social good incubator2
DESCRIPTION
A vision for a model that marries the benefits of incubation space with a systemic view of resource allocation with a view to solving the chronic underfunding of early stage social ventures.TRANSCRIPT
Social Good Ecosystem Incubator
Supporting Pre-Proof of Concept Social Ventures by
Rethinking the Resource Allocation Paradigm
What Is The Opportunity?
Develop a prototype for a solution that will solve a systemic problem!... To totally change the game… to make a difference at a global level…
Ramp up capacity for the movement for change in our local area
The Paradigm Shift
1. Systemic View of Resource Allocation… from funding one project at a time to funding one ecosystem at a time!
2. Combining two resource allocation concepts into oneEarly stage seed funding… cash
Incubators… in-kind
Different forms of
value
What We Will Cover
Social Finance concepts and articulation of the systemic problem
Present concept for prototype of the Social Good Ecosystem Incubator
Present initial sketch of Social Good Ecosystem Pooled Fund
Scalability: how we can make the model go viral!
What is a Social Venture?
There are many definitions. I am offering the following…
‘Projects, the objective of which is to bring about positive social change’
Note that, there is no reference to said projects necessarily having to make money in this definition
Why this definition?
I will start with the following assumptions… The world needs fixing We need more social innovators We must provide social innovators maximum
flexibility to innovate
Hence, we cannot allow the requirement to make money to be a constraint on the development of innovative models.
First... A rough picture of the current Funding landscape
returns
NOTHING!!
Charities/
Not For
Profits
For Profit
Companies
-100% rate of
return
Traditional
market rate NOTHING!!
Socially
Motivated
Financially
MotivatedNOTHING!!
So what is needed is...
Charities/
Not For
Profits
For Profit
Companies
-100% rate of
return
Traditional
market rate
returns
Social Ventures-for profit-not for profit
Socially
Motivated
Financially
Motivated
Social Investors
looking for Social
AND Financial Returns
Socially and Financially
Motivated
What is the Problem Being Solved?
Lack of resources (cash and in-kind) for pre-proof of concept social innovators… which is a systemic problem
… why is this a systemic problem?
The Systemic Problem
Seed stage social innovation projects (as defined) carry very high risk and very little financial return potential (by definition)
This is to be contrasted with financial innovation which behaves like…
‘Financial Driven’ Angel Investments… return distributions
Socially motivated investments don’t have this return
potential
Seed stage Social investments have
high risk and moderate return
potential
All seed stage projects are risky but some that are profit motivated do really well!... This compensates for all those that do poorly…
Guess where the bottleneck is?
Pre Proof of Concept
Proof of Concept
Mid Stage
Late
Stage
No $
Small $
Volume of Ventures
Some $
Huge $!Enterprise Centric Model
Where is the money going?
High Financial Return/Low Social Return
- traditional investments… served by existing capital markets infrastructure
High Financial/High Social Return
- traditional ‘social ventures’… served by current social financiers… at least to some extent
Low Financial Return/Low Social Return
- badly designed projects… deserve no external capital
Low Financial Return/High Social Return
-No financial support from social investors!
Taking a System Approach… from One To MANY!
Traditional Funding Mindset… scale one project
Scalability: support the one project that has the highest probability of doing extraordinarily well.
Problem… Ignores 9/10 projects Reinforces survival of the fittest
Underlying Perspective Competition versus cooperation
Social Change and Cultural Change… proliferating social entrepreneurship
The Problem with the One Project Scalability model…
Is it better to fund 1 * $200,000 into a great project that will scale… or 10 * $20,000 into smaller unproven projects?
Not clear from a financial perspective
A definite NO from a cultural change perspective
The Cultural Mix
Is it better to have?...
HighlyScalable Projects
ModeratelyScalable Projects
From the perspective of the system... The world!... How do
we scale the entire system?
How Can We Solve the Problem of Lack of Resources?
In principle there are three ways1. Convince social innovators to focus on making
money2. Convince investors to assume reduced financial
return3. Structure transactions to mitigate financial risk4. Structure the relationship between projects
(and the community) to flow non-financial value to the project … think in terms of ecosystems… and provide resources to the entire system
What is an Incubator?
Co-location space Provide support services…
• Infrastructure
• Advisory
Connect projects to mentoring support For profit: equity stake in projects
What is a Social Good Incubator?
Internal Ecosystem located in a Co-location space
Provide in-kind support services… • Infrastructure
• Advisory
Connect projects to mentoring support Offsets financial cost
How Can An Incubator Mitigate Financial Risk?
What is the primary financial obligation for projects situated in an incubator?... Lease payments (and other costs of being in incubator)
So, the question is…
How Can You Reduce the Burden of Lease Payments for Seed Projects?
View the Incubator As An Ecosystem!
Hmm… what does this mean?
Distribution of Lease Payments (costs)… sufficient in aggregate
Organization Type Lease Payment Capacity
For Profit Service Profit Service Providers
Strong cash flow… and ability to cover lease payments
Established Social Business Service Providers
Reasonable cash flow… and ability to cover lease payments
Early Stage (post proof of concept) Service providers
Some cash flow… can manage reduced lease payments
Pre Proof of Concept Service Providers
No cash flow… no ability to cover lease payments
Hypothetical Project Mix
SERVICE TYPE
For Profit Social Venture
Not-for-Profit
Technology Technology infrastructure/web development
Strategy Business/strategic planning
Media Film, video, content development
Crowdfunding Anti Pipeline Activists
Why would sustainable organizations ‘cover’ lease payments for early stage projects?
