The Future of Financing Impact: An Interview with Kevin Jones

I am launching a new regular interview series on the Social Velocity blog that will feature discussions with the leading thinkers and doers in the social innovation space. I will talk with philanthropists, social investors, social entrepreneurs (from the nonprofit and for-profit side) and others leading the way in this new space. What they all have in common is that they are doing really exciting,  interesting, provocative, challenging things that are pushing the social innovation movement forward.  We will discuss what they are contributing to the space, what excites them, what concerns them, what we should be thinking about, and what’s next.

Our inaugural interview is with Kevin Jones. Kevin is a visionary in the social investing and social entrepreneurship arenas having launched two important entities in the field. He co-founded both Good Capital, one of the first venture capital funds that invests in social enterprises, and the Social Capital Markets Conference (SoCap) which marks its third year with the upcoming October event. He is also part of the team launching the first US node of The Hub, a network of more than a dozen work spaces for social entrepreneurs in cities across the world from Cairo to London.

Nell: This is the third year of the Social Capital Markets conference. You have said that the first year defined the social enterprise landscape and the second year validated the space, so what are you hoping that this year accomplishes?

Kevin: We want to find out what the next thing is that this community, this movement, this asset class should do, the next big obstacles to overcome, the place where we could put our efforts to make the biggest difference. Now that people are taking us seriously there is a need to understand how we fit into the landscape and how impact investing can leverage its, uh, impact by partnering with nonprofits, foundations and public sources of funding.

Nell: There are an increasing number of conferences in the social innovation/social entrepreneurship space. How is SoCap different? What is the value add of this conference?

Kevin: SoCap brings together more people from a broader perspective and approach to the intersection of money and meaning than any other conference. It’s the place your most likely to run into people you don’t know but should know. Cross pollination and expanding the dialogue while keeping the conversation focused on making a difference in an increasingly intelligent, and increasingly collaborative way is what SoCap10 is about.

Nell: It’s true that SoCap brings together an amazing group of thought leaders, social entrepreneurs and social investors for 3 days in San Francisco, but what happens after the conference ends? What changes to the social enterprise/social investing space have you seen as a result of the past two SoCaps?

Kevin: I’ve seen startups get funding. I’ve seen people from the corporate world get jobs in social enterprise, I’ve seen funds raise multiple millions to achieve scalable social impact. I’ve seen deep and lasting partnerships form between people making a difference. I’ve seen the market fragment and pieces of SoCap pop up in either regional approaches or specific vertical markets, from community activists to nonprofit funders, to technology conferences about money. The market at the intersection of money and meaning is a meme, an idea that I see growing and finding a home within a lot of other groups’ frame of reference.

Nell: This year you have made a deliberate effort to include nonprofits and philanthropy in the conference with the new Tactical Philanthropy track, as opposed to a greater focus in past years on the for-profit side of social entrepreneurship and social investing. Why the shift and what are you hoping comes out of this widening of the net?

Kevin: Well, nonprofits and philanthropy are a big part of the market of money and meaning, now that’s been established as a real place, this intersection of money and meaning. You could even say the new for-profit impact investors have crashed a party long established by philanthropy. It was past time to acknowledge that, and by bringing in Sean Stannard-Stockton [CEO of Tactical Philanthropy], we’ve got an expert and convener with far deeper knowledge than I have in the area to lead the way. SoCap10 is a lot about translation as people learn to work together across boundaries and frames of reference to build a bigger social capital market than either philanthropy or for-profit impact investing could do on their own. And of course, we also have a much bigger public sector funding participation than we have before. Some of the practical thought leaders are joining us to think and talk about what the next thing to do is.

Nell: How has the social enterprise space changed in the last three years and where do you see it going?

Kevin: It’s bigger. People are taking it seriously. We are starting to see some of its limitations, and some of the areas where it needs to grow. It used to be the cutting edge, out there doing this new thing. Now it’s the leading edge, connected to other groups and partners. I think I see the old hero myth dying out and people recognizing that we need enterprises that go beyond the heroic visionary founders, that deal with necessary founder transition issues to grow organizations with scalable impact. Or maybe that last part is wishful thinking.

Nell: What do you hope the social enterprise landscape looks like when SoCap 2015 rolls around?

Kevin: I do hope we have grown beyond the heroic visionary entrepreneur as our model. I hope the cutting edge, change making, risk taking aspects of the movement meets asset class are still intact while it becomes more tightly coupled to public sector and philanthropic efforts to make a difference. I hope it has found a room for the crowdsourced capital, like more lending platforms, in new areas like fair trade, and beyond microfinance. I hope there is a deeper linking between efforts to eradicate poverty in the U.S. and internationally, market growth while preserving the upstart innovation nature of what makes social enterprise a great positive force for disruptive innovation.

Tags: Good Capital, Kevin Jones, Sean Stannard-Stockton, SoCap, Social Capital Markets conference, Social Entrepreneurship, social investors, Tactical Philanthropy, The Hub

Austin the Social Startup Capital of the World?

One of the things I talk and write about (possibly ad nauseam) is how well positioned Austin is to lead in the social innovation movement.  Our rank as the 3rd largest venture capital city in the country, our entrepreneurial spirit, our tech focus, our passion for green living and our tremendous wealth all make us uniquely positioned to capitalize (both financially and socially) on the growing movement for innovation and enterprise around social impact.

