Seeing Is Believing: New Tools for Conveying Business Value
A few weeks ago Mark uncovered this gem (below) moving through the social entrepreneurship world. It’s a new framework for looking at creating a social impact start-up by Alex Osterwalder, the Business Alchemist. There’s no lengthy excel charts or text-laden business plan outlines, the entire process is done completely through pictures and visualization. The result is something brilliantly simple, and globally useful.
Development agencies and social impact investors are hungrily looking for people and projects. While there are significant funding gaps for small and medium enterprises (SME’s), the gap between funders and investors and social impact enterprises is widened by social entrepreneurs who are unversed in conveying business model value (or even structuring the enterprise in general).
This stagnates emerging market potential and social development in a few ways:
1. Important projects and enterprises are simply not being funded. Promising projects are simply being overlooked or go completely unrealized because social entrepreneurs are simply unable to convey value or provide a sense of long term strategy or viability. This continues a cycle of poverty and inequality. Further ensuring disproportionate access of the poor to financial services and funding because basic tools for communication of value and conceptualization are unavailable.
2. Social investment firms / major development agencies are being overstretched. Development agencies, often in tandem with social investment entities, often come in to provide continued support of business plan. This collaboration is a good one, and often showcases the winning partnerships that can occur between private, market-savvy actors, and on-the-ground NGO’s that understand local process and relationships. However, individually coaching entrepreneurs through to capitalization is both timely and costly. For one, there is just not enough direct support that can be offered through the NGO community and investment actors cannot provide that service without increasing fees for financial services (which is already difficult enough for those in the developing world to access). Making business planning tools more readily available to a broader group of entrepreneurs means the opportunity to identify promising projects more efficiently and hone in on those that need specific support.
3. The length of time between contact by an investment firm and actual capitalization is too long. The collaborative process between NGO’s (or in some cases, investors themselves) in refining and flushing out business plans and models, is, as mentioned above, incredibly time consuming. One investment firm we recently spoke with said that an average project demanded 1 person, 1 day a week, for four months to provide the business skills, planning, oversight, and strategy construction needed. Having a clearer way to understand the mission and value of a business proposal at the outset means that donors, investment firms and NGO’s can better gauge their investment in the enterprise. This offers long term sustainability for social impact investing as an profitable industry and reducing the amount of investor risk in new social enterprise start-ups.
Bringing it back to agriculture
For agricultural development this is particularly exciting. With rural populations it’s always preferable to convey complex ideas through pictures especially in dealing with differences in language, culture, literacy, and education. We are seeing great innovations in both lending and business development skills through great lending agencies like Root Capital and Agora Partners here in Latin America, with terrific results for farmers, local communities, and investors.
We are seeing a reawakening in agriculture for investment after experiencing a decline for the last 30 or so years. Out of the 31 identified funds that target returns in sustainable agriculture enterprises in developing countries, 58% (18 funds) have been set up in the last few years, between 2007 and today. Multiple factors continue to drive investor interest including climbing global population growth, increased in purchasing power of emerging economies (like China and India) and a demand for renewable energy sources including bio fuels. The culmination of these factors point to significant returns on investment. With food security on the radar of governments and the rediscovery donors and foundations of using agriculture as an important platform for development, a network of groups and organizations are beginning to put human and financial capital towards facilitating new business models for sustainable agricultural enterprises. Providing social entrepreneurs in developing countries better tools for communicating business value and purpose will succeed in making the shift towards sustainable agriculture all the more inclusive.
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