Oct 20, 2018 | Uncategorized
“If you’re doing something for me without me… it’s not for me” In this bonus episode, Chandler shares six resources for social entrepreneurs to know what’s going on in the world – so you can start solving problems that matter now.
Podcast Summary
As social entrepreneurs, we believe that we can use business as a vehicle to solve problems.
One of my biggest takeaways from Kenya is that you have to go to where you want to solve a problem to see it from the ground. If you don’t have the chance to go… You better have really good data about the challenges. I’ve found that’s pretty tough! So I started digging, and I found some amazing resources and thought I’d share my favorite top six with you.
- 2030 Agenda for Sustainable Development
- The SDG Indicator Handbook
- UN Stats List
- SDG Data Hubs – Explore Geospatially Referenced Data by Goal
- UN Data Forum Blog
- The UN Global Pulse
Listen in to hear why these six are such game-changers… and to source data on the problem you’re solving!
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Maybe you’re excited about impact and trying to figure out what business you want to start, or maybe you’ve been in the game for a while and have had several social ventures. So we’re problem solvers and we see these global goals as opportunity to integrate those that we want to impact into our business model. The bigger our business grows, the bigger the impact.
“if you’re doing something for me without me… it’s not for me”
It takes really good data to effectively address a challenge. And I’ve found that’s pretty tough. Finding real numbers about these grand challenges can outdated, biased based on the source, etc. We’re talking about every country, 17 goals, 169 targets, and 232 indicators (which are the specific metrics they measure).Here are six resources you can use to find the data you need.
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The 2030 Agenda for Sustainable Development provides a global blueprint for dignity, peace and prosperity for people and the planet, now and in the future. And we’re only three years in.
I’d highly recommend checking out the 2018 progress report! It’s on unstats.un.org You’ll find every global goal on here with progress metrics. Are we ahead of pace or behind pace? Which ones are Goals are going really well and ahead of schedule and which are behind?
For example, in the least developed countries, the proportion of the people with access to electricity more than doubled between 2000 and 2016.
However, the proportion of undernourished people worldwide increased from 10.6 per cent in 2015 to 11.0 per cent in 2016. This translates to 815 million people worldwide in 2016, up from 777 million in 2015.
These are just a few stats that scratch the surface. Go check out your favorite global goal and see the progress.
The global indicator framework was adopted by the General Assembly on July 2017. It’s goal is to provide a solid framework for how we will go about measuring progress of the goals to inform policy makers and ensure accountability.
These efforts are especially important in identifying those left furthest behind, since data are increasingly disaggregated by income, sex, age, race, ethnicity, disability, geographic location and other characteristics. This type of detailed information is the basis of effective policies.
Tool #3: Inside the SDG Indicator Handbook | UN Stats List
I found a great handbook that breaks all of these indicators down to make the progress very easy to understand. The handbook defines the indicator, shares how they gather data for the indicator, and shows references. For my data friends out there, you can even see the formulas they use! 😍
Yes. I’m excited too.
- Indicator 1.1.1: Proportion of population below the international poverty line, by sex, age, employment status and geographical location (urban/rural)
- Target 1.1: By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day[1].
- Goal 1: End poverty in all its forms everywhere
If that isn’t cool enough, this database has an open API. The database, maintained by the Statistics Division, was released on 20 June 2018 and contains over 1 million observations.
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Tool # 4: Explore Geospatially Referenced Data by Goal | SDG Data Hubs
This site breaks down all the indicators by location to see progress. They have maps and other data visualizations and analyses, and easy to download in multiple formats.
And, you can also see by country! Ireland, Mexico, Philippines, and the state of Palestine.
This blog is updated constantly with new info on how the UN is gathering data for the SDGs. For example, one great article was centered around the topic of how can we use mobile network data to integrate into the global data platform to better understand the progress towards the SDGs? This is particularly fascinating because the amount of people who have access to the internet is growing so rapidly.
With more than 5 billion people connected to mobile services in 2017, and projections reaching 5.9 billion by 2025 (71% of the world’s population), we can see the mobile phone sector is increasingly important in achieving the SDGs.
And still… can we use data to make decisions with over half of the current population not online?
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Global Pulse is a flagship innovation initiative of the United Nations Secretary-General on big data. Its vision is a future in which big data is harnessed safely and responsibly as a public good. Its mission is to accelerate discovery, development and scaled adoption of big data innovation for sustainable development and humanitarian action.
To this end, Global Pulse is working to promote awareness of the opportunities Big Data presents for sustainable development and humanitarian action, forge public-private data sharing partnerships, generate high-impact analytical tools and approaches through its network of Pulse Labs, and drive broad adoption of useful innovations across the UN System.
___________
So if you’re like me and a data nerd, you’re going to spend a TON of time of these sites. My goal for you is that it makes you curious.
How can you use this data to better understand the people you want to impact. And to get what’s happening in your market?
Or if you’re already hyper zoned on the problem… What impact are you making on a global scale?
Show us with the data.
Listen Now
Oct 15, 2018 | Season 1
In 2016, 42% of Kenya’s GDP was transacted on the text-to-pay platform M-Pesa. So, without bank accounts, wifi, or credit cards. In this episode, we have the CEO and Global Managing Director at I-DEV International, Jason Spindler, to talk about how M-Pesa works.
Episode Summary
- Jason’s background and how he got into the business in Kenya
- How M-Pesa works without internet
- How M-Pesa impacts the economy
- Strengths and weaknesses of mobile money
- Factors of the success of M-Pesa
- The timeline as M-Pesa scales
We talk about M-Pesa’s impact on Global Goal #9, innovation and infrastructure. Find out how simple solutions can transform an emerging market in this episode.
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Jason’s Background
[02:30] “I’m the one of the Co-founders and the managing director of I-Dev International. We started about 10 years ago. The core of what we do is help high growth businesses in emerging markets grow and scale.”
I-Dev focuses on working with SMEs across their target markets. Our global headquarters are in San Francisco. Our Latin America headquarters is in Lima, Peru, and our Africa headquarters are in Nairobi, Kenya where Jason is based. The business landscape in Nairobi has only evolved in the past five, maybe 10 years in East Africa.
The Kenyan Ecosystem
[05:04] The Kenyan ecosystem is unique, Jason says, because almost everyone you meet here is starting something. But in Kenya, they are actually they’re immediately out rolling it out and they’ve got their first customer traction.
There’s very little that’s just in the idea stage for the people who do make the move out here. The locals who do decide to start something are actually getting it done.
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Mobile Money
[08:10] “Everyone in Kenya uses mobile money. I think it’s something like 90 percent of all adults use it. And that’s been the case for around 13 years now. ” Jason says.
“I saw a stat a while ago where one in five mobile money transactions globally happened in Kenya, and that’s in a world where WeChat is very pervasive. India is moving to mobile money, too. Now, we’re helping Peru launch their mobile money platform.”
So, so why is everyone using it and what’s it all about?
MPesa mobile money in general has a couple of different forms and versions. We’re not talking about digital wallets like Apple Pay or Google Wallet. Those are for people who already have online capital. They’ve already got their banking online, they’ve already got their money online. And that just consolidating your analog, your credit cards and your money into digital.
[09:27] “In this day and age it’s kind of silly for us to use cash or credit cards, the physical plastic. And if you think about it, the physical plastic that you use is just an analog representation of what you have in your digital account. So why do you need to go and take something from your digital bank account or digital credit card statement and use a piece of plastic, a physical thing, to just complete a transaction that will go into someone else’s digital account? It doesn’t really make a lot of sense.
So that’s where the world is moving – away from any physical forms of money and toward totally digital currency.
What is mobile money in the context of emerging markets?
[10:09] It’s a tool for people who don’t have accounts.
Two to 3 billion people on the planet or nearly half of the population don’t have access to digital currency, meaning digital bank accounts. They’re not online with their banking. So that means if I want to buy something or pay or something, I have to physically hand someone the cash to do it. Now, think about all of the transactions that you do every day, how often have you walked into the store to buy a microwave, a refrigerator, you know, almost anything and paid in cash?
That is a world that two to 3 billion people on the planet had been left out. They’ve had to physically walk in and hand someone cash. That means they can’t do long distance transactions.
