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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 />

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Summary<br /><ul><li>Imperative

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Opportunity

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Local Solution: Social Venture Exchange (SVX)

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Global Solutions: Global Impact Markets

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Discussion and Questions</li></ul>Pg 2<br />

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Markets for Good<br />Imperative<br />

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We are faced with seemingly intractable social and environmental problems at a global and local level.<br />

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Our Challenges:<br />1. Poverty<br />2. Climate change<br />3. Government debt<br />4. Economic transition<br />

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Sandy Lake First Nation 2008<br />

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Kenya 2009<br />

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Ottawa 2009<br />

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Windsor 2010<br />

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The Cost:<br />Billions & trillions <br />of dollars.<br />Hundreds of thousands <br />of lives.<br />

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Markets for Good<br />Opportunity<br />

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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 />

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Local Ventures<br />

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The Market<br />Canadian foundations: $32M<br />Local impact funds: $250M<br />200+ individual deals<br />Local: $2B<br />Global: $50B<br />

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Toronto Community Housing Corporation (TCHC) Bond:<br />$1B Regent Park Revitalization with $450M Bond<br />

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Rowe Farms: ~$4 million in debt and equity investments to grow/expand retail operations via Investeco. <br />

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Planet Bean Coffee: $75k loan as a part of a $250k debt capital raise for expansion of retail operations via CAIC. <br />

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Centre for Social Innovation (CSI): $1.8M bond issue for the acquisition and re-development of new facility.<br />

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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 />

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Infrastructure<br />20<br />Industry Standards & Systems<br />Technology<br />Internet<br />+<br />+<br />+<br />Soft Infrastructure: Talent, Trust, Networks, Models<br />

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Opportunity<br />21<br /><ul><li>Intermediation

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Impact Measurement

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Identification, due diligence and coordination

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Deal design and financial expertise</li></ul>Investors:<br />Supply of Capital<br />Ventures:<br />Demand for Capital<br />

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Markets for Good<br />Local Solution<br />

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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

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venture listings, fund listings, a resource centre, investor collaboration tools, and a service provider listing

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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

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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 />

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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 />

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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

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Deal size: Up to $10M

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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 />

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Social Venture Exchange (SVX)<br />Listings Requirements and Process<br /><ul><li>Rigorous listings requirements and process for ventures

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Important listing requirements modeled on mainstream markets related to:

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Management and Governance

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Finances

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Social and Environmental Performance

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Multi-step process from venture identification to private listing

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Due diligence supported by third party providers and listings team, which includes financial professionals (CAs/CFAs)

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No opinion or recommendation to the investor on the investment opportunity; just high quality information

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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

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Funder, venture, investor, service provider outreach

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Product development support

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Metrics Workshop Sessions: February & March

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Listings review and due diligence on first selected ten ventures from March to May

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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

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Support impact fund development at a regional and provincial level</li></li></ul><li>Markets for Good<br />Global Solutions<br />

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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

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CapLinked: platform for private investors, entrepreneurs, and advisors to find each other, build relationships, and transact business

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SharesPost: 100 companies, 50,000 members, $1B in posts market for Facebook, LinkedIn

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SecondMarket: facilitated $500M in trades since 2008 with average transaction of $2M and 3-5% commission</li></ul>Pg 31<br />

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Global Solutions<br /><ul><li>Growing number of Markets for Good launched or in development over the past five years around the world

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Parallel evolution alongside other online markets

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Venture focus: entrepreneurs in the developing world and sustainable, new economy ventures

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Geographic focus: a global outlook or particular regions outside Canada

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Motivation: Tackle social and environmental problems with increased access to capital

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Range of financial returns (Zero – beyond market)</li></ul>Pg 32<br />

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Pg 33<br />

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Pg 34<br />

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Global Solutions<br /><ul><li>FINRA compliant online marketplace

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Private placements and Direct Public Offerings (DPOs)

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Secondary transactions and liquidity for restricted and illiquid securities and DPO shares

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Investment minimums of $25k

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Focus on community investments, environment sector, sustainable agriculture, microfinance, co-ops

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Available to accredited and institutional investors only

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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 />

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Global Regional Markets<br />

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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

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IPO and secondary trading platform providing liquidity and transparency

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Products: Equity investments in for-profit social purpose businesses; Bond investments in both businesses and not-for-profit organizations

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Provide both regulated financial reports and social/environmental reports that will be audited by third parties

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Impact Partners: First step in strategy with matching platform launching in mid-2011

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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

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Over ten communities have demonstrated interest with greatest potential in Lancaster, Detroit, Hawaii, Columbus, and Albany

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Interest in establishing a regional coalition starting with:

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a conference to bring together small group of interested stakeholders and emerging exchanges;

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coordinating staff to catalyze the regional impact exchange agenda through networking, shared research, and supportive business development; and

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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 />

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Discussion & Questions<br />