Socent – Frontier Market Scouts

Moving the Needle

Nicole Manapol FMS in Action, Frontier Market Scouts, Socent, Uncategorized February 17, 2015February 24, 2015Impact Investing, socent, Social Enterprise 0 Comment

This post was submitted by MPA student and FMS alumna Nicole Manapol

“How do we move the needle?” is a question participants will hear often during their two weeks in the Frontier Market Scouts training program. In a program designed to enable social enterprise and promote impact investing the question is not intended to be rhetorical – it’s a straight up challenge.

According to a 2014 report released by J.P. Morgan and the Global Impact Investing Network there is currently about $46 billion of social impact money under management.[1] As FMS instructor Rob Lalka from Village Capital pointed out “that’s a drop in the bucket when you compare it to the total size of global financial markets” estimated to be over $87 trillion.[2]

FMS instructor Amit Sharma, Co-Founder of Empowerment Capital and Wall Street veteran concurs:

“It is mind boggling that we can create the most esoteric, complex, opaque, multi-dimensional financial products that conceivably diversify risk and drive profits. Yet we do not apply that same talent and energy innovating financial enabling instruments that grow social enterprise.”

Sharma who teaches a module on impact metrics and social venture profiling argues that by definition social enterprise is wealth accretive and risk reductive—it can bring in 2.9 billion people living under $2 / day into the market place as consumers, producers, and market participants. “Social enterprise creates value and yet the amount of innovation in the financial and capital markets currently does not comport to this immense commercial potential.”

So what is preventing more mainstream capital from flowing into the impact space?

As another FMS Instructor and Invested Development Senior Investment Manager, Alex Bashian, explained, “the problem is matching a fragmented supply of deals with the right financially and mission-aligned counterparts on the investment side” The majority of impact investors are not willing to invest in seed-stage enterprises. Without the requisite data and metrics we all depend on in well-established financial markets (like credit history) most investors find it too risky. The majority will choose to invest when an enterprise is ready to scale. Yet without seed-stage capital few social ventures ever reach that point. Essentially it’s a Catch 22 – on the one hand you have investors that are risk averse on the other hand you have seed-stage entrepreneurs unable to assume the burden of traditional debt and equity financing. As Alex points out, “it’s difficult to move money into seed stage enterprises in many emerging markets given the existing system. As an impact fund we need to try and match the different needs for capital with appropriate financing products and other creative mechanisms to help enable growth in this space.”

When it comes to managing risk – metrics matter

One of the main barriers to mobilizing more investment capital into social enterprise is the lack of data and metrics that help investors understand and hedge their risk. Standard metrics for quantifying social impact and assessing risk in this space are difficult given the diversity of contexts in which these enterprises exist. As Sharma explains to students – “although we talk about social impact we continue to benchmark the majority of impact performance through solely monetized value.”

With the proliferation of ESG (Environmental, Social, and Governmental) measurements like the Global Reporting Initiative, GIIRS, B Corporations and others it’s hard not to be overwhelmed. Sharma sees the proliferation of these impact metrics as a positive development but a symptom of the same disease that has caused failure in the mainstream – overly complex metrics that are difficult to translate across sectors and cultures, useful to some social enterprises and exclusionary to others, particularly in emerging market contexts. As Sharma emphasizes to students –

“we have to remember that impact, return and wealth creation are contextual, any model of metrics we create has to be dynamic, simple, user friendly, and in a language that the financial purist, socially neutral investor or institutional capital markets can use…as well as the philanthropist.”

No one understands this challenge better than Sharma whose career has straddled the non-profit, government and private sectors. Amit began his career in grass roots international development and social enterprise with the Peace Corps. After receiving an MBA and MA in International Policy Studies from the Monterey Institute of International Studies (MIIS), Amit worked at the U.S. Department of the Treasury where he served as a Senior Advisor in the Office of Terrorism and Financial Intelligence, which began as a special task force unit established post 9/11 to develop and execute anti-money laundering and counter-terrorist financing strategies. He later served as a member of the Department’s senior team, and Chief of Staff to the Deputy Secretary. He then moved on to Wall Street where he joined Mitsubishi UFJ Securities (USA) as their Chief of Staff and Project Management Head to their Global Markets Unit. It was during this period that Amit saw first-hand the power of capital markets as an engine for innovation and growth. Leaving Wall Street in 2013 he transitioned to a boutique consulting firm, Command Global Services (CGS), where he managed the investigation, intervention and recovery of stolen foreign assets from rogue states, as well as the strengthening of financial integrity and regulatory controls.

