If you’ve kept up with SocialEarth during the last few months, you know we’re passionate about social entrepreneurship and it’s evolution into mainstream economies.
Perhaps more importantly that promoting social entreprenuerhsip, we’re keenly interested in its sccessful implementation to those that need it most, those at the Bottom of the Pyramid. And of course a discussion about the BOP wouldn’t be complete without mention of India; where hundreds of millions critically need a compelling movement in social entrepreneurship to improve their welfare.
Recently we had an opportunity to dig deeper about issues focusing on social entrepreneurship in India during an interview with the folks over at Capital Connect. CapitalConnect is an online marketplace that allows investors, lenders, and social enterprises to share information with one another, send debt and equity offers, and to explore strategic partnerships. Their hope is to facilitate the flow of commercial capital to social enterprises.
Below is a transcript of our interview.
SocialEarth: Can you describe the social entrepreneurship environment in India?
CapitalConnect: Indian social entrepreneurship space has myriad of hybrid models with a one billion thinking structure. One billion thinking necessitates cost effective models involving the bottom of the pyramid. The majority of these models are scalable and replicable. In terms of numbers, microfinance space may have the lead over other social enterprises although social enterprises are blooming in other domains as well with the majority of the players operating in service space.
In addition to service space, there is a natural predilection towards rural areas as 70% of the population lives in the hinterland. Recently, the rural scenario in the country has emerged as a lucrative option for the mainstream economy. Various organizations are viewing rural areas as potential markets, resulting in a gamut of innovative solutions within the social entrepreneurship space that focuses on and emerges from rural areas.
The other notable change is the involvement of mainstream financial institutions in social entrepreneurship. Various venture capital firms are investing in for-profit entities with social objectives. Another emerging model is the involvement of agri/retail corporate in mentoring and supporting social enterprises for strengthening their value chain and sourcing. In addition to the aforementioned entities, premier academic institutions are incubating various social enterprises and supporting research to address various social goals.
SE: What was the inspiration behind starting CapitalConnect?
CC: While working with various social enterprises—primarily MFIs–we realized that access to financial support is crucial for the success of an enterprise. Usually access to capital is critical for the seed stage and the growth phase. M-Cril (Associate of CapitalConnect) has enabled the flow of capital within the microfinance space, but the lack of information exchange between stakeholders has limited the flow of capital. Information asymmetry primarily results in hindering access to capital, consequently limiting prospects of scaling-up viable models and conducting pilots for innovative concepts. With this intent we started CapitalConnect; to facilitate social entrepreneurs across the world to access capital.
SE: Can you explain the interaction of current users? Has there been any investment because of a connection made?
CC: Interactions on debt and equity deals have taken place on our platform. On average, debt offers range from $10,000 to $1,000,000 and receive approximately two responses from other members. Presently, our focus is on strengthening the platform and bringing options to enterprises. However, in light of the present recession investors are shying away from new investments. To address this situation, we are involved in the offline search and selection of potential investee enterprises for new investment funds.
SE: How does CapitalConnect facilitate communication between entrepreneurs and investors?
CC: CapitalConnect is a community-driven platform where social entrepreneurs and investors can freely communicate and share information. Our team screens the information of applicants before providing their authentic information to our members. Our offline services include social and financial ratings and due diligence for potential investee enterprises. In addition, we are striving to develop benchmarks for various financial transactions and increase transparency in the sector.
SE: What is the most significant challenge you have faced as an organization?
CC: The most significant challenge is the current economic environment. In the present context, new investments have taken a backseat for various financial institutions. Money has become more scarce, conservative, and costly. In this scenario, we are working on promoting CapitalConnect, supporting institutional investors with a comprehensive selection process and bringing more members on our platform. We believe that our groundwork and experience in the present economic environment will be a boon in growth phase.
SE: What is your vision for CapitalConnect?
CC:We would like to establish financial benchmarks within the social enterprise domain to promote transparency and facilitate the optimum pricing of capital. We envision a full fledged exchange platform that provides a level playing field for social enterprises and institutional investors.
SE: What innovative future plans do you have for your organization and how are you implementing them?
CC: We are presently concentrating on increasing our footprints on the world map and brining more social enterprises, and investors on our platform. We are working on a multilingual version of our website to ensure easy access for our potential members. In addition to these initiatives we are also working on introducing new features on our website that provide useful information to our member base and promote their enterprises.
SE: What advice can you give other social entrepreneurs who are striving for the greater good?
CC: We believe that a good idea with a double bottom line focus and a scalable model is a potent force. However, the key is execution and timely financial assistance; it is imperative for social enterprises to keep track of potential funding opportunities. In addition, entrepreneurs should network with fellow entrepreneurs and well-wishers for leveraging on their information base and vetting your ideas. We believe that these individuals or enterprises act as marketing maven for furthering the growth of an enterprise.
SE: What Web sites do you visit the most (for news/social entrepreneurship/nonprofit info/etc.)?
SE: How has your organization had impact? Can you provide any statistics of direct influence?
CC: The CapitalConnect platform was launched online in July, 2008. Within only a few months we have reached a membership base of 87, including 81 social enterprises and 6 investors. Members have utilized the platform for exchanging offers and understanding the mechanism of CapitalConnect. However, in the present economic climate investors have adopted the ‘wait and watch’ approach for new investments. In this backdrop, we are focusing on strengthening our offerings and assisting new funds for identifying potential investee companies.
- EDA CapitalConnect offers an online marketplace for socially responsible investments that provides innovative solutions to global poverty.
- Organization Type: For-Profit
- Website: www.edacapitalconnect.com
- Founder(s):Sanjay Sinha
- Founded: 2008
- Location: Gurgaon, India
- See complete company list here
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