Social Entrepreneurs: Ready to Share Center Stage with the Public and Private Sectors in Producing Growth with Equity

1. Social Entrepreneurs:Ready to Share Center Stage with the Public and Private Sectors in Producing Growth with Equity October 4, 2011 | 10:00 AM EST Speaker: Arvind Gupta Lead Financial Sector Specialist, World Bank Institute

2. Power of Social EntrepreneurshipVision Spring Social enterprise dedicated to reducing poverty by delivering high-quality, affordable eyeglasses to individuals via a network of local entrepreneurs using a scalable model that reaches more people every day.

3. Vision Spring • 35% Increase in Productivity • In collaboration with the University of Michigan, Vision Spring performed a rigorous impact assessment --- demonstrated an average increase in productivity of 35%, meaning more ability to work, learn and support a family. Equivalent of adding two and a half working days per week to each user of our products. • Increased Earnings. By conservative estimate of average daily income, working days per year, and expected life of a pair of eyeglasses, Vision Spring calculates that each pair of glasses produces Rs 15,000 in increased earnings over two years for those who need it most. • Leverageof EachDonorDollar in 2009: 55:1

4. Why Focus on Social Enterprises • SEs combine three attributes central to "growth with equity" • social conscience and ethics, • public service delivery mission of the public sector and, • the business efficiency of the private sector. • Put formally SEs simultaneously enhance "Technical" and “ Allocative" efficiency. • SEsneed growth capital and non-financial services to scale via… Replication Expansion

5. Social Enterprise Investments: Three Elements Scalable investments have declining marginal costs and good reach Commercially Viable investments appeal to financial investors, have positive cash flow and good rates of return High Social Impact investments have a high rate on social return and service BoP

6. The Challenge +Declining Unit Costs ---downward sloping cost curve +Increasing Coverage --- geographic, consumer numbers DM & Impact Investors catalyze investment where commercial investors will not venture Scalable Financially Viable High Social Impact ChallengeSpace + High Social Rate of Return +Income benefits@ BoP +Income Mobility of Poor +Impact on Availability of essential living goods +Cover Operating Costs +Breakeven on cash flow basis +Full cost breakeven + Assured funding for financing cash deficit Sweet Spot

7. Where we need to add value. Scalable • Invest in areas others can’t and won’t • Catalyze the social enterprise space with new investors • Invest in early stage entrepreneurs who are first movers in their space • Convene a consortium of official and private funders interested in public goods delivery by non-state actors. Commercially Viable High Social Impact Adding Value

8. The Double Bottom Line • Focus on "Operational SEs" access growth finance and capacity building services to enable them to go to "Scale" in a "Financially Viable" manner. • "Operational SEs" mean SEs that for at least two years have been providing services using some type of a defined business model. • "Scale" means evidence of, or potential for, a downward sloping marginal cost curve. • "Financial Viability" (not the same as commercial viability) means ability to secure a predictable and growing cash flow stream to fund expansion in operations --- capex and/or working capital, for at least three to five years. The distinction between financial viability and commercial viability is critical.

9. Financial-Social Axis

10. Social Investing Ecosystem Early/”idea” stage –“Seed capital” Proof of concept stage –“venture capital” Established market viability – “investment phase”

11. Current Environment for Social Entrepreneurship Issues and Needs Few ventures are financially stable and achieve systematic impact and scale Access to growth capital is inhibited Limited access to targeted capacity development and patient capital Opportunities Impact Investors looking to increase deal flow If origination/due diligence costs are lowered and targeted capacity building is available… ... Growth Finance from Impact Investors can flow Governments willing to help fund PPPs

12. The Financial Conveyor Belt

13. Our Objectives: Mobilize Capital + Capital markets Sovereign wealth funds SEs SEs Capital + Capacity SEs SEs SEs Pension funds SEs SEs Wealthy diaspora SEs SEs SEs Foundations SEs Local Philanthropy TA Providers “This group recognizes that it is not a “supply of capital” nor a “lack of deal flow demand” but rather intermediation barriers that inhibit the sector from achieving its full potential” Aspen Network for Development Entrepreneurs

14. New DM Focus DM support is at the "early take off" stage. --a tested working prototype business model ready for scaling / replication with support of patient capital. Major hump and transition point in a firm's life cycle. If navigated leads to successive rounds of financing

15. New Development Marketplace Strategy From To Direct funding of Grantees Linking mature pipeline to impact investors Build ecosystem from HQ then “Fund and Forget” Work with local partners for origination, due diligence, capacity development and incubation models One-off Competitions Programmatic approaches and leveraging Bank balance sheet Direct Origination Support existing pipeline of “nearly financeable” projects In-house management of grants Subcontracting to third parties such as Ashoka

16. Program Objectives • Identify and support field testing of INNOVATIVE, early stage ideas with potential for high development impact. • Forge strategic partnerships to execute and scale-up these ideas. • Serve as a source of skill building and knowledge of best practices for social entrepreneurs.

17. Types of Impact Investors

18. Evaluation Criteria

19. DM Program In India India. • Support SEs in the seven officially designated low-income states. • With IFC and a local collaboration partner DM providing intensive capacity building support to 14 selected via a competitive process. In addition DM is also supporting 140 non-winners through a collective capacity building program. • This fiscal year DM plans to hold one or two competitions targeted at SEs in the other four low income states or targeted at SEs that work in the area of improving rural livelihood • DM working with key local partners to strengthen local ecosystem capacity for pipeline generation, enterprise incubation, and growth financing.

20. DM Program In East Africa & MNA East Africa • Pilot TA facility that in collaboration with IFC, impact investors and early stage Investment funds would select and curate a set of SEs that after purposive capacity building support are likely to reach financial close with funders. • The aim is to curate at least 30-35 enterprises during the pilot stage, test and refine the TA delivery model and in due course spin of the facility as a self-standing institution. The pilot is expected to be launched by early next year. MNA • Pilot competitive grants program to surface and curate social enterprises that provide livelihood and income mobility services targeted at unemployed youth. Pilot designed to test out the features of the SE landscape in the MNA region. • Long run intention is to strengthen local ecosystem for supporting SEs.

21. DM Projects with Funders Investment Platform • Uses MBA students to work with Social Enterprise to develop detailed funding proposals that could be presented to funders. • An on-line matchmaking platform organized as a club. Capacity Building Alliances • Collaboration with the Global Social Benefit Incubator (GSBI), School of Business and Administration, Santa Clara University to scale up their highly successful SE incubation and training program. • Our planned collaboration will take this to scale ---- 300- 400 SEs per year, by developing an online version coupled with remote and face to face mentoring services provided by Silicon Valley entrepreneurs and successful entrepreneurs/corporate executives located in the country of the SE.

22. 2011 India Development Marketplace Identify and fund inclusive business models with a clear potential for going to scale and/or being replicated in the States of Bihar, Orissa and Rajasthan 13 winners Awards: $50,000 over 2 years +Technical assistance

23. India DM Assessment Process 264Proposals received in Open Call • Eligibility Screening • 4“screeners” on eligibility 187 Eligible for being Assessed • Assessment Process • 36 Assessors Assessment 30Finalists to Marketplace Event 2011 India DM EventApril 6 • Marketplace Event • 8 jurors interviewing 30 proposals 13Winners