The Beginnings of a Social Capital Market

One of the key things necessary to fundamentally change our ability to solve social problems is the creation of a social capital market.  By social capital market I mean that financial tools and vehicles of a significant size, volume, variety and usefulness are made available to social entrepreneurs and ventures.  Nonprofits and social businesses are sorely undercapitalized.  In order to really change their ability to scale and attack problems at their root cause we need to create significant social capital through various means (philanthropy, equity, debt, etc).  This past week highlighted some exciting developments in the social capital market space.

First, late last week the Senate passed the Serve America Act, which the House and President are also expected to approve, which, among other things, creates a A Social Innovation Fund Pilot Program.  The Pilot Program will pool government and private investments into a venture philanthropy fund to scale successful nonprofit programs. It would make $50-million available in 2010, growing to $100-million in 2014, with matching funds required from other sources.

Second, Root Capital, a nonprofit social investment fund that provides capital, financial training and market connections to grassroots businesses that build sustainable livelihoods and transform rural communities in poor, environmentally vulnerable places announced last week their launch of a $63 million growth capital campaign, in partnership with the Nonprofit Finance Fund (another leader in the creation of social capital vehicles).  The growth capital will allow Root Capital to:

• establish a sustainable social enterprise and fully self-sufficient lending program by 2013
• accelerate its ability to impact global poverty by linking rural small and growing businesses with capital markets
• triple its loan portfolio, enabling it to lend $121 million each year to more than 350 grassroots businesses, representing one million households

The campaign will be a combination of philanthropic equity and debt capital.  They expect their investors to include foundations, corporations, socially responsible investment firms and individuals. Funders and investors already committed include The Kendeda Fund, The Rockefeller Foundation, and the Skoll Foundation.

And finally, last week was the Skoll World Forum on Social Entrepreneurship, the annual gathering of leading social entrepreneurs.  Among many topics of conversation was the creation of a social capital marketplace to support these great social entrepreneurs.  Nathaniel Whittemore captured amazing video interviews with some leading attendees.  Two of these interviews focused on the creation of social capital markets and gave some very interesting insights on how this marketplace is being created and what remains to be done.  First is his interview with Shari Berenbach, the President and CEO of the Calvert Social Investment Foundation.  Shari describes how the Calvert Social Investment Foundation creates a marketplace for investors interested in social innovation:

SWF09 Interviews: Shari Berenbach from Nathaniel Whittemore on Vimeo.

Second is Nathaniel’s interview with Steve Hardgrave, head of Gray Ghost Ventures, which makes early stage equity investments in social ventures.  Steve has a really interesting perspective on the creation of the social capital marketplace and encourages those involved to think much bigger about what is required:

“We need to dream bigger. To think that $100 million is a lot of money, in real world terms it’s not, it’s a drop in the bucket.  So all of us making strides to take this, not to millions or 100 millions of dollars, but billions of dollars is a challenge that we can’t let up.  The urgency of that challenge needs to be very real for us.”

SWF09 Interviews: Steve Hardgrave from Nathaniel Whittemore on Vimeo.

Very true.

Tags: Calvert Social Investment Foundation, Gray Ghost Ventures, Nonprofit Finance Fund, Root Capital, Serve America Act, Skoll World Forum, social capital market, Social Entrepreneurship