"Non Profits Can't Scale"

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.
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NOTE: this picture is from a recent article about One Acre Fund in Good Magazine.

"Market Creation Is Hard Work" - Seth Godin

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."

Carrots & Sticks

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.

Design Challenge: Inventions That Matter

I am a technology nerd. I think it goes with being an unrepentant optimist. One thing I like to do is read through popular magazines about new technologies, and think about how they might change our collective future for the better.

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?

When Minimal Viable Product Doesn't Work (Part 2)

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.

The Art and Science of Building a Board

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.

First, a bit more about Anne Marie. She works for the Draper Richards Kaplan Foundation in San Francisco. Basically, she helped Bill Draper*, Robin Richards and Jenny Shilling set up a foundation that took the disciplined approach they had used in the venture capital business over to the social sector. As with traditional investors, they sought to "Find, Fund & Support" social enterprises. Their portfolio is impressive, a who's who of changemakers: Kiva, Living Goods, Room to Read, Vision Spring and The Mission Continues. When you talk to DRKF entrepreneurs, they will tell you the foundation provides much more value than the money. And it is in these conversations that Anne Marie's name often comes up. She is, to put it bluntly, a world class non-profit board member.

As with any venture investor, Anne Marie can only be on a few boards (eight these days). And to get her on your board, you need to win a fellowship from DRKF, which is no easy feat. Fortunately, she is willing to share how DRKF works with portfolio companies. And I am going to try to share what she shared with us yesterday.

She started with a story of how Andrew Youn, founder of One Acre Fund, began with a board that came from a sign up sheet he had posted. Over just a few years, just as he went from 30 to 30,000 farmers served, he also built a strong board. There were some gaps in his early board (no one else had been to Africa), but they all were very passionate, and a number were hands on, willing to help do what was needed. She compared boards to chapters in a book, with different boards performing different functions as a start up grows up.

Anne Marie also told a few cautionary tales. The general theme was that social entrepreneurs often wish to exercise strong control over the organization's mission, and are often afraid to give over this control to a board. This behavior may end up reducing the organization's impact in the long run. Cautionary tale #1 involved an entrepreneur that decided a board wasn't needed. Over time, funding dried up, because funders perceived that no one had a fiduciary duty toward their donations. Cautionary tale #2 was of a talented board member who resigned because the board didn't grow with the organization. The board member grew tired of being the lead on everything, and wanted other talented people to join and share the load. But the founder wouldn't support growing the board.

Anne Marie discussed that there is often an explicit "Give or Get" role for non-profit board members. You either need to personally donate $X or be able to go get it from your network. Her advice is that if this is expected, it needs to be explicit, and is best led by the board chair.

She went on to discuss that successful organizations can have different types of boards, such as "kitchen cabinet" boards that were brought together for their perspective and ideas, but not funding (here the founder was very good at fundraising) to "fundraising boards" where board members are expected to bring $25k/year to the organization.

Most of the workshop was breaking down what boards do into 4 core functions:

1) Composition (Members and Logistics). Key takeaways: explicit job descriptions for board members, true north alignment with mission, regular meetings, set board meeting calendar.

2) Governance (Policies and Financials). Key takeaways: maintain 501c3 status, identify key policies and risks, quarterly financial reports (if you don't get these, points to a systemic problem); calendared budget planning process.

3) Planning (Strategy Development). This is the function most people think boards do. She is a fan of dashboards for financial issues and impact.

4) Execution (Staff Support and Fundraising). Key takeaways: Executive Director reviews key, support (not do) top management searches, help executive set compensation philosophy, set fundraising targets (and board members should be willing to support these by opening their personal network).

She also suggested that once boards start functioning well with the basics they begin to set their agenda based on Bill Ryan's 3 areas of governance: 1) fiduciary- do these in committees and have these on a "consent agenda" where they get approved rapidly without much discussion at the beginning of the meeting, 2) strategic- these are the dashboard items, and if information is distributed prior to meetings, less information sharing is required, and focus can be on discussion and decisions, 3) generative- these are items are for the "big questions" facing the organization, and where broader longer discussions can occur.  As Anne Marie said, "you may only get your board to have 10 hours of discussion a year- it is your job as a leader to make sure you prioritize these hours. If a topic gets an hour, then it should be a 'top 10' issue."