“So if I’m a farmer and I’m trying to send my crop to Nairobi, the capital and I live several hours away I may or may not know the person that I’m sending my crop too. I have some hesitancy about putting that crop on a truck and shipping it. Let’s say it’s coffee and I’m shipping it to the merchant that I’m trying to sell to because I’ve got no way of making sure that they’ll actually pay me that crop needs to arrive. They need to inspect it. Then they need to give someone else the money to bring to me. It’s needing to be physically present for transactions that slows down these economies.”
Mobile money is really addressing that. It allows the people that don’t have access to credit, and don’t need access to a bank to make payments.
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Tech Literacy and A World Online
Chandler says, “I think the part that really blew my mind the most, Jason, was that I learned that you could buy a “dumb phone” for 10 bucks and you can use MPesa to send money via text.”
Jason says, “I do believe that we need to add an extra dimension to literacy. I think that in this day and age if you don’t know how to get online and access things online, either through a smartphone or through a computer, most people in the emerging markets and at the base of the pyramid are leapfrogging laptops and computers and are actually going straight to smartphones. That’s how you have 3 billion people are getting onto the Internet for the first time and are staying on.
But if you’re, if you don’t know how to do that, I think that’s functionally illiterate.
So, not only do you need to be able to read, write and do basic math, but you also need to be able to access things online. So there is still a significant percentage of the population that doesn’t have access to the internet on a regularly recurring basis, which is a critical factor. If you don’t have access to the Internet, how are you going to do online transactions? E
Even if you do know how to get online, the mobile money that I’m speaking of enables you to send money using a text feature on the phone.
Disrupting Banking with Mobile Savings
[14:33] You’re able to send people money. People in Kenya use it for everything from buying one cigarette or buying a coca cola. Here, it’s also become the country’s largest savings account. So you can have loaded onto your account up to a thousand dollars.
I’d actually like to see that limit go up. I think the banks have probably been a big pressure on the government to put that in, that you can keep up to a thousand dollars in that account for most of the population in Kenya. I would say that for the majority of the population, that’s a decent chunk of savings. If they do hit that thousand dollars, MPesa has become their bank account or savings account. And this is where we’re seeing a ton of disruption. MPesa has become the largest banker in the country. It’s hosting more transactions and more volume than any of the other banks in the country.
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Cashless Transactions and Data Collection
Next, Jason talks about the 85%+ of the commerce in Africa that happens offline via vendor transactions. Companies like Twigga are simplefying the transactions in that market by placing them all on their app/
[19:33] “There has been no data on that population at all, but they’re representing 85 percent of the volume of the very large market. So Twigga Foods recognized is that they can control a small part of that market. They started with bananas and in nine months they became the largest buyer and seller of bananas with a few thousand customers. They basically buy from the farmer and sell to the kiosk owner right to their doorstep. They built a hub and spoke model. They own the entire logistics network from farmer to kiosk retailer.
So now those kiosk owners open their app and they say, I want five kilos of tomatoes, five kilos of bananas, six kilos of onions. The next day the order gets delivered to their doorstep at a significant discount to what they can buy in the traditional market. They’ve been able to do this because they’ve cut out a ton of waste and loss, product damage, etc. Throughout the supply chain. Now here’s where it really gets interesting and where mobile money comes in because all of that’s happening online. Twigga is a completely cashless business.
They pay the farmers with mobile money for the product. They have access to an entire two to 3 billion people that have lived almost entirely off the grid, around the planet.
One of the really interesting things about mobile money is that it allows businesses to leverage the data that they can collect in realtime, not static data. Survey-based data. So I call and ask you questions, you give me answers that you think I want to hear and we all go away and say good job.
So for example, within Twigga’s network, one of the areas that they can move into with this data is to start saying, ‘Hey, you’ve been a great customer for six months. Why don’t we automatically provides you with working capital financing? You want to expand your store, we’ll give you a small loan to be able to do that.’
Lending and Insurance
[24:26] Then, you’ve got the customer automatically on the system, you’ve got credit analysis and history that’s pretty accurate for that customer. And you can automate the lending process. So your cost of customer acquisition, your risk profile for acquiring customers has come down dramatically. Your default rate is coming down because they don’t want to default on their payment. That means they’re defaulting on their distributor. So you essentially completely disrupted the lending on the street for these small businesses. And that’s just one area. Now you’re starting to develop much more accurate data on these populations that can then be turned into insurance product for them as well.
Expanding to more emerging markets: How long will it take?
[34:37] “I think we can actually take the 12 to 13 year time frame that it took to get Kenya to where it is and shorten it to five or six years to build a similar ecosystem,” Jason says.
[34:46] I think there’s a couple of factors at play. it’s regulatory environment. So the banks either don’t want it to happen or they wanted to control it. There’s a big push and lobby for that from the banking side to want to roll it out. Similarly, telecom companies want to have the monopoly on MPesa too.
[35:50] So there’s two large political factions that are also large industries. They have strong political networks and inputs that are battling it out. That’s caused a lot of the issues.
MPesa’s use case is for someone who’s not online right now, who is not doing online banking. MPesa will really be relevant to them and really, really change their life. They’re not a first adapter. So they need a real reason to use mobile money. They need it. It needs to make their life better or they won’t use it. So use cases, whether it’s energy, whether it’s you’re paying through mobile money, whether it’s your customer and you’re on it because your distributor requires you to use it for transparency… The use cases are really critical to driving volume and driving consumer adoption.
[37:06]So to drive adoption in a new ecosystem, you need to go into a market when you can build out those use cases in the ecosystem that makes it relevant for the local population. Those companies are being developed just now, here in Kenya. They’re getting ready to start scaling in a massive way. Then the Kenya model will work in Nigeria. It will work in Mexico City and in Lima. But it’s just in the early days of development. It’s the early adoption, like when Google was just getting started and it took five, 10, 15 years for that to get going.
Facebook and the future of mobile money
Chandler talks through his takeaways:
[43:32] My biggest takeaway was thinking about the role that mobile money plays in an emerging market. If we were to take a look at global goal number nine and talk about creating resilient infrastructure is for our economies. I believe that mobile money is a vital role in an economy to have a secure, fast and cheap way to transfer money for goods and services.
If someone is looking to start saving for the first time ever, you don’t need credit, you don’t need a bank account. It is location independent and you can start saving in a financial first step. This provides reliability and efficiency in life and in business in general.
It allows you to start planning for the future ahead so you’re not just surviving from day to day. You can start surviving and thriving from week to week, month to month, et cetera. I believe if we’re going to have amazing innovations coming into emerging countries like drones or self-driving vehicles, we need to be able to have the basics for people to transact, which is exactly what MPesa has proven out.
[44:50] “What happens when Google or Facebook really tries to roll out their own mobile money and does it in emerging countries? They already have the trust. They have the global network. They could reach billions. I believe this is a super interesting landscape for those that are looking to enter into the mobile money game and if your business is looking to expand globally.
Takeaways
- Wow, the role of mobile money in an emerging market is huge!
- Global Goal #9: It’s vital in an economy to have a secure, fast, and cheap way to transfer money for goods/services. Not to mention a safe way to save money.
- And loved the challenge from Jason here… What happens when Google or Facebook really tries to roll this out mobile money?
- The Mobile Money Landscape: If your business is looking to expand globally, you’ll need to ask:
- How are we willing to take payments?
- How do we plan to take payments depending on the country we go to?
- Are we flexible?
- Is it easy to integrate?
- Can we adapt as this landscape changes?
Those are the top takeaways. Want more? check out resources at idevinternational.com
Oct 8, 2018 | Season 1
The average age in Uganda is 16 years old, and the unemployment rate is over 60%. Nationally, 400,000 people graduate university each year in Africa while only 80-100k jobs open up! In this episode, we will talk about the online platform that closes that graduate-to-career gap.
Episode Summary
We talk with Eddy Vaisberg, the COO of Fuzu. Fuzu is a career platform where 500k active users can discover their talent, get the skills they need to fully unleash their potential and find a career they love. We will talk about:
- 3:00 The unemployment challenge
- 7:30 How Fuzu aims to help graduates and employers
- 26:30 The technology behind Fuzu
- 46:30 The business model
- 48:45 The global goals they are tackling
Find out how Fuzu tackles 3 Global Goals: Global Goal #8, decent work and economic growth for all, Global Goal #10, reducing inequalities, and Global Goal #1 of taking on poverty through the power of jobs. Listen and enjoy!