AmitSharma_Headshot — Amit Sharma, Co-Founder of Empowerment Capital and FMS Instructor shares the importance of impact metrics

Developing a common language

Recognizing the need to develop a common language between the impact and mainstream investment spaces, FMS Co-Founder Yuwei Shi approached Amit in 2014 to create a new FMS training module devoted to impact metrics.

In June 2014 the two collaborators launched Profiling Ventures for Impact Investing a two-day workshop led by Sharma that takes students through the current system of ESG ratings and analytics, including the ones commonly used in impact investing such as GIIRS. FMS participants then compare those metrics with established commercial financial rating systems and analytics to understand the complexity of “impact risks” more comprehensively, and in a manner that enables greater engagement with mainstream financial participants and stores of capital. Importantly, the workshop emphasizes the recognition and growth of social enterprise across all sectors, including among mainstream corporate entities.

Using what he calls “the five bucket approach” Sharma boils down five core aspects of venture profiling that any social entrepreneur, fiduciary, government regulator, investor or philanthropist is really concerned with – wealth, risk, market, assets and leverage – “how does one leverage their assets to mitigate or diversify their risks and service their respective markets to achieve their impact / wealth objectives?”

GroupShot_Winter2015_training — FMS Fellows at Winter 2015 Training in Monterey, CA

As Sharma emphasizes, “the purpose of this approach is to help students avoid getting pigeon holed in their thinking, which only contributes to the bifurcation between the social impact and corporate activities.” Instead of spending energy on trying to distinguish impact investing from mainstream investing the module encourages students to take a step back and see how they fundamentally relate. As Sharma points out, “the basis of all investing whether you’re a philanthropist or financial purist is to advance a particular objective to maximize returns in a manner commensurate with their deployed risk (this puts an emphasis on how “returns” are defined, and how risk is understood). We would be selling ourselves short by not engaging global commercial and financial entities and figuring out how to mobilize the power and influence of those markets to advance social enterprise as viable commercial endeavors.”

Impact Venture Profiling

Perhaps the most exciting opportunity the new module brings to FMS is the chance for fellows to contribute to the development of a more comprehensive solution to impact analytics that they can then go out and test in the field. Impact Venture Profiles is a new research-based initiative for select fellows heading out on 6-12 month field assignments in emerging markets. During their time in the field working with seed stage entrepreneurs, fellows will develop impact venture profiles to better understand the nature of social enterprise creation and operations, the universe of risk influencing social ventures, and to better refine the metrics and benchmarks that are required to grow impact activities.

Coreyell_Kenya — FMS Fellow Coryell Stout with colleagues at One Degree Solar – Nairobi, Kenya

As Sharma explains, “we [at FMS and the Center for Social Impact Learning] have a tremendous opportunity with this research initiative to help overcome current bottlenecks in this space by providing crucial data and metrics to the impact venture community that are needed to redefine, validate and grow the ecosystem around social enterprise. The potential of these profiles is enormous—they can be used to create case studies for research and academic purposes, conduct deep dive due diligence for investors seeking a pipeline of deals, and as real-time management tools for scaling social enterprise. But most importantly it brings multiple stakeholders to the table, including those from the corporate arenas, to recognize social enterprise as profitable business –
to really move the needle.”

[1] Saltuk, Y., Idrissi, A., Bouri, A., Mudaliar, A., & Schiff, H. (2014). Spotlight on the market: The impact investor survey. Global Social Finance, JP Morgan and the Global Impact Investing Network, London, 2.

[2] https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html

Frontier Market Scouts Take on the World Of Social Impact Investing

Danielle Johnson FMS in Action, Frontier Market Scouts, Socent, Uncategorized, Village Capital January 7, 2015February 24, 2015 0 Comment

This post was submitted by MPA and FMS alumna Danielle Steer.

It’s not every day that a person can sit at a pub watching the World Cup and listen to four different languages at the surrounding tables, while discussing impact investing as a poverty alleviation strategy. Unless, of course, you’re a part of the Middlebury Institute of International Studies at Monterey community. Today, this is my lunch break.

This experience seems apropos considering I’ve just finished two intense weeks in a classroom with 30 other inspiring, diverse, and experienced individuals and practitioners for the Middlebury Institute’s Frontier Market Scouts (FMS) program.

