Managing Impact & Portfolio Strategies

Pipeline Fellowship Workshop January 27, 2012 Jackie Vanderbrug Managing Director, Criterion Ventures

What makes today successful for you?

How has a gender lens impacted your life?

Agenda
Social Investing Gender Lenses Measuring Impact Case Study Call to Action

Agenda
Social Investing Gender Lenses Measuring Impact Case Study Call to Action

Social Investing
Social investments seek to generate both financial returns for investors and social returns that benefit broader society
Philanthropists: Maximizing social returns

High

Social Investors: Blended Value Social and financial returns

Social Returns
Investors: Maximizing profit

Low

High

Financial Returns
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Impact Investing
Actively placing capital in businesses and funds that generate social and/or environmental good and at least return nominal principal to the investor

Venture Philanthropy Program Related Investing SRI Screens Women Invest in Women Community Investing

Impact Investing
Crowd Funding Carbon Markets

Micro-lending

1980

1990

2000

2010

Impact Investing: Magnitude

Global Assets Under Management

Socially-Oriented Investments

Screens: $6.99 T Philanthropy: $.33 T $50 T

Impact Investing $.5 T

Socially-Oriented Investments

Who is investing in social enterprise?

Friends & Family Foundations & Institutions
Program Related Investments (PRIs), microloans
PRI Makers, Confluence

Angels and Angel Networks

Toniic Investors Circle PYMWYMIC Women

Fund Managers
RSF Social Finance

Venture Capitalists
City Light Capital IGNIA

Banking
New Resource Bank
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25 Pioneer Funds
North American Pioneers Emerging Markets Pioneers

Who else is financing social entrepreneurs?

Crowdfunding
Kickstarter Kiva Crowdrise Indiegogo

Foundations/Nonprofits/Academic Institutions
Awards, Fellowships, and Grants
Examples: Echoing Green, Mobilize.org, Draper Richards Foundation, Global Giving, Kauffman Foundation, Skoll Awards, Unreasonable Institute
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Where Pipeline Fellowship Fits In

Friends &
Self Capital Contributions
Family/Public

Angels Equity, Debt US$150K US$1 million

Loans, Grants, Awards US$1,000 US$50,000

Venture Capital Equity, Debt US$1 million & up

Banks, IPO, etc

US$50,0000
12 Reference: Angel Resource Institute, Angel Investing: An Overview. (2011).

Across Asset Classes

An increasing number of innovative financial products (investment vehicles) across asset classes, altering the landscape of social investing for consumers
Equity
Ownership; Stocks; Longer Duration

Debt
Fixed Income; Bonds

Cash
Cash Equivalents; Money Markets; Liquidity; Short Terms

Real Estate
Commercial; Residential; Industrial; Mortgage-Backed Securities

Commodities
Futures; Forwards; Options; Oil; Gold; Corn

Impact Portfolio: Geographic

Emerging Markets
Latin America, Africa, Asia

Domestic/Local
Example: Boston Metro Area

Multi-national
Cross-border issues (environmental, human trafficking, etc)

Impact Portfolio: Issue Area

Environment
Climate Change, Water, Sustainable Agriculture, Fisheries

Womens Rights
Womens Education, Womens Health, Sex Trafficking

Healthcare
Accessible Technology, Affordable Medicine, Research, Systems

Types of Companies/Ventures
For-Profits (Companies and Stock Corporations)
Non-Profits
NON-PROFIT

Hybrids
NON-PROFIT FOR-PROFIT

FOR-PROFIT

FOR-PROFIT

NONPROFIT

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Benefit Corporation
Purpose is to create a general public benefit Adds a fiduciary responsibility - a public benefit Requires certification by a recognized entity & an annual for-benefit report Benefit officer joins the board as a voting member Required two-thirds super majority to change the status from a for benefit corporation

Low-Profit Limited Liability Company (L3C)

Purpose to further a socially beneficial mission and mirror the PRI requirements Charitable or educational purpose of IRS code Production of income/appreciation of property not a significant purpose Purposes not to include political/legislative In a small and growing number of states (Vermont, Michigan, Wyoming, Utah, Illinois, Maine, Crow and Oglala Sioux Nations)

Flexible Purpose Corporation

Companys articles of incorporation would have to specify a special purpose that the corporation engages in, which can include but is not limited to charitable activities
-Can include promoting positive effects of companys activities upon stakeholders, community, society, environment OR minimizing adverse effects

Unlike the Benefit Corporation, the CA legislation does not require that flexible purpose corporations and their special purposes be certified by a third party Unlike the L3C, profitability is still an express purpose of the corporation - directors are not required to prioritize the charitable purpose over profit

Impact Investing: Current State

Impact investing could become a complementary force for providing capital, talent and creativity necessary for addressing critical social challenges Challenges Lack of efficient intermediation Lack of enabling infrastructure Lack of sufficient absorptive capacity Opportunities Growing interest among capital providers

Need for new solutions to social problems

Early successes; developing track record for impact investing Flock of talent

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Agenda
Social Investing Gender Lenses Measuring Impact Case Study Call to Action

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Goldman Sachs

Nike Foundation

World Bank

Hillary Clinton 100 Years, 100 Women

Women Effect Investments (WEI)

Women Effect Investments is a field-building initiative that seeks to mobilize more investment dollars toward improving the condition of women and girls worldwide

Mobilizing women investors and investment capital towards generating the Women Effect through investment Strengthening and creating new investment opportunities with a gender lens across a diverse set of financial intermediaries (funds and other vehicles)

When women are economic agents and leaders, social change accelerates and returns multiply This is the WOMEN EFFECT
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3 Gender Lenses
A gender lens serves as a viewfinder for investment opportunities both from impact and financial return perspectives

Workplace Equity

Access to Capital

Products & Services

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Workplace Equity

Workplace Equity

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Products & Services

Products & Services

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Access to Capital

Access to Capital

oses* only,* use* its* for* by* author,* Karmijn* Kapitaal* Fund* (the* I* Fund)*

a' on* the* by* Fund.* This* business* plan* does* cons' tute* offer* not* an* or*

n' ty.* This* business* plan* confiden' al* proprietary* intended* is* and* and*

*of*the*recipients*to*treat*the*informa' on*accordingly.*Under*no*
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ransmiHed,*or*otherwise*given*to*any*person*than*the*authorized*

press*or*implied,*are*made*as*to*the*accuracy*or*completeness*of*

Asking Questions is the First Step

Management and Board # of females on management team? # of females on the BOD or board of advisors? Employees % of total female employees? Breakout of number and percent of females by level Initiatives in place to increase female employment? Policies and Programs Maternity leave policy? Onsite daycare services? Other policies and programs for female employees? Flexible career options (eg telecommuting) Reporting on these policies and programs? Historical compliance? Suppliers and Vendors Gender composition of supply chain (female ownership of distribution, manufacturing)
Legal Complaints or reports of gender discrimination, such as salary inequality? Capital Access Services Services that help women gain access to capital, such as technical training? Ownership % of company owned by women

Workplace Equity

Access to Capital

Products & Services

Products and Services Products and services targeted at female customers? If so, how do they provide value to females? Any indirect benefits females receive from the products and services? % of female customers?

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Agenda
Social Investing Gender Lenses Measuring Impact Case Study Call to Action

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The Great Debate: How, How Much, and When?

Uniform metrics to build an industry
Multiple stakeholders asking for different metrics has crushed too many good organizations. George Overholser, NFF The first impact evaluation I ever saw of microcredit made my stomach ache. It asked clients You are eating better now, compared to before yes? [This organization] was doing just as much to measure its impact as anyone elsevery little. Dean Karlan, IPA

Core guiding metrics + context specific

Context-specific measures as developed by the entrepreneur. Tom Bird

RCTs

Pick one thing

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Timeframe and Different Perspectives

You need to be measuring from the outset or you wont know what youre achieving. Job # 1 is to get to sustainability or you cant accomplish anything You need to get to break even before measurement.

Concept

Investment

Profit

New business

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Core metrics across portfolio, that serve as proxy for returns and impact for individual organizations

Revenue Growth Lives Touched Growth

Financial Customer Business Process Learning Growth

Customized Metrics for Each Organization in 4 key areas

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Whats the right way to measure?

