Investing with Purpose Practice & Experience Richard Biggs, D 3 Jubilee April 16 th, 2013

What is a Social Enterprise?

 Many definitions  For Profit / Non-profit

What is a Social Enterprise?  Many definitions  For Profit / Non-profit  Local / Global

What is a Social Enterprise?  Many definitions  For Profit / Non-profit  Local / Global  Impact Intrinsic/Extrinsic

What is a Social Enterprise?  Many definitions  For Profit / Non-profit  Local / Global  Impact Intrinsic/Extrinsic  In Common:

What is a Social Enterprise?  Many definitions  For Profit / Non-profit  Local / Global  Impact Intrinsic/Extrinsic  In Common:  Seek improvement for the Most Vulnerable

What is a Social Enterprise?  Many definitions  For Profit / Non-profit  Local / Global  Impact Intrinsic/Extrinsic  In Common:  Seek improvement for the Most Vulnerable  Innovative

What is a Social Enterprise?  Many definitions  For Profit / Non-profit  Local / Global  Impact Intrinsic/Extrinsic  In Common:  Seek improvement for the Most Vulnerable  Innovative  Market-based Solutions

Why is Vulnerability important?

 Exposure to external shocks

Why is Vulnerability important?  Exposure to external shocks  Financial crisis/misfortune  Education fees  Critical illness  Death

Why is Vulnerability important?  Exposure to external shocks  Financial crisis/misfortune  Education fees  Critical illness  Death  Environmental crisis  Natural Disaster  Famine  etc

Why is Vulnerability important?  Exposure to external shocks  Financial crisis/misfortune  Education fees  Critical illness  Death  Environmental crisis  Natural Disaster  Famine  etc The Bible Isaiah 58:6-7 Is not this the kind of fasting I have chosen: to loose the chains of injustice and untie the cords of the yoke, to set the oppressed free and break every yoke? Is it not to share your food with the hungry and to provide the poor wanderer with shelter - when you see the naked, to clothe them, and not to turn away from your own flesh and blood?

Why is Innovation important?

 Philanthropy vs Corporations CorporationsPhilanthropy

Why is Innovation important?  Philanthropy vs Corporations CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation

Why is Innovation important?  Philanthropy vs Corporations CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation ConsumersWantNeed

Why is Innovation important?  Philanthropy vs Corporations CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation ConsumersWantNeed Ability to payYesNo

Why is Innovation important?  Philanthropy vs Corporations CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation ConsumersWantNeed Ability to payYesNo Business ModelFor-profitNon-profit

Why is Innovation important?  Philanthropy vs Corporations CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation ConsumersWantNeed Ability to payYesNo Business ModelFor-profitNon-profit FundingCapital MarketsFoundations, Govt

Why is Innovation important?  Philanthropy vs Corporations CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation ConsumersWantNeed Ability to payYesNo Business ModelFor-profitNon-profit FundingCapital MarketsFoundations, Govt Growth StrategyDemonstrate revenue & profit generation Demonstrate need

Why is Innovation important?  Philanthropy vs Corporations  Social Entrepreneurs need to find Market-based solutions to situations where Customers may be Unable to Pay, and secure funding from Non-Traditional sources CorporationsPhilanthropy ObjectiveProfit maximisationImpact maximisation ConsumersWantNeed Ability to payYesNo Business ModelFor-profitNon-profit FundingCapital MarketsFoundations, Govt Growth StrategyDemonstrate revenue & profit generation Demonstrate need

What is a Social Enterprise?  A For-profit company that creates social impact which is intrinsic to the business model Miracle Company Profit- focused SE Social Impact Profit Impact- focused SE

Financing Social Enterprises

 For companies to grow, they need Capital  IMPACT INVESTING

Financing Social Enterprises  For companies to grow, they need Capital  IMPACT INVESTING Impact Investing is the process of actively placing capital in businesses and funds that generate social and/or environmental good and at least return nominal principal to the investor. (Monitor Institute)

Financing Social Enterprises  For companies to grow, they need Capital  IMPACT INVESTING Impact Investing is the process of actively placing capital in businesses and funds that generate social and/or environmental good and at least return nominal principal to the investor. (Monitor Institute) Impact Principles of Investment Warren Buffett’s rule #1: Don’t lose money. #2: Don’t forget rule #1.