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The Unemployment Issue
Eddy explains the numbers of the education to job-entry gap.
“What you’re looking at is a bunch of young people coming into their own, looking over the next 5-10 years to start building their careers to push the continent forward. But at the same time we don’t have the ecosystem to support them yet. What you see is this great push toward education… however, unfortunatly, the quality of that education is not at the level of the States, or Europe, or Asia. So when they come out of higer education they are not ready to jump into the job market. 70-80% of these graduates are not ready to contribute. And there’s nothing that bridges that gap between education and unemployment.”
Here are some of the stats:
- Kenya: 40% unemployment for the last 3 years of graduates
- Uganda: 65% unemployment for recent graduates
- 400k people graduating in Uganda, 1% of the population per year. But only 80-100k jobs open up each year.
Eddy talks about the infrastructure in the US, Europe and Asia to get graduates into jobs, like mentors, peer groups, career counseling, and internships. Africans need further training before they can even go into an internship, and African companies are only accepting 3-5 years of experience.
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How Fuzu Closes the Gap
Here are some of the initiatives happening to help Africans close this employment gap:
- Large companies like Microsoft running intensive trainings
- Government and organizations looking at this problem intensively
But even with many initiatives, the scale of the education-to-employment gap poses the biggest problem.
“750 million people will enter the job force in the next 25 years. These initiatives can’t provide the tools and solutions that can solve this problem across the millions. For us it’s about how we support millions of aspiring junior professionals with tools, career advice, and mentorship to address the problem for Africa.”
Fuzu is intended to be a deep, personalized, catered technology experience to enrich the job seeking journey and unleash the potential of millions of graduates.
A Digital Career Companion
Here’s what will make Fuzu stick:
- Hosting the best job openings
- Contributing the best career content: how to write an email, how to do an interview, how to drive a discussion or lead a meeting
- Supplementing the experiential knowledge that is lost in multiple-choice-test style education
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Fuzu and the Global Goals
Eddy emphasizes equal opportunity as an important focus for Fuzu (Global Goal #5). In oder to address the multiple Global Goals they care about, Eddy says that the platform must be the most engaging and opportunity-rich platform experience available.
“We’re trying to leverage all of the analytics to drive a merit-based hiring approach. In order for us to drive our mission, to have graduates and junior professionals utilize their potential and become a leader in the continent by providing the best job opportunities. So what we do is we give employers access to their personality, their talents and core competencies, and their experience.”
The user experience and analytics on Fuzu addresses 2 problems:
- Eases the unknown element of recent graduate hiring
- Mitigates the referral network approach of hiring – which is exacerbated by the tribe network and gender biases in Africa
“This way we force our employers to hire on merit, so everyone has an equal opportunity to get a great job.”
How It Works
- The employer creates a job search with detailed skills and personality requests
- The platform scrapes all 500k users to find matches
- Fuzu reaches out to the top 1000 potentials for the job by email
- Users apply through the platform
- The platform ranks applicants from 1-100 based on the accuracy of matching
- Employers review applications and select a new employee
“You don’t have bus drivers applying to be your accounting manager, or 5-year marketing managers applying for entry level customer service positions.”
The Business Model
Fuzu makes the platform accessible to anyone to use the tools and take the courses. For the employers, the platform has a freemium model, and for applicants, there are certain paid features like creating a CV.
“We don’t want to limit anyone from dreaming, growing, or being found. Most of the monetization is on the employers side, where we have large companies on an annual contract to ingrain us into their hiring process, and manage the hundreds of hires they engage per year.”
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Scaling Fuzu
Here are Fuzu’s main points of focus to scale:
- Market expansion, to disrupt and enter a market ready for a new solution. This means going into West Africa, South Africa, and other areas. “You can only enter a market once. So we’ve got to make a big splash,” Eddy says.
- Enriching the experience to become the #1 career companion and CRM.
“We see Fuzu as a tool for building the economies and create more people that are ready to make a contribution. It will become a self-fulfilling cycle of job creation… and we want to impact and touch as many people as possible.”
Takeaways
- Wow, the education system isn’t giving real-world skills! How do we decide how we’re educating youth?
- What is it going to take to change the education system?
- We can tackle poverty and economic development by equipping young people to stimulate the economy from the bottom up.
www.fuzu.com
Oct 1, 2018 | Season 1
600 million Africans do not have access to electricity, and most of them burn fossil fuels inside their homes. Is there a way to power off-grid homes and businesses sustainably?
The Green Mini-Grid Facility Kenya (GMG Kenya) provides grants and technical assistance to mini grid developers, to expand energy access to rural communities in Africa. In this episode, we talk with Nakul Sharma, a senior associate at I-Dev international and one of the lead managers of the Green Mini Grid Facility (GMG Facility Kenya) project.
Episode Summary
- 5:00 What is the Goal of the GMG Project? | Find out how this company plans to get power to the pockets of homes and businesses who are not connected to a grid.
- 11:30 Why is a Power Grid Important? | Find out what life is like off the power grid, and what it takes to get power to people who live on less than $4 per day.
- 17:00 African Resources | Africa is the world’s largest geothermal resource, so why is expensive diesel fuel so popular?
- 21:00 The Mini-Grid Solar Business Model | See how GMG Facility addresses the biggest problem in their market: demand for power.
- 27:00 Maslow’s Hierarchy | Kenyans priorities food first, then education. But when they can save 25% of their daily income, priorities shift.
- 36:45 A Business Model that Puts Itself Out of Business | With enough mini-grids, the governments and industry in Kenya will see rural areas as viable to connect to the grid. How will GMG Facilities stay in business?
- 42:00 Global Goal #7: Clean Energy for All | Nakul asserts that although access to sustainable power is clearly in the future, it will take time.
Full Post
Most countries have a national electrification plan. This program was created to cover the communities that were not included in the program. Some are so rural that it isn’t economically feasible to add the communities to the grid.
The households they help are the lowest income households with no electricity access. They use kerosene and flashlights to operate at night and cook. The mini-grids use a standard solar or hydro technology, and 400-500 households and businesses can be powered.
Nakul says that if their company is successful, the mini-grids they create will create a larger grid and make the community viable to connect to the existing governmental grid. “Success for this sector means that we connect these communities to the larger grid.”
“So essentially, it is GMG Facility’s job to put ourselves out of business.”
GMG Facility also covers funding: they pay for 50 percent of the cost of the panels, batteries, and hardware. Then, they help the communities and businesses raise the remaining 50% to pay for the grid. The idea is to use the funding and the development to generate interest in the sector: developers, investors, and governmental interest in connecting these communities to the grid.
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Why is a Grid Important?
“What we’re seeing in the lowest end of that spectrum are some really cool innovations. What is the key issue for someone making less than $2 or $3 per day? It’s affordability.”
Nakul talks about a recent innovation in buying power in whatever increments you can purchase it, as you need it. So for agricultural communities where income is seasonal, they can buy power when they need it.
Previously, the lowest increment you could buy power was $0.50 per day, which is half to a quarter of the daily income. So, integrating a “pay as you go” business model was critical for affordability.
African Resources
The African continent doesn’t need more coal or dirty fossil fuel. “Kenya alone has the worlds largest geothermal resource currently because it sits on the rift valley. I don’t know the science of it but I know it creates a hell of a lot of steam.” Steam turbines create energy from these rifts as well as hydroelectric power from dams as electricity resources.
However, diesel is the most widely used resource in Africa. It’s both the dirtiest and the most expensive resource. Nakul is optimistic though that Africa has the most opportunity for using clean energy since so much is available at a lower price than diesel.
“A commercial and industrial stand-alone solar system for a business can produce power for $0.04-.07 per kilowatt hour, while diesel provides power at $0.40 per kilowatt hour. The general electric grid can provide power at about $0.15 pkh… So, the opportunity is enormous,” Nakul asserts.
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The Minigrid Solar Business Model
Affordability is the main deciding factor in the success of the mini-grid business model. Developers go from house to house collecting payments, and GMG Facility had to come up with a way for developers to be compensated dependably.
