LGT Venture Philanthropy is proud to announce the launch of the iCats Program: The iCats Program is an answer to the need for professional know-how and resources in many philanthropic organizations and social enterprises. LGT Venture Philanthropy created a web-based platform to match experienced professionals with specific positions in selected philanthropic organizations.

The fellow positions for 2010 are now online on www.icatsprogram.com ! Application deadline is 26th October 2009.

A fellow works 11 months on-site with a portfolio organization from February to December 2010 and receives regular mentoring from the LGT Venture Philanthropy team. In addition, a 4-day induction workshop brings all fellows together in the Swiss mountains. Go to www.icatsprogram.com to find out more and to apply.

About LGT Venture Philanthropy
The LGT Venture Philanthropy Foundation was founded in 2007 by initiative and funds of the Princely Family of Liechtenstein. Its mission is to raise the sustainable quality of life for the less advantaged people especially in the developing world. Applying a venture philanthropy approach, LGT Venture Philanthropy supports both organizations with financial, social and intellectual capital. LGT Venture Philanthropy makes use of grants, loans and equity investments. Any generated profit is channeled back into the fund and will be used for additional investments.

LGT Venture Philanthropy is pleased to share some results of its philanthropic activities with you: The portfolio has grown to seven organizations with USD 3 Mio invested, the global team now counts 12 people in seven countries, negotiations with several clients interested in LGT Venture Philanthropy\’s due diligence and investment services are ongoing, and last but not least, the feedback about the 1st generation of fellows in LGT Venture Philanthropy\’s fellowship program has been overwhelmingly positive!

Last night in my Social Venture Capital class, my professor said something that I found interesting.  With regard to requirement of many social VCs for their portfolio companies to make market comparable returns, he explained it as the following:

We want to develop a track record for these ventures so that they can show traditional investors later on that they are robust enough for their capital to scale up even further.

I find this rationale interesting as I have traditionally believed that Social VCs should sacrifice returns in order to widen the range of companies they can invest in for the social impact. However, when focusing on long-term scalability of such ventures, this alternative approach does seem intriguing.

What are your thoughts on this?

Anil G of  New Ventures India informs us that New Ventures is inviting clean tech companies to submit their business proposals for a chance to receive mentorship, assistance, and connections with capital and market opportunities to scale up.  Click here for further details about the call for proposals, including eligibility requirements and contact information.  Proposals are due by April 30, 2009.  This is a great opportunity for clean tech and clean energy SMEs in India.

About New Ventures India:

New Ventures India works for sustainable entrepreneurship and is specially designed to meet the needs of Indian entrepreneurs and help them overcome common business challenges to deliver environmental and social benefits in addition to economic development and growth opportunity.

Shital had written in last November about Sankalp 2009, a business plan competiton for Medium, Small and Micro Enterprises (MSMEs) organized by India Development Gateway, in partnership with Rural Innovations Network (RIN) and National Bank of Agriculture and Rural Development (NABARD).

Turns out the business plan competition has now developed into India’s first ever Social Enterprise and Investment Forum, with additional support from the Rockefeller Foundation.

Sankalp (English: Pledge or Determination) is conceived as a South Asia Social Enterprise and Investment Forum with the primary goal of bringing together various stakeholders sharing a common conviction that capital should be invested to create multiple bottom-line returns (financial, social and environmental) and not exclusively financial (profit-maximizing) or social (philanthropic) returns.Sankalp 2009 along with partners such as The Rockefeller Foundation, National Bank for Agriculture and Rural Development (NABARD) and the Rural Innovation Network (RIN) is the region’s first investment forum for emerging enterprises as well as ideas that aim to solve pressing issues of the day in a sustainable and profitable manner. Sankalp is an initiative of IDG (India Development Gateway).

Sankalp 2009 is an effort to discover, connect and support the most investible social MSMEs (Micro, Small and Medium enterprises) operating in high impact sectors such as:

•   Agriculture and Rural Innovations

•   Education for all

•   Clean tech and Energy

•   Healthcare Inclusion

•   Highly Scalable Social Models

The event will represent the culmination of months of nation-wide search to recognize the most Emerging models & High Impact Social Enterprises.

Editor’s note: In addition to being informative, this post also outlines what IFMR Trust is looking for in potential hires. If you would like to see that immediately, go after the jump.

Before Thanksgiving break I had the pleasure of sitting down at an informal roundtable with Dave Wallack, Senior Vice President of People to learn more about IFMR Trust’s ambitious plans to provide financial inclusion to every person in India. Chaired by Dr Nachiket Mor, who is also the President of the ICICI Foundation for Inclusive Growth, the Trust’s mission is to “ensure that every individual and every enterprise has complete access to financial services.” In order to accomplish this goal, the Trust is looking at a rather unconventional business model that where the non-profit parent oversees multiple self-sufficient for-profit silos in various financial sectors.

The three ventures that the Trust has currently launched are the IFMR Trust Holding Company (ITHC), the IFMR Trust Advisory Services (ITAS) and the IFMR Trust Guarantee Company (ITGC). Each venture has a specific and distinct goal. The ITHC aims to build a network of Kshetriya Gramin Financial Services (KGFS) that will serve as low-cost, paperless branches providing access to financial products. According to Wallack, the goal is to have one of these branches for every 10,000 people or 2,000 households. Wallack emphasized the feasibility of such scale is due to the incredibly low-cost structure of each branch. By being completely paperless, transaction costs is on the scale of 20-30 rupees as opposed to $20 dollars. Wallack self-titled the initiative as the Starbucks of microfinance, as they are able to provide loans at only 11.5%, far less than the typical 20-30% charged by traditional MFIs.

The ITAS’ charge recognizes that microfinance is merely a stopgap or defensive measure and that more aggressive financial services will be needed to enable true inclusion. In order to do this, the ITAS has structured as essential a private equity firm and with the aim of raising $150 US. Utilizing this capital, ITAS will look at 14 different supply chains that reach the rural population and figure out ways of improving and fixing them through investments in operating companies along the product cycle. These investment strategies, organized as Network Enterprises, will operate in a for-profit fashion with the belief that the quest for profits will seek out the most efficient and effective ways to address the supply chain breakdowns.

One example is the current gap that exists between urban labor demand and rural supply. After some preliminary research, ITAS discovered that the major hurdle was that rurual workers could not afford to live anywhere in the city for their first 2 weeks, because they had yet to been paid. In order to resolve this ITAS partnered with a local temporary housing and staffing company in order to provide that stopgap housing for these workers.

Finally, the ITGC will focus on providing much needed debt capital to small and medium size enterprises throughout India to truly enable them to grow. Here, the organization is partnering with many existing financial providers to roll out their offerings more aggressively.

In order to staff all of these initiatives, IFMR Trust is actively looking to hire bright and driven individuals. Wallack outlined the following criteria for working at an Network Enterprise:

Job Description: Essentially one would help run these self-sustaining initiatives

1. Management Consultant: perform the research necessary to identify the problem and to develop a solution
2. Investor: Actually perform the necessary due diligence to make investments along the supply chain
3. Business Development: Actively source demand for the new product or service

Requirements

1. Finance Background
2. Experience: ideally operational or project management
3. Sectoral Expertise
4. Strong Entrepreneurial Spirit: As Wallack said, they want people who truly buy into the American Dream to come over and inspire others

You can find a partial list of openings here.

We all know the power of prizes to motivate innovation and so this new award will hopefully do just that:

The financial services firm, Edelweiss Capital Ltd is partnering Kubera Partners, a private equity firm based in USA to launch the Kubera-Edelweiss Social Innovation Honours, three awards totaling US$ 60,000 to felicitate outstanding innovations that positively impact the status of the girl child, through the delivery of services in three areas: education, health and nutrition, and future employability of the girl child. EdelGive Foundation, the not for profit subsidiary of Edelweiss Capital is managing the entire process of these awards.

Deadline for applications is December 1st of this year, so please prepare your applications ASAP.

For further information on the award categories, the broad selection criteria, rules and regulations and the application form, please visit - Kubera-Edelweiss Social Innovation Honours  or contact us at +91 22 23675623/4 and edelgive@edelcap.com

Yesterday, Acumen Fund’s Chief Investment Officer Brian Trelstad came to NYU to conduct a live case study on a real company that Acumen Fund invested in, in an effort to educate MBA and other students on the investing strategy and process of this innovative social venture fund. I actually wrote about Acumen’s approach sometime back.

The company under scope was Ziqitza Healthcare Limited (better known at Dial 1298), a for-profit ambulance service located currently in Mumbai aiming to provide ambulance assistance for all in 15 minutes. Using a willingness to pay revenue model, the company subsidies services for the poorest through fees generated from providing care to those that can afford to pay.

Before I jump into the heart of the case study, here is a video that we were shown at the outset of the lunch. In addition to providing ambulance services, the company is now also figuring out innovative ways to power their vehicles with renewables. You can read the rest of the review after the jump.

[youtube=http://www.youtube.com/watch?v=8PMmyyN2pH0]

The first thing that hit me was how similar to a traditional VC Acumen’s investing process is. The issue of valuation and returns dominated the second half of the event. When asked by another student why the social impact of a business is not included in the valuation of the company, Trelstad responded by saying that if the company had not convincingly shown the potential magnitude of their social impact initially, they would not even have gotten to the point in the process where valuation is even a negotiable term. In this respect, Acumen views the social impact of any potential portfolio company as the first major hurdle that must be overcome before capital discussion can start. In order to actually measure this, Acumen utilizes the BACO, or the Best Alternative Charitable Option — a metric used to develop a comparable assuming the money was allocated to a different approach.

