Sunday, December 28, 2008

Business Approach to Social Good - Rule #1: Don't Get Greedy

I have a good reason, for promoting NBC re-broadcast "Tech Awards for Global Uses of Technology to Benefit Humanity" Sunday, Dec. 28, at 9 pm PST. The show is also available online from the NBC web site billed as: "When technology is applied to philanthropy...Vision is turned into action....".
It so happened that I read an op-ed "The Sin in Doing Good Deeds" by Nicholas Kristof. It is the story of the failure of an event management company- unique in that the events raised money for charitable causes. The reason provided for its failure is about how the (stupid) world is against a business approach to philanthropy. It is a familiar tirade, a false argument, entirely unworthy of discussion. So I let it go. But then I read comments on the article and wondered how many potential social entrepreneurs would get discouraged by reading the story of Mr. Pallotta and his company? So I feel compelled to post this link to the tech laureates show - profitable businessmen doing social good. For one Mr Pallotta there are many more social entrepreneurs doing good and doing well. See for yourself.
The key to success in running a profitable business with a mission of doing social good is to not get too greedy - It sounds like that was the issue with Mr Pallotta - his argument being - "Greed is good - its Okay in regular business so its okay here too". First of all its not okay in regular business though they do get away with it (witness the mechanics of the current financial meltdown). Second - the money raised for social businesses often comes, at least initially, from charity sources -like people digging into savings- so moderation in business expense is key in keeping their loyalty. The parallel for regular business would be "delivering customer satisfaction" which obviously Mr Pallotta did not do. BUT - here is my issue - when his business failed - instead of being a good sport and fessing up, he becomes a cry-baby and writes a book about how business approach to "charity" does not work and then Kristof writes an op-ed, generalizing from this single data-point, instead of calling it something like "Pallotta Palaver" which would have been far more accurate.

Tuesday, December 23, 2008

Keeping your morale and sanity in tough times

Something that helps me weather challenging times, and is helping me right now is to focus on what I do have, rather than what is missing. My vehicle for this is a simple gratitude list. Try it for a week even. I simply list 10-25 things every night I am grateful for (big stuff like my good health, my son, the means to pay my bills this month usually appear on my list every night) but if you have a hard time coming up with other things it will force you to start looking for the good during your day, such as getting that parking spot in downtown San Francisco when I was running late, hearing back from a recruiter, or even how cozy my warm house feels right now in this frigid weather...I have also been looking for "bright lights" every day -- just observing people in the cars around me, or as I entered a crowded restaurant last week and I watched the (seemingly happy) Mom conversing with the two children sharing her table... Even just thinking about looking for bright lights seems to pick up my day, and I can almost feel those positive neural pathways burning in my brain...Wishing you all happy holidays,
-post from Janice Roberts

Wednesday, December 10, 2008

How to Raise Social Capital- The Must, Want Principle

It is no secret that the term "Social Capital" is an oxymoron; "Capital" is a pot of money I give that comes back to me as a larger pot of money and "Social" is the giant sucking sound of the pot of money I give that comes back as a demand for another even larger money pot. This is not bad news; its just really tough news. But there is also the good news - most investors are interested in a social return - they just don't know how that is possible. So here is the secret - make it clear and explicit how it will be possible. Capital is a Must (money makes the world go 'round), Social is a Want (what good is money if the world don't go 'round?). A social entrepreneur must make it clear from the outset how the must and the want will be satisfied and what compromises will be made in case of conflict between those two objectives.

The questions I get most often are around strategies for raising social capital and in my informal survey of over a hundred social entrepreneurs, greater than 90% end up getting seed investment i.e. social capital, from a foundation or a philanthropic individual and hence incorporate as a non-profit venture. This is perfectly fine, as long as the entrepreneur exercises financial self-discipline, which is not the same as boot-strapping - it is about creating a revenue stream from the business. By definition, a foundation is not interested in a financial return so it confuses second round investors and can become a barrier when you need to raise serious money. Two rules of fund raising, made explicit from the beginning help overcome the "social capital" oxymoron:
Rule #: identify and recognise the Investor Types and their expectations
*Entrepreneurs: In-kind equity, equity
*Family and Friends: equity, debt, grants
*Individual Investors (angels or social investors): equity, grants, debt
*Foundations: Grants, Program Related Investments (PRI’s)
*Venture Funds: Equity
*Social Venture Capital: Equity, debt
*Banks: Debt, equity
*Corporations: Equity, debt
*Corporate Business Partners: Warrants, equity, debt
*Government: Grants
Rule #2: Identify business lifecycle, seek appropriate investment from appropriate investor
*Lifecycle Phase: Seed, Startup, Early expansion, Late Expansion
*Type of Investor: • Risk/return expectations • Exit strategies
*Type of Investment e.g. grant, debt, equity and so on
*Size of Investment e.g. grants are typically small and appropriate as seed and loans for expansion
The bonus rule of course is to ask for help in forms other than "money".

Wednesday, December 3, 2008

Dedicated to Unity and Peace

Signpost put up by the Indian army on the highest passes in the world.......

When trekking the Himalayas, one sees amazing sights - some are man-made - like this one.

Monday, December 1, 2008

CNN Heroes - Role Models and Media

Lately, I have been following any and all coverage of the Mumbai blasts on TV and that's how I stumbled onto CNN Heroes last night. I tend to avoid TV (I disagree with the notion that only bad news is media-worthy) because the odds for good use of my time are low. But I cannot deny the power of media - especially now when global is not global - it is local. My not watching TV does nothing for anyone but me. So, when I see a show celebrating the goodness in us, I am ecstatic. Criminals and terrorists are news; but so are people who spread peace and solace. CNN heroes provides for new role-models for a generation looking for something new. I hope we see more such shows.