“When your power bill comes in, you also get the option to pay-as-you-go with credits in advance of the month. You can also use mobile money and pay with your phone. This way, when the mini-grid developer goes around and physically collects payments, he isn’t put off week after week when families cannot pay. Instead, they can pay with their phone or pay as they go in advance.”
Nakul shares the main driving question to the business model: “How do we create demand?” He says there are 2 models the company is looking at to answer these questions.
- Traditional model: developer driven. In this model, the developer finances the equipment teaches a business or family how to use the equipment, and manages the grid and the implementation.
- Enterprise-driven model: In this model, you look at a larger company (like an aquaculture company and see what they need. Then, you set up a mini-grid right next to that commercial complex to provide power to all of its related facilities. This way, the company provides 70% of the demand for the mini-grid to break even, and the remaining 30% of the profit comes from the demand for rural businesses and families.
Maslow’s Hierarchy
Those at the lowest income bracket in an emerging market have problems at the bottom of Maslow’s hierarchy – food, shelter, and
basic health. Nakul suggests that energy is a basic need for education, connection to the internet, and communication to generate income. As GMF has interviewed families though, they have found that they typical expenses priorities are food first, and then education expenses second. Since kerosene, diesel, or a flashlight are viable options when you’re living on less than $4-$5 per day, the demand for energy decreases as funds decrease.
But there are health repercussions of using kerosene. The oil burns and produces smoke that can cause asphyxiation in the lungs.
Nakul talks about the World Bank study to link the use of fossil fuels to deaths or health hazards. He says they couldn’t find strong evidence for the health risks, and therefore clean energy companies need to focus on the economic benefits.
“Kerosene costs 50 cents per day. A stand-alone solar home system costs 50 cents per day for only 420 days,” Nakul says. So after a bit more than a year, you own the system. Each system is good for about 20 years.
“We’re Putting Ourselves Out of Business”
Nakul creating a scaling strategy for a business model that will be irrelevant once it works: Once GMF successfully connects many smaller mini-grids to the larger grid, the mini-grid developers won’t be needed.
Nakul’s idea is that the developers will be the distribution channel for power from the main grid to get to the mini-grids across Africa.
“We already have the distribution structure, so let us supply it to the households.”
One of the problems, Nakul says, is that even when the grid arrives it isn’t as dependable as a larger city grid. Eventually using the mini-grids as power distributors from the main grid is a great way to mediate reliability and rural access problems.
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Global Goal #7: Clean Energy for All
“Africa is probably where India was 20 years ago.”
He says it’s a matter of time before off-grid communities will be connected to the grid. As technology costs go down over time, power will be more and more available to emerging markets and those who have never been able to pay for energy.
He also mentions the critical step of Government endorsement and funding of power into the commercial and private sectors. Nakul leaves us with a recommendation to get involved at a personal level in the clean energy sector through crowdfunding, so check out these crowdfunding sites:
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Sep 24, 2018 | Uncategorized
In areas where resources and infrastructure are scarce, a few key investments can elevate the entire economy. In this episode, find out how the IFC’s education and healthcare portfolios are impacting Global Goals 3 and 4 in Africa.
Summary
- 2:00 How the IFC works | Investing in profitable AND sustainable ventures
- 12:30 What kinds of investments does the IFC do in Africa? | How the IFC impacts a whole ecosystem with $5 million+ investments.
- 18:00 Healthcare & Education | How the IFC supports these two critical impact areas in Africa
- 21:00 Medtech & Edtech | Technology can bridge the gap for off-grid families to get fully accessible, standardized education
- 26:00 Challenges to Scale in an Emerging Market | Kenyans value education, so the challenges of resources and infrastructure create opportunity for innovation.
- 28:00 Measuring Impact | Standard and case-by-case metrics for impact investing
- 35:00 Business in Africa | An invitation to do business in Africa
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Senior investment officer Ananya Sengupta works with the IFC Sub-Saharan Africa division. The International Finance Corporation is part of the World Bank group, and they are committed to partnering with the private sector to end extreme poverty and increase shared prosperity.The IFC has invested more than $25 billion in African companies to help their partners overcome the financial, operational and growth challenges of business development.
We’ll see how the IFC measures impact in this episode, and how the healthcare and education industries are developing in Ananya’s point of view.
Investing in Profitable AND Sustainable Ventures
“We must be able to offer something that the market cannot offer,” Ananya say, like expertise, advice, or specific kinds of loans. IFC is a for-profit group that is proving that investing in emerging markets can be profitable.
“For any economy to grow, it’s not only the government that needs to invest but the private sector that needs to invest too. They will only do that if they see that it’s sustainable. So that’s what we do.”
Ananya talks about working in the health and education team with the IFC, then moving into a portfolio team for investments. Her portfolio group has more than 150 businesses, and she specifically manages about 40 companies. “We monitor the portfolio, the quality, the trends, and also at an individual level. After we’ve dispersed money to a company and it comes into our portfolio, we give the company a credit rating.” She talks about her job in creating the reports on those companies to ensure the quality of her portfolio.
What kinds of investments does the IFC do in Africa?
Ananya talks about the different industries and countries that they are involved in. She says they work with investments above $5 million, “because we believe in having the biggest bang for the buck. Our philosophy is to work with bigger companies that have a bigger impact on their whole ecosystem. This way we can impact a whole ecosystem of companies around the one we invest in.”
Healthcare
“We’re seeing a lot of medical tourism because Kenya’s becoming a center of excellence in healthcare. …But even though Kenya is strong in the region in healthcare, the cost is expensive. So many Kenyans go to South Africa or India for healthcare.”
Large parts of the population still don’t have access to affordable, quality healthcare services. Ananya says that the competition will help address those issues, as more and more companies arise from the market.
Education
The investments that the IFC does in education are some of the smallest in their portfolio, and “they meet a very real need… in areas where there are just not enough public schools.” She describes schools that are run by one or two people out of someone’s garage and the opportunity for corporate alternative schooling companies to come in and provide quality education.
She talks about higher education as well, which includes technical and vocational universities.
Medtech & Edtech
Technology can now address problems like:
- Lack of teachers
- Lack of infrastructure
- Access to a school
- People living off of the energy grid
- Education quality
- Standardized curriculums
Ananya says that kind of technology is critical for Africa, from providing content and services that have never been available but also to increase engagement in education in Africa.
Challenges to Scale in an Emerging Market
Here are the main challenges Ananya mentions:
- Lack of electricity (though there is internet)
- Lack of resources and curriculum
- Lack of teachers
- Allowing remote access to a class they need
The opportunity, Ananya says, is that in Kenya education is very prized. People are willing to pay for their children to go to school.
Measuring Impact
Ananya’s portfolio group agrees on impact metrics that they will use to choose a company. Some of the Metrics the IFC looks for are:
- How many female employees do you have?
- What are the learning outcomes (for education)?
- ROI over time – infrastructure metrics vary, and are specific to each company
- How much business has this company given to SME’s (Small to medium sized businesses)?
Leap Frog to Africa
In Africa, you don’t have to go through all the pains of developing infrastructure because the market is ready for up to date innovation. For people who are willing to take that risk “there is a huge opportunity to make money and to make a real difference to the people here.”
Takeaways
- The IFC has taken a long-term stand to prove impact investing is profitable, and have created thousands of jobs.
- If you have a business with traction, head to IFC.org to get connected and see what work they have done for good.
Sep 17, 2018 | Season 1
Lori Systems is a logistics coordination platform that connects Cargo Owners and Transportation in East Africa. Find out how the company addresses Global Goals 1, 8 and 9 in this episode.
Summary
In this episode, Chandler interviews Ron Okello, the head of product marketing and PR at Lori Systems. Ron shows us how Lori Systems solves a major economic problem in East Africa: the relative cost of moving goods across East Africa is one of the highest in the world.
- 4:30 How the Platform Works | Lori Systems is a logistics coordination platform that seamlessly connects Cargo Owners and Transportation.
- 13:30 Why Does the Data Matter? | With data on transporter reliability and costs, the company helps suppliers optimize their business.
- 19:00 Business Model Insider | Ron talks about three pillars of their business: tech, operational excellence, and customer service.