I know Anne Marie helped our students think differently about building a board. And I hope this post helps you to creatively think about how to begin to build (or rebuild) your board. If you have more questions about this topic, post a comment, and I will see if I can get Anne Marie to provide some answers. 

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*It is hard to briefly label someone like Bill Draper... how's this for a bio: "In 1965, Mr. Draper founded Sutter Hill Ventures. From 1981 to 1986, he was President and Chairman of the Export-Import Bank of the United States. Thereafter, Mr. Draper was the head of the United Nations Development Program from 1986 to 1993...." Brief. Modest. Weighty.  If you want to read more about the how and why of DRKF, I'd encourage you to read Mr. Draper's book "The Start Up Game"- Chapter 8 is about the foundation's founding and work, as well as case studies of some of the organizations mentioned above. 

Completely Unreasonable

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. 

It Takes a Village to Raise an Entrepreneur

A lot of people say that one person can change the world. I don’t believe that.

History is filled with stories of individuals who changed the world—Steve Jobs, Richard Branson, Gandhi, Martin Luther King. But what history ignores is that none of these bold visionaries achieved anything without exceptional teams and without the hundreds of people who mobilized to provide them support.

My team and I believe that to change the world, it takes a village.

That’s exactly why we’ve built the Unreasonable Institute. It’s a place where we bring together 25 world-class entrepreneurs from every walk of life and put them in one house for six weeks in Boulder, Colorado with mentors and funders—literally a village of entrepreneurial support.

                   [Dinner- fellows from Netherlands, Canada, India & China]

The entrepreneurs who show up come from many sectors and from all over the world. They range from a former child soldier from Liberia to a McKinsey consultant from India to MIT graduates in Pakistan. They’ve secured US Navy contracts, partnerships with Wal-Mart, HP, and the Indian Government. They’ve landed $1.5 million in funding from the European Union and recognition from the World Health Organization.

But the chance to live with and work with our 50 mentors helps these entrepreneurs move faster than ever before. Mentors range from Paul Polak, whose leadership at International Development Enterprises has enabled over 19 million farmers out of poverty, to Phil McKinney, the CTO of HP. The entrepreneurs also live with and build relationships with portfolio managers from 20 investment funds, including Acumen Fund, First Light, and E+Co, with the hopes of securing capital.

As Unreasonable 2011 Fellow Nat Koloc said, “I’ve been waiting for this community for a long time.” It’s thanks to this convergence of peer support, mentors, and funders, that he says, “I got more done in six weeks here than I would have in a year.”

We believe that changing the world is not about entrepreneurs or pioneers working in isolation. It’s about their aggressive participation in a global movement. In a family of people who are just unreasonable enough to take on the world’s greatest challenges!

If you’re an entrepreneur who believes this, join us. Apply by November 10 to attend our 2012 Institute. Reasonable entrepreneurs need not apply.

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Teju Ravilochan is co-founder of the Unreasonable Institute, an acceleration program for entrepreneurs tackling social and environmental problems. Each year, it unites 25 world-class entrepreneurs from across the globe in Boulder for 6 weeks. They live under the same roof, work with 50 mentors, pitch to 100 investors, and build relationships with portfolio managers from 20 investment firms.

Hacking The Financial System

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?
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* 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.

SoCap Redux

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.

The general idea was to talk about our experiences with raising money, or investing it, in social ventures in the developing world. I was asked to speak from the entrepreneur's perspective. 

One thing about not preparing for a session is that it puts you in "improvisation mode"... no time to try new material. I covered my experience in helping raise money for Envirofit International (a non-profit that sells clean energy products in emerging markets) and Inviragen (a for profit that is developing vaccines for infectious diseases in developing world). Both companies have raised over $10 million, including significant grant funding. 

John asked us to share "lessons learned," and I shared a few. First, I like the advice that entrepreneurs should think of "hiring investors." This involves thinking about organizational fit, roles, time commitment, etc. Take off the rose colored glasses and think about who you want on your team when the going gets tough. I have posted on this topic before. I think we hired good investors in both companies. We said "no" to deals that didn't feel good, and those still seem like good decisions. We also have invested significant time with our investors, and have strong, personal relationships with them. I can't emphasize enough how important it is to keep investors "in the loop"; many problems arise when this slips. 