Moreover, Trelstad urged us to view it from the perspective of an exit. With Ziqitza, for example, the most likely exit for Acumen is when the company is acquired by a larger healthcare conglomgerate, e.g. Apollo,  and they will not be looking at the social impact of the company when making their decision. So it does no good to inflate the valuation of a portfolio company by including social impact in their valuation. This second point is something that has never occurred to me before, but upon hearing it I could not help but agree.

I will return to valuation in a second, but first I wanted to highlight some useful observations that came out of the case itself.

• Deficiencies in the leadership team: One of the evident characteristics of Ziqitza’s leadership team was that despite their entrepreneurial background and passion for the company, none of them had any operational experience in the ambulance service industry before. In order to address this weakness, the management team actively forged partnerships with organizations in London and New York to exchange best practices and knowledge transfer. The lesson I thought that was most crucial here was (1) the ability for the team to recognize its deficiencies and (2) to proactively go out and tap into networks that would help them address those shortcomings.
• Labor Risks: Often times the actual proficiency of staff gets overlooked, especially in places like India, where labor supply is so large. For Ziqitza, they needed to train paramedics or convince doctors to ride the ambulances, resulting in a workforce of either under- or over-qualified personnel. Would such a workforce materialize in Mumbai?
• Barriers to entry v. Network effects: One concern that many of us raised was the apparent lack of barriers to entry for other competitors to come and and drive down profits. Mumbai’s current ambulance services industry is very fragmented, however, and so this fragmentation actually resulted in a pseudo-barrier. The complexity of the actual operations coupled with the lack of a market leader actually appears to have assisted Ziqitza in developing a sustainable market presence — an outcome that would appear counterintuitive at first blush.

Returning now to Acumen’s valuation methodology, of which Trelstad readily admits is often more “art than science,” it seems as though many of the critical criteria that conventional VCs employ apply in the social space as well. For example, Acumen generally is very wary of owning more than 49% of a company, a maxim that most VC’s also follow. One area where Acumen differs greatly is their hurdle rate, or lack of one. Many VCs will value companies in a way that forces them to return a minimum amount that is conducive to the VCs risk tolerance. In doing so, sometimes the valuation of the company ends up fitting the expectations of the investor, as opposed to the other way around.

Overall the talk was a great look at how Acumen, and theoretically other social VCs, are investing their philanthropic capital to help social ventures achieve scale.

Madura Micro Finance has received an investment by Unitus Equity Fund to ramp up their offerings to women self help groups (SHGs) in rural India.

Madura Micro Finance will use UEF’s funding to increase its management bandwidth and institutional capacity as well as continue to expand its customer base, which is comprised primarily of women.  The firm’s central financing product is a group loan to self help groups (SHGs) which are formed and trained through its partner organization, Microcredit Foundation of India. These SHGs undergo training in good financial practice and business skills before being considered eligible for MMFLs loans. Madura does not post to the MIX database. It reported USD 35 million in disbursements in 2007, and an SHG member base of 500,000.

[Source: Microcapital.org]

The market for double bottom-line investments in India is becoming hotter and hotter. Interestingly, its not just the microfinance institutions who are attracting the capital. We reported earlier in TC-I about MokshaYug Access, securing $2 million in funding from Unitus and the ISB based SME fund set-up by Google.org in partnership with Omidyar Network and Soros Economic Development Fund. 

This time it is Comat Techonologies, a Bangalore based social enterprise dedicated to providing easy access to essential information and transformational services to Rural India. Comat just secured Rs. 60 crore in funding from Omidyar Network and Unitus Equity Fund (UEF): 

Comat Technologies, operating India’s largest network of Rural Business Centres enabling socio-economic growth of rural communities, announced it has received an investment of Rs 60 crores from Omidyar Network and the Unitus Equity Fund (UEF). Omidyar Network, the philanthropic investment firm of eBay founder Pierre Omidyar, led the investment round, which marks the organization’s first direct investment in India. Comat is the first non-microfinance investment for UEF. Managed by Elevar Equity LLC, UEF is a private equity fund that makes strategic investments in high growth microfinance institutions and social enterprises. 

The investment will enable Comat to expand to new States, accelerate service delivery for training and financial services, strengthen management bandwidth, and enhance its brand.

According to Mr Chu, “to roll back poverty rather than to merely alleviate it”, any solution needs to be able to reach massive numbers, deliver permanent results that can help many generations, provide continuous effort so it gets better and better at what it does, and provide continuous efficiency so it also becomes cheaper and cheaper. Mr Chu believes the only state that can offer all these four requirements is business.

From a review of a debate between the father of microfinance Mohammad Yunus and Michael Chu, former President and CEO of ACCION. Given that today’s Blog Action Day is focused on poverty, it seemed fitting to highlight this issue. 

Can we truly reach microfinance’s potential without the efficiency and scalability gains that business and for-profit models provide? Is profiting off of the poor unethical, and as Yunus argues, should we only be looking to sustain the model at the lowest possible point of surplus?

You can read the rest of the recount by Amy Rennison here at Microcapital.org.