Equity crowdfunding has become something of a legend in the startup industry. It is being hailed (and criticized) for being a brand new conduit for startups to raise capital and for entrepreneurs to launch new endeavors. It’s true that a great amount of potential capital could be unlocked by including the non-accredited investors in the startup industry.
At the cutting edge of new social innovation financing are social impact bonds(SIBs), a potentially transformative idea. SIB transactions merge traditional public/private partnerships and performance based contracting. Private investors invest in demonstrated social programs, with a promise from government to repay that investment, plus a profit, if predetermined performance targets are met.
“Today, we can track social outcomes and compensate investors and service providers through measurable government savings. This means we can hand the keys of venture capital to social sector organizations that can innovate and deliver results. We now have the possibility of turning impact investing into a very important tool to solve social challenges.
The Power of Impact Investing, a new book from Rockefeller Foundation and published by Wharton Press, details stories from impact entrepreneurs who figured out how to sustain themselves through for-profit models for social good.
When the U.S. federal government gets involved in things, chances are that innovation goes awry. This month, the Senate is holding hearings on the Social Impact Bonds (a.k.a pay-for-success social innovation bonds). Private-public partnerships are supporting these financial instruments and offer the first true possibility of solving long-standing and neglected social issues. Some members of Congress are reasonably wary of these bonds. Other members are attempting to nix the entire concept right out of the chute without even understanding how they work and if they work. Congress should be saying: Wow! Something that has real potential to level the playing field for those historically left out of the system. This is one program we should embrace as a private-public policy for Good.
Social Impact Bonds are Wall Street’s way of support social change with profit incentives. Profits margins are substantially less at an average 12% return over five years of investment. But so is the risk.
Mission Markets, otherwise known as: “Markets with a Mission” connects environmental finance with traditional capital markets. It provides liquidity, transparency and a central place to buy and sell ecosystem services.
Social Impact Bonds are the latest innovation from the mission-based investing sector. The term “impact investing” was introduced by economists Jed Emerson and Antony Bugg-Levine at the Clinton Global Initiative in 2006 who co-authored a book of the same name. Since then, the practice of “impact investing” has taken off in leaps and bounds and become a standard-bearing funding alternative.
We are in an incredible era of innovation. Antony Bugg-Levine and Nonprofit Finance Fund write: We envision a world where capital and expertise come together to create a more just and vibrant society. We unlock the potential of mission-driven organizations through tailored investments, strategic advice, and accessible insights.
Being an entrepreneur is not for everyone. It takes vision, guts, dedication, and luck according to the experts below. Harvard professor Allen Grossman defines entrepreneurship as “an activity or behavior” that involves “the pursuit of opportunity regardless of the resources you currently control.” Social entrepreneurship takes that one step further by including the objective of creating “pattern-breaking social change.”
From San Francisco to Brooklyn: if you love food and want to support your local eating establishment, you might be able to do so with “Credibles:” purchasing power that gives you Groupon-like discounts by essentially pre-paying for food products at your favorite eateries. In return, small businesses get to offer services and products in exchange for much needed operating capital.
At a recent soiree complete with locally sourced wine and healthy treats, Bard College’s MBA in Sustainability Director, Eban Goodstein and social entrepreneurship expert, Diana Ayton-Shenker teamed up to discuss the landscape of raising capital for social enterprises.