The second, related, point was that the deal has to fit the needs of both the company and the investor, and to question "conventional wisdom" as it is embedded in the law firm templates for different instruments. An example I gave was that at Inviragen, we didn't have a min/max for our first round of convertible notes. We had one amount, $10,000. And we made darn sure that this was perceived as "not much money" by each of our investors. Several people wanted to put in quite a bit more, but we said "no." The idea was that this was high risk (others had tried and failed at making a dengue fever vaccine), and all our investors were people we knew well. We wanted to pass the "Safeway" test- if we lost their money, they'd still say "hi" to us at the grocery store. Similarly, a big reason we formed Envirofit as a non-profit was that we just couldn't come up with a plan we had confidence in that would return money to investors. Since our overall intent was to reduce pollution and improve health, we could fit under the requirements for a charity, and be transparent with our investors (what we always called our donors) about the risks of this venture. 

Part of being a panelist is knowing when to keep your lips zipped, and I had very knowledgable co-panelists. Kelly, Will and Arjuna shared some great learnings, and I will invite them to post their comments below. 

Duh + Duh: Start Ups as Experimental Networks

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.

Similarly, Steve Blank's advice is to think of the start up as an experiment to determine whether there are customers and a business model to effectively serve them. I don't know if he knows Bill Easterly, but I know he has a similar faith in "searchers." I do know that thinking of a start up as an experiment is  advice I heed on a daily basis. 

So, two retroactively "obvious" perspectives, which, if combined, get us to think of start ups as temporary associations tasked with experimenting, prototyping and building networks. These networks are built, then reinforced as weak bonds become stronger. Trust makes these synapses fire faster and more accurately.

I think this is why people are so interested in successful, serial entrepreneurs. They de-risk a start up somewhat, because they know it is about building a network, and they know the questions to ask as they start a search.The entrepreneur that has built successful networks has a head start- if they have done it well, they have existing relationships. What customer wouldn't want to give Tony Hsieh a try if he started another company? What investor wouldn't want in to a deal with an entrepreneur that had given them a good return? What community wouldn't want to have another start up from someone who had been involved in an earlier company? What supplier or distributor wouldn't want to be part of supply chain v2.0? And the cream of former employees often show up in the founding team as well, not wanting to miss out on another fun run.

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.
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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." 

Welcome to Emergence (A Venture Gapitalist's View on #SoCap11)

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?

As with many start ups, it began with two friends who thought they could do something better (well, actually it started with an argument). Of course, they had to finish grad school, so they did the start up on the side. They didn't have any real industry experience. Or money. And there was a lot of competition from well entrenched competitors. But they kept at it, and over time, they gained traction and built a company. They called it "Backrub."

I was a bit shocked to see that this company became a teenager today. Yep, Google is now thirteen years old. On track for $30 billion plus in revenues, and over 28,000 employees. I think we could all agree that is pretty good performance for a start up. Even though I have had my disagreements with Larry and Sergey in the past, I think we should all congratulate them as they leave the Wonder Years and become teens. It happens to everyone, even Harry Potter.

The Social Capital Markets Conference (SoCap) turns four this week. What does this have to do with Google? Maybe not much; maybe a little. SoCap is aimed at the intersection of money and meaning,* so it is very much about impact investing. Which, after four paragraphs, gets me to the title of this post.

The term "impact investing" emerged in 2007, but it has been shaped by earlier movements... socially responsible investment, venture philanthropy and noblesse oblige.** While people are still arguing over definitions of impact investing,*** it seems to come down to the idea that people would like to invest their money in a way that makes the world a better place.# This is, I have found, much more difficult than it sounds (so sorry, Larry and Sergey, for my earlier impertinence).

Which really does get me to the title of this post. Impact investing is new. It is emerging, as SoCap puts it, at "the intersection of money and meaning." But generally speaking, things emergent are small, weak, and hard to predict.## A storm in the south Atlantic can dissipate, or turn into a hurricane. We know how to predict this, but we don't know how to prevent, or invent, hurricanes. A start up can dissipate, or turn into a Google. We don't really know how to predict this, although many try.

The impact investing industry is a start up, as are most of the funds, organizations and social enterprises promoting it. And as Steve Blank says, the right way to view a start up is as an experiment. But I don't think that this has happened with impact investing. Instead, I think many are treating it more as a baby they want to go to Harvard, rather than a cluster of hypotheses that need testing. Just look at my "zoo" post from last year... do we know which of these animals have been most successful? We may be able to measure popularity, but that has little correlation with longevity or impact. How many deals are being done? How much capital is actually being deployed to make a difference? And, is it fair to ask these questions before most aren't old enough to go to kindergarden?