Financing Social Enterprises  For companies to grow, they need Capital  CAPITAL FLOWS

Financing Social Enterprises  For companies to grow, they need Capital  CAPITAL FLOWS Investors

Financing Social Enterprises  For companies to grow, they need Capital  CAPITAL FLOWS Investors Entrepreneurs

Financing Social Enterprises  For companies to grow, they need Capital  CAPITAL FLOWS Investors Entrepreneurs CAPITAL

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL Scale

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL Scale Sophistication

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL Scale Sophistication Commitment to Profit

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL Scale Sophistication Commitment to Profit Financial Viability

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL Scale Sophistication Commitment to Profit Financial Viability Governance

Financing Social Enterprises  Many Barriers to Capital Flow Investors Entrepreneurs CAPITAL Scale Sophistication Commitment to Profit Financial Viability Governance Commitment to Impact etc

Financing Social Enterprises  Need to Remove Barriers Investors Entrepreneurs CAPITAL Scale Sophistication Commitment to Profit Financial Viability Governance Commitment to Impact etc

Financing Social Enterprises  For Impact Investing to become a sustainable channel for funding social enterprises…

Financing Social Enterprises  For Impact Investing to become a sustainable channel for funding social enterprises… Barriers to Capital Flows must be removed

Financing Social Enterprises  For Impact Investing to become a sustainable channel for funding social enterprises… Barriers to Capital Flows must be removed HOW?

Financing Social Enterprises 1. Investing is about TRUST

Financing Social Enterprises 1. Investing is about TRUST 2. Trust involves RISK

Financing Social Enterprises 1. Investing is about TRUST 2. Trust involves RISK 3. Risk is about UNCERTAINTY

Financing Social Enterprises 1. Investing is about TRUST 2. Trust involves RISK 3. Risk is about UNCERTAINTY 4. Uncertainty can be overcome with INFORMATION

Financing Social Enterprises 1. Investing is about TRUST 2. Trust involves RISK 3. Risk is about UNCERTAINTY 4. Uncertainty can be overcome with INFORMATION Investment Barriers can be removed through PROVISION OF INFORMATION

Mainstream Financial Markets

 Same problems:  Trust, Risk, Uncertainty, Information

Mainstream Financial Markets  Same problems:  Trust, Risk, Uncertainty, Information  Evolved a comprehensive Ecosystem to provide information and mitigate uncertainty

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture Established

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture Established Public

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture Established Public Angel Investors

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture Established Public Angel Investors VC Funds

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture Established Public Angel Investors VC Funds Private Equity

Mainstream Financial Markets  Capital Markets Ecosystem 1.Differentiated Funding Sources Risk (Uncertainty) Size Startup Venture Established Public Angel Investors VC Funds Private Equity Mutual Funds, Institutional

Mainstream Financial Markets  Capital Markets Ecosystem 2.Accounting / Auditing

Mainstream Financial Markets  Capital Markets Ecosystem 2.Accounting / Auditing  Audit of company accounts & financial statements  Generally Accepted Accounting Principles (GAAP)  CPA certification  Big 4 accounting firms

Mainstream Financial Markets  Capital Markets Ecosystem 3.Ratings Agencies

Mainstream Financial Markets  Capital Markets Ecosystem 3.Ratings Agencies  Research all aspects of an organisation’s finances  Assign a rating to the ability to repay debt  Moody’s, S&P, Fitch etc

Mainstream Financial Markets  Capital Markets Ecosystem 4.Regulatory Bodies

Mainstream Financial Markets  Capital Markets Ecosystem 4.Regulatory Bodies  Determines the regulatory framework for investment  Organisations are held accountable - enforcement

Mainstream Financial Markets  Capital Markets Ecosystem 5.Fiscal Incentives

Mainstream Financial Markets  Capital Markets Ecosystem 5.Fiscal Incentives  Tax breaks for some  Tax surcharges for others  Subsidies  Taxes/Subsidies approximate to +ve/-ve externalities

Mainstream Financial Markets  Capital Markets Ecosystem 6.Financial Intermediaries

Mainstream Financial Markets  Capital Markets Ecosystem 6.Financial Intermediaries  Connect Investors and Entrepreneurs  2 major forms: Buy-side (fund), Sell-side (advisor)  Facilitate capital flows through aggregation  Database Pooling  Specialisation  Best Practice  Initiates capital flows through deal creation

Mainstream Financial Markets  Capital Markets Ecosystem InvestorsAccountingRatingsRegulationGovernmentIntermediaries

