Invested Development: August 2010

Monday, August 30, 2010

Weekly Review – August 15th – August 28th

(almost)Every week at Invested Development we scan the web for articles that relate to what we do and what we like. This week we read a lot about…

BP Oil Spill Claims Another Victim, An Aspiring Entrepreneur

Just another example of why it is impossible to predict what challenges a start-up will face. We hate to hear about entrepreneurs becoming the victim of uncontrollable circumstances and we also hate to hear that it puts our friends at Village Capital in jeopardy of not getting re-paid. Luckily, this story ends well…Victory! Change.org and Groupon Members Help Rescue Ethical Flip Flop Company Feelgoodz

Twitter Social Enterprise of the Day

This is from a couple of weeks ago, but we couldn’t miss the chance to promote our friends at Runa who where selected as Beyond Profit’s SE of the Day. We have known the guys at Runa since last summer and have been enjoying their Guayusa tea ever since.

A Call to Action: A Market-Based Vision for Rural Development

For social entrepreneurs collaboration is always key, but even more so with those focused on rural markets. The sustenance farmers who inhabit the sparsely populated areas of emerging markets are amongst the worlds poorest and their dispersal makes reaching them expensive. ID portfolio company, FrogTek, is doing their part to help. By leveraging mobile technology, they are reducing costs and improving efficiency for small merchants in emerging markets and creating a platform for suppliers, financiers and customers to work with small, remote businesses.

The Promise of Microfranchise: Leapfrogging a Decade

Deborah Burand’s gap analysis of the fledgling microfranchise industry is a much-needed primer for those interested in leveraging the proven franchise model for entrepreneurship for economic development in emerging markets (and we are not just saying that because she is an ID ally.) With her new position as General Council for OPIC, she’ll be in a good position to influence the policy changes she is advocating.

The Future of Microfranchise: An Interview with Deborah Burand

Our good friend Deborah Burand made the rounds last week. This time in a lengthy interview with Next Billion blogger Josh Cleveland. The article provides nice insight into why Deborah believes microfranchising can pick-up where microfinance left off.

Summer Spotlight: How Patient Capital Can Redefine Scale

Nanako Kudo brings up discussion point for our industry. If capital is “patient”, what is it waiting for? Is it just a bridge to traditional capital? What then? It is something that we have been writing and thinking about a lot (see our blog post on patient capital here).

Friday, August 13, 2010

Weekly Review – August 8th – August 14th

Every week at Invested Development we scan the web for articles that relate to what we do and what we like. This week we read a lot about impact financing, from Angels to Stock Exchanges and everything in-between.

Social Angel Investors Need to Figure Out How to Get to "Yes"

You would think that as often as we link to Nathaniel Whittemore’s articles, we would pop-up on his radar. Cleary, not yet. We have not only been making this argument for over a year, we actually built a company around it!

Buyer-backed Supply Chain Financing (BSCF): Making Small Businesses More Bankable

One criticism of Microfinance is that the businesses supported by micro-loans do little to solve the unemployment issues that plague emerging markets. It is an unfair criticism because mom-and-pops can’t become SME’s without growth financing and that is not what MFI’s are designed to do. We need more growth capital innovations like the one mentioned in this article to help MFI’s achieve their full potential.

Mission Markets Propels Ecosystem Markets

If you follow our blog you know that we are big advocates for anything that helps create liquidity in impact investing. Luckily our friends at Mission Markets are almost ready to launch their two trading platforms, the Private Capital Marketplace and Mission Markets Earth. This is a great start and it won’t take long for them to build momentum.

Starting a Stock Exchange for Socially Conscious Companies

Be sure to follow the link and read the entire interview. Durreen Shahnaz has an impressive background, but she is not alone in her efforts to build the first impact investment stock exchange. There are similar initiatives in Germany, South Africa, Canada? and London that we know about. The question is, will there be enough deals to keep them all busy?

Social Versus Entrepreneur

The debate continues… and it should, we are far from defining ourselves as industry and even further from articulating that clearly to others. Unfortunately, as the article points out, I don’t think we are getting any closer. We agree social entrepreneurs should do-good not just do-no-harm and we have been writing about it a lot lately.

A New Definition of Poor

Another big debate in our industry is the definition of poverty. We wrote about this in our first blog post back in May. In that post, we supported the UN’s decision to move away from the hard $1.25 metric because poverty is the lack of access, not the scarcity of funds. It’s subtle difference, but very important.