One of the things I got to do this summer is work on a special edition of Innovations Journal for SoCap. It is intended as a "provocative primer" on impact investing, for investors, entrepreneurs and policy makers.### There are a number of excellent essays, cases and analyses which discuss, describe and poke at this emergent creature. Many celebrate its potential, but a few question whether it will turn out well. One of my favorite articles is from Katherine Milligan and Mirjam Schoning of the Schwab Foundation, and I think it summarizes the situation well: "... the hype is obvious. The (social capital) market is not ready to absorb commercial capital on anything close to the order of magnitude being talked about...."

SoCap is a four year old. I just googled this, and found that this means it "walks a straight line" but also "can run in circles... and delights in creating... silly language." Still very much exploring boundaries, still very emergent. If you come with an open mind, and an understanding of how much hard work is required to make something new happen, I think you will find it inspiring and useful. And if you come with an urgency to create, develop and act, you can help shape SoCap and impact investing.

We only have 9 years before SoCap becomes a teenager. By then, impact investing should be more fully formed and easier to predict. These are still the Wonder Years, full of hope and dreams, and the opportunity to shape a movement. Welcome to the awesome responsibility of raising a start up. It is an experiment, full of good intentions, but no history. And like many four year olds, it may just turn out alright despite us.

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* VC John Doerr, who knows quite a bit about making money, is credited with the "make meaning" mantra. He is also on the board of Google, but perhaps that is just a coincidence. But probably not.

** I had to google that. Since its French.

*** I think there are two types of people in the world. Those that like to argue over definitions, and the rest of us.

# It is curious that this seems a novel concept. I mean, who wants to invest their money to make the world worse? It seems to be moving in this direction already, and doesn't really need additional help, does it?

## Think babies.

### I think it came out well, and you can see if you agree by picking up a hard copy at Fort Mason this Wednesday, or buying it on Amazon (available NOW). Don't worry, I don't receive a penny of your $3.99. It all supports MIT, an educational institution located in New England that needs all the money it can get. (I just used Google again).

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.

Simple, Not Easy

"There are no easy answers, but there are simple answers." Ronald Reagan

Being an entrepreneur isn't easy. But it also isn't all that complicated.

Last week, I was cleaning off my desk (which tends to pile up), and ran across an email from April 2008. I had been asked to speak to Rockies Venture Club entrepreneurs about what to do during "tough times." Of course, things have gotten a bit tougher since then.

Here's what I said:

"My advice to entrepreneurs doesn't really vary with economic conditions:

-figure out something that's broken;

-figure out a clever way to fix it;

-figure out who you want to work with;

-figure out a way to cash flow it as you develop it; and

-figure out a way to pay yourself once you get going."

Pretty simple. Not so easy.

Kickstart This!

Find out more about Diane's project, and the inventors and entrepreneurs she is filming in Africa at her website. Then go to Kickstart, watch IDDS'ers Bernard and Jodi in action, and make a contribution.

Accidental Entrepreneur

Library of Knowledge - Paul Hudnut from Unreasonable Institute on Vimeo.

What are you doing here?

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?

Hermione Way had a provocative post yesterday on Silicon Valley, and her impression that it has lost its way. As she asks: "What happened to irreverence, thinking outside the box, wanting to make a difference in the long run?" The thread through her post seems to be: what a waste of talent, money and ecosystem.

She writes that Silicon Valley entrepreneurship seems to be driven by money and exits. Interestingly, a recent survey of many of these companies would counter that claim. StartUpGenome surveyed 650 startups, and the data indicate that impact and experience matter more than money.

Do these worthy motivations survive the funding process? Bringing in outside investors can

either jeopardize a company's mission, or reinforce it. It depends on alignment between founders and funders. Many VC funds are investing other people's money, and those other people have asked for high returns. But impact investors are emerging, in Bay Area and elsewhere, and that may begin to change the system.

I'd encourage Ms. Way not to give up on Silicon Valley. It isn't just Y Combinator and Sand Hill Rd. Outside of the glare of the mainstream, there are worthy enterprises that may indeed change the world. They are in the eddies and edges, but they are there. Earlier vintage companies include Kiva, PAX Scientific, D.Light, Revolution Foods and many clean tech companies.

