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A Primer on Impact Investing
A Primer on Impact Investing
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Markets for Good

  1. 1. Markets for Good<br />Examining the Social Venture Exchange (SVX) and Global Impact Markets<br />Prepared for MaRS Lunch & Learn<br />Wednesday, February 23rd<br />MaRS is where science, technology and social entrepreneurs get the help they need. Where all kinds of people meet to spark new ideas. And where a global reputation for innovation is being earned, <br />one success story at a time.<br />
  2. 2. Summary<br /><ul><li>Imperative
  3. 3. Opportunity
  4. 4. Local Solution: Social Venture Exchange (SVX)
  5. 5. Global Solutions: Global Impact Markets
  6. 6. Discussion and Questions</li></ul>Pg 2<br />
  7. 7. Markets for Good<br />Imperative<br />
  8. 8. We are faced with seemingly intractable social and environmental problems at a global and local level.<br />
  9. 9. Our Challenges:<br />1. Poverty<br />2. Climate change<br />3. Government debt<br />4. Economic transition<br />
  10. 10. Sandy Lake First Nation 2008<br />
  11. 11. Kenya 2009<br />
  12. 12. Ottawa 2009<br />
  13. 13. Windsor 2010<br />
  14. 14. The Cost:<br />Billions & trillions <br />of dollars.<br />Hundreds of thousands <br />of lives.<br />
  15. 15. Markets for Good<br />Opportunity<br />
  16. 16. 12<br />socialfinance<br />[soh-shuhlfi-nans, fahy-nans], n.; synonym: impact investing<br />Social finance is an approach to solve social or environmental challenges while generating financial return.This includes investments that range from producing a return of principal capital to offering market-rate or even market-beating financial returns. Social finance encourages positive social or environmental solutions at a scale that neither purely philanthropic supports nor traditional investment can reach.<br />
  17. 17. Local Ventures<br />
  18. 18. The Market<br />Canadian foundations: $32M<br />Local impact funds: $250M<br />200+ individual deals<br />Local: $2B<br />Global: $50B<br />
  19. 19. Toronto Community Housing Corporation (TCHC) Bond:<br />$1B Regent Park Revitalization with $450M Bond<br />
  20. 20. Rowe Farms: ~$4 million in debt and equity investments to grow/expand retail operations via Investeco. <br />
  21. 21. Planet Bean Coffee: $75k loan as a part of a $250k debt capital raise for expansion of retail operations via CAIC. <br />
  22. 22. Centre for Social Innovation (CSI): $1.8M bond issue for the acquisition and re-development of new facility.<br />
  23. 23. Market Potential<br />Local foundations: $20B<br />Canadian HNWIs: $1.42T<br />75% of target investors interested<br />Local: $30B<br />Global HNWIs: $120B<br />Global: $40B - $1T<br />
  24. 24. Infrastructure<br />20<br />Industry Standards & Systems<br />Technology<br />Internet<br />+<br />+<br />+<br />Soft Infrastructure: Talent, Trust, Networks, Models<br />
  25. 25. Opportunity<br />21<br /><ul><li>Intermediation
  26. 26. Impact Measurement
  27. 27. Identification, due diligence and coordination
  28. 28. Deal design and financial expertise</li></ul>Investors:<br />Supply of Capital<br />Ventures:<br />Demand for Capital<br />
  29. 29. Markets for Good<br />Local Solution<br />
  30. 30. Social Venture Exchange (SVX)<br />What is the Social Venture Exchange?<br />A local, impact-first market connecting social ventures, impact funds, and impact investors in order to catalyze new investment capital geared towards improved social and environmental outcomes.<br /><ul><li>private online market platform
  31. 31. venture listings, fund listings, a resource centre, investor collaboration tools, and a service provider listing
  32. 32. allows investors to share due diligence, collaborate on deals, identify and access high quality, screened investment opportunities with detailed information reducing the burden of due diligence