Wednesday, August 11, 2010

Bees Do It for the Honey

At a recent social entrepreneurship forum we were amazed by the ideas and technologies being presented; mobile phone based eye diagnostics, safe and affordable infant incubators, and even affordable sanitary pads. Inspiring stuff.

What was less inspiring were the business models. Despite a clear realization of the high-impact each product could have, the massive market potential, and the obvious lack of large distribution networks, each technology was coupled with a non-profit designation and an “open-source” distribution scheme.

Now let’s be clear, when it comes to computer programming or scientific knowledge we support open source models (in particular the non-profit kind). Both are freely (or very affordably) distributed and have the benefit of existing distribution networks. But when it comes to products that are going to require that someone build a distribution network, create a marketing campaign, and ramp-up production capacity; open-source is probably not going to get it done.

People might think of this as callous or unimaginative but that is just an easy way out. We are not insensitive to oppose models that get peoples hopes up but never deliver. We are not cold-hearted to object to models that fail and leave people without a product they have become dependent on. Unfortunately, those of you who work in development probably can’t count the times that these scenarios have played out in the field

So what does this have to do with bees? Bees are remarkable creatures. They exist in complex societies and create far more good than harm. Yet their most important contribution to earth (and one of the most important contributions of any species!) is pollination.

Through pollination alone, bees contribute somewhere between $32 and $50 billion each year to U.S. agriculture production. Despite our modern agri-business, today bees help pollinate 1/3 of U.S. crops^[1]. Think about the shear scale of that task.

Yet the interesting thing about their impact is that bees are doing this out of self-interest; not out of benevolence, guilt, or a sense of responsibility. They are the most productive pollinators on the planet and yet they don’t do it for the fruits or the flowers. Bees do it for the honey.

Social entrepreneurs, investors and aid organizations should stop and think about what we can learn from bees: Their self-interest not only does-no-harm, but actually does-good (a lot of it). They create value at both ends of the production cycle (pollination on one side and honey on the other). And, most importantly, they create tremendous benefit through scale (the average bee hive supports over 60,000 bees).

Bernard Mandeville long ago claimed that without private vices there is no pubic benefit[2]. He too used the self-interest of bees as a metaphor for the benefits of self-interest (in a much less flattering light than we are). For social entrepreneurs that self-interest can be a powerful tool for achieving public benefit. Especially when we harness it from those we are trying to benefit.

[1] These statistics are slightly old and probably under-represent the current impact. Taken from “Silence of the Bees - Impact of CCD on US Agriculture” at www.pbs.org/wnet/nature

[2] Mandeville, Bernard. “Fable of the Bees” published in 1724

Friday, August 6, 2010

Weekly Review – August 1st – August 7th

We missed last week, so this weeks Weekly Review has a few more stories then usual. In case you are new to the blog, every week at Invested Development, we scan the web for articles that relate to what we do and what we like. This week we read a lot about clean water and mobile money.

PlayPump's Problems Prove Designing for Water Shortages Is Tough Work

This is a quick illustration of the many risks that remain for great ideas trying to become great ventures. We all too often fall in love with a concept, product or design only to loose focus on it’s implementation. For start-ups the risk to scale quickly can lead to botched implementation, high-costs, poor results and worst of all, disproof-of-concept. Another important topic mentioned, there is never one solution. Entrepreneurs and investors should continue supporting innovative twists, despite a few high profile competitors grabbing dollars and headlines.

1/2 of All China's Water is Too Polluted to Drink

Affordable clean water is a huge issue and a real opportunity for a creative social entrepreneur to go big while dramatically improving the lives of the world’s most needy. This article (the title alone) illustrates just how big a need it is and the next article highlights some unexpected solutions.

India’s Long-Distance Watershed

Just to highlight the pandemic that clean water is becoming; a Houston based company, S2C Global Systems has created a for-profit business that will ship bulk drinking water from Alaska to India. For anyone who is familiar with water’s more annoying qualities (it is heavy, hard to contain and evaporates at relatively low temperatures), this is a real eye-opener.

Financing Solar Power in the Developing World

A look at how the Solar For All competition entrants are getting capital, but they are really missing the mark. Promethean Power, a third-place winner, got seed capital from very traditional sources like Quarcus Trust and one of Invested Development’s Angel Investors as well as ID partner First Light Ventures. We are certain they are not the only ones tapping for-profit investors.