For earlier stage, the Unreasonable Institute entrepreneurs are visiting the SF Hub on July 18-19. While not based in Silicon Valley, they understand the value of its unique funding ecosystem. And I think many of them know what they

are doing here. Trying to hack it.

Don't Fight Awe

It is easy to be cynical. "That will never work."

It is easy to be apathetic. "Why should I care."

It is hard (some days) to be an artist, builder, creator, discoverer or entrepreneur (and that is just "A" through "E").

If you discover something awesome, don't fight it. If you find awe, you are lucky. Embrace it. Awe is an effective antidote to cynicism and apathy. It is worth looking for. And examining when you find it. Why does this thing/experience/being make you feel this way? How is it designed? Is it designed at all, or has it evolved? What is common to the things that awe you?

Awesome things aren't always what everyone is talking about. Sometimes you find them by yourself. Alone. Then you get to decide whether to share them, and with whom.

The Grand Canyon, flight, a leaf, an inspiring idea, powder skiing, a fishing spot.

Be an awe hunter.

BFF(F)?

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.

Last night I was at Unreasonable Institute and heard Daniel Epstein* interview David Kyle. This topic came up, and while I can't remember the exchange verbatim, it went something like this:

David: "you need to be careful about starting a venture with your friends. Sometimes the things that need to be said, don't get said because of the friendship. And you want diverse viewpoints and experiences, which may not happen with friends. If you do start a company with friends, get the roles defined. A lot of companies that get started by friends end up not being companies and not being friends."

Daniel: "well you know Unreasonable Institute was started by 3 friends, and I don't think we would have started it, or kept it going, without each other."

This month's Fast Company features some famous "best friend founders," listing Bill & Dave, as well as Cohen & Greenfield.** And there is also the case of starting companies with people you don't know real well, but with whom you become friends by virtue of starting and building things together (these often seem to become very strong friendships).

Who's right? Both. Neither. It depends.

The conventional wisdom (be careful about friends) is good advice if you want to solve a problem, get it funded by outside investors and sell. Perhaps some expertise is really critical, and you don't have friends that have it (or can develop it in time). On the other hand, if you are the kind of people that do well by making commitments to people you care about, can sacrifice somewhat equally in the early days, are willing to learn on the job, and think it would be cool to work with these people for many years (why sell the company when we are having so much fun together?), then go for it.

I can't think of a more important question to ask when starting a start up than "who am I starting it with?" There are some of my friends who would be great to start companies with, and others, well, not so much.

I think it is fine to start a company with a good co-founder that happens to be your friend. Just be sure they meet the test for being a good co-founder, not just the test of being a good friend. Start with character- are they honest, passionate and hard working? Then look at results- have they produced, and are they demonstrably good at things they care about? Next- do you work well together? Ask yourself- what challenging things have we done together, and how did that go? Is your potential co-founder friend still making the cut? Want more?

As with many of these issues around start ups, there are multiple "right" ways (and wrong ways) to do it.*** Despite many attempts, there isn't a cook book that guarantees a successful venture. As with the many early, important issues you face, I think the best approach is to think of them as design constraints. If you found a company with friends, what are the pros and cons? How can you work through them? These are definitely worth thinking through and discussing with your co-founders and mentors, and that may help you with the decision, too.

If you do it well, you might just get a BFFF (best founder friend forever).

___________________

* btw, Daniel is getting to be a pretty smooth interviewer (at least if he has good material to work with), what with practicing every night. Charlie Rose better watch out.

**bet you clicked the link just to check.

*** personally, I think it's unlikely I'd be a co-founder of another company unless it is with a friend (or at least long time acquaintance). But never say never.

Funding Ob-Seth-sion

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.*

Building a company sometimes requires outside funding.** For these, funding is one of many activities that founders need to pursue. But the focus needs to be on fixing what sucks. That is the purpose of your enterprise, not getting funded. It is finding something that needs fixing, and building an enterprise to do that, that results in funding. Not the other way around.

But I don't need to write that post anymore, because Seth Godin did. Right here.

_____________________

* So I just ask a second question- what will you use the money for? Then we can discuss the many options they might use to obtain those resources.

** This depends on your business model design. Many good companies get built without outside funding. I'd encourage you to prototype several bootstrapped business models for your venture so you understand your options.

