Social Impact, Meet Venture Capital

Ask any entrepreneur: starting a new organization is difficult. Add to this, focusing on a customer who has little means to pay in a place with significant gaps in infrastructure with a solution requiring a fully integrated value chain. Starting a new organization with social impact goals is almost impossible.

Social entrepreneurs struggle to overcome these scenarios in order to improve the lives of people around the world. While their intentions may be good and they often strive to offer support for the social goals of an operation, the financial community has made a challenging situation even more difficult.

Who is the financial community? It’s not investment bankers and venture capitalists alone. This community includes grant makers, business plan competition judges, social fund managers, and the newly popular impact investors. Consultants to this community often suggest that each must “define a theory of change” and use this as the criteria by which to judge potential grant recipients or investments. This is difficult, especially for individuals with little to no experience or expertise in a certain issue (e.g. education, healthcare, agriculture) or geography. While not theoretically detrimental, due to the power dynamic between entrepreneurs and investors, can lead to inefficient, misdirected, and potentially damaging results.

There is no organized market for investment in social organizations, nothing like a stock exchange, and the output of these organizations is more complex than revenue measured in currency. Each transaction is unique, which requires that the social entrepreneurs and individual investor have to be involved in every transaction. Instead of equity, investors are buying a specific outcome (i.e. training 100 farmers, performing 1000 attended births, creating a new mobile clinic, etc.) and so they insist on playing an active role in defining the outcome and therefore the course that the entrepreneur must take to achieve it. The outcome they support may (or may not) be aligned with the longer-term, broader geographic, or most necessary goals of the organization. But, much like the governments in the developing nations where much of this work takes place, the entrepreneurs see any investment as good and necessary to keep their operation going. This process is time consuming and generally not well suited to the skills of the either the entrepreneur or the investor. It’s no surprise that the resulting agreements are often far from ideal.

So, what then?

I’d suggest that investors in social organizations take another page from the for-profit world and apply it directly to the way they plan their relationship with social entrepreneurs. Venture capitalists are fond of saying that they’d rather invest in a strong team with an average idea, than an average team with an amazing idea. And, while VCs offer advice and take seats on boards, they do not often exert control over the operations of the companies in which they invest. They don’t have time. This is not their role. They serve as a resource for the entrepreneurs when requested, during scheduled board meetings, and if things go terribly sideways. They are proud to have been a part of the successes of those in who they invest and they take responsibility for making bad decisions when there are failures. But neither the success, nor the failure is theirs.

Investors in the social space need to recognize the difference between themselves and the entrepreneurs they support with financing, and perhaps with advice and connections. They are not the entrepreneur. They do not know the market best. They are not taking the full-fledged risk. They should select entrepreneurs in whom they believe after reasonable due diligence, then give them the promised resources in a timely fashion. They should expect reports through board meetings and structured, general feedback common for all investors. They should let the entrepreneur know they are available, but not impose their views or physical presence on them. They should understand their role and stick to it.

In the social sector, organizations have long accepted, if begrudgingly, the need to appease those who make grants to their organizations. After all, it’s free money. But, as the money stops being offered for free and grants turn into PRIs, convertible notes, and straight-up equity, the recipients are paying enough and should not have to also be beholden to endless reports, prepare for various field visits, and expect that their efforts and achievements will be commandeered by those who provide funding. If social investors want to be taken seriously, then they also need to act like serious investors.

Ask any social entrepreneur and they won’t say any of these things. Right now, they can’t afford to. But, I believe that the intentions of those who work in the social space are good. We all want to better the planet. So, maybe it’s time that well-intended social investors know that they are getting in the way.

Now, please excuse me, I have some social impact to make.

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Daring Greatly: A Kick in the Pants

This quote from Theodore Roosevelt hit me like a ton of bricks this evening:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

I’ve been struggling lately about things like this, which I know in my logical head, but have yet to fully embody in my heart. It is only by taking risks to do something I am not certain will succeed that I learn, grow, create and innovate. Maybe it’s because I’ve felt the sting of defeat, the dirt kicked in my face, the bloodied knees, the bruised ego, or the red-faced embarrassment. And I’ve experienced the real, deep, piercing pain that those things cause. So, perhaps it is logical that I protect myself and recede from risk.

But, what my heart knows is that the pain never lasts that long. No matter how deep the cut, dusty my seat, or bruised my ego, it will be washed away by time. Except for when it’s not. And that’s the difference. There are some arenas from which I can’t stay away, no matter what punishment I’ve taken in the ring. And there are others from which I hide, entirely or by playing the critic. And so it’s those thoughts and experiences that it’s time to name, to explore, and to understand.

When are you a doer of deeds? When are you a back seat driver? And what’s keeping you from taking the steering wheel?

Thanks Teddy. I needed that kick in the pants today.