  33. 33. provides ventures with increased access to capital and increased financial expertise</li></li></ul><li>Social Venture Exchange (SVX)<br />Accredited <br />Investors<br />Financial Service<br />Providers<br />SEARCH FOR SCREENED FUNDS & VENTURES<br />CREATE & MANAGE INVESTOR PROFILE<br />CREATE & MANAGE PROVIDER PROFILE<br />SVX<br />Lawyers, auditors, analysts, alternative banks and credit unions, and investment banks <br />Foundations, Endowments, Wealth Managers, High Net Worth Individuals (HNWIs), Asset Managers<br />SHARE DUE DILIGENCE & PRESENT COLLABORATIVE DEALS<br />ONLINE<br />OBTAIN FINANCIAL TRAINING & RESOURCES <br />Venture Listings<br />Fund Listings<br />Investor Listings<br />Financial Service Provider Listing<br />Resource Centre<br />Collaboration Tool<br />SEARCH FOR SCREENED VENTURES<br />Social <br />Ventures<br />Impact <br />Funds<br />SEARCH FOR FINANCIAL SERVICE PROVIDERS & INVESTORS<br />Local impact investing funds<br />Nonprofits, cooperatives, social purpose businesses<br />CREATE & MANAGE FUND PROFILE<br />CREATE & MANAGE VENTURE PROFILE<br />Impact-First I Innovative I Trusted Connector I Market Consolidator Public Service I Non-profit I Access Point I Low Fee Structure<br />
  34. 34. Pilot Objectives<br />1. $2.5 million in capital for ten social ventures;<br />2. Positive social and environmental impacts;<br />3. List a majority of identified, existing investment opportunities; and<br />4. 50 investment opportunities listed during pilot period.<br />
  35. 35. Social Venture Exchange (SVX)<br /><ul><li>Ventures: Small and medium enterprises (SMEs <$25M revenues) based in Ontario with prioritized social mission including nonprofits (particularly social enterprises and housing providers), co-operatives (housing, worker, financial, service), and social purpose businesses
  36. 36. Deal size: Up to $10M
  37. 37. Products: debt (bonds, promissory notes, private debt, loan guarantees, and debentures) and equity (common/preferred/co-op shares, limited partnerships [ie. funds], and other private equity)</li></li></ul><li>Social Venture Exchange (SVX)<br />Ventures will be focused in the following sectors and subsectors:<br />Social:Ventures creating opportunities and breaking the cycle of poverty in the following subsectors: affordable housing, employment services, food security, education, First Nations, and New Canadians (or settlement supports).Environmental:Ventures building environmental sustainability in the following subsectors: renewable energy, sustainable agriculture, consumer products, water, and transportation. <br />
  38. 38. Social Venture Exchange (SVX)<br />Listings Requirements and Process<br /><ul><li>Rigorous listings requirements and process for ventures
  39. 39. Important listing requirements modeled on mainstream markets related to:
  40. 40. Management and Governance
  41. 41. Finances
  42. 42. Social and Environmental Performance
  43. 43. Multi-step process from venture identification to private listing
  44. 44. Due diligence supported by third party providers and listings team, which includes financial professionals (CAs/CFAs)
  45. 45. No opinion or recommendation to the investor on the investment opportunity; just high quality information
  46. 46. Ventures pay a tiered listing fee and a success based matching fee based on deal size</li></li></ul><li>Social Venture Exchange (SVX)<br />Upcoming Milestones<br /><ul><li>Operational Plan roll-out
  47. 47. Funder, venture, investor, service provider outreach
  48. 48. Product development support
  49. 49. Metrics Workshop Sessions: February & March
  50. 50. Listings review and due diligence on first selected ten ventures from March to May
  51. 51. Platform Launch: June 2011</li></ul>Long-Term Objectives<br /><ul><li>Fully-regulated market with access for retail investors that could be parallel or integrated into mainstream markets
  52. 52. Support impact fund development at a regional and provincial level</li></li></ul><li>Markets for Good<br />Global Solutions<br />
  53. 53. An Important Aside<br /><ul><li>Growing number of web platforms (with social networking capabilities) facilitating venture capital and crowdfunding for retail and accredited investors
  54. 54. CapLinked: platform for private investors, entrepreneurs, and advisors to find each other, build relationships, and transact business
  55. 55. SharesPost: 100 companies, 50,000 members, $1B in posts market for Facebook, LinkedIn
  56. 56. SecondMarket: facilitated $500M in trades since 2008 with average transaction of $2M and 3-5% commission</li></ul>Pg 31<br />
  57. 57. Global Solutions<br /><ul><li>Growing number of Markets for Good launched or in development over the past five years around the world
  58. 58. Parallel evolution alongside other online markets
  59. 59. Venture focus: entrepreneurs in the developing world and sustainable, new economy ventures
  60. 60. Geographic focus: a global outlook or particular regions outside Canada
  61. 61. Motivation: Tackle social and environmental problems with increased access to capital
  62. 62. Range of financial returns (Zero – beyond market)</li></ul>Pg 32<br />
  63. 63. Pg 33<br />
  64. 64. Pg 34<br />
  65. 65. Global Solutions<br /><ul><li>FINRA compliant online marketplace
  66. 66. Private placements and Direct Public Offerings (DPOs)
  67. 67. Secondary transactions and liquidity for restricted and illiquid securities and DPO shares
  68. 68. Investment minimums of $25k
  69. 69. Focus on community investments, environment sector, sustainable agriculture, microfinance, co-ops
  70. 70. Available to accredited and institutional investors only
  71. 71. No membership or listing fee; transaction-based fee structure</li></ul>Pg 35<br />Cooperative worldzine on food, <br />social justice, and global economy<br />Human capital financing investing <br />in postsecondary students<br />Online bookseller converting books into literacy and education<br />
  72. 72. Global Regional Markets<br />
  73. 73. Global Solutions<br /><ul><li>Vision: Regulated trading platform for securities issued by sustainable for-profit social purpose businesses and and not-for-profit organizations in Asia
  74. 74. IPO and secondary trading platform providing liquidity and transparency
  75. 75. Products: Equity investments in for-profit social purpose businesses; Bond investments in both businesses and not-for-profit organizations
  76. 76. Provide both regulated financial reports and social/environmental reports that will be audited by third parties
  77. 77. Impact Partners: First step in strategy with matching platform launching in mid-2011
  78. 78. Shujog: capacity building arm</li></li></ul><li>Global Solutions<br /><ul><li>Informal network of regional exchanges/markets with a local, sustainable focus emerging in US with strong interest in impact investing as a foundational focus
  79. 79. Over ten communities have demonstrated interest with greatest potential in Lancaster, Detroit, Hawaii, Columbus, and Albany
  80. 80. Interest in establishing a regional coalition starting with:
  81. 81. a conference to bring together small group of interested stakeholders and emerging exchanges;
  82. 82. coordinating staff to catalyze the regional impact exchange agenda through networking, shared research, and supportive business development; and
  83. 83. a shareable [open] market platform, which could be based upon the infrastructure developed by SVX.</li></ul>8th Annual Year in Ideas<br />Most Innovative Nonprofit<br />
  84. 84. Discussion & Questions<br />

Notes de l'éditeur

  • Ultimately, a key component of an Impact Investing strategy at MaRS, with pillars including catalyzing/talent building, public policy, metrics, education, and product/market development
  • What we’re doing is not original; out there; risky.
  • What we’re doing is not original; out there; risky.
  • - Microinvesting/impact investing mashup buying into the right to receive a percentage of venture revenue for a period of time (No One Without, one of the fashion companies on 33needs, is sharing 5% of their revenue for 3 years with investors) NY Times, guardian, Huffington Post, Tech Crunch, and Venture Beat investing in social enterprises around the world from start up to scale up137 investments; 5 countries; 23 days live Focus on environment, education, community, health, opportunity and sustainable agriculture
  • Facilitates microloans to entrepreneurs in Africa; focus on the missing middle (SMEs) you can invest for as little as 5 EurosSo far 17,880 investors from 108 countries have invested €12,737,417 in 6,393 businesses in 7 African countries screening process, bid negotiation (Dutch auction process), then investment