated by a desire to learn from, not just help, others. Examples of impactful co-creation are rare, but worth studying carefully. Examples of well intentioned "help that isn't" are not so rare, and are also worth studying carefully.
While I have been a skeptic on the issue of impact metrics, one of their most important uses may be to remind people of what really matters most. Metrics should measure mission, not drive it. And they need to be designed to measure what is done (are we "well doing"?), not what is meant to be done (are we "well meaning"?).
Saturday, January 29, 2011
Historically, the autocrat's strategy for control could be the three legged stool of poverty, malnutrition and ignorance. Recent developments indicate that smart phones have knocked one leg out from under that stool. It is increasingly difficult to keep a populace ignorant of what is going on in the world.
Years ago I read Iqbal Qadir's provocative article on the impact of ICT on development and governments- much of what he discussed is now coming true.
"By influencing governance, these technologies can release resources trapped beneath vested interests. This impact is far greater than the conveniences for which these technologies are ordinarily known."
The other two legs may be cut short as well. Iqbal's brother helped develop Cell Bazaar in part to transmit better market data to Bangladeshi farmers so they could get better prices and higher incomes. And a recent story on NPR detailed efforts by Mercy Corps to use mobile cash to replace more traditional forms of aid (including often disruptive food aid).
The impact of the smart phone on the BOP dwarfs the impact of most aid, development and social entrepreneurship programs. In recent days, it also seems to also be dwarfing the impact of national intelligence, diplomacy and news media.
Some refer to mobile phones as "just" a tool. You know, like fire, the wheel, agriculture, genetics....
This past week I was fortunate enough to meet with some leaders in the field of innovative philanthropy and impact investing. So thanks first to my guides at Mercy Corps, Lemelson Foundation, Draper Richards Kaplan Foundation, Imprint Capital and Omidyar Network.
One term I heard quite a bit was "demonstration effect." For our meetings, this meant examples of investments that provide impact and return on capital. Or enterprises that serve poor customers fairly and make a fair profit they can share with their owners and employees. Each of these could start self-reinforcing trends, attracting more human and financial capital to mission based companies.
More generally, demonstration effect recognizes the power of examples over ideas. Hearing about an idea that has never happened is very different than seeing something unexpected happen. Real examples open people up to new possibilities, and shift their frame of reference. The unlikely becomes more likely, and the world is never the same for that person. As these events are shared, they ripple to companies, communities and societies. There is no going back.
This morning, the AP is reporting that China is blocking #egypt on their twitter like services. The street demonstrations in Egypt were in part a result of the demonstration effect of similar protests in Tunisia. Could it be that China is worried that it is next? That the democratizing force of social media will drive a different type of domino effect? Tunisia ->Egypt->China? And imposing internet darkness may backfire on these governments.
These are tectonic political shifts. The longer the built up energy is surpressed the more impressive is its release- in building continents, the result can be earthquakes and in building nations, the result can be revolutions. The Latin root of this word is "to build," and tectonic means "building through structural deformation." In other words, creative destruction (right Mr. Schumpeter?) Continents, countries, and industries are built on ruptures, shifts, shaking and destruction. I wait, hopeful that Egypt (and any other countries that follow) don't add violence to the list. Iran's brutal repression is still a fresh gash on this hope for a better world.
In a more personal light, I spoke to one of my African students earlier this week. She told me that she had never thought of herself as an entrepreneur but that my class had shown her a) examples of others who had decided to make a difference through entrepreneurship, and more importantly, b) given her personal experiences that had shown her that she could be an entrepreneur. She made some tough decisions at some cost and difficulty and now has embarked on a new venture. Another dandelion starts to bud through the soil and sunlight provided by demonstration effect.
Throughout history, the power of seeing something work opens our eyes to new possibilities. Whether it is a "demo" of a new product, the self realization of one's potential, or the possibility of over- throwing an autocrat, the demonstration effect has vast potential for rapid replication. This can be both scary and exhilarating. These are common emotions to unreasonable people- revolutionaries, activists, entrepreneurs, hackers and (ad)venturers. Emotions that I imagine were felt in Boston in 1773 and are being felt in Cairo today.