- 27:00 Tech in Africa – Who Will Survive? | Hear the two main industries ready for tech innovation in East Africa.
- 32:30 Timeline for Exponential Technology | Ron expects exponential tech to come sooner than we think.
- 40:45 Lowering Costs, Alleviating Poverty | Find out how problem-solving in the cost margins can shift a whole economy.
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Lori Systems was founded in 2016 by Joshua Adam Sandler, a South African Native and Harvard Alumni. When they saw the inefficiencies in the transportation industry, they created a platform to revolutionize logistics in Africa.
Platform features:
- Manage invoicing and operations
- Visibility of where the trucks are
- Rates for product moves
- Which cargo is coming and going, and the cost
- Access to consistent cargo
- Centralized control system and reliability enforcement
- Consolidation of providers, products, trucks, and feedback on driver compliance
- Journey and performance monitoring
- Push notifications telling their driving habits and arrival times
Formerly, there was no certainty that trucks would show up when a company would call them to transport products. This way, the product companies and warehouses can dependably transport their products and optimize their business based on the data in the platform.
Getting from point A to B in East Africa is not as easy as ordering Uber Eats. Most cities in Africa have unmapped, unpaved areas between them. This makes driving and delivering product challenging.
“The driver is our number one priority. His compliance and reliability is important to us.”
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What do you do with the data?
“Every month we have a sit-down with our clients, and have a conversation about performance. We give feedback and they give feedback, based on the data. We better ourselves and also scale with the data.”
Lori Systems decreases the cost of goods for their customers by 15% just in lowering transport costs. “When we do this we will be able to realize more of the global goals – bettering economies and reducing poverty.”
Lori Systems address the Economic Development Global Goal by providing transporters consistent wages, and also they address poverty by reducing the cost to move products.
“The biggest goal for me would be Industry Innovation and Infrastructure. We looked at the challenges within that goal, and we come in to bring the innovation to streamline the process and make it more efficient.”
Business Model Insider
“We are centered in 3 pillars. We have technology to drive decision making, Operational excellence to operate teams, and customer service – which is the biggest one if you ask me. The beauty with Lori systems is that 33% of a move cost goes into fuel. And how we solved that problem is through fuel financing. We provide them with fuel to execute the job, and when they come back they give us the invoice. Then, we handle the documents with the clients and ask for a contract.”
This means it’s an all-around win for the transporters. They have fuel, insurance and access to consistent cargo.
“We map out your future for you. On your journeys we are looking for your return journeys, or move you from town B to town C because we have a new customer there. We always make sure that your trucks are constantly moving. I can’t begin to stress how much time we save the transporters.”
Tech in Africa – Who Will Survive?
“Tech cannot solve all our problems. It needs to be supported by people.”
Ron talks about crowdsourcing solutions to the industry, since it’s an industry “build on relationships.” He sees opportunity in the growing workforce and the government’s support of indigenous companies.
Ron suggests that any tech company oriented toward the Global Goals will be more likely to make it. Agriculture and logistics will especially thrive in African markets.
Another area of tech opportunity is tech for finance. Any technology that can help create access to capital or make fund transfer simpler will go over well.
“In a nutshell, as long as its a problem that you can solve, the industry is ripe and open to solutions.”
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Timeline for Exponential Technology
Ron explains that on the financial side, exponential tech could arrive “sooner than we think.” Blockchain is growing in Africa since transparency is an issue in developing markets. “Self-driving cars may take awhile,” he says, since the infrastructure to support exponential tech in transportation is still developing.
Trust is a key factor in adopting exponential tech, Ron says, even if the market is ready. Moving from carrying groceries on your head to riding a hoverboard is an unlikely leap.
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Expanding Impact
As far as Lori’s expansion, Ron talks about moving into Uganda next. Expanding the company requires partnerships and tackling the infrastructure issues in the country. How will they bank? What roads will they use? Though Lori will have the advantage of access to landlocked ports, they will have to create partnerships to allow imports and navigate the existing infrastructure.
Lowering Costs, Alleviating Poverty
Though costs of goods increase as their source companies move more inland, Lori is able to maintain consistent pricing because of the services they offer. Ron says it costs 4x the amount to move product in Africa as compared to the United States.
Takeaways:
- Moving things is expensive! Margins are a critical problem-solving opportunity in an emerging market.
- What margins have you planned for in creating a business in an emerging market? How will increasing volume impact those prices and margins?
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Sep 12, 2018 | Season 1
The Kenyan manager of Metta shares about the business climate in Nairobi and talks about how technology improves the emerging markets by solving simple problems.
- 6:45 What is the startup landscape in Nairobi Kenya? The small population and scarcity of talent and resources impact which businesses thrive.
- 18:45 What is M-Pesa and why is it such a big deal? M-Pesa is mobile money sent through text. It makes business safer and easier for Kenyans.
- 26:00 What are the biggest challenges to starting a business in Nairobi? Companies have to be solving an immediate, critical problem and avoid government corruption.
- 31:00 How does technology impact building a company in this ecosystem? The technologies that work are very simple and they solve a pertinent problem.
- 37:30 What will it take for people to get access to basic needs and address the Global Goals? Maurice talks about social impact companies that give people jobs while they address systemic problems.
Maurice Starts with the vision of Metta:
All entrepreneurs to have an equal opportunity and access to resources across the globe. To do that, we form partnerships in the middle east, Asia and Africa so that by 2025 each of those markets are connected and able to move from a nascent to an established entrepreneurs ecosystem.
Currently, Metta is located in Hong Kong and Nairobi. They will be starting in Bali and Thailand soon, and they have representatives in 14 countries. Through the virtual platform, their members can log in and meet each other.
“If I was to predict, I would say probably South America will be next for us.”
Metta is not just a place where entrepreneurs come together, but a place for them to find resources, community, and mentorship.
“We are limited in terms of mentorship to grow businesses into unicorns, and limited in terms of investment opportunities. We’re also limited in terms of finding talent. …So, we’re offering something different than coworking spaces and accelerators. We’re offering shared resources.
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Business in Nairobi
“The difficulty you face in East Africa is that we are a very small population. Within even the small market the people are at the bottom of the pyramid.”
Maurice talks about the market in detail: “Since technology innovations are new to the market, there’s very little investment in those projects in Kenya.” Many of the people are involved in NGOs and are refugees from other countries. So, the mentality, Maurice says, is “Gimme gimme gimme.” Startups and investment are a new conversation.
What does success look like for startups in Africa?
The successful companies, Maurice says, are companies who don’t mind sharing. Also, they are the ones creating solutions for people living on $1 per day or less. The individual entrepreneurs who are successful are the ones who take meetings and go to events frequently. They spend money to get talent, too.
“They do spend an arm and a leg to get the talent they need. But you need a good team who can hold fort while you go to brave the fronts of getting investment.”
First World Problems
Maurice teases about first world problems that Americans deal with versus survival problems that Africans deal with. “Do we even have a road?” he laughs.
It is easier for an expat to start a business in Kenya because they can look at what businesses worked in their country, and bring those same business models back to Kenya.
The Benefits of Starting a Business in Kenya
Maurice lists the benefits for founders in Kenya:
- Payments are transmitted so quickly through M-Pesa
- The weather is good and Nairobi is beautiful
- Kenya needs businesses and startups
- Most Kenyans speak 3-4 languages. English, Swahili, language from schooling (Japanese, French, etc) and one of the 14 tribe languages.
- Moderately expensive to live there, but more stable than neighboring cities and countries.
- Many expats and company headquarters based in Nairobi as well.
M-Pesa
Here’s the basic outline of the power of M-Pesa:
- No internet access needed
- Money transfers through text
- There are 100k agents or dresser-sized ATM’s to get money
- Banks are now partnering with M-Pesa to put your money in your M-Pesa wallet
Interestingly, there are still 70-80% cash transactions in Kenya, but the technology is spreading rapidly. M-Pesa was a major need in Kenya because opening a bank used to be for the rich. The minimum deposit for a bank account is $100, so it was too much to open and maintain a bank account for most Kenyans.
Also, carrying money is dangerous in underdeveloped countries. So M-Pesa provides a measure of safety.
