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Three Key Camps at the Heart of the Impact Investing Movement

Ben Powell, Founder and Managing Partner of Agora Partnerships

If you are like many people, you are new to impact investing, have a mild notion of what it is, and believe that it could be important, maybe even revolutionary. But this notion is tempered by massive confusion surrounding the term.

Understanding the different agendas of the three key camps under the impact-investing umbrella can help you navigate this complex conversation.

Impact-First Investors (also called “Social-First”)
The origins of the term impact investing begin with a handful of foundations and non-profit organizations (incidentally, nearly all of which were founded by entrepreneurs). These groups believed that investing in entrepreneurs was a better way to solve social problems around the globe rather than the project-based approach that has dominated development assistance since the 1960s. These foundations wanted to get affordable, “patient” capital to real entrepreneurs who could then turn it into measurable impact. For this group, which includes most of the founding members of ANDE, the primary purpose of impact investing is social – to serve the needs of society, as quickly and tangibly as possible

A good example of an impact-first investor is Kevin Starr at the Mulago Foundation, author of an excellent recent post on the dangers of impact investors chasing returns over impact. His definition of impact investing is:

The practice of putting money—loans or equity—into impact-focused organizations, while expecting less than a market rate of return

Return-First Investors (also called “Finance-First”)
This is a group of mostly mainstream investors interested in creating products for their clients that allow their money to generate a triple bottom line return – meaning a market rate of return and a measurable (or at least ratable) social and environmental return. Much of the attention around impact investing has been focused on these big players like JP Morgan and Prudential. The hope is that traditional finance companies will unlock billions in investment capital that also demands to know its social impact.  Return-first investors are trained in closing deals that make money. For them, the defining feature of an impact investment is that it can favorably compete with the financial returns of a traditional investment. Ignia Fund is a good example of this approach, as is the official definition of impact investing from the GIIN.

Entrepreneurs and Field Builders
The third group doesn’t consist of investors at all, but of non-profits and some foundations that are focused on entrepreneurial eco-system development and supporting the field at the entrepreneur level. This group includes many of the founding ANDE members and smaller start-ups.  As a whole, this group believes that the key drivers of development are entrepreneurs, not investors, and that now is the time to focus our efforts on entrepreneurs. For this group, impact investors are key allies, but they lament that not enough of them are yet willing to pull the trigger, especially with smaller, angel deals, where their impact can be greatest.  The basic allegiance of this group is to the entrepreneurs on the ground. An impact investor might ask, “How can I find good deals that created blended value?” The entrepreneur camp, on the other hand, asks, “How can we help entrepreneurs make better decisions that result in increased growth and increased impact?” B Lab is a great example of this camp.

A working definition of impact investing for this group is Agora’s own:

The practice of investing in impact entrepreneurs.

Working Together
While each group has its own motivations and agendas, they must all rely on one another if we are to put ourselves on the path to a more sustainable capitalism for the 21st Century. Whether these groups can coordinate their resources effectively and work together is one of the most fundamental questions facing the movement today.

Reflections on my time as a Summer Associate

Originally uploaded by agorapartnerships1

by Andrew Zizmor

As the end of the summer draws near, I wanted to share some insight into my summer internship with Agora’s Washington D.C. office. It was only 11 weeks ago when I first stepped into the Agora office. I was excited to become involved in the small and growing business and social impact investment community and work with Agora on an exciting new initiative, the Accelerator. For me, the opportunity to become involved in this larger community and further develop Agora’s unique approach towards entrepreneurs was an opening that I could not pass up.

During my first week at Agora, I attended the ANDE Orientation Training in New York. This was an incredible experience as I was able to get my “feet wet” within the industry and discover the different business models popular in this sector. Even though each organization has their own method to success, we all have the same goal: to help develop small and growing businesses. Some organizations focus purely on the investment side, while others provide entrepreneurs in developing countries with socially beneficial products that they can sell. While both these methods can be successful, I believe Agora’s integrated approach is the best way to support entrepreneurs and develop economies.

Over the past summer, I have seen firsthand the impact Agora has in Nicaragua and the approach the team has taken towards entrepreneurs. With this experience and knowledge, I have been working with Agora on its new initiative, the Accelerator. The Accelerator is a six-month program that will supply impact entrepreneurs with the knowledge, networks, and capital to succeed as a business. The venture capital model will allow the participants to work one-on-one with a portfolio manager to develop their businesses and prepare to pitch their businesses to investors at the annual investor conference. The past participants will form a regional network to encourage and assist other impact entrepreneurs within their region. This integrative approach is the best method to develop entrepreneurs in Central America.

