Making an Impact: Lessons and Encounters in the Social Business Sector

This summer I am interning at Agora Partnerships, a nonprofit organization that provides early stage social entrepreneurs with access to capital, networks, and resources in Latin America. Social businesses are those organizations that are financially sustainable and make an economic, environmental, or social impact. Impact investing refers to investments that are made by individuals into organizations or products that claim to make a social impact and generate sustainable financial returns.

I am currently based in Managua, Nicaragua and my role this summer is to recruit social entrepreneurs from across Latin America (specifically Colombia, Brazil, Mexico, and Peru) for Agora’s accelerator program. Thus far this experience has been very valuable, and the purpose of this entry is to discuss some of the opportunities and challenges facing the field of impact investing. Most of these observations were made at the ANDE (ASPEN Network of Development Entrepreneurs) Orientation Training 2013 and the Agora Impact Investing in Action Conference (IIA) 2013.

To learn more about these organizations (Agora & ANDE), click on the links below:

http://agorapartnerships.org/

http://es.agorapartnerships.org/

http://www.aspeninstitute.org/policy-work/aspen-network-development-entrepreneurs

http://impactinvestinginaction.org/

The impact investing sector is young compared to other sectors that have been in existence for centuries but it presents many valuable opportunities. For example, the demand for investments that generate social impact and a positive financial return has risen greatly especially by Generation Y or “Millennials” (refers to those born after the 1970’s or 1980’s). This new generation expects a stronger sense of social fulfillment, and they are beginning to amass great wealth through new ventures and startups. Their influence is growing, and examples can be seen in the leadership of organizations such as Twitter and Facebook.

Another opportunity has been a stronger focus on impact metrics, or metrics that describe the positive difference that a social business or organization is having on a community, country, or region. Three examples of these types of metrics are “number of women employed,” “greenhouse gas emissions”, and “water use.” Organizations such as Global Impact Investing Rating System (GIIRS) and Impact Reporting and Investment Standards (IRIS) are helping social businesses and related entities to capture this information to make this industry more transparent, to share best practices, and to search for inefficiencies. Finally, the quantity of services offered in the social impact have grown and these include capacity building, connecting entrepreneurs with investors, investing in social entrepreneurs, and providing actual knowledge and resources to social entrepreneurs. There are organizations such as the Acumen that focus on all the aforementioned, and then there are organizations such as Agora Partnerships (an accelerator) that have one main focus, capacity building.

To learn more about GIIRS and IRIS, click on the links below:

http://giirs.org/

http://iris.thegiin.org/

Although the impact investing sector presents valuable opportunities, it is also important to be aware of the challenges relating to this sector. One of the largest challenges faced by investors and entrepreneurs in this sector is the balance of impact and profit. It is very difficult for a for-profit organization to make an impact and to generate sustainable revenue simultaneously. As organizations grow, so do the number of stakeholders, capital expectations, demand for resources, and more. This can sometimes cripple a social business solely focused on impact, or it can push a social business to stray from its original mission (mission drift). Another challenge is the scalability of social businesses, or its ability to offer the same or similar products services across new markets. The products and services that a social business offers to the consumer might only be relevant to a specific market, making it too expensive or too risky to tap into new markets. The last challenge relates to fundraising for social venture funds, accelerators, and early stage entrepreneurs. Individuals from each of these groups raise funds through donations, foundations, government grants, and crowdsourcing. Without these additional sources of revenue, organizations in the social business sector are not able to survive. Because of the turbulent economic environment, it has been very challenging to raise these funds. Many of these organizations are still trying to find a sustainable revenue model that does not focus so heavily on donations or grants.

To learn more about the social business or small and growing business sector (SGB), click on the link below:

http://www.aspeninstitute.org/publications/ande-2012-impact-report

My next entry will focus more on what lessons have been learned and applied by this sector in Latin America.

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About Benjamin Rene Garcia

CLASS President - Energetic, Game Changer, and Cornell MPA Graduate Student
This entry was posted in Brazil, Colombia, Mexico, Nicaragua, Peru and tagged , , , , . Bookmark the permalink.

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