Challenges of Doing Business in Nairobi
Maurice says that in order to be successful in Nairobi, you have to be solving an immediate, critical problem. He notes key areas that impact business growth in the country:
- Security
- Infrastructure
- Addressing an immediate need
- Avoiding corruption – caution when interfacing with the government
“Funny enough, we’ve had the most recent political assassinations of any country. That was an eye opener. Also, Europe is 35 years behind Silicon Valley, and Africa is 10 or 15 years behind Europe. But I think right now, it’s coming of age.”
Do Tech Companies Survive in Emerging Markets?
“The fundamental thing people are forgetting is that you are solving a problem first, before you introduce the tech. So over here you find that the technologies that work are not that advanced. They are very simple and they solve a pertinent problem.”
Problems like “How to get milk to a place that has a lot of bananas” – these are the simple technologies that work in Kenya.
Blockchain has been recently introduced to address corruption in the government, and Maurice says that is a huge step. “It’s simple but very very key.”
As far as exponential technologies, Maurice says they are present and it’s a matter of time before they begin to spread. Adaptability is the issue, though. For example, in order for Uber to spread to Kenya, people have to know how to use Google Maps. Google Maps hasn’t been adopted yet, and the country isn’t well mapped. Once distribution, basic data, and familiarity with basic applications are established, exponential tech can grow. “10-20 years, I’d say,” says Maurice.
What It Will Take To Address the Global Goals
“It’s already started” Maurice says. He talks about social impact companies that give people jobs while they address systemic problems.
Takeaways
- M-Pesa: 30 million people rely on M-Pesa for their transactions through their flip phones.
- So, wherever you go, you’ve gotta have a financial foundation!
- M-Pesa addresses the corruption and banking problems that made starting a business next to impossible.
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Aug 27, 2018 | Season 1
Three years ago, two biomedical engineers had the courage to travel to Uganda and discover why millions of newborns die of preventable causes. In this episode, hear how Sona and her co-founder Teresa created a social impact startup while still in grad school, and how you can tackle a Global Goal with field research.
Podcast Summary
- 7:50 Sona’s Story to Become a Social Entrepreneur While still in grad school, Sona and her cofounder headed to Uganda and decided to solve the problem they found at the newborn wards.
- 9:30 Tackling Global Goal # 3.2: Neopenda’s goal is to help end all preventable deaths for children under 5 years old with a simple vitals monitor.
- 15:45 Why is the Product so Disruptive? Sona talks about infrastructure and medical device problems in emerging markets, and the valuable data that their devices collect.
- 22:30 Business Model and Growth Path How will two biomedical engineers grow a company to enter and transform newborn health in an emerging market? Hear how to enter an emerging market with new technology.
- 32:00 Create A Career Around a Global Goal Chandler and Sona share what it takes to explore a problem you care about and create a solution. “You might come out of grad school with a startup… and be the happiest you’ve ever been.”
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About Neopenda
Three years ago, two biomedical engineers had the opportunity to travel to Uganda. They discovered that many hospitals did not have medical equipment and that newborn wards are overcrowded and undersupplied. They discovered that babies don’t make it out of the hospital for preventable reasons, and decided to do something about it.
After spending time at the wards in Uganda, Sona and her soon-to-be co-founder discovered the key problem with few nurses taking care of so many newborns at once. This meant that the nurses didn’t know when the babies were in trouble. Sona and Teresa then designed a wearable technology for newborns that continuously measures four vital signs and signals health problems:
- Pulse rate
- Respiratory rate
- Blood oxygen saturation
- Temperature
The vital signs from all the newborns in the room wirelessly connect to a tablet that the nurse holds. This way, the nurse can see the status of all the babies in the room.
“3 million newborns are dying around the world, and most of them are in emerging markets. Something like 80% of those deaths are preventable.”
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How does Global Goal 3 Direct Tech development?
Image via sight.iee.org
Although the rate of mortality for children under 5 is decreasing, the mortality rate of children under 28 days old has not decreased. Neopenda targets that problem specifically. Sona talks about Uganda as a great starting point, since there has been a 46% increase in the country’s spending on medical devices. Uganda also has one of the highest fertility rates of any country in the world.
Turning Overwhelm to Impact in Uganda
Chandler asks what the first visit to Uganda was like, and Sona mentions how much emotion is still there for her.
“It’s overwhelming…and it’s inspiration for us. When we go, we spend time in the hospitals to see what’s really happening. And I would be remiss if I didn’t say it’s overwhelming. We already have ideas of what our next products will look like… but it isn’t one solution that will fix everything.”
When there are 2 nurses watching 125 babies stay alive for the first 28 days of their life. Neopenda’s first product makes a huge difference, and Sona was moved to tackle the problem after walking by bed after bed of babies that had died unnoticed.
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The Business Model: Who are Neopenda’s Customers?
Neopenda is for-profit, and they focus on emerging markets. “We are impact driven… and we see that emerging markets are a huge opportunity for us because there aren’t very many medical device companies specifically for emerging markets. That market is untapped.”
Neopenda will sell devices to private facilities in emerging markets because they have more purchasing power and less red tape to try new devices. The cost of acquisition is higher with private facilities while the team goes from hospital to hospital, but Neopenda is engaging health ministries (governmental organizations) to get to public health facilities. Finally, Neopenda is partnering with international NGO’s who already have a presence and distribution channels all over the world.
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Private Hospital Partnerships
Many private hospitals in emerging markets are backed by faith-based organizations that have a lot of jurisdiction over the hospitals they work with. That means it’s easier for Neopenda to work with the organizations and the hospitals to find out what will best serve their infrastructure.
Sona says it’s unusual for a 3rd party company to provide medical devices through partnerships, and shares that they sell the monitors in packages of at least 15 to ensure the wards have more than one monitor. “We don’t want to be the only monitor in the wards,” Sona says, “but that is often what we see right now. So, it is displacing the market a little bit but we want to show the value of the product not just from how many lives we actually help, but also in helping them understand how we can help improve their efficiency and cost-effectiveness. How can they improve the retention rates of nurses… all kinds of types of value that we can provide with one device.”
Is the Market Ready?
Sona says there are some facilities that are excited to do pilot studies and some that are not as willing to change. That unwillingness impacts the sales cycle and rate of adoption. This means that pilot tests can become the inroad to make product adoption an obvious choice.
Technological Details
Sona talks about the divine as similar to the finger-clip you get when you get at the doctor to pick up your vital signals. The sensors connect with bluetooth to the nurses’ tablets. She talks about designing the product to work on low energy and without wifi. The next step, she says, is collecting data with the tablets for NGO’s and hospitals to better address the problem.
Chandler asks what else they will be able to do with all this data, and Sona brings up analytics for resource allocation. “Another level,” she says, “is that most wards are calculating statistics on the babies on paper.” Neopenda can collect all that information simply through the tablets. The tablets can run for 5-7 days on batteries, then recharge the battery with a standard micro USB cord. With Bluetooth, the tablets can connect without wifi, and the company will be able to collect all the data from the tablets to the cloud by connecting once or twice a month.
Sona talks about FDA approval, logistics, and the business model, and shares that Neopenda is about 1 year from commercialization. The company has opened a crowdfunding equity campaign and is moving through rounds of investment while the product pends FDA approval.
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Emerging Market Challenges
As far as the challenges in emerging markets, Sona talks about medical device testing regulations. Many emerging markets do not have regulations for new device adoption, and they do not purchase devices. Most medical equipment is donated in these countries. “It will be a mindset shift,” Sona says. She mentions the “equipment graveyard” room in most hospitals in these markets, where donated devices without manuals or working parts pile up.
This is just one reason Neopenda is a for-profit model instead of a nonprofit. “The more profitable we are and the more successful we are as a company, the more babies we can help.”
How to Get Involved
Sona recommends several steps to start off as a social entrepreneur:
- Reach out to leaders in the industry you’re interested in, and reach out to projects or initiatives that are already happening.
- Follow your heart and interests!
- Get out to the field as much as you can and witness the problems there.
Sona says, “Choose a Global Goal, start doing some research, and you may come out of grad school with a company… and be the happiest you’ve ever been.”
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Takeaways:
- It takes a high commitment to address a Global Goal. The Neopenda device was designed specifically for the problems their customer faces. No wifi needed, long-term battery, and valuable data provision.
- Get in the field. Have you gone to explore your customers problems?