Logic Model = Impact Value Chain

1
Build a community of Certified B Corporations

2
Advance supportive public policies
3

Drive capital to impact investments through use of GIIRS

GIIRS Products
1 2 3

COMPANY RATINGS

FUND RATINGS
CUSTOMIZED PORTFOLIO IMPACT ASSESSMENTS GIIRS ANALYTICS

Beta test starts in Q1

25 Pioneer Funds
North American Pioneers Emerging Markets Pioneers

Company Assessment - Topics

Impact Area Governance Workers Community Environment Socially & Environmentally Focused Business Models Subcategories Corporate Accountability, Transparency Compensation, Benefits, & Training, Worker Ownership, Work Environment Community Practices (Local Involvement, Suppliers & Distributors, Civic Engagement & Giving, etc.), Community Products & Services Environmental Practices, Environmental Products & Services The Socially and Environmentally focused Business Models (SEMs) highlight a companys core impact business model, amplifying their positive impact beyond simply high impact business practices

IRIS & GIIRS

Impact investors require a common language to describe social and environmental performance IRIS was developed to meet this need GIIRS uses IRIS definitions to create ratings and then applies an assurance process From the beginning, IRIS and GIIRS were designed to fulfill complementary roles in the impact investing sector

Adopting IRIS
Direct investors can adopt IRIS by identifying a set of applicable metrics and reporting performance data consistent with IRIS definitions

Benefits Credibility, Comparability, Consistency, Benchmarks, Infrastructure

Whats the right way to measure?

IRIS

GIIRS

Impact Measurement at SvF

SROI (Social Return on Investment)

Measures the system-level socioeconomic value created by an investment as opposed to the individual beneficiarys earnings boost

BACO (Best Available Charitable Option)

Compares the cost-effectiveness of creating one unit of social impact through investing to the cost-effectiveness of creating one unit of social impact through charitable option

REDF

Acumen Fund

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TRASI

Getting in the Entrepreneurs Shoes

Whats the right way to measure? How much should we be spending? What do we get out of it? (Is it worth it?)

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Agenda
Social Investing Gender Lenses Measuring Impact Case Study Call to Action

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What is The Hoop Fund?

Bundles
For profit Customer Brand Partner social enterprise 3 full time employees Mission: Change consumer behavior to build $25.00 a more connected marketplace

Producer

The Hoop Fund

$10.00

$10.00

$5.00
Minus Costs - customer acquisition - transaction fees

Social Return on Investment

Attract and Retain Impact Investors Internal Growth Measurement Assess Impact of Individual Projects

SROI Quantifiable Benefit

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Runa Tea
Total Loan Amount: $575 Total Number of Lenders: 17 ($28 each) Loan Recipients: 20 Kichwa farmers (part of a 200 member cooperative) Product Made: Runa Tea Project Funded: Reforestation of organic Guayasa trees Primary Target Impact: In 5 years, the income generated from harvesting guayusa will generate approximately $800 per family per year, doubling their income vs. the areas average. Social Impact Indicator
Increase in yearly income per family Increase in employment opportunities Improved quality of life

Measured by
Amount of increased income Number of new cooperative memberships Stories and testimonials

Goals for Success

$800.00 per family per year New memberships as a result of increased profitability for farmers Farmers and families report improvements

Agenda
Social Investing Gender Lenses Measuring Impact Case Study Call to Action

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Investment Vehicles in the Market

Microcredit, Mezzanine Debt, Social Investment
Vehicle Gender Lens Access to Capital Access to Capital Access to Capital Geography Global United States (Ohio) United States (Bay Area, NYC, Chicago) Southern USA Africa Latin America India Global Category Microcredit Microcredit Microcredit

Access to Capital Access to Capital Workplace Equity Products and Services Access to Capital Workplace Equity Products & Services

Mezzanine Debt Social Investment Social Investment (Venture Capital) Social Investment (Note)

Investment Vehicles in the Market

Venture Capital, Private Equity, Mutual Fund. Vehicle Gender Lens Access to Capital Access to Capital Access to Capital Geography United States West Coast USA Spain Category Venture Capital Venture Capital Venture Capital

Access to Capital Workplace Equity Products & Services

Access to Capital Workplace Equity Access to Capital ISIS Fund Access to Capital Workplace Equity Access to Capital Products & Services Workplace Equity

Iceland

Private Equity

France Netherlands Global Sub-Saharan Africa Global

Private Equity Private Equity Private Equity Private Equity Mutual Fund

uthor,* Karmijn* Kapitaal* Fund* (the* I* Fund)*

siness* plan* does* cons' tute* offer* not* an* or*

* confiden' al* proprietary* intended* and* and*

Investment Vehicles in the Market

Angel Investing

Vehicle

Gender Lens

Geography

Category

Access to Capital
Access to Capital Workplace Equity Access to Capital

North America
United States (Midwest and South) United States (Wisconsin and Midwest)

