Comments on: PRIs: Another Part of the Emerging Social Capital Market

By: A False Dichotomy: Non-profit vs. For-profit Solutions « Austin Entrepreneur Network

Thu, 18 Jun 2009 07:29:01 +0000

[...] nonprofits (which he calls charities) versus social businesses. Tony and I have sparred before on PRIs and mission-related investing, and I had to take up the cause again with his argument that poses a false [...]

By: Foundations Can Lead the Charge Toward a New Philanthropy « Austin Entrepreneur Network

Tue, 16 Jun 2009 20:51:11 +0000

[...] the use of program-related investments (PRIs) to include capacity building projects like upgraded nonprofit fundraising [...]

By: Too Many Nonprofits…Or A Weak Ecosystem? « Austin Entrepreneur Network

Too Many Nonprofits…Or A Weak Ecosystem? « Austin Entrepreneur Network — Tue, 16 Jun 2009 20:50:52 +0000

[...] great ideas, giving seed funding for ideas that have potential, using mission-related investing and program-related investments, working as a group to discuss innovations in philanthropy and share and leverage [...]

By: A Call for Mission Related Investing « Austin Entrepreneur Network

A Call for Mission Related Investing « Austin Entrepreneur Network — Tue, 16 Jun 2009 20:50:16 +0000

[...] Related Investments: Nell had an excellent post on this topic. Deployed as loans at below-market yields, the risk-adjusted returns over time [...]

By: Foundations Can Lead the Charge Toward a New Philanthropy | Social Velocity

Foundations Can Lead the Charge Toward a New Philanthropy | Social Velocity — Tue, 16 Jun 2009 17:14:43 +0000

[...] the use of program-related investments (PRIs) to include capacity building projects like upgraded nonprofit fundraising [...]

By: A False Dichotomy: Non-profit vs. For-profit Solutions | Social Velocity

A False Dichotomy: Non-profit vs. For-profit Solutions | Social Velocity — Thu, 14 May 2009 15:52:30 +0000

By: A Call for Mission Related Investing | Social Velocity

A Call for Mission Related Investing | Social Velocity — Mon, 11 May 2009 15:20:35 +0000

[...] Related Investments: Nell had an excellent post on this topic. Deployed as loans at below-market yields, the risk-adjusted returns over time [...]

By: Nell Edgington

Nell Edgington — Fri, 17 Apr 2009 21:34:52 +0000

Great comments, Scott. I agree with you on all. Thanks for joining the discussion!

By: scott collier

scott collier — Fri, 17 Apr 2009 21:26:29 +0000

Terrific discussion here with some valuable insights.
Re: Martin Fisher: I see valid points on both sides in the given context, but what about PRI directed to non-profits that will have zero dependence on grants? I am talking here about social businesses: to be clear 1. “companies that focus on providing a social benefit rather than on maximizing profit for the owners, and that are owned by investors who seek social benefits” or 2. “Profit-maximizing businesses that are owned by the poor or disadvantaged.” (quoted from Creating a World Without Poverty by Yunus). These ventures are well suited to receiving an injection of patient startup capital with a 3-7 year payback expectation. This is social venture capital: an ideal role for PRI money.
RE For-profit PRI: Interesting. I will dig into this as I too assumed PRI investing in a for-profit would be off limits. Thanks for the links.
RE Return vs. Social Benefit: This area needs a lot more discussion and debate as I see unrealistic expectations being set that could have a negative overall impact on social investing. Generating a market return by investing in small businesses is no easy thing. After 18 years in venture capital and going through a couple major financial cycles, even with 100% focus on maximizing returns, I have seen businesses go belly up generating a total loss to shareholders. I have also been fortunate enough to be in deals with returns of greater than 20X to shareholders. The point is that the goal of all these was the same, to maximize financial return, and huge effort and capital was expended to do that only to see it sometimes work and sometimes fail. If in these deals we had to strive for positive social impacts in addition to the competitive concerns of the marketplace I am confident that we would have had to compromise at times. Yunus does a better job than I at arguing the “you can’t serve two masters” point so I will just say I am in agreement with him. I am not a big fan of the “double bottom line”. We would do better to set the expectation at foundations that MRI investing will produce below-market returns, not because of inefficiency or a confused mission, but because in all business decisions the recipients of the MRI capital will be focused on achieving the social mission in a sustainable way but NOT a way that maximizes profit or return to investors. By establishing this low or even zero return expectation (but still much better than negative 100%!) we can then have honest dialog between foundations and investees about the degree of social impact this new category of investment can have without it being clouded by missed return expectations.

By: Nell Edgington

Nell Edgington — Fri, 17 Apr 2009 21:07:13 +0000

You make great points, Tony, and I’ve enjoyed the debate. However, I still disagree with your delineation between what you call social entrepreneurs and social innovators (and assume that they are only for-profit in nature) and nonprofits. Is the assumption that good nonprofits only provide public goods? What about nonprofits that are also subsidized social enterprises? Does the mere fact that they are subsidized make them inferior or less efficient than a market-based cousin of theirs? What if such a cousin simply couldn’t exist because they couldn’t find market-based revenue to survive? I think by focusing on “the for-profit ideas that are so good they scale” and the “nonprofit ideas that are truly public goods” you are leaving out a whole category of social innovations and solutions, simply because they don’t fit neatly into one of those two categories. I think it’s a too limited view of social innovation.