In my last post on SOCAP Europe, I wrote about the space, the need and the movement for social capital markets. Since, I had the opportunity to interview Kevin Jones, the co-founder and convener of SOCAP Markets. A remarkable visionary, here is what he has to say about his take on SOCAP, a 10 year vision and his number-one advice to social entrepreneurs:
Q: I love the fact that SOCAP is taking on a more international scene by having one in Europe this year. Can you shed some light on the development trends that you are starting to see on an international scale and how this would impact us here in North America?
A: The biggest trend is toward impact investing being taken seriously by mainstream finance. At SOCAP Europe, we will have large $100 million plus fund of funds announcing they are integrating impact investing into their portfolios, two banks, one large and mainstream, abn amro, and one deeply mission aligned, triodos are on board as sponsors. Pension funds are also at the table. The issue for impact investing is going mainstream and avoiding losing their mission, what I call avoiding mission risk, the ben and jerry’s problem. Avoiding a microfinance scenario.
Another big thing is that renewable energy in the developing world is becoming a clearly investable sector. A new, not published yet report by McKinsey commissioned by mid-year pegs that potential at $6.5 billion. The upside to renewable energy is that it is a public good, in places like rural Africa and rural India; you are removing kerosene lamps that kill 1.5 million people a year through indoor air pollution, cutting power costs by around 1/3 and doing it at high margin. Unlike microfinance which became a derivative and allowed investors to demand an unreasonable return on their equity to the point that it exploited the poor in some places, there is no chance to saturate the rural African village market with life saving electricity that enhances a family’s ability to be productive. The report pegs that market size at $6.5 billion, but it will be a week before we can use that figure.
Q: You’ve been in the social investing/enterprise space for a while now, and noted in one of your more recent interviews on how the space is continuing to grow on both ends of the spectrum. What do you believe is the biggest barrier/challenge for this environment?
A: What is the biggest challenge? It’s still mindset, the inherited cultural frame in which people think about investing. They feel justified thinking only about financial return on their money and then they do good in giving. On the other hand, I am really encouraged by new research from NESTA that says 39% of folks in the U.K. would take a lower financial return if they could invest alongside what they believe, for causes they care about. and that the percentage goes up dramatically for people under 40.
That said, there will be failures, and people should be ready for them. Not just scams like three cups of tea seems to be, but things go wrong. So hopes could be dashed, etc. if people are naive. We are working on the toughest problems of the world. In new ways, with new tools, but they are still the things that put us all at risk.
Q: SOCAP is a conference that brings together the intersection of money and meaning. How does this conference fit into the picture of bridging the gap between for-profit and nonprofit and where do you see the ideal form of collaboration between these two groups?
A: SOCAP is about bringing all the resources into the market and using what’s appropriate to get the job done. Many if not most social enterprises often start out needing donations or subsidies, or as a non profit working on a problem, a way to pay for the mission without relying only on program money from a foundation creates the need for earned income that then grows into a social enterprise that could be investable as they work out the model. But the market does not solve all problems. Take malaria: the young mothers and children one to five who comprise 80% of the nearly 3 million who die every year in Sub-Saharan Africa (some say 1 million) do not have and are not likely soon to have the money to buy insecticide treated nets. So they need to be subsidized.
SOCAP is about using gifts and grants where they are appropriate and when they are appropriate and subsidies that go away over time when that is the way to go, soft debt from mission focused, often non profit lenders like a Root Capital or E+Co when its appropriate and fast moving, catalytic venture capital like equity from an impact investment fund where it is the answer. SOCAP is a big tent event where people who work in silos come together to get more done than they could alone or working with the people they already know or run into in their regular course of work. It’s the gathering that incorporates giving and investing as twin forces for good for a world that needs all the help it can get.
Q: What is your 10 year vision for the social enterprise/impact investing space?
A: What is my 10-year vision… that mixing your money with your meaning will be the way most people think about investing. That a mindshift has taken place. That boomers will contribute to the efforts of millennials who want to change the world they have inherited from us.
Q: What is your #1 advice to social entrepreneurs/enterprises?
Start. Do it now. Fail fast, and fail smart. If you are not relentless, you will not make it. this needs to be not just your peace corps stint. This has to be the way you approach the world. When I started good capital six years ago, I went to the smartest investor in this space that I knew. He told me and Tim, my partner:
- Our idea was wrong;
- Our plan was flawed;
- We were the wrong guys;
- Our chances for failure were high;
- And he did not want his name associated with us.
People tell you that all the time when you are an entrepreneur, the more disruptive your approach the more likely smart guys will give you that reaction. and they may be right. Your idea may be wrong, your plan flawed, you might be the wrong guy. But if you need to do this, if its baked into who you are that this is the way you approach the world, and what needs to be done, you will do it anyway. Not everyone should be an entrepreneur. Most people should be employees or help the visionary reach her goals. It takes a certain level of insanity to go against the common wisdom. If you are afflicted with too much sanity you won’t survive as an entrepreneur.
Q: And just for fun: What is your favorite quote?
A: Probably one from Dirty Harry, “A man has to know his limitations.”
For more information about Kevin and SOCAP Europe, visit europe.socialcapitalmarkets.net.