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A constellation of mentors

I’ve wished for a mentor countless times, the way one wishes for a fairy godmother, but she never appeared (neither have the coach, white horses, or glass slippers). Some days, this has made me a strange mixture of sad and mad, envious of those around me who seemed to be so well supported, and wondering if I’d done something wrong to be in such a position.

As my career advanced, I started to appreciate the independence and creativity that were born of the required self-reliance and my desire for someone to guide me more or less evaporated, leaving only a thin film of longing. The longing nagged, like a reminder I hadn’t been selected for the kickball team, but I could tolerate it.

Recently, at a Rock Health Retreat for Women (aptly named the XX Retreat) I admitted my frustration at the lack of women mentors (see attached video). But, I realized in watching the video again that I wasn’t being completely honest. There are many women who teach, guide and support me—I just needed to broaden my field of vision and stop only looking up.

It turns out my mentors aren’t the older, wiser, leaders with battle scars who I was imagining. My mentors are the group of women I’m lucky enough to call friends (and consider my chosen family). I am surrounded by amazing women who inspire, encourage, and challenge me every day to be a better professional and human being. And so, today, I want to recognize and thank each of them.

Lisa is sensitive, in the most beautiful and powerful way. Standing by her as she gracefully navigates challenges and changes in life, professionally and personally, reminds me to be kind to others and myself.

I’m still not sure how Diana does it all, even though I’ve seen it up close. But it is the selfless love and attention that she invests, which inspires me to recognize the deep, deep internal well from which we each can draw to give to others.

Sangeeta speaks truth to power, fights for those who can’t fight for themselves, and is impatient with injustice. She showed me, rather than told me, how to channel that anger into creating lasting change, by marrying it to empathy and respect for our fellow beings.

I miss Michele, who isn’t afraid to recognize herself and show others how she feels. She taught me that I could trust and allows me to practice being emotional, messy, and out of control, to work through the many layers of feeling to get to the core of the matter.

Naomi is a force of nature. Her drive and determination are inspiring and witnessing her professional success, matched with her personal happiness, makes me want to work harder, do more, and always bring my best effort to the table.

I didn’t like it much at the time, but am thankful Amy pushed me to be more honest with myself and other about who I am, what I need, and how I feel. Her ability to show up has given me the courage to do the same and experience how people respect authenticity.

Christine has allowed me to travel with her on a journey exploring what makes her happy. Although it’s a winding, sometimes perilous, road she reminds me it’s important to take pause and look inside for direction when facing accidents, diversions, and detours.

I was sick and vulnerable in Rwanda when I met Sara and thought I’d never be so brave to give as much as she does. With her as a model, I appreciate how faith—blending spirituality and science—can be a source of the courage it takes to be of service to others.

Laura reminds me to open up and laugh. It’s not just because she’s funny, but rather because she does everything she can to make those around her safe. Security provides a jumping off point to play and I appreciate that she has shown me how they are related.

Carlotta influences me even though we’re hundreds of miles apart. She has combined raw talent, intelligence, and persistence in multiple arrangements to achieve so much in so many ways. Her creativity sparks mine, and I’m lucky to count on her anytime I need her.

These women have taught me lessons over the years I’ve known them and I’m grateful for each one. Even more, I’m grateful for the constellation that they together form, which I look to for guidance and inspiration just like the stars.

I’d encourage everyone to think about who truly mentors them, and recognize that while this might not come from the places you’d expect and it might not look like what everyone else has, that it’s possible you are surrounded with the just the mentors you need.

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Solutions to Needs (alone) are Like Brussels Sprouts

Studying the Science of Marketing, there are three principles about which we learn early: need, want and demand. They are simple words and you all know their definitions. But, the relationship between them is critical when selling products to customers and, I would argue now that I’ve crossed over to the world of International Development, when giving away, subsidizing or selling products to beneficiaries. Let’s review:

need /nēd/ (noun) a requirement, necessary duty, obligation

want /wänt/ (noun) a deficiency, lack

demand /diˈmand/ (noun) an insistent and peremptory request

When we develop products to sell to customers, we often do research into these areas so that we understand what people will buy. It’s not necessarily logical. While most of the time, it’s easy to sell something that people need – like food, housing, or clothing. But, wants can dictate behavior that augments or changes the power of a need. It drives some of the credit crisis we face in America, someone may need to save, but they want to appear cool and so they buy a mobile phone, expensive clothing, or car. And just because a person needs or wants an object, he may not demand and actually buy it. He may want a to go on a cruise, but not have the money, the access or the will to do so.

This is true in fields of international development as well, people–rich and poor–are more similar than different in this regard (at least). A man may need food for his family, but he wants banana beer. A woman may want her children to be free from malaria, but since a bed net is too expensive for her to purchase on a given day, and saving her cash is difficult due to other needs, she will not demand or purchase one. A family living in a slum will demand a television, even though their children are still in need of education and healthcare.

