NRN VC Fund: Help those doing good work

A headline in my TOI (Times of India Friday Oct 23- I'm getting addicted to acronyms like all Indians) has made my day - yes its the one about Murthy (of Infosys fame) setting up a $36 million VC fund saying "entrepreneurship is the only cure for poverty and job creation". In India, family businesses still rule. If its not the M&M saga its headlines like "Prez's son leads the baba log charge" (about Pres. Patil's son winning assembly seat- politics is business) or how 5th generation Kapoor is set to be the next bollywood star (entertainment). So a move like this by one of the most respected people in India signals change. But it is the fine print that excites me. Murthy has said he will invest in the fields of basic health care, education and nutrition signalling that long term investment is also a priority. Additionally his reason for setting up the fund is: "there are people doing good work in India." He wants to support them and help them grow rather than start yet another effort himself and reinvent the wheel.
Good move Mr. Murthy - I am a fan of Good Capital.

Wall Street Woes- and what to do about it

I don't know about you but I am getting very tired of hearing about Wall Street woes; about executives who must sell their jets and how, somehow, that translates to average folks getting laid off. Its just fear tactics. The issue is Wall Street has only one metric - financial performance. So Wall Street is always overly emotional - down in the dumps or unnecessarily bullish, which leads to hyper-movements of capital. It is an overly constrained system. Wall Street has boxed itself into a single-bottom-line system and doesn't know how to get out. So folks, - if the system isn't working change the system - think out of the box.

Its time the financial wizards admitted they have no clue what to do and start learning from us research types. Wall Street has one metric - the bottom line - and the entire house of cards is built on that. In new product development, at a minimum we evaluate around three metrics - faster, better, cheaper - its the mantra that modulates expectations -maybe you hit one maybe you hit all three - at least there is room for experimentation and different vectors to push. If wall street followed an R&D model it would look for and formalize other metrics besides financial performance. That would allow social entrepreneurs to go mainstream instead of being boutique; get on Wall street and seek capital. allow diversification of capital instead of all based on profit. I don't know what the right answer is but here are some ideas:
- following the micro-finance model - rate a company on how many people are served (not just amount)
- Tax credits (like R&D credits) for companies that serve the BOP - after all they serve those whom the government serves
- IPO for social businesses except - instead of financial returns give voting rights on how to run the company
- New job creation - e.g green job creation gets points
When I first started at HP, we used to say - focus on the value you create not the stock price. If you create value stock price will follow - Value for us was high quality products and a satisfied employee base and a welcoming community wherever we operated. Yes - its time to get back to basics - its takes more than money to be a good capitalist.
I am glad the auto-industry is not getting a bailout; but I am not glad the Wall Street isn't thinking about more change itself.

Social Entrepreneurship Defined

Social entrepreneurship is somewhat new. It is difficult to understand for people new to this area because it is not philanthropy and not quite business though it is known to masquerade as both. Hope the following characterization helps:

1. The motivation is social good and the means is business creation. Typically social good is in the purview of governments, foundations and NGOs. The area lacks financial instruments required by business. Legal structures exist but are not optimal.

2. In a typical social venture, financial return follows social return. Additionally, local social mores play a role in market creation and expansion – making the task operationally more difficult and slower in yielding results.

3. There are successful social entrepreneurs around but none are achieving scale at any significant rate. Possible solution is public-private partnerships but there are few success stories in this area and many failures. Another solution is venture capital but there is low (and slow) financial return to investor. On the plus side I think the risk is lower too.

Example success stories – (mentioned in this blog over time)
Micro finance: SKS, Kiva, Grameen-phone;
Health care – Aravind eye hospitals, Jaipur foot;
Energy – Selco, D.light;
Education- Barefoot College

For organisations interested in participating in this space - Examples of useful services (become a focal “go-to” place for social entrepreneurs and socially motivated investors) are from small to big-

Scholarships to attend conferences/ events
Special track at conference/events
Infrastructure services – create incubator - office space, legal, business plan review
Provide networking opportunities
education opportunities – for investor as well as entrepreneur
sponsored competitions – e.g. best business plan
Mentor services
Technology-social entrepreneur match ups
Social venture fund creation