Happy Fifth Anniversary to my Blog or... JULIA ROBERTS, SEX! AND 8 THINGS EVERYONE SHOULD KNOW!

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.

This has led me to the following THINGS EVERYONE SHOULD KNOW about me and this blog:

1) I still mostly agree with myself and find my early naivete and optimism to be amusing and refreshing. I also laugh at my own jokes.

2) The fields of BOP focused business and social entrepreneurship are progressing. In the early days, there wasn't much written and there were few conferences. Now it is hard (e.g., impossible for me) to keep up with the many books, articles and events.

3) I still have little idea of who the thousands of people are who read my blog every month. Commenting on blogs seems to be "so 2007." In any event, thank you. I hope my thoughts are useful to you. And I hope that many of you are "BOPreneurs" (or at least proto-BOPreneurs).

4) If you want to increase your readership, use titles such as "10 steps to...", "Ten Tips on...", "8 Things Everyone Needs to Know about... " or make references to sex and/or celebrities (I never anticipated that Julia Roberts would become the spokesperson for clean cookstoves).**

5) The way people come to my blog has changed. Used to be google and RSS. Now it is twitter and facebook.

6) I don't post as often as I used to. Part of this is that I have said what I have to say on what I view as key topics. And part of this is that I have less time. And part is I am now exploring impact investing more deeply... my guess is that more future posts will be on this topic. But I will leave BOPvestor blog to someone else (Ross? Rob?).

7) I started this blog to share my thoughts and learnings about my core belief that entrepreneurship is a powerful force for positive change in the world. From the beginning, my focus*** has been "to share experiences and opinions about the BOP, entrepreneurship, investing, philanthropy, sustainability, teaching, innovation, design or whatever I feel like." This focused approach seems to be working so far.

8) I still plan to write "longer than average" posts. Sorry, Nathaneal. I also hope to have more guest posts. (Ben Lyon, if you are reading this, you still owe me).

For twitter followers and facebook friends, this week I will be bringing back a few of my posts from the vaults. Looking back, some seem prescient, some misguided... and most unrepentantly optimistic.

_____________

*Except I had no clue what I was doing. As in many things, I just started, and figured it out as I went.

**The title of this post could have worked in a sex theme too, but I just won't stoop that low on the 5th anniversary.

*** Use of intentional irony. Times two.

Light Weight Business Models

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.

At the end of my presentation, I offered a free consult to anyone in the audience that was willing to publicly commit, then and there, to design/redesign a business model for a global health venture. I look forward to finding out more about the 16 people who took this first step to jumping in!

I also learned a lot from my co-presenters, and wish that we had more time for discussion following the session. Check out Ted London's new book, "Next Generation Business Strategies for the BOP" as well as the HBR article he referenced. Very helpful resources for thinking about what you want to do, and how you might go about it. It is much easier to travel light if you have friends along the way and rely on local resources, as Ted recommends.

If you enjoyed Michael Fairbanks of SEVEN Fund, I'd encourage you to check out his new blog, the Daedalus Experiment, where you can find out why some social entrepreneurs are like "self licking ice cream cones." Be careful... too much of that type of ice cream will put on the pounds, and you want to design a lean and light weight venture which can fuel itself off ounces of prevention.

Business Models for Prevention: "An ounce of prevention..."

View more presentations from Paul Hudnut

Banning the Banal: 5 Phrases #Socent would be better off without

Note: a mini-rant follows.

There are many serious issues facing our planet. This post is not about them. It is, instead, a list of the phrases I would like to see expunged from discussions of social entrepreneurship, impact investing, social metrics and international development.

Definitions of "banal" include: devoid of originality, hackneyed, commonplace, ordinary. In short, of little use. These platitudes are not inspirational, they are insipid. They are not motivational, they are meaningless. Remove them from your speech, your life, even your powerpoint presentations.

1) "Doing well by doing good." Oh please. Get back to work.

2) "Teach a man to fish, rather then giving him fish." Often said in a with an "oh-so-sincere" expression; implies that the speaker knows how to fish, which is usually not the case, or if it is the case, the speaker knows how to fish in his home waters, but not half way around the world.

