Solvation

Tying Funding to Asset Growth

I'm hosting a forum on SocialEdge.org for the next two weeks centered around Marc Dangeard's work building and Entrepreneur's Commons.  There are many other ideas that are being discussed in the lists and the forum, and I'll pull them together at the end of the two weeks so we can see what came out of the discussion.

Some questions are just too good of a platform for me to let slip by!  Today, Andrea Saveri from Institute for the Future asked the question:  How/does this take into account the measurement of various capitals (social, financial, natural, etc.)?

The way it is related to issues regarding the development of non-financial capital is based on a current disconnect: Currently, people whose sole mission is to protect their fund's financial capital (i.e. VC's, Angel Investors) have made it difficult for organizations with non-financial goals to raise capital.  This is due to a design that requires a very high return on investment in a short amount of time.

However financial and non-financial capital are actually related through the idea of intangible asset development, which is a necessary precursor to financial return anyway. So even for-profit organizations sometimes have issues with the rate and amount of financial return necessary for their funders, as they try to develop their internal capacity rather than focus on short-term financial results. Certainly, social entrepreneurial ventures have even more difficulty, as their desired outcomes involve building non-financial assets, which are only related to the original investment in terms of "economic health." Think, for example, of an educational non-profit: eventually an entire generation of optimally educated young people would be a huge boon; but that's a 20-year time horizon.

So Marc's Entrepreneur Commons manages to find solutions for both these issues: how to maintain financial protection (risk/return) for investors, while simultaneously allowing the venture to focus on building its intangible assets for future financial return, and/or to build non-financial assets within the community.

7/29-8/4: Skoll Foundation SocialEdge.org forum

Next week, I'll be hosting a forum on the Skoll Foundation's community website,  SocialEdge, which describes itself as "the global online community where social entrepreneurs and other practitioners of the social benefit sector connect to network, learn, inspire and share resources."

I'll be addressing the following issue:  When entrepreneurs start a social venture, they are immediately in conflict: they have a short-term focus on achieving financial return for their investors, with a long-term focus of building a community's intangible assets as their mission.

A social venture itself is usually specifically about developing intangible assets within a community: social connectedness, intellectual resources and skills, creative expression, personal health, a safer and cleaner environment. But the entrepreneur/investor relationship (typically through an equity deal) is at odds with this because the equity partner is mostly interested in return on financial capital: in an equity deal, this is the only measure of success.

Microfinance has emerged as a solution by providing debt, which changes the expectation for the scale of financial returns.  However, microfinance typically manages risk of course by lending small amounts and also by focusing on how building a community's intangible assets manages the risks associated with default. 

Social Enterprises often require a scale that microfinance can't address, and while the service area may be in desperate need of intangible asset development, the social enterprise is rarely a "distressed property" in terms of its social, physical, and intellectual assets.

But a hybrid is possible:

• apply concepts from microfinance to Entrepreneurship in developed countries (heretofore the VC playground)
• use debt to provide seed capital for ambitious ideas -- de facto very high risk
• mitigate the risk through the same focus on intangible asset development: providing resources to develop the social and intellectual assets associated with the building the enterprise.

An example of such hybridizing is what Marc Dangeard is building with the Entrepreneur Commons, which I've mentioned here previously.  He explains:

Sustainable Economy

A few people have asked how in the world the variety of things I work on are related to each other. Well, some aren't (tennis, piano, quilting...). But professionally, they're all tied together. 

I've decided to make a map of what that looks like to me. For my astute and precise friends, you'll notice that there are many more examples that could be added. Please feel free to comment if your map is faceted differently, and of course mention anything you feels needs mentioning.

Gas Prices and Car Decisions

The situation with gas prices seems to be somehow representative of many peoples' current woes, ranging from getting financially slapped around, to environmental concerns, to the many issues surrounding the war.

So in the interest of giving something concretely useful to the extremely focused yet incredibly representative question of "what should I do about my car?" amidst the chaos of the world as we know it, I've made a simple "back-of-envelope" spreadsheet model:

Download the spreadsheet. Enter your annual miles, the expected annual gas price increase, the price of gas now, and two different car mileages to get a cost difference between the two cars.

For those who don't want to bother, I'll give you one little tidbit: in 6 years -- when my son graduates college -- assuming a 10% annual increase, the cost of gas will be $8/gallon.  The difference in gasoline expense between a 35 mpg car and a 20mpg car will be $215/month for 15,000 miles/year. That's how much he would save owning a 35 mpg car; that's not including the actual cost for the gas, let alone the car itself.

Think of the implications. If you were a 22 year old, would you buy a car? How about a motorcycle?  Would you choose to live in a city with poor public transportation?

And on that provocative note, let me point out a great new game by Institute for the Future, which as usual blows the lid off the concept of "provocative,"  Superstruct. It's part of their very popular Ten Year Forecast, widely subscribed to by large corporate clients and non-profits. It's open to everyone to play.

This is a game of survival, and we need you to survive.

Super-threats are massively disrupting global society as we know it. There’s an entire generation of homeless people worldwide, as the number of climate refugees tops 250 million. Entrepreneurial chaos and “the axis of biofuel” wreak havoc in the alternative fuel industry. Carbon quotas plummet as food shortages mount. The existing structures of human civilization—from families and language to corporate society and technological infrastructures—just aren’t enough. We need a new set of superstructures to rise above, to take humans to the next stage.

You can help. Tell us your story. Strategize out loud. Superstruct now.

It's your legacy to the human race.

Community

I belong to a few online groups; one was having a discussion thread called "To Give or To Get - That is the question!" I responded, as did many others, and a few people have said it was helpful for them to think about how I had phrased things, so here's what is essentially a repost: