It’s great to be here with so many leaders who are driving a truly global movement to achieve lasting social change through innovation and entrepreneurship. I want to thank Sankalp, whose conviction that enterprise-led development is a crucial way forward. They have been instrumental in bringing about the incredible growth in the space that we’ve seen in such a short time.
Today I want to celebrate, but I also want to agitate.
First, I want to celebrate with all of you the tremendous progress that has been made with impact investing and social entrepreneurs.
I also want to agitate, which may be a strong word but it’s the kind of word you use in an opening morning address to get people’s attention. I’m agitated about the challenge that all of us are experiencing in different ways. This challenge is about how entrepreneurs can take their ideas to scale.
Let’s start with the celebration. What everyone here is doing is amazing. We at the Rockefeller Foundation have tried to do our part to support all of the wonderful innovators and risk-takers by helping grow the field of impact investing.
Many years ago, we and others saw the possibility and necessity of unlocking capital from the private sector to address our most important social and environmental problems. We all know that governments and philanthropies fall trillions of dollars short in financing solutions to the challenges we face. We also saw an increasing appetite among investors for opportunities to realize both financial and social returns.
So we spent more than $40 million USD in the first phase of our work to bolster the infrastructure for impact investing and help it take root. This included helping start the Global Impact Investing Network and the Impact Reporting and Investment Standards, or IRIS, to provide a common framework for reporting the performance of impact investments. More recently, and here in Asia, we partnered with Asia Community Ventures to launch the Impact Economy Innovations Fund, a challenge that garnered over 40 proposals from 8 countries in East and Southeast Asia, ultimately awarding $400,000 in grants to four organizations that will help foster the growth of the impact economy.
We continue to voice our support for the development of the field, working with groups that are developing policy recommendations and letting investors of all kinds know that there’s still more than enough room for them to jump in and put their dollars to work toward achieving social impact.
I’m also excited to share with you that the Rockefeller Foundation’s President, Judith Rodin, will soon release a new e-book, titled The Power of Impact Investing: Putting Markets to Work for Profit and Global Good. Co-authored by Margot Brandenberg, a former colleague of ours, the book serves as a guide to the field, full of anecdotes, history, and practical advice, all of which points to an important truth: anyone—from a single individual or small group of investors, to a large corporation—can be an impact investor.
I’m proud of what my colleagues at The Rockefeller Foundation have accomplished, and we’re prouder of what our partners and many of you have accomplished. With that, I end the celebration part of my address. Let’s move on.
We’ve achieved a lot, but there’s more to be done. As I mentioned earlier, a priority if for all is to start thinking more—and innovating more—about reaching scale.
There’s been incredible growth in the number of enterprises that intentionally seek financial viability, social impact, and influence. These impact enterprises, and the investors who will fund them, have the potential to significantly enhance the wellbeing of poor or vulnerable populations.
But too many of these enterprises struggle to invest in their own growth, to continually reduce costs and complexity, and to frame opportunities for investors who are willing to invest in their next stage, particularly the equity-like investments that can be directed to growth rather than day-to-day operations.
So how do we break through this scale barrier? Maybe we need more ways to think about reaching scale than just growing the enterprise.
For example, some impact enterprises tackle the scale barrier by connecting social entrepreneurs with others who have already faced, and met, the challenge of achieving scale in a range of situations. This gives impact enterprises the capacity and knowledge—important forms of human capital—that they can’t develop internally and organically.
I met Teju Ravilochan, about six months ago in San Francisco. He is one of the founders of Unreasonable Institute, an organization that matches social entrepreneurs with accomplished mentors from the private and social sectors. Teju tells the story of a visit he took to India when he was a boy. After seeing his father give money to a beggar, also a boy, Teju asked his father what had just happened—he couldn’t wrap his head around why he and this other boy had such different experiences of life. His father then talked to him about poverty for the first time, and explained that people did sometimes try to fix it, but for the most part saw it as an impossible problem to solve.
Teju’s father was a doctor, and Teju knew that he’d been to medical school, and had great teachers. So Teju asked him a simple question, one that would set him off on the mission he’s still working to carry out today. He asked, “Is there a medical school for people who want to solve poverty?”.
And that’s what Unreasonable Institute has become—a kind of med school for entrepreneurs seeking to tackle the world’s greatest challenges. They learn to help people come out of poverty from people who have done it. They learn how to raise money from people who have done it. They learn test and prototype products from people who have done it.
Teju has found a way to provide entrepreneurs with a different kind of growth capital—human capital and the networks necessary to scaling up any enterprise.
Others are looking to achieve scale by creating communities of social entrepreneurs tackling similar problems, with the idea that, together, their efforts can equal more than the sum of their individual parts.
Take Ross Baird, for example, who, when working with education-focused impact enterprises in Hyderabad, India, observed a paradox: there was an incredible number of talented enterprises, but there wasn’t a functioning system to support them.
So in 2009, Ross started Village Capital, which recruits entrepreneurs devoted to solving problems, and operates a rigorous management training program to help them find business models. At the end of each program, entrepreneurs receive investment capital through a unique peer selection model. While Village Capital’s original partner programs focused on a geography, Village Capital has evolved to take a problem-based approach—recruiting entrepreneurs solving similar problems, building a community of practice to make real progress.