- Here’s a link to check out Neopena’s fundraising campaign!
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Aug 20, 2018 | Uncategorized
In this episode, find out how the Hack Fund platform uses blockchain to create accessible funding for startups outside of Silicon Valley.
Episode Summary
- 6:30 How to Raise $5 Million: “I don’t know man, I’m a nurse!” Jonathan shares the journey of balancing nursing night shifts, coding, and running Hackers and Founders events.
- 14:00 Choosing Companies in Emerging Markets In Central America, the likelihood of a company going public or selling to Google is slim. How can a blockchain fund incentivize investors, and help them to select great companies?
- 21:30 Thousands of Beers and Founder Struggles Once he was invited to the Small and Emerging Companies (SEC) committee, Jonathan knew “We’re gonna end up solving poverty in emerging markets.”
- 29:30 Investment to Solve the Global Goals One micro VC fund in Latin America grows the market by 10% per year. Hack Fund can transform a continent’s economy by investing with local profitable companies.
- 45:00 Technology to Solve the Global Goals Each new technology job creates a ripple effect of economic growth in an emerging market. See how this blockchain platform addresses root problems to address the Global Goals.
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How Jonathan Started Hackers as a Nurse
Jonathan starts us off by sharing the mission and vision of hack fund.
“The mission and vision of hack fund are to solve the world’s liquidity problems and to fix investing in emerging markets.” Jonathan spent a couple of years on an SEC advisory committee looking at why investment gets so concentrated in certain areas of the country. He kept hearing entrepreneurs faced with the same problem, ‘I’m not able to raise money for my business.’
“85% of the world’s mergers and acquisitions happen in Silicon Valley.”
Usually, how funds are freed up is that a company gets sold or it goes public. Otherwise, investor funds are frozen in their investment companies. Chandler explains, “We’re retaining this thing called equity, and it doesn’t actually mean anything until the company is actually sold.” Liquidity means I can turn my stock or investment money into cash.
Jonathan hilariously describes the process of creating a public mutual fund legally. When on the phone with a lawyer who could create such an entity, he heard something to the effect of,
“One second Jonathan, I’m on the deck of my yacht in the Manhattan harbor and it’s very noisy here. One second – Raoul! Pour more Chabli! Don’t spill on the white leather!”
It came out to millions of dollars to get the public mutual fund off the ground legally. But Jonathan was
“absolutely convinced we need liquid funds.” He began to hear more and more about Blockchain, and began to think about creating a digital security with a Token. Jonathan loved this idea, and he thought it was possible if it could be done legally.
“Essentially we’re just issuing a digital stock certificate that is a share in our fund. It’s a Cayman Island company.” Cayman Island companies have specific laws that will recognize both digital and paper documents, and that leave funds in the Hack Fund sector totally unregulated.
“The superpower that the fund gives me is that as compared to a traditional silicon valley venture capitalist raises money from other people and buy stock in other tech companies. They hope to god that 1 in 50 of these tech companies gets acquired by google for 1, 2, 5 billion dollars, and then everybody involved makes money. Unless you have a huge acquisition or IPO, the venture capitalists don’t make money.
In my model it’s my job to make sure that my share price grows. We,, how do you measure that? I don’t know… they have profits?! I said profits in Silicon Valley!”
“My superpower is, i don’t have to worry about whether one of my companies gets acquired or not. I don’t have to ask any of my entrepreneurs, ‘what’s your exit strategy?’ I don’t care!”
Jonathan talks about the auditing and vetting that takes place to ensure his investments are viable companies making profit.
What’s Possible for Emerging Markets
In emerging markets, like Guadalajara or Ireland, potential investors don’t see a return potential on their investment because it’s unlikely that a company from those markets will sell to Google or Ebay, or go public.
It’s unlikely that a startup will find investors if they are in an emerging market like that. The Hack Fund can give emerging markets that same opportunity through a digital stock through cryptocurrency. And, the value of the stock is established by the profitability of the company.
How To Choose Companies for Investment
“Well, I’m actually disrupting my own business.” Jonathan talks about the events and mentoring he’s done to bring companies to Silicon Valley and get them funded. Now, with Hack Fund, he doesn’t have to do that.
To be selected, there are three simple steps:
- Scoring Each company is reviewed and scored by other entrepreneurs instead of by other investors.
- Introductions Those who scored well will talk with the Hack Fund investors, who will review and score them based on their capacity to hit specific milestones.
- Final Cut If they pass those stages, we sit down with them to see if we care about what the company is up to and if we can add value.
From Nurse to Technology Investor
It was Jonathan’s dad who had him become a nurse, because “computers are for video games and you can’t do that for the rest of your life.” His interest in tech and computers led him to move to Silicon Valley soon after becoming a nurse, where he worked as a nurse 3 nights a week and coded for the other nights.
Jonathan gives credit to his wife for the start of his career. “I believe she said, ‘I’m f*cking tired of hearing about coding and entrepreneurs, you have to go out at least once a month and talk about it to someone else.”
“When the economy tanked, the underemployed nerds started to make things. They would come up with a great idea and then ask me, ‘How do I raise 5 million dollars?’ I don’t know dude, I’m a nurse!”
Thousands of Beers and Founder Struggles
“The Hackers and Founders tagline is, ‘Making founders’ life suck 34% less all around the world.’ Primarily that’s because we spent years having beers with founders around the world and talking about what sucks. This money thing came up over and over and over again.”
“Apparently not a lot of people have had beers with thousands of entrepreneurs.” That gave Jonathan leverage, and he was invited to an SCC committee that began his mutual fund path.
“We’re gonna end up solving poverty in emerging markets,” Jonathan says. He talks about his hometown in rural Honduras and being “the only white kid at the end of a six-hour long dirt road. That’s where I came from.” There were 35 coup d’etats in the region, where cops had M16s and AK47s. His friends didn’t have shoes to play soccer. But his dream was to move to Silicon Valley, flip tech companies, and then come back and put shoes on the little kids.
“I think if we can use blockchain to tweak how capitalism works, tweak how we invest in companies, and tweak how companies access crypto markets around the world, I think we end up growing the economies in entire countries. For me that’s fun… That’s my Don Quixote hero’s quest. How do we fix poverty, and to do that how do we fix capitalism and make it a bit more collaborative?”
How does the Hack Fund work to Stimulate Emerging Markets?
One fund can stimulate an entire country’s economy dramatically. Jonathan says, “A hundred million dollar fund, or a micro-VC fund, spread out over 4 years, would increase investment into an entire continent by 10% per year.”
In addition, for every 1 tech job created there are five satellite additional jobs are created. So, each tech job feeds 5 people and impacts 10 or 15 people.
In order to put shoes on millions of kids in these countries, their moms and dads need better jobs. Jonathan talks about transitioning family incomes from agriculture to software-based vocations, and says that transition is possible within one generation. “For each young person who takes their software knowledge and builds a company, they will be making enough to stimulate their whole town on their own.” That creates lasting, systemic impact.
“I’m tired of precious little cute development projects. We need to grow these economies.”
Jonathan suggests transitioning agricultural economies to knowledge-based economies as a way to address poverty and grow the economy.
Technology to Solve the Global Goals
Jonathan talks about the ability to empower brilliant scientists and technologists in emerging markets by funding their idea development. He notices that people like Bill Gates and Steve Jobs had access to capital and that there are similar undiscovered geniuses in other parts of the world. What would happen if they got funding?
Another new capacity with the Hack fund is to enable people in different income brackets to invest, since it only costs $2 per person to become an investor. Once they are on board, they receive tokens that will eventually be used for basic living expenses.
“In emerging markets, there are going to be billions of people that are going to need to put a little bit of money to work.”
Jonathan talks about the inefficiencies of pensions and hedge funds, as he learned about them in nursing. He saw how much wealth was locked up in the nurse’s pension programs, and started thinking on a way for nurses to make 30% a year on their pensions by keeping the management fees low.
“This is why I think Blockchain is the future of finance.”
The Root Causes of all the Global Goals
Jonathan walks through the “clunky” user experience of the current Hack Fund platform. Users can log on now and invest, and the platform will become more user friendly in the next year.
And, Jonathan believes Hack Fund is on the right track to make a huge difference toward the Global Goals.