3) "Never doubt that a small group of committed citizens can change the world. Indeed, it is the only thing that ever has." This used to be a cool quote from Margaret Mead, and was often used to end a lecture. But it is now officially overused, and is now usually uttered by a band of committed citizens in one part of the world trying to change another part of the world, without a very clear idea of whether the change is desired by those that live in that other part of the world. George Bernard Shaw's similar quote on "unreasonable men" is also approaching a saturation point.

4) "Be the change you wish to see in the world." Sorry Gandhi, your wonderful quote has been misused so often it might drive you to violence. I have been guilty, but never again.

5) Drum roll for the final banality: "Problems can't be solved with the same level of thinking that created them." Es tu Albert? It doesn't take a genius to know that this overused quote needs to be consigned to "the dustbin of history" (a phrase used by Trotsky, Reagan and Gaddafi!).

There are more, and I invite my bleeps to add their "favorites" to the list in the comments to this post. Maybe even play "Banality Bingo" at your next conference or event.

Don't get me wrong, I like quotes, and use them frequently.* Fortunately, there are lots of good quotes out there that are underutilized. Explore the long tail of great thinkers from all cultures, both to inspire yourself and others.

________________________

*Next week, I plan to use "an ounce of prevention is worth a pound of cure" in a talk at the Global Health & Innovation Conference. I know that this is a well known quote, but I hope to put a bit of a twist on it, and will post my slides on this blog eventually.

"I can't get no..."

"When I'm ridin' round the world

and I'm doin this and I'm signin' that....

I can't get no satisfaction."

The Rolling Stones

I love mountains, and have from an early age. For my seventh birthday, I asked my parents to take me to climb Mt. Marcy, the tallest peak in New York. I loved it. When we moved closer to the Adirondacks when I was a teen, I plotted how to climb the 46 "High Peaks." Too young to drive, this often involved convincing at least one of my parents to go climbing. Some days, we would "knock off" a single peak, other times we would get on a ridge trail, and "bag" several peaks.

To me, it was all about the destination. Satisfaction lay in achieving the goal. I remember one summer day at the top of Algonquin Peak, my mother saying "Paul, let's just sit and enjoy the view." As I suspected throughout my youth, she was a crazy woman. We had two more peaks to climb that day. Summits were for eating your sandwich, cramming in a small box of Sun-maid raisins and a square of Hershey's bar, and moving on down the trail to whatever came next. "Sit and enjoy?"

Now, 40 years later, I realize that for my parents it was not about the destination, and all about the satisfaction of hiking through the woods with their excited son. For my Mom, it was much more about watching the cloud shadows race across the cliff streaked nearby peaks, seeing how far she could see, and chatting with other hikers. For my Dad it was identifying birds by their songs, making a walking stick with his jack knife, or speculating on whether there might be "good-sized trout" in an unmarked clump of beaver ponds that he'd spotted from the ridge.

"Life is a journey, not a destination." Wise words attributed to Emerson (as well as Aerosmith), but ones I question still. Doesn't the destination direct and shape the journey? Isn't the destination enriched by the journey? And, anyway, isn't life composed of many journeys and destinations? Where one's summits are like individual notes in a piece of music, sometimes melodic, sometimes not?

For me, life is about both journey and destination, and feels best when that elusive balance between them is, even momentarily, achieved. That, for me, is satisfaction, flow and joy. It is about getting to the summit, and enjoying it. And then starting out towards the next one.

_______________

NOTE: I am known in my family for remembering all of the good, and none of the bad, on many of our trips. It is possible that I have, at times, encountered bugs, mud, injuries, unfriendly animals and locales, and freeze dried eggs with worms in them. At times, I may have packed too little food figuring I would catch enough fish. And, years later, one of my son's friends refers to a backcountry ski tour as "The Trail of Tears." So my parents may have a different recollection of some of these trips during my Wonder Years.

NOTE #2: Update. My parents do recollect that I was a tad difficult. I was pleased they used the past tense.

Who decides?

"We are always paid for our suspicion by finding what we suspect."

Henry David Thoreau

Lillian BeVier, one of the most popular profs at UVa Law, used this basic question to teach constitutional law. Her point was that societies face many decisions, and it is important to decide which institutions will make them. And to have "checks and balances" in the system.

Today, we face big challenges that go beyond national boundaries. I was reminded of Prof. BeVier this morning when I read this article: "Tweaking the climate to save it: Who decides?"