Tech @ State – Mobile Money

This is a nice collection of videos from the Tech @ State event this past week in D.C. This particular collection of videos is from the Mobile Money panel featuring Ben Lyons (Frontline SMS: Credit & Kopo Kopo) and Raul Hinojosa (Transfercel), two entrepreneurs that ID is very familiar with.

In 3.5 minutes, learn how M-PESA reached 10 million Kenyans in 3 years

The title says it all. This nifty video created by CGAP explains just how the M-PESA system works. It is the most successful mobile money platform in the world for a reason… to bad that it won’t work in many countries due to regulations prohibiting telecoms from acting like banks.

For mobile banking, lessons from research into illiteracy

Literacy is becoming a key issue in the evolution of mobile banking. Unlike traditional banking (where clients can interact verbally), mobile banking requires that a user be literate (at least semi-literate). This is not a prerequisite for mobile phone use and many of the Worlds 4+ billion mobile phone users are indeed illiterate, especially when we look at the 1.25 billion unbanked mobile users.

TED Talks to Beyond Profit: Guido Nunez-Mujica

Guido and the LavAmp team are also Unreasonable Fellows. We had an opportunity to meet the team on a recent trip to Boulder. The technology still needs some tweaking, but it has tremendous potential as an affordable diagnostic tool for both humans and animals.

Monday, August 2, 2010

Leveraging Mobile Ubiquity to Improve Life at the Base of the Pyramid

This post is the second of a series on mobile phones and the Base of the Pyramid. You can find the first of the series here.

In our previous post we explored the explosion of mobile phone access and the innovative businesses that enabled it. In the next two posts, we will look at companies and trends that are leveraging mobile access to provide valuable services to the poor in emerging markets.

SMS Enabled Services

SMS (Short Message Service), better known as text messaging, has had a tremendous impact everywhere in the world. To many of us, it is just a simple way to quickly communicate with friends and family. However, to an increasing number of people at the base of the period, it is an essential platform enabling everything from ad-hoc marketplaces to outsourced employmnent. This post will highlight a few of the innovative companies that are revolutionizing what we can do with regular cellphones to help some of the most needy people in the world.

Mass Texting for NGOs

An early service derived from the ubiquity of mobile phones is mass SMS or text messaging. At its most basic level, it provides an easy way for groups to communicate even where computers are impractical. FrontlineSMS for example, provides a platform for NGOs to manage texting lists (mailing lists, for text messages). Using this software, a NGO can reach out to their fieldworkers anywhere in the world, raise awareness for a campaign, run surveys through FrontlineSMS’s SurveyManager or reach specific individuals in a targeted community.

Mobile Payments

Mailing lists where just the beginning, even for Frontline SMS, as they have spun out several other services including Frontline SMS: Credit; a Mobile transaction service enabling MFI’s (microfinance institutions) to provide financial services via SMS messaging services.

Mobile banking platforms are too numerous to list. They are largely operated by established Telecom’s (e.g. Safaricom’s (Vodafone) mPesa) or Financial Institutions (e.g. ANZ’s Wing Money). However, what might be the most interesting innovation in mobile banking is largely being carved out by small start-ups like Kopo Kopo and SF Global that are creating neutral mobile transaction platforms that don’t require affiliation with a given telecom or financial institution.

Texting to make money

Beyond simply moving money using SMS technology, a few companies have figured out how to leverage mobile phones to directly contribute to the income generation of those who need it most.

TxtEagle has leveraged mobile ubiquity to develop paid micro tasks assigned to mobile users with a little free time and a need for cash. TxtEagle breaks simple tasks into small units so that individual mobile users around the world can complete a part of the task via SMS. In turn, the mobile users are paid in either airtime or mobile money.

Another great example is Empleo Listo!, the Latin Americas arm of US based Assured Labor. They are creatively using mobile technology to improve employment inefficiencies at the base of the pyramid. By creating an SMS enabled job listing and employment matching service, Empleo Listo! provides anyone with a mobile phone immediate access to jobs that are pre-screened to meet their specific requirements.

Final thoughts

The few examples here are just the tip of the iceberg and every week we see new innovations in mobile technology for the poor in emerging markets. The sheer size of the market is driving mainstream manufacturers to produce cheaper and cheaper products, but the real innovation is on the software side, where developers are finding ways to reinvent everything as affordable, empowering mobile apps. Next week we will look at smartphones and the massive potential that their computing power and connectivity create.

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