In my opinion, small and growing businesses need more than just capital to succeed. They need business skills, and a network to support them. The Accelerator provides business training courses and a community of mentors to guide fellow entrepreneurs in their development. There are many great companies out there that are not yet investment ready but need additional support, the Accelerator will help guide them.

While providing services and products such as glasses and equipment allows entrepreneurs to run socially beneficial business, it does not provide the infrastructure and community to inspire other entrepreneurs. One of the really amazing aspects of the Accelerator is the community that it will create among the entrepreneurs. At the start of the Accelerator, participants will be introduced to their fellow impact entrepreneurs and matched with mentors to guide them through the process. In addition to the networking lunches, entrepreneurs will be trained on how to develop their own communities. This will hopefully create an inspiring and lasting chain reaction within these communities.

With the great work that my co-workers and I have done over the summer and the amazing partners we already have on board, I know that the Accelerator will be a great success. Not only in terms of the entrepreneurs that we will help grow but also in the towns and communities that will reap the benefits of their success.

ANDE Latin America Conference 2010

By Lissette Cuadra

This past week I spent most of my days at the ANDE Latin-American Conference in Granada, one of the most beautiful cities of my lovely Nicaragua. Agora had the honor of hosting it along with Root Capital and TechnoServe. Let me reiterate what and honor it was.

As part of the Agora Staff in Nicaragua, it was a great experience getting to know some of the organizations we are related to through the ANDE network and to strengthen the bonds for collaboration.

The whole week was very productive in terms of learning about what other partner organizations are doing, sharing experiences to develop entrepreneurship and SGBs in the region, and overcoming obstacles in the creation and improvement of best tools and networks for the growth of these businesses.

I felt like I needed to talk to so many people about so many things! I didn’t know where to start.

I will definitely begin by mentioning my first contact with Agora’s new additions.

New Associate in DC, Roger Teran, he seems to be a great addition to the team, and I’m glad to have a new link to the DC office. Roger seems very talented and eager to work with Agora’s Nicaragua office and I’m glad that he got to come to our country for this event.

Also, it was nice to meet Sarah Hiller, our upcoming 2010 Fellow. She will be joining us in Nicaragua early April. She will be an integral part of the exapnsion of our Women’s Initiative. I will need so much help with that, and I know that her experience in Guatemala, and her general background will be of great assistance to make this program successful. I will tell you more about it in my post next week. Continue reading ANDE Latin America Conference 2010

Why Granada Matters

ANDE’s first ever conference in Latin America holds huge promise to put entrepreneurship on the development agenda in some of the hemisphere’s poorest communities.

By Ben Powell

On March 26th, over 100 representatives from over 50 organizations across Latin America are convening in the colonial city of Granada, Nicaragua for the Aspen Network of Development Entrepreneurs’ (ANDE) inaugural regional conference.

The setting is auspicious. After Haiti, Nicaragua is the second poorest country in the Western Hemisphere. There are few places where good entrepreneurs are more needed than in Nicaragua. With investors and development organizations looking for new models to support sustainable capitalism throughout all of Latin America, the meeting is timely.

The conference aims to build the entrepreneurship movement in Latin America by bringing together development organizations, fund managers and funders. While microfinance and large-scale businesses in these countries have markets that function reasonably well and are supported by professional industries, the same cannot be said for the small business sector.  The ecosystem that supports small and growing businesses is on life support in poor communities throughout the hemisphere.

These communities need a serious injection of energy, coordination, investment, trust, and partnerships to lay the foundation for entrepreneurship to flourish. They need a professional class of local men and women who can work together to create a self-sustaining environment that encourages innovation, risk taking, and entrepreneurial vision. Continue reading Why Granada Matters

Gearing up for the ANDE Conference

We’ve been working hard to let everyone know about the Aspen Network of Development Entrepreneurs (ANDE) Conference coming up March 23-26 in Granada, Nicaragua.  There’s been lots of talk about the event in the DC office as we talk with event organizers, tweet to supporters and anticipate what we expect to be a productive event.  This marks the first ever regional conference called “Growing Small Businesses in Latin America,” so there’s lots to be excited about!  Not to mention the fact that Agora Partnerships is co-hosting the event.

We can’t wait to hear all of the innovative  ideas that will come from this gathering of key players, all focused on supporting entrepreneur-driven strategies to help combat global poverty.  We’ll be sure to post updates during the event and after — hopefully, we’ll have ways for you to be involved even if you can’t join us.