Be a good community citizen Provide in-kind support for social
enterprises Receive in kind-support from other
organizations in ‘ecosystem’ Receive financing from Ecosystem
Pooled Fund
Hypothetical Financial ModelREVENUE
For Profit $9,000
Social Venture (cash positive) $1,000
Not-for-Profit $300
COSTS
Lease $10,000
Internet $100
Insurance $200
But Projects Need More Than Their Costs Being Reduced…
So extend the ecosystem beyond the boundaries of the Social Good Incubator…
… and build a Value Exchange mechanism within the ecosystem… a Social Good Currency
Social Change Ecosystem
SOCIAL GOOD INCUBATOR
Social Change Ecosystem
Ecosystems
Some technology/ open architecture concepts
What is an Ecosystem?
“An ecosystem is a community of living organisms…”
“…ecosystems are defined by the network of interactions among organisms, and between organisms and their environment…”
“While the resource inputs are generally controlled by external processes like climate and parent material, the availability of these resources within the ecosystem is controlled by internal factors…”
Why Ecosystems Now?... The connectivity network
Internet connectivity penetration rates are increasing
Bandwith limitations are being reduced
The cost of communication is dropping (thank you Skype!)
Interoperability protocols, applications etc. are evolving
Social networking platforms (Facebook...) are changing the culture of communication
Processing power is being pushed to the edge of the network (Smartphones etc.)
The real time infrastructure is evolving (Twitter)
We are connected like at no other time in history!
The Collaborative Context
Information flows freely across organizational boundaries
Geographic constraints are less meaningful
Structural limitations on information management don’t constrain participation (thousands of people can work on projects!)
Meetings can be run virtually
Projects can be managed asynchronously
Projects can be scaled to involve many people with minimal incremental cost
Your communications infrastructure can be scaled to include many people with minimal incremental cost
Collaboration makes sense!
Build a Technology Layer Across the Ecosystem of Projects
Social Change Ecosystem
SGEI
Why?
Emergence, Presence, Visibility and the Fluidity of Early Stage Projects
Early stage projects are… Basically concepts… … residing in the head of one or two people … lacking in resources … lacking moral support … they can go in many directions … depending on people… money… opportunity…
If only we, as social entrepreneurs, had a sense of the bigger picture (the Ecosystem)… and others that were working on similar things!
Build a shared virtual space!
Systemic Visibility… an example
Systemic Visibility… an example
Early stage projects are fluid… what if we could see what others were doing
and where they wanted to go?
Governance and Scalability
OK… but how does this model scale?
What do we mean by scale?... Remember the goal is to proliferate the world with more social entrepreneurs!
To Scale we need to…1. Ramp up the number of federated
Social Good Incubators2. Ramp up Ecosystem Pooled Fund
What about Governance?... Cooperative
Operate as a cooperative Democratically governed One vote per member organization Membership classes can be defined,
however if necessary
A Few Principles and Processes To Drive Scalability of Model
Develop and document Prototype Develop Open Source platform to
disseminate prototype Develop Federated Open Collaboration
Platform to connaect incubators Develop an emotionally compelling story Utilize video Utilize social media channels
Federating the Social Good Incubators with Open Architecture
SG Incubator
SG Incubator SG Incubator
SG IncubatorSG Incubator
Open Source Best Practice Repository and Communication System
(Embrace P2P/Sharing Economy Principles)
SG Incubator
In Principle an ‘incubator’ is just an ecosystem with a physical footprint
SG Incubator 1
SG ‘Incubator’ Ecovillage 2
Social Housing Complex
Ecovillage 1
Open Source Best Practice Repository and Communication System
(Embrace P2P/Sharing Economy Principles)
SG ‘Incubator’
The Social Good Ecosystem Pooled Fund
Developing Ecosystem Focused Funding
Structures
But Projects Need Real Hard Cash As Well!... Introducing the
Ecosystem Pooled Fund Capital Distribution Models!
The Paradigm Shift
Construct the funding structures in a manner that is targeted at the unique features of the SGI Model, in particular…
1. The SGI is based in a physical location
2. The SGI provides capital to high risk projects
Traditional Pooled Financial Capital Distribution Models
Manager
Company Company Company Company Company
Financial Capital Pool
Investor Investor Investor Investor
Ecosystem Pooled Fund Capital Distribution Models
Project Project Project Project Project
Social Good Ecosystem Pooled Fund
Investor Investor Investor Investor
Cooperative
Crowdfunded Creative Structures Targeted at Financing Ecosystem
Social Good Ecosystem Incubator
Zero Coupon Principle Guaranteed Social Good Bond… an example
Raise $1,000,000 via Social Good Bond Invest $930,700 in a 5 year zero coupon
bond guaranteeing investors their principle back
Invest $69,300 in ….. A project… a pool that can invest in other projects…
Traditional Bond Payments
Ecosystem Pooled Fund
$1,000,000 – Principle Guaranteed!
Ecosystem of Projects
Investor Investor Investor Investor Investor
Fund Entire Ecosystem Governed As A Cooperative
Targeted at High Net
Worth Individuals … that are
socially conscious
Targets Another Problem: how do we unlock private sector capital?