Patience is not a virtue: Funding and scaling innovations for the Global Goals
Michelle Arevalo-Carpenter, CEO of IMPAQTO, +SocialGood Connector
I am sitting in front of my computer in Quito, Ecuador — where the slightest interaction with the girl who sells fruit on the sidewalk reminds me of the commitment we have to ensure her education, health and development. Two weeks out from UN Week and joining the Social Good Summit, I look back to the whirlwind in New York with a sense of hope, but also urgency.
When it comes to the Global Goals, patience is not a virtue. 2030 is approaching fast. Since we won’t get different results doing more of the same, the global community seeking to achieve the Global Goals is in a race to identify, support and scale innovations that can truly move the needle.
This year’s Social Good Summit was curated to remind us that those amazing change makers can be found everywhere, and that there the combination of technology, leadership and will can be powerful in improving people’s lives:
- Pete Cashmore, Founder of Mashable, did a fantastic job moderating a panel about the power of blockchain. Roya Mahboob of the Digital Citizen Fund shared the potential of bitcoin in frontier markets to changing the lives of unbanked populations, while Ben Siegel of ConsenSys spoke about how blockchain can offer those without an identity a channel to obtain it and participate in society as active citizens.
- I particularly enjoyed learning about the Chef Manifesto — a worldwide initiative where chefs commit to sustainable sourcing, eco-efficient cooking and empowering communities through urban and rural farming. Chefs Arthur Potts Dawson, Anahita Dhindy, and Manal Al Alem were outstanding in illustrating how as a global collective, chefs can and should make a difference locally.
- Finally, we were treated to amazing stories of hyper-local innovators, community organizers –from fighting polarization in the USA, to supporting breastfeeding in India to support of the community of deaf people in Brazil — who are finding better ways to pursue their cause through technology. Deepti Doshi, head of Community Partnerships of Facebook moderated a conversation on their shared experiences and ability to grow by connecting more profoundly around purpose.
In the middle of covering this amazing experience, a voice in the back of my mind kept saying : “Great, but how do we scale? Inspiring, but how do we help them grow? Fantastic, but how do they get funded?”
This is where the impatience kicks in: we have far too much to achieve to rely on rare innovations making it through the valley of death, where lack of funding, partnerships or access to networks hinder their growth.
As the co-founder of a social innovation incubator, I know all about the trials and tribulations of growth and scale: of the 150 impact ventures we have incubated in Ecuador, little over 15 % have secured outside funding with our support. Most of the rest rely on friends and family circles, but we all know that counting on family wealth is not available to everyone. On the other hand, the urgency of the global challenges presented to us in the Global Goals are too pressing to oversee the lack of support and funding for social innovations.
To be sure, Andrew Lee, Head of Sustainable and Impact Investing of UBS, assured us at the Social Good Summit that impact investing is growing and that institutional funding is moving towards impact that will drive real change. Yet, the pipeline of investable opportunities for deals the size UBS makes is small — and the reason is found upstream: lack of impact financing for early stage impact ventures making the funnel smaller and slower.
In IMPAQTO, we released the study “The Second Wave: Promoting a Second Decade of Impact Investment in Latin America” last week. In it we dive deeper into the root causes of this challenge: large-scale impact funds are hungry for investable opportunities, yet innovations (mostly located in smaller markets) are too small for the deal size and fall into the “missing middle” of finance, defined for this study as between the range of US$1,000 — US$500,000. This is the financial need IMPAQTO sees within its pipeline of enterprises in Ecuador, and our interviews corroborated this funding gap exists.
For example, micro-finance and government funding in the under US$1,000 range is more common, typically supporting micro- and small enterprises or smallholder farmers, that, while important to local economies, are typically not interested in scaling regionally or globally; and institutional funding in the US$1M to US$2M+ range is, in general, more plentiful because at these amounts, the traditional closed fund model is more financially viable, according to LAVCA’s recent report “The Impact Investing Landscape in Latin America.”
This report was an effort to highlight those brave individuals and institutions that are building a new model for Latin America, these rare sprouts growing in unforeseen places, but so necessary to making the Global Goals a reality. And by highlighting their struggles and their successes, we draw inspiration from those who have already successfully “hacked the system” — who have transcended the generally held assumptions about small markets and their challenges and found a way to make the system work for impact entrepreneurs and the investors that seek to support them.
Given the size of this challenge, I see this blog entry as a provocation to the impact investment space as well: we understand that impact investors were breaking barriers and innovating ten years ago to create a sector that didn’t previously exist. Yet, the world is impatient. 2030 is around the corner and its time for the entire sector to innovate!
Let us not forget what Buckminster Fuller, a true change-maker once said, “you never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete…”