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Impact Investment
impact Investment
impact Investment
impact Investment
What is a social enterprise?
Activity 
• Discussion in groups of 5, the life-cycle of a 
social enterprise 
– Idea 
– Funding 
– Incubation 
– Growth 
– Scale 
– Innovation 
– Buyout or death
impact Investment
How do organization fund their ideas 
and their businesses?
How to fund Your Organization? 
• Different ways to finance your project 
– Crowd Funding 
– Bank Finance 
– Angel Investor 
– Venture Capital (profitability and exit potential) 
– Government backed finance 
– Traditional Fund raising activities (charity events, cold 
calling, door to door, celebrity endorsement etc) 
– Social Enterprise competitions (Dell, Hult, Venture Cup) 
– Startup Weekends?? 
– Social Investment fund
Bank Finance 
• KFW and GIZ 
• ADB 
• Nabard India 
• IFU in Denmark for Developing countries 
• World bank and IFC 
• Porparco and AFD 
• OPIC US government
Crowd Funding 
• KickStarter 
• Kiva 
• MyC4 
• Mylaap 
• Types 
– Reward 
– Equity 
https://www.youtube.com/watch?v=8b5-iEnW70k
Government Ministry Funds 
• https://www.youtube.com/watch?v=iV2ViNJF 
ZC8 
• (Monty Pythons’ Ministry of Silly Walks)
Social Enterprise Competitions 
• Dell SoCent Competition 
• Harvard SoCent Competition 
• OxBridge SoCent Competition 
• Hult SoCent Competition 
• X-Prize foundation 
• Startup Weekend Competition 
https://www.youtube.com/watch?v=dPAOj40rr5 
k
Social Investment Fund 
• It is not microfinance !! 
• It is not venture capital !! 
• It is investing in businesses that create positive 
social value in communities
What is impact investment?
What is impact investment?
Impact Investment Firms 2001-2012
Types of Social Investment Fund 
• For profit social investment fund 
– Bridges Ventures 
– Legatum Ventures 
– GrayGhost Ventures 
– Aavishkaar 
• Foundations 
– Gates Foundation 
– Dell Foundation 
– Tryg Founden 
– Ferd Social Entrepreneurship Fund 
• Incubation Funds 
– Villgro 
– Unitus Seed 
• Fellowships 
– Ashoka 
– Acumen
Indian Case 
• Aavishkaar 
(https://www.youtube.com/watch?v=r5vSbcxVGko) 
– 2002 with 100 dollars 
– Currently they have raise over $400 million 
– Mandate 
• For profit social enterprises 
• Marginal markets and difficult to operation, remote markets 
• Ethical business practices 
• High level of innovation 
• $ 200K to $2 Million 
• Equity based investment: 10% to 30% 
• Institutional investors
Indian Case 
• Villgro 
(https://www.youtube.com/watch?v=ZvblnKyJG2 
8) 
– Investor, Incubator and Mentor 
– Invests in social enterprises where social mission is 
integrated with the market 
– $20K to $200K 
– Equity 10% 
– Based inside an engineering university, looks for high 
degree of innovation 
– Government grants
Due Diligence 
• Type of Funding required (equity/loan/Grant) 
• Social Mission Diligence 
• Financial Return Diligence 
• Social Network Diligence 
• Political Diligence 
• Mission Drift 
• Exit Strategy
Type of Funding Required 
• Equity Funding 
– Buy a part of company (shares) based on certain 
valuation 
– Valuation based on expected returns over the next 5 
years 
– Valuation based on company capitalization in the next 
5 years 
– Valuation based on the entrepreneurs’ 
experience/age/current customer/ board 
members/celebrity endorsement/novelty and 
innovation 
– Very high risk
Type of Funding Required 
• Loan 
– Based on collateral 
– Low risk 
– Interest rate
Type of Funding Required 
• Grant 
– Project proposal 
– Project approval 
– Very low risk 
– Time consuming 
– Lots of paper work
Social Mission Due Dilligence 
• Baseline case and theory of change 
• Qualitative and Quantitative 
• Qualitative 
– Peace and happiness 
– Reduction in social inequality 
• Quantitative 
– Change in status quo as a function of intervention
Financial Return Due Diligence 
• Market and industrial condition, Economic and 
social indicators 
• Revenue streams 
– Costumers 
– Turnover time 
– Government grants 
• Cost 
– Inventory 
– Customer acquisition cost 
– Salaries of staff 
– Office space
Social Network/Political Due Diligence 
• Political climate of the local region and 
national level 
• Entrepreneurs’ History and social network 
• Board members and their reputation 
• Staff and their social network
Mission Drift Management 
• Hiring 
• Scaling 
• Managing investors 
• Managing Investees
Exit Strategy 
• IPO 
• BuyOut (different strategies) 
• Collateral/ Asset Selling 
• Debt reimbursement
Investment Decision 
• Contractual Document 
– Legal risk 
– ESG risk 
– Financial Risk 
• Role of entrepreneur 
• Management of the investment
Activity 
• Put yourself in the shoes of the investor 
• Critically study your projects and think what 
will it take for an investor to invest in your 
project or reject your project 
• Critically think who could be the potential 
investors and why
Crises of Legitimacy 
• Lack of metrics 
• Lack of standard practices 
• Lack of standard valuation practices 
• Role of social in valuation of the enterprises 
• Managing financial returns 
• Conflict of social vs commercial

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impact Investment

  • 5. What is a social enterprise?