A third model is to step even further back, and think about scale in terms of enabling entire industries, as opposed to single enterprise or even groups of enterprises. In fact, the Rockefeller Foundation and others concerned about this question recently supported research by Monitor Deloitte that addresses this very issue. They just launched a fascinating report earlier this week, “Beyond the Pioneer: Getting Inclusive Industries to Scale” which I understand the Monitor Deloitte team will be discussing here on Friday. The report offers many recommendations for removing barriers to scale at the industry level that impinge on the ability to achieve meaningful social impact.
One example of this industry and ecosystem approach is a Rockefeller Foundation initiative calledSPEED—Smart Power for Environmentally-sound Economic Development. We took a close look at one of India’s most pressing challenges—rural electrification. Some of you are doubtless familiar with the challenges we found: 42,000 villages in the country are either under-electrified or entirely unelectrified. This leaves over 400 million people without the energy they need to perform basic tasks, like lighting their homes, or power small-scale equipment like irrigation pumps that would go a long way toward improving their quality of life.
But at the same time, in the very same rural regions, there’s been ongoing growth in the mobile industry. This has led to the building of thousands of new cell towers in these electricity-poor villages. Right now, without access to the electric grid, these towers consume expensive, dirty diesel fuel—about two billion liters every year. They are searching for cleaner and cheaper energy solutions.
So we’re exploring ways to work with communities, NGOs, government leaders, and industry to develop a game-changing new business model that would attract private energy service companies to build off-grid renewable energy power plants in these areas, leveraging the steady source of revenue that the cell towers would provide and enabling communities to become customers as well. The bigger the overall demand, the cheaper we can provide the supply. Combining cell phone tower demand and community demand together is one way to do this that benefits both parties.
But there’s more. With this infrastructure for electricity in place, we can also aggressively promote the development of microenterprises and other businesses that create jobs and secure livelihoods in rural areas—this would further boost demand for power, making energy companies all the more eager to invest in these areas. You can start to see the positive feedback loop that starts to develop when you take an industry perspective.
It’s a relatively new idea, one we’re still developing and testing, but we’ve already seen that the model can have real impact on people’s lives. We see our role as helping support the ecosystems and market for innovations to occur and scale.
While the economics are attractive, the potential for impact is what’s truly exciting. I travelled with our team to a village called Bara in Bihar, which isn’t fully connected to the grid. I met a carpenter named Tamesh, who makes furniture for people in Bara and its neighboring towns. Tamesh used to cut wood using a diesel-powered table saw. Not only was this expensive, but the fumes and noise from the diesel made it impossible for him to work for as long as he would have liked.
With some financing help to convert from a diesel motor to an electric motor, and additional financing help to pay for the first six months of electricity, Tamesh was now able to purchase electricity from a biomass power plant operated by one of our partners. His energy costs have been cut in half, he’s been able to produce more furniture, and the excess electricity has made it possible for his children to study at home after dark. He can also now use electric hand tools to expand the range of his work, and the electric light bulb allows him to work longer hours. All this from what you and I mostly take for granted—reliable electricity.
But I’ll be honest: despite all this great work that I’ve just described, I’m still left somewhat dissatisfied that we don’t systematically think about scale as much as we should. There’s still a fundamental gap between the way that we in the social sector do business, and the way it’s done in the world of traditional entrepreneurship in the private sector. It’s a gap that we need to bridge before we see impact investing and social entrepreneurs realize the amount of change that we all aspire to.
I think it starts at the very moment when the idea for an enterprise is formed. One of the best parts of my job at the Rockefeller Foundation is meeting great social entrepreneurs. Typically, a social entrepreneur’s starting point is to say: “I see a problem, and I have an idea for how to solve it,” then imagines an organization that would implement that solution—first at a small scale, then if it works, incrementally at a larger scale. As the social entrepreneur discovers their path to scale, they have to invent ways to make the enterprise sustainable along the way.
But before joining the Rockefeller Foundation, I was a strategy consultant who spent a lot of time in Silicon Valley. Over there, the starting point is usually the desire to realize absurdly large scale returns. They’ll start by saying something like, “I have a rough idea about a new use for text messaging and I want to create a billion dollar company,”
My point is that for many Silicon Valley entrepreneurs, reaching scale is inherently part of the initial idea. That is what attracts investment upfront and gives the entrepreneurs the ability to finance their growth in addition to their operations. My belief is that for too many social entrepreneurs, scale is something to be addressed after their initial idea has proven to be feasible. I’m not trivializing what they accomplish—improving schools is a lot harder than a writing a new text messaging app—but scale is often not built into the wiring of the original model as much in the social sector as it is in the private sector.
So what I’m wondering is how we can encourage that kind of bold thinking about realizing scale at the onset among social entrepreneurs. Taken to an extreme, I’m imagining the entrepreneur who, instead of starting with a theory of change about improving a school or developing a new water pump, says, simply, “I want to improve 100 million lives,” and then figures out the best way to get it done.
One thing is certain: if we can achieve that shift in thinking, it’ll happen because of gatherings like this Unconvention Summit, and leaders like the ones here today. The same dedication that has spurred countless advancements in social entrepreneurship and innovative financing will help us do more for the people we’ve set out to serve.
Thank you.