The theme of the article is that political institutions are at a logjam on actions which might significantly reduce/mitigate green house gasses (Copenhagen), so it might be prudent to have a "Plan B" for involving adaptation and geo-engineering.

Atmospheric scientists might learn from the experience of their biotechnology colleagues. Political decisions get made by people who don't understand the science, and (this can be frustrating) on grounds that have little to do with science (see Stem Cells). But bringing in experts from other fields, such as ethics, political science, economics- and yes, law- will result in a broader conversation and a better chance for a workable framework to emerge.

Just as there are frameworks for approvals before injecting animals or people with chemicals... we will need similar frameworks before experimenting with injecting the atmosphere with chemical "cures." So, who decides what the framework is, and how it will be implemented?

The Royal Society tapped academic experts in their 2009 report "Geoengineering the Climate" which included a chapter on governance, including short sections on ethics and international frameworks. These provide an overview of the issues, but little traction on our question.*

From the "Tweaking" article, it appears that these fields were represented at the tranquil countryside estate of Chicheley. While I could not find the list of attendees at this meeting (transparency?) the journalist reported that attendees came from an invitation list** of "blue-ribbon cross section of atmospheric physicists, oceanographers, geochemists, environmentalists, international lawyers, psychologists, [and] policy makers" from six continents. No mention of ethicists, economists or engineers.

It seems that the attendees had a hard time wrapping their heads around this being a credible "Plan B." One participant stated "as soon as you start to do this research, you say its OK to think about things you shouldn't be thinking about." Really? I better go read up again on the scientific method. But it concerns me that there are things we "shouldn't be thinking about." Not the best approach for someone fancying themselves a "decider," is it?

So, back to the title. Who decides? At this point, the scientists are taking the lead on what seems to be more of a policy question. I hope that the process will be open minded, transparent and accepting of diverse points of view. And that they remember that while science provides an important perspective on the topic, others will be needed if there really is going to be a Plan B.

_____________

*One of my favorites: "A sufficiently high carbon price, credits for sequestration and financial support for reduced radiative forcing would be necessary to stimulate greater entrepreneurial activity in developing geoengineering technology. It is not yet clear if this would be desirable." (p 44)

**the article notes that the invitations were put together by the Royal Society and the Environmental Defense Fund. EDF is a well known environmental organization, and I respect much of their work. But it is far from unbiased when it comes to geoengineering. While I might agree with their view on geoengineering, I am concerned that they were doing the invitation list. The scientific community just doesn't seem to get it that these approaches reinforce the perception of bias, and undermine the credibility of meetings like this one. I guess it might have disturbed the countryside tranquility to invite a Nathan Myhrvold, Bjorn Lomborg or Steven Levitt to the event.

Educational Arsonists?

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

For those who like the sound of "educational arsonist" but aren't sure what I am talking about, click here.

I like the debate... a few observations (as an educational arsonist):

1) I think that "both" is best, but unusual in one person, and that is why entrepreneurship is such a great team sport.

2) It would be nice to recognize that "college/degree" is an early chapter in an evolving narrative, not the conclusion. Lots can happen post-university, thankfully. We are not bound by the decisions we make as 17 year olds.**

3) Perhaps some data-cruncher will establish the correlation between job creation and the degrees that a society's educational institutions grant. Until then, I am skeptical of any claim that granting more of any type of degree will create more jobs. That doesn't mean politicians won't still claim a tight relationship, but I think they confuse jobs with votes sometimes. How about letting go of the value judgements of which degrees are better?

4) Let's remember that a lot of education happens outside of classrooms and schools. Which is fine. Probably a better evolutionary swamp for disruptive innovation. Maybe "publish or perish" will become "adapt or perish" or maybe not. Universities are certainly one of society's longer lived institutions, and certainly not one of it's bigger sources of disruptive innovation.***

______________________________

*Thanks Nathaneal, for sharing the link with me on facebook earlier today.

**Disclosure: I settled on Political Science over Biology after conferring with my advisor junior year and checking my finances. I would graduate sooner and I thought I had hit the point of diminishing returns for college.

***For fun, substitute "reactive" for "innovative" in speeches on the topic of university innovation and entrepreneurship.

Well Meaning... Well Doing

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"?).

Losing a Leg

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....

Egypt & Entrepreneurship:Tectonic Demonstration Effects

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.

Entrepreneurial By Nature

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.
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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.