  • 6. Activity • Discussion in groups of 5, the life-cycle of a social enterprise – Idea – Funding – Incubation – Growth – Scale – Innovation – Buyout or death
  • 8. How do organization fund their ideas and their businesses?
  • 9. How to fund Your Organization? • Different ways to finance your project – Crowd Funding – Bank Finance – Angel Investor – Venture Capital (profitability and exit potential) – Government backed finance – Traditional Fund raising activities (charity events, cold calling, door to door, celebrity endorsement etc) – Social Enterprise competitions (Dell, Hult, Venture Cup) – Startup Weekends?? – Social Investment fund
  • 10. Bank Finance • KFW and GIZ • ADB • Nabard India • IFU in Denmark for Developing countries • World bank and IFC • Porparco and AFD • OPIC US government
  • 11. Crowd Funding • KickStarter • Kiva • MyC4 • Mylaap • Types – Reward – Equity https://www.youtube.com/watch?v=8b5-iEnW70k
  • 12. Government Ministry Funds • https://www.youtube.com/watch?v=iV2ViNJF ZC8 • (Monty Pythons’ Ministry of Silly Walks)
  • 13. Social Enterprise Competitions • Dell SoCent Competition • Harvard SoCent Competition • OxBridge SoCent Competition • Hult SoCent Competition • X-Prize foundation • Startup Weekend Competition https://www.youtube.com/watch?v=dPAOj40rr5 k
  • 14. Social Investment Fund • It is not microfinance !! • It is not venture capital !! • It is investing in businesses that create positive social value in communities
  • 15. What is impact investment?
  • 16. What is impact investment?
  • 18. Types of Social Investment Fund • For profit social investment fund – Bridges Ventures – Legatum Ventures – GrayGhost Ventures – Aavishkaar • Foundations – Gates Foundation – Dell Foundation – Tryg Founden – Ferd Social Entrepreneurship Fund • Incubation Funds – Villgro – Unitus Seed • Fellowships – Ashoka – Acumen
  • 19. Indian Case • Aavishkaar (https://www.youtube.com/watch?v=r5vSbcxVGko) – 2002 with 100 dollars – Currently they have raise over $400 million – Mandate • For profit social enterprises • Marginal markets and difficult to operation, remote markets • Ethical business practices • High level of innovation • $ 200K to $2 Million • Equity based investment: 10% to 30% • Institutional investors
  • 20. Indian Case • Villgro (https://www.youtube.com/watch?v=ZvblnKyJG2 8) – Investor, Incubator and Mentor – Invests in social enterprises where social mission is integrated with the market – $20K to $200K – Equity 10% – Based inside an engineering university, looks for high degree of innovation – Government grants
  • 21. Due Diligence • Type of Funding required (equity/loan/Grant) • Social Mission Diligence • Financial Return Diligence • Social Network Diligence • Political Diligence • Mission Drift • Exit Strategy
  • 22. Type of Funding Required • Equity Funding – Buy a part of company (shares) based on certain valuation – Valuation based on expected returns over the next 5 years – Valuation based on company capitalization in the next 5 years – Valuation based on the entrepreneurs’ experience/age/current customer/ board members/celebrity endorsement/novelty and innovation – Very high risk
  • 23. Type of Funding Required • Loan – Based on collateral – Low risk – Interest rate
  • 24. Type of Funding Required • Grant – Project proposal – Project approval – Very low risk – Time consuming – Lots of paper work
  • 25. Social Mission Due Dilligence • Baseline case and theory of change • Qualitative and Quantitative • Qualitative – Peace and happiness – Reduction in social inequality • Quantitative – Change in status quo as a function of intervention
  • 26. Financial Return Due Diligence • Market and industrial condition, Economic and social indicators • Revenue streams – Costumers – Turnover time – Government grants • Cost – Inventory – Customer acquisition cost – Salaries of staff – Office space
  • 27. Social Network/Political Due Diligence • Political climate of the local region and national level • Entrepreneurs’ History and social network • Board members and their reputation • Staff and their social network
  • 28. Mission Drift Management • Hiring • Scaling • Managing investors • Managing Investees
  • 29. Exit Strategy • IPO • BuyOut (different strategies) • Collateral/ Asset Selling • Debt reimbursement
  • 30. Investment Decision • Contractual Document – Legal risk – ESG risk – Financial Risk • Role of entrepreneur • Management of the investment
  • 31. Activity • Put yourself in the shoes of the investor • Critically study your projects and think what will it take for an investor to invest in your project or reject your project • Critically think who could be the potential investors and why
  • 32. Crises of Legitimacy • Lack of metrics • Lack of standard practices • Lack of standard valuation practices • Role of social in valuation of the enterprises • Managing financial returns • Conflict of social vs commercial