I’ve written here and here about what elements of a city’s infrastructure are necessary to catalyze social innovation.  And I was particularly excited when Nathaniel Whittemore, Director of the Center for Global Engagement at Northwestern University, described in a recent blog an ideal environment to stimulate successful social enterprise:

So here is what I’d like to see. Someone combines The Hub model of collaborative working space for social entrepreneurs with the Y-Combinator model of funding low-cost tech startups [provide promising startups small amounts of seed capital and intense mentorship and networking in anticipation of further investment ]. In this model, which is geared toward social enterprise, the Y-Combinator style investment would be focused on tech startups that are building services useful for other businesses and social startups (things like Yammer, which is great for keeping a team of volunteers or employees connected to one another). In addition to the cash investment, the tech startups get to work (and maybe even live?) in the Hub space. In return, they give up equity – but also a small chunk of their developer time (25%? 10 hpw?) to pro-bono or reduced cost projects for the nonprofit social entrepreneurs who are part of the same Hub community. This combines the density, talent and energy of the tech startup world with the mission focus of the social enterprise world. All it would take are the right partners. Sounds like a pretty good combination to me…

This sounds just like Austin.  And, in fact, we have these kind of incubators on the pure business side.  For example, Capital Factory is an Austin-based seed stage mentoring program for startups that provides a small amount of seed capital and weekly mentoring sessions by entrepreneurs who have founded successful companies.  What if there were a Capital Factory for social enterprises and social businesses?  I’m not aware of anything like that anywhere else in the country.  Couldn’t Austin pave the way in social enterprise by taking something we already do very well (venture capital, angel investing, start up incubators, entrepreneurial mentoring, etc.) and put a social spin on it? That would be truly innovative and get us out ahead of the curve of what is shaping up to be a huge movement.  And there is financial and social profit to be made.  Don’t we want a piece of that?  It seems such a natural thing to me.  What is stopping it?  And how do we overcome those roadblocks?

If you’re interested in exploring this topic more, join me and Jessica Shortall for our RISE session on March 3rd:  Start Ups with Social Impact where we’ll talk with Austin-based social enterprises and discuss what is required to make Austin a leader in this space.

Tags: Austin, Capital Factory, Center for Global Engagement, incubator, social business, Social Enterprise, social innovation, The Hub, venture capital, Y-Combinator

Austin A Potential Hub of Social Enterprise

The terms Social Enterprise and Social Entrepreneurship are often used interchangeably, but they are really two very different concepts. While social entrepreneurship is defined as pattern changing ideas for solving persistent social problems (you can read my post laying out this definition here) Social Enterprise is any business that has a double bottom line, i.e. they exist to make a financial AND social profit.  Although I think both have potential in Austin, I would argue that Social Enterprise could really thrive in Austin’s entrepreneurial, venture capital, tech-savvy, green economy.

There is a continuum of social enterprise that ranges from a nonprofit that has an earned income venture on the side (an art museum gift shop) all the way to a publicly traded for-profit company that includes a social good in its business model (a solar panel company).

More and more people are becoming interested in the idea of social enterprise as a necessary and very viable part of a strong American and global economy. The blending of financial and social return could be a necessary salve to an economy that has been torn apart by lack of regulation and greed.

In fact, some social enterprises seem to be thriving despite the recession.  Better World Books is a great example of this.  They collect and sell used books online and then give a good part of the profit to nonprofit literacy programs throughout the world.  They are also saving thousands of tons of waste by keeping discarded books from ending up in landfills.  They are achieving a triple bottom line: financial, social, and environmental profit.  And they are doing very well, despite the recession:

• Since launching in 2002 the company has converted 16.4 million donated books into $5 million in funding for literacy and education.
• This holiday season they saw a 500%+ increase in gift certificate sales over the previous holiday season.
• Revenue grew 194% in December 2008 compared to the year before.
• December revenues grew to $2.1 million and revenue for January is expected to top $4.5 million.
• They are on target for $31 million in revenues this fiscal year.

Better World Books got a significant investment of $4.5 million in April 2008 from Good Capital, a venture capital firm whose investments have BOTH a social and financial return.

So, what you start to see is an interesting model that could really take off in Austin.  We already have tremendous venture capital wealth.  We have a very entrepreneurial business climate.  We have a real interest in social causes, particularly green ones.  What if some of the investment capital floating around the city went to social enterprises?  In fact, I think there is an opportunity for Austin to create a new model for cultivating social enterprise and become a real leader in this space.  Nathaniel Whittemore, Director of the Center for Global Engagement at Northwestern University, described in a recent blog an ideal environment to stimulate successful social enterprise:

So here is what I’d like to see. Someone combines The Hub model of collaborative working space for social entrepreneurs with the Y-Combinator model of funding low-cost tech startups [provide promising startups small amounts of seed capital and intense mentorship and networking in anticipation of further investment ]. In this model, which is geared toward social enterprise, the Y-Combinator style investment would be focused on tech startups that are building services useful for other businesses and social startups (things like Yammer, which is great for keeping a team of volunteers or employees connected to one another). In addition to the cash investment, the tech startups get to work (and maybe even live?) in the Hub space. In return, they give up equity – but also a small chunk of their developer time (25%? 10 hpw?) to pro-bono or reduced cost projects for the nonprofit social entrepreneurs who are part of the same Hub community. This combines the density, talent and energy of the tech startup world with the mission focus of the social enterprise world. All it would take are the right partners. Sounds like a pretty good combination to me…

Doesn’t this sound like Austin?  We have all kinds of tech incubators and venture and angel capital.  If there were a social enterprise incubator/venture fund here, we could be on the cutting edge of this movement.  And we have all the pieces already in place to make it happen.  It’s a pretty interesting proposition.

Tags: Better World Books, Good Capital, Social Enterprise, Social Entrepreneurship, The Hub