Participants from Around the World

I was unsure at first what types of professionals might be attracted to the program. My career has previously focused on gender education and development; so I was excited to learn more about how entrepreneurship could help build local economies and empower the impoverished. I was beyond pleased on the first day when I found out my colleagues in the class hailed from backgrounds not only in development and the public sector but also big banks and Wall Street. Some were gaining relevant professional experience during graduate school while others had quit jobs at Visa and Citibank to take part in the training and fellowship. We were also a geographically eclectic group as well with participants from Ireland, USA, Singapore, Australia, Philippines, Cameroon, China, the Netherlands, and Rwanda.

Intense Training with Real Experts

The two week FMS training is broken down into five-two day workshops covering different aspects of social entrepreneurship from the scouting and entrepreneurs to the impact investor perspective.

The first session was taught by Ross Baird, Executive Director at Village Capital. Ross brings a contagious energy to the course and provides a great introduction to impacting investing and social enterprise. From pitching frameworks to impact evaluation criteria for entrepreneurs, we explored various options for how scouts might identify and develop entrepreneurs in emerging markets.

Session two brought a change of pace with Simon Dejardins, currently residing across the pond at the Shell Foundation in London. Although his content was jam packed with “how to scale” high impact social enterprises, we were able to experiment with various approaches in business support and stakeholder analyses.

The half-way point of the training brought Dr. Yuwei Shi, founder and Director of Research at the Center for Social Impact Learning at MIIS. Yuwei focused on an action learning approach to business modeling by bringing in fellow experts on business development and ideation. In addition we explored a live case study, Salud2. Salud2 is a social enterprise at the concept phase started by five MIIS alumni this spring. Although Salud2 was a runner up at the recent Hult Prize competition, the FMS participants were able to go through the a business modeling exercise to help Salud2 consider alternative directions they might take their business before they enroll at the Hult Accelerator this summer.

With two sessions still to go, the FMS crew took a two day break to process the immense information we had covered over the week. We were also able to take advantage of the local beauty and activities along the way!

Feeling rested we returned to the ever charismatic, Paul Berloff of Accion Venture Labs. Paul led us through a series of lectures and activities focusing on investor perspectives. From the due diligence and the role of investors to the trends and criteria for impact we took an in-depth look at impact investing through the eyes of Accion Venture Labs.

For the final training session, we were joined by MIIS alumni, Amit Sharma and Ravi Kurani. This workshop provided an overview of the current universe of systems of environmental, social, and governance ratings (ESG ratings and analytics), including the ones commonly used in impact investing such as GIIRS. We also walked through the development of ImpactSpace , a start-up with the mission to help capture data and impact measurements for social ventures working with their counterparts.

Putting it All Together

Although I feel like I’m still processing information, theory, methodology, and tools packed into two short weeks, there were some common themes and big ideas throughout the course.

In the classroom I learned not only from the practitioners brought in to teach but also my colleagues. The class was a healthy mix of experience and knowledge that allowed us to work in meaningful and balanced groups. When I faltered on financial models, the ex-Citibank employee was there to simplify the process. When we talked about design and impact, the development students helped clarify impact metrics and the methodologies used to understand them.

After class, we dove into the nuances of culture and various informal aspects of the impact investing space during happy hour. Each of the practitioners took the time to get to know the participants and share stories about their very different experiences in the space.

As a people person, I really enjoyed the focus on relationship-building as a common theme throughout the two-week training. Whether you’re an entrepreneur looking for seed funding or an investor hoping to make an impact, personal connection and human interaction drive the entire process. I feel fortunate that I now have 30 new FMS colleagues in the field and around the world.

Corey arrives in Nairobi

Erina McWilliam Africa, Alumni Stories, FMS 2014, FMS in Action, Frontier Market Scouts, MIIS Updates, Socent, Uncategorized, Updates from the Field March 25, 2014March 25, 2014 0 Comment

FMS 2014 Fellow Corey Stout landed in Nairobi recently to begin her field assignment as a Project Manager for One Degree Solar. Corey, whose Kenyan nickname is “Mac Truck,” shares her most recent adventures in the field:

Corey Stout, FMS 2014 Placement: One Degree Solar — Corey Stout, FMS 2014
Placement: One Degree Solar

What is an SQ?
My move to Nairobi is official: resident of Trafford Court in Kilimani, two minute commute to work, and occupant of our home’s SQ. What is an SQ, you ask? Wise question, I tell you. And wise question that I did not ask. Although you may think that SQ stands for square feet, which makes complete sense (at least for some…or one), it is in fact the abbreviation for Servant’s Quarters. Needless to say, I was in for a treat when I moved into my “room”, the SQ or Servant’s Quarters of our house. While I have a knack for small rooms, I am getting used to the world of the tiny. The SQ’s 7x7x7 measurement does not take into account the 8 car batteries, which take up 1/3 of the room, and serve as the backup power for the rest of the house. Fortunately, a metal cage surrounds the batteries (they can electrocute upon touch…this finding may or may not have been from personal experience), so I have created a makeshift closet/clothes steamer by placing hangers around it. And to think that everyone thought Sophie was the crafty one in our D.C. apartment. DIY has basically become my middle name.