Friday, January 28, 2011
My longtime bleeps may think this post will once again refer to the debate on whether entrepreneurs are born or made. But- surprise- that topic has almost nothing to do with this post.
No, this post has to do with Colorado. What some refer to dismissively as one of "the flyover" states. But they are wrong. That is old school thinking.
In December, a small group met to talk about how to promote Colorado's entrepreneurial and innovative culture. As is often the case with a small group, someone said something, and someone else built on it, and all of a sudden, we had a pretty cool mantra. "Colorado... Entrepreneurial by Nature."
For those entrepreneurs who are digging out of the most recent blizzard on the Right Coast, or stuck in traffic on the Left Coast, maybe it is time to come to Colorado. Not to ski, but to create. I live not too far away from a city named after the man who exclaimed over a century ago: "Go West young man, and grow up with the country." Well, old Horace had a point, I think.
A personal story. During law school, I interviewed with a prestigous old Boston law firm. At one point, they asked me where my parents went to college and what they did. I doubt they know how that ticked me off. At that point, mentally, I turned on my heel and walked out the door on the East. In the West, we don't care where your parents (or you) went to school. We don't care much about what you wear or drive (though you get points for riding your bike or horse). Mostly, we care that whatever you do, you do well. It isn't about your daddy, it is about you. If you can hang with us, in business or out on the trails, you are welcome to come along.
Now, if this were an official campaign, this is where I'd break out lots of numbers to convince you that moving here is a no-brainer. But it isn't an official campaign, so let me just tell you about my day. While all days are unique, this day is fairly typical for me, and offers some flavor of why I am always happy to come home to Colorado.
I flew in from SF late last night. When I woke up, I thought I might head up to the mountains to ski later today- it has been a great snow year (in the mountains) and there is nothing like a bluebird day on the slopes. But I've been away a lot, and the forecast was for a nice few days on the Front Range. Very nice. Sunny and 60's. In January. So I decided to stay in town. Since it was early, I connected with a few people in India (12.5 hours), catching them before their weekends started. Then exchanged emails with a few folks in the east, and a phone call with a microfinance friend in Boston who called me "old school" for picking up the phone to chat. Then a bit of time reading and preparing for next week's class.
OK, no biggie so far. I could have done this most anywhere with an internet connection. But it was a bit past noon, and had warmed up nicely outside. So I jumped on my mountain bike* and took a ride up through the foothills and along the reservoir. The sky was blue, and the trails were tacky. It was so warm I was tempted to swim in the lake until I remembered that it was January and the water was probably freezing.
After the ride, I "had" to swing by New Belgium** to drop some papers off... and fill up a growler. They suggested Trip #7, a recently released Black IPA. I caught up with a few folks, met intern Drew of the new Lips of Faith Drew's Beer, then heard briefly about brewmaster Peter's recent trip to another brewery where he had seen some exciting stuff. Then, I was off to chat with a friend about some challenges and upcoming changes as his company begins to market in Africa. And we did put a dent in that tasty Trip #7.
The point is not that I get to do interesting stuff. It is possible to do interesting stuff with interesting people almost anywhere. This makes the "where" of innovation both less important (got internet?) and much more important (do I live in a place that makes me feel alive/joyous/energized?). While you can tap into big parts of the global innovation community from a lot of places, there are far fewer that offer the range of opportunities that Colorado has. It is a place to be entrepreneurial...artistic...musical...athletic... by nature***. Maybe it is just me, but I think the combination of good work, good biking, good weather (and good beer) is pretty special. At least for me, I can't imagine better growing conditions for new ideas and ventures.****
If you want to come check it out, might I suggest TEDxMileHigh on April 7. They plan to highlight some of the entrepreneurial gems of the state. Then you can spend a few days to investigate Denver, Golden, Boulder and Fort Collins. And then go take a few days to ski, or go mt biking in the desert.
Entrepreneurial by nature... sounds pretty good, doesn't it? Maybe we will see you around.
Just a few examples:
* A Yeti. From Golden, Colorado.
** One of our wonderful Fort Collins breweries.
*** For music: Aspen Music Festival, Telluride Bluegrass, Red Rocks, New West Festival
**** Supporting Data Point: Recently opened Innosphere for start ups is already full.