Impact Investment Ecosystem

 The Impact Investment Ecosystem  Needs all the players in the Mainstream ecosystem

Impact Investment Ecosystem  The Impact Investment Ecosystem  Needs all the players in the Mainstream ecosystem  PLUS:  Impact Assessment  Mentoring/Consultancy

Impact Investment Ecosystem InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment Ecosystem  Some Players 1.Investors

Impact Investment Ecosystem  Some Players 1.Investors 2.Ratings/Assessment

Impact Investment Ecosystem  Some Players 1.Investors 2.Ratings/Assessment 3.Accounting/Taxonomy

Impact Investment Ecosystem  Some Players 1.Investors 2.Ratings/Assessment 3.Accounting/Taxonomy 4.Government/Regulation

Impact Investment Ecosystem  Some Players 1.Investors 2.Ratings/Assessment 3.Accounting/Taxonomy 4.Government/Regulation 5.Intermediaries/Accelerators

BREAK

Impact Investment in Korea

InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea InvestorsAccountingRatingsRegulationGovernmentIntermediaries Mentoring/ Consulting Impact Assessment Social Enterprises Accelerators

Impact Investment in Korea  A Long way to go

Impact Investment in Korea  A Long way to go  But we have also come a long way

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE + hundreds more

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE + hundreds more Investors

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE + hundreds more Investors Government

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE + hundreds more Investors Government Foundations

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE + hundreds more Investors Government Foundations Corporates

Impact Investment in Korea  A Long way to go  But we have also come a long way Entrepreneurs 700+ govt certified SE + hundreds more Investors Government Foundations Corporates HNW Individuals

Impact Investment in Korea  A Long way to go  But we have also come a long way  NEED to get the Capital Flowing!! Entrepreneurs 700+ govt certified SE + hundreds more Investors Government Foundations Corporates HNW Individuals CAPITAL

D3Jubilee Practice & Experience

D3Jubilee MISSION: To foster the growth of Social Entrepreneurship in Korea and beyond

D3Jubilee  Two-pronged approach MISSION: To foster the growth of Social Entrepreneurship in Korea and beyond

D3Jubilee  Two-pronged approach 1.Build up Entrepreneurs MISSION: To foster the growth of Social Entrepreneurship in Korea and beyond

D3Jubilee  Two-pronged approach 1.Build up Entrepreneurs 2.Build up Investors MISSION: To foster the growth of Social Entrepreneurship in Korea and beyond

D3Jubilee  Building up Entrepreneurs

D3Jubilee  Building up Entrepreneurs  Corporate Advisory Services  Essentially comes down to raising capital

D3Jubilee  Building up Entrepreneurs  Corporate Advisory Services  Essentially comes down to raising capital  Research Reports  Necessary for potential investors

D3Jubilee  Building up Entrepreneurs  Corporate Advisory Services  Essentially comes down to raising capital  Research Reports  Necessary for potential investors

D3Jubilee  Building up Entrepreneurs  Corporate Advisory Services  Essentially comes down to raising capital  Research Reports  Necessary for potential investors  Financial Consulting  Speak the language of Investment

D3Jubilee  Building up Entrepreneurs  Corporate Advisory Services  Essentially comes down to raising capital  Research Reports  Necessary for potential investors  Financial Consulting  Speak the language of Investment  Business Mentoring  Many SE come from NPO backgrounds  Some are very young

D3Jubilee  Building up Investors

D3Jubilee  Building up Investors  Creating an Angel Investor Community for Impact

D3Jubilee  Building up Investors  Creating an Angel Investor Community for Impact  DIIN Roundtable

D3Jubilee  Building up Investors  Creating an Angel Investor Community for Impact  DIIN Roundtable The D3 Impact Investor Network Held every 3 months 10 Entrepreneurs Presented Over 150 guests 14 Impact Investors created 5 SEs invested USD 2.5 million raised

D3Jubilee  D3Jubilee Impact Companies

D3Jubilee  D3Jubilee Impact Companies

D3Jubilee  D3Jubilee Impact Companies

D3Jubilee  D3Jubilee Impact Companies D3 Cleantech Fund (US)

D3Jubilee  DIIN Investor Profile  Mostly High Net Worth Individuals  Experienced Investors  Keen to see Impact

D3Jubilee  Long-term Objectives  To support the creation of a sustainable ecosystem for impact investment  To raise “Superstar” social enterprises  To build a stable base of committed impact investors  Investing Locally and Overseas

Thank You!