All this is to say, that when individuals and organizations working in international development say they understand the needs of poor people, that isn’t enough. That understanding must be augmented with understanding their wants and their demands. We must spend the time to examine the desires that drive beneficiaries actions. Otherwise, the solutions may be like putting a plate of Brussels Sprouts in front of a five-year old hoping for chocolate ice cream; they might be what she needs, but good luck getting her to eat them.

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In the absence of data

Our brains are designed to recognize patterns and respond.  So, when there is missing information, we tend to fill in the blanks.  But, our ability to fill in the blanks is based only on the history of what has happened, neither randomness nor radical change is taken into account.  That is, except when we will in the blanks with what we want to be true, even if that is counter to the patterns of the past, and especially if we have revised our memory of history to fit into the pattern of what we believe to be a truth.

Filling in the blanks in this way sounds analytical, mathematical, and even scientific.  But, it’s can also be thought of as telling yourself a story.  A story about what someone thinks about you, why something happened to you, or when/if you are ever going to get somewhere.

I do this all the time: at least every day, on some days every hour, and in some hours every minute.  Often it makes me seem smart, quick, intuitive…when I’m right. Often it makes me feel safe, assured, protected…until I’m wrong.

I challenged myself recently to try not to believe a story I told myself in a situation without data.  It was hard.  I had been able to ignore the first version of the story, and the second (which incidentally was radically different from the first).  But when story after story came to replace the last, I couldn’t hold out anymore.  I started to believe it was the truth and (because it wasn’t a particularly positive story) it hurt, just like it had really happened.  And then, it did really happen and it hurt again.

I wish I’d learned some sort of lesson from this latest experience.  But, I’m still processing it.  On one hand, perhaps filling in the missing data created a self-fulfilling prophecy.  On the other, perhaps by feeling the pain before it really happened, I prepared myself to hurt less.  I don’t know and by analyzing it too much, I’m just starting to tell another story.

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It stings, like a slap in the face

When someone insults you, it hurts.  Even if you don’t believe it.  Even if it’s not based in data.  Even if you don’t like the person it’s coming from.  When someone insults me, it really hurts.  Mostly because it hits the on button of the critic that lives in my head who is insulting me all the time.  Do you know her?  Perhaps she’s friends with the critic in your head?  I like to think they have coffee on Thursday afternoons where they laugh at us.  Then I like to think of them choking on the coffee.

Anyway, I saw a blog today that hurt my feelings like a slap in the face.

But now that it’s been 15 minutes and a walk around the block I can see her (Monica, twitter handle: @CyberlandGal) points.  Well, I can see some of them.  And they are valid.  My talk wasn’t perfect.  There were some factual errors.  It was my opinion based on conversations and not a proper research tool with a statistically significant sample size.  I knew that was going to happen before I did it (honestly I’m just glad I got through my 4 minutes without shaking).  I tried to correct the errors in the comments after the talk (you can see those here:  I’d love to do real research on this, but this is just my opinion.

And I respect her opinion, because let’s be honest, I certainly don’t think of myself as “jaw-dropping, informative, or inspiring” either.  But, I did start a conversation.  I did some research, wrote a presentation and put my opinion out there.  After the sting, all that is left to do is recognize that she did too.  My lesson about this is that not everyone agrees with me and I’m okay with that.  I’m even okay with the critics, because they can never be as harsh as I am to myself…and they may offer a different perspective that will help me to learn more, be a better communicator, and practice smiling in the face of the slap.

So thanks @CyberlandGal.  If you are free for coffee on Thursday, let me know.

People, places and things

When considering how to implement a program in a setting with which you are not familiar, it is important to find out how things work.  You’ve probably heard the story about Chevrolet launching the Nova in Latin America, not considering that the brand, translated to Spanish actually means “will not go,” which isn’t such a great message for a new car.  While this is an error of language, which seems obvious in retrospect, there are other simple assumptions that may cause similar problems in design and implementation:

– in many parts of the world names do not follow the given name and surname model, with the surname passed on from the father

– when there aren’t street names, there often aren’t addresses

– when employment isn’t reliable, neither is the place people call home, but there are often patterns in the times and places to which people move

– while mobile phones are becoming ubiquitous, prepaid phones mean that numbers are not always kept by the same person

– without a clock, one might not know the time and without a calendar, one might not know the date

– in some countries, the calendar is different from what we use

– federal holidays are not always announced in advance

– in some places white, not black, is associated with death

– different parts of the body are considered tantalizing in different places.  just because it’s acceptable for a woman to show her midsection, doesn’t mean that it’s acceptable to show her knees

I’m sure that other people have examples of customs and taboos and things that they have learned throughout their work experience and travels around the globe.  I welcome comments to share those here.

One thing to remember in all of this is that  we have all said or done things that weren’t quite right.  The most important thing is to pay attention to your surroundings and take cues from those around you to alter your behavior and change your plans when you learn something new.  Humility, an apology, and the flexibility to change plans can go a long, long way.


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