During my first night in the SQ (apparently you do not even refer to it as a room…let alone your room; while it may be a faux pas to say “my SQ,” I have no qualms about reminding my roommates that I hold the keys to our backup power), I decided to test the shower in the adjoining bathroom. The “bathroom”, which is attached directly to the SQ “bedroom”, consists of the basics: a toilet, sink, shower head and facet. There are no floor or wall dividers around the shower head or facet to separate the “shower” from the rest of the bathroom and the rest of the bedroom is only divided from the bathroom by a door. Confused? Just picture a minimalist’s heaven. While I am not new to the concept of shower heads in a bathroom without a shower, I am new to double checking that a drain exists prior to exfoliation.

Meeting the Roommates
Halfway into my ice cold shower, I heard a loud thump. Luckily, I did not have to waste any time dealing with shower doors (serious feng shui) and quickly opened the door of the bathroom to see that the SQ was completely flooded…and my only clean outfit for my first day of work had fallen from its “closet” and was drowning. I had not yet had the pleasure of meeting my five roommates nor was I aware that they were all male (again, who would have thought to ask such questions?), but I made my presence and estrogen known. With a neon pink towel, soaking wet hair, and a trail of soap suds, I ran to the main house (since the SQ is obviously separate), startling Mark, David, and Andrew, who were just about ready to dive into their Indian takeout. Alas, as the true gentleman that they are, they abandoned their chicken masala and instead dove into the SQ pond, rushing to get towels, switching off the backup power (opps), and helping to mop up the water, which had begun to rush out of the SQ into the driveway. Night and SQ saved. Note to self: always make sure that your shower has a drain (and use any SQ flooding as an excuse to shower in the the main house, which has hot water…très luxurious).

Despite my first night’s mishap, I have gotten used to the SQ, settled into my job, and fallen in love with Kenya. I am working for One Degree Solar, a solar energy company that brings power to households, schools, and business without access to electricity, and overseeing our plans to scale within Kenya and across East Africa. As cheesy as it sounds, I still have to pinch myself each morning that I am actually here and working for such an exciting company.

The Making of the “Mac Truck”
Finally, five short, but essential, updates to get you fully up-to-speed on my life (whether by blood, water, or beer, this is what you signed up for, after all):

My boss has coined me the “Mac Truck.” He claims the nickname is from my abrupt body rotations and tendency to bump into anyone/anything in my path (i.e. I still have not regained horizontal head/neck movement), but I have stopped throwing out my chocolate wrappers in his trash can.
Up until yesterday, my brother thought I had moved to Accra, Ghana (and we only discovered this because he had looked up flights to come visit…I still have not decided whether the points for a visitation attempt negate this “mistake”).
I have already signed up two customers to purchase One Degree Solar’s BrightBox, our flagship solar kit that can power four lights, 10 phones, any USB device, and a radio for up to 24 hours (cue “wowza!”): Sudanese refugee camps on the Northwestern border and Mark, the mango seller outside of my office. I made the sale to the refugee camps by pitching our product to an international aid organization and I made the sale to Mark by convincing him that my mango consumption will pay off his BrightBox in a month. Though the pitches and quantities purchased differed, I am equally proud of both.
I have already set off the fire alarm twice in our house (popcorn burns so easily), broken our living room speakers (re: Mac Truck bullet above), and woken up the next door neighbors with my persistent use of snooze in the morning (our security guard had to knock on my window to kindly ask me to “please wake up, Miss. Query”), but fortunately my roommates are forgiving and have accepted me for the liability that I am (I wish I could say the same about my neighbors).
The amazing Elyse Lipman came to visit last weekend. We took motorcycles to Karen (a beautiful suburb named for Karen Blixen, author of Out of Africa), fed giraffes at Nairobi’s giraffe sanctuary, bonded with orphaned elephants at the David Sheldrick Wildlife Trust, and safaried in Nairobi National Park (black rhino spotting included!). Am I rubbing my new backyard in your face? You betcha.

Any and all visitors are welcome!! Miss you all!

xoxo, Corey