“I believe the liquidity problem is the root cause of many of these problems… I’m not Utopian by any means. Yes, there’s corruption and scams. But just like the internet democratized peoples’ publishing, Blockchain will democratize people’s access to investment and entrepreneurship… And what the hell, that’s worth spending 20 or 30 years on.”
When it comes to the root cause of the problems that the Global Goals address, Jonathan speaks to education. He says access to the internet and funding education are steps before addressing education itself. He also mentions that corruption is a huge factor in emerging markets, and he imagines all nonprofits and governments putting their transactions on blockchain to create transparency.
Here’s the goal. In a number of years, families in emerging companies will say “I’m selling bananas but my kids are selling software.”
Takeaways
- Learning about a blockchain based fund that can solve the liquidity problem. This way, you can generate returns year over year as long as the value of the companies keeps growing.
- The gap between emerging markets and access to capital is huge! With access to more capital, the problems these economies face can be solved from the ground up. This is possible through new jobs and through equipping specialists in these countries to develop solutions that work.
Aug 12, 2018 | Season 1
The founder of SoCap and ImpactAssets shows how impact investing works, and how to start a private foundation with as little as $5,000.
Episode Summary
- 2:15 What is ImpactAssets? Tim talks about how impact investing works, and what differentiates it from regular investing and venture capitalism.
- 9:30 What Was Impact Investing Like Before? Although investors face the same problems in choosing companies to support, the biggest difference is in the mindset.
- 12:15 The Coolest Social Impact Events in the Country Tim talks about the start of the social impact conference movement, and the ten years it’s taken to create social impact hubs all over the world.
- 25:00 Donor Advise Funds: A Big Pile of Accounts and a Tax Break Time breaks down how to create your own miniature family foundation, and why it’s a good idea.
- 38:30 Where Should I Invest? Interested in doing good with your investment dollars, but don’t know where to start? Here’s how to have advice and options brought to you.
- 48:00 The Secret To Investing Like a Millionaire Tim talks about democritizing investing, and how much impact is possible when small funds and personal funds are aggregated on the ImpactAssets platform.
Full Post
Last year, the
Social Capital Markets Conference brought 3,000 social entrepreneurs and impact investors to San Fransisco to collaborate. Now, the founder of SoCap shares how to democratize impact investing even further with the
ImpactAssets platform. ImpactAssets is the leading facilitator of direct impact investing and donor advice.
What is ImpactAssets?
ImpactAssets is an asset management platform built by impact investors for impact investors. The platform hosts thousands of investors of all contribution levels. That way, the assets can be allocated across many vetted projects.
Mission: Time shares that ImpactAssets was first built for “The apologetics of impact investing.” Or to bring the idea of impact investing to the mainstream and show that returns are good. But now, Tim says
“It is time to move toward much more dynamic user experience…where people are highly engaged and can express their passions in a collaborative way.”
Tim talks about impact investors interacting with more information inside their portfolios, and increasing face-to-face conversation with social entrepreneurs.
Glorified Intern
Tim shares about his journey in investing before impact investing was a thing.
“We were getting on planes to pull down $100k from a family foundation. Impact investing didn’t come online as a term till much later.” At the time, it was called “responsible investing.” Tim says, “things were a lot slower and much less mainstream at the time.” That was more than eight years ago. But in the timeline of cultural and social change, eight years is not long at all.
“You’ve got to be calibrated for the long haul. It’s a zeigeist shift, a total cultural shift we’re in… and you measure that in decades and generations, not quarters and years.”
PreHistoric Social Impact: What Was Impact Investing Like Before?
Tim says it was similar in some ways, in that it takes “wrestling” with wealth holders to allocate funding to vetted projects for social good. He says the same issues still abound, even with impact investing becoming more mainstream. “Stage and scale are complexities that are never going to go away in impact investing,” he says.
Tim talks about the question of market value when investing in social good companies.
“Can you do just as well or better by doing good? Or should you actually suspend some of the rules around the conventional rate of return and get stuff done that needs to be done in the world?”
He asserts that those questions will only be fully answered when we reframe capitalism entirely.
The Coolest Social Impact Events in the Country
Tim talks about a common theme in the events he’s started. “I’m comfortable and see the value in middle-ware plumbing: What sits in the middle and knits people, ideas and capital together?” Be it a digital platform or an in-person event experience, he says
“I see it as a catalytic tool kit.”
In 2008 when the markets crashed, Tim saw the need for a gathering place for the tribe. Social entrepreneurs needed to keep steam in a depressing time. “The market was messy and fractured, and we needed to get everybody together to look at things in one place.” The idea of SoCap was to create a diverse, impact-driven Lollapalooza.
More recently Tim and his team have been working on more in-depth meetings and events. It’s important for all involved parties to “put their chips on the table,” and look at what there is to work with in one place. “We fell in love with this idea of having a persistent exchange of value of diverse parties on a regular basis. You talked about collaboration a year ago with your neighbors from another country, but it became out of sight and out of mind.” Tim casts a vision of
ImpactHubs that are “embodying where change goes to work.”
Now, there are 103 of these hubs across 30 countries and 5 continents, and about one new location opens per month. “We’ve had as many as 600 members in San Francisco, from student groups to investors to consultants to nonprofits to for-profit companies. All these things can hang together.” The intention is to take care of social impact projects that have “middle-ware” or system-oriented needs.
“I’m trying to build a set of frontier activities that will pull the public toward more appropriate tools to get done what needs to get done in the world, considering the wicked problems we’re facing today.”
Tim defines donor advised funds and shares that they “allow people or companies to bring a bunch of assets and get the tax break at day 0.” The opportunity in donor advised funds is that all of your donation and investing money can be “scrubbed of doing ill in the world” and designated in areas that align with your personal passions.
Also, Tim talks about the “menu” of projects and categories that ImpactAssets provides to people, so that they can take their 100k and support 10 different really cool curated projects. The investing options are customised and various, to make sure investors find the best place for their dollar to get specific things done in the world.
“The technology is not the issue, the will is not the issue, it’s the customer acquisition that is the issue,” Tim says. It costs something to connect investors and projects, even with great technology. Tim describes the business model, which is 1% of recurring annual assets.
Where Should I Invest?
Do you want to establish a personal charitable foundation? Then, you go to a donor advised fund, and THEN you invest in your favorite VC fund. That way you get the tax break. “It’s like having your own little Gates fund.” The fund is for putting aside funds you want to use for good, when you would still like advising and curated options.
How amazing that we can have donor advised funds for $5,000 and eventually $500 is a big deal – it’s a democratization of investing to make a difference. “It’s not just a playground for the rich and powerful,” Tim says. It calls to question “oligarchical philanthropy in the United States.”
Why is a Donor Advised Fund a Good Idea?
Unless you have tons of time and money, Tim says you’re going to find more options and more intentional returns with Donor Advised Funds. The funds do not have a return profile, because they are so specific to each donor.
“The answer depends on what you choose to munch on off of our platform,” Tim says. The returns are solid, but there is not a direct market value relationship with impact investing options.
The Secret To Investing Like a Millionaire
“They make it possible to become a major endowed philanthropic institution, in terms of your capabilities and access to impact investing, because you’re joining a group of many people that are aggregating to the scale that’s required.
If you have thousands of people with their little investing pools and put them together on a platform, you can allow them to access these incredibly arcane elite structures of private debt and equity etc. at effectively no minimums, because at an aggregate level we’re still making those institutional minimums. So that’s the secret, and what we’re making available.”
Tim talks about customizing the investing experience as a platform, by tracking opportunities, companies, and transactions. Before long it will be easy to find the options that relate to the Global Goal you’re most interested in solving.
“I think we will move a small number of billions of dollars over the next not too many years… I think our catalytic change this is is related to, how do we engage and innovate for a wide range of participants to get involved and integrate values into their day to day expression of passion with their wealth”
Takeaways:
- What it took in 2008: 10 years ago a small group of people stood up and created something that has now grown internationally.
- Impact Hubs make SoCap a yearly event: It’s so important to create an ecosystem of resources and support tribes to get something done in the world.
- Donor Advised Funds: These are an amazing way to structure your investment funds easily and efficiently to make a difference in areas you’re passionate about.