Angel Investing
Angel Investing

Angel Investing

It Takes an Ecosystem
Investment Vehicles Investor Groups

nta' on* for* is* discussion* purposes* only,* use* its* for* by* author,* Karmijn* Kapitaal* Fund* (the* I* Fund)*

Supporting Networks

Supporting Organizations

e* been* furnished* informa' on* the* this* by* Fund.* This* business* plan* does* cons' tute* offer* not* an* or*

urisdic' on* any* to* person* en' ty.* or* This* business* plan* confiden' al* proprietary* intended* is* and* and*

ents.*It*is*the*responsibility*of*the*recipients*to*treat*the*informa' on*accordingly.*Under*no*

*a*copy*be*shown,*copied,*transmiHed,*or*otherwise*given*to*any*person*than*the*authorized*

esenta' ons*or*warran' es,*express*or*implied,*are*made*as*to*the*accuracy*or*completeness*of*

* business* plan.* *

nce* that* Fund* achieve* investment* the* will* its* objec' ves* that* will* is* or* it* or* likely* achieve* to* results*

se* reflected* herein,* will* or* make* profit,* will* able* avoid* any* or* be* to* incurring* losses.* Investments* in*

le* only* qualified* for* investors* that* fully* understand* risks* the* associated* with* such* investments.* *

What Can YOU Do?

VOICE: The questions you ask What you write Advocacy

LEARNING: Gender Lens Investing Forum Ecosystem Calls Research papers

#GenderLensInv

What Else Can You Do?

Beyond investing, Beyond educating yourself and others, There are lots of ways to support building this field And they wont happen with out philanthropy.

TECHNICAL ASSISTANCE Women entrepreneurs training, incubation, mentorship Support social entrepreneurs to get capital-ready

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What Else Can You Do?

Beyond investing, Beyond educating yourself and others, There are lots of ways to support building this field And they wont happen with out philanthropy.

Research Due diligence around fund design Field/pipeline mapping Specific inhibitors (e.g. advisor strategies)

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What Else Can You Do?

Beyond investing, Beyond educating yourself and others, There are lots of ways to support building this field And they wont happen with out philanthropy. Community/Education Case studies Events for ecosystem players investors, intermediaries, entrepreneurs

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What Else Can You Do?

Beyond investing, Beyond educating yourself and others, There are lots of ways to support building this field And they wont happen with out philanthropy. THE ENABLING ENVIRONMENT Cultivate the opportunity for more gender lens investing vehicles Mobilize women investors and investment capital to invest with a gender lens

Women Effect Investments Bringing a Gender Lens to Investing 60

5 Things to Keep In Mind

1. Look for ventures with multiple lenses 2. Ask questions from a gender lens perspective, even if youre not making demands 3. Push questions of impact, while being flexible about when and how the measurement will happen 4. Stay active in the emerging space of impact assessment 5. Avail yourself of experts when you need them
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Resources/References
B Corp (Beth Richardson), Pipeline Training IRIS: Impact Reporting and Investment Standards. (n.d.). Retrieved December 5, 2011, from http://iris.thegiin.org/ Global Social Venture Competition. (n.d.). Retrieved December 5, 2011, from http://www.gsvc.org/the_competition/social_impact_assessment/ How We Assess | Venture Philanthropy Partners. (n.d.). Retrieved December 5, 2011, from http://www.vppartners.org/results/how-we-assess Local Money Flows (LM3) | nef consulting. (n.d.). Retrieved December 5, 2011, from http://www.nef-consulting.co.uk/services/local-money-flows-lm3/ Social e-valuator - measurement of social return on investment (SROI). (n.d.). Retrieved December 5, 2011, from http://www.socialevaluator.eu/SROItool.aspx SVT Group (Sara Olsen and Paul Lamb), webinar, Spelling Out the Alphabet Soup of Impact Tea Loan | Planting 2,000 Guayusa Trees in Ecuador. (n.d.). Retrieved December 5, 2011, from http://hoopfund.com/loan.webui?id=11247 Tools and Resources for Assessing Social Impact. (n.d.). Retrieved December 5, 2011, from http://trasi.foundationcenter.org/record.php?SN=83 TRASI -Tools and Resources for Assessing Social Impact. (n.d.). Retrieved December 5, 2011, from http://trasi.foundationcenter.org/browse_toolkit.php

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