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Most social sector work, if not all of it at this stage, is driven by some type of results framework that is focused on outcomes. Unsurprisingly, when people (or a government or foundation) give you their money to do some good in the world – they want to know that it actually happens… or, as often happens, at least you gave it your best shot. Underpinning these frameworks are theories of change. In this paradigm, gaps in markets or social contexts are identified by the social actor and then the design programmes, products and services in an attempt to fill those gaps.
Now, for those of you who have been listening to this show for any amount of time, this is standard stuff and, as you know, we’re here to talk about how we break this system. So, on today’s 166th Terms of Reference Podcast, my guest Alex Zwane. She and I explore an alternative to the theory of change approach – what she and her colleagues call being venture or entrepreneur driven. Alex is the CEO of the Global Innovation Fund, a $200 million fund that takes a venture capital approach to supporting entrepreneurs and the scaling of evidence-based innovation in global health and development.
This is an exciting discussion as we discuss the Fund’s current ventures and the criteria for those investments, how the Fund partners with the private sector, how you successfully exit from investments in social problem solvers and much more.
You can connect with Alix here:
https://www.linkedin.com/in/alix-zwane-1819292
IN TOR 166 YOU’LL LEARN ABOUT
- The Global Innovation Fund, a lending/investment initiative designed to help social impact initiatives at any step of their way
- The difference between an institutional, global goal-based approach and a “venture capital approach,” and how they complement each other in A&D rather than compete
- The need of rigorous impact evaluation in social entrepreneurship, but only after “it makes sense” in terms of size of the impact and resource commitment
- How GIF’s model allows them to take on risks differently, on different kinds of risks, and bring light into risks previously unexplored so, among other things, more traditional investors can enter
- The benefits of having a “team of generalists” rather than specialized roles with neatly defined tasks
- The challenges of stacking up outcomes across ideas that vary greatly in width, depth and breadth
OUR CONVERSATION FEATURES THE FOLLOWING
Names:
- Global Innovation Fund (GIF)
https://www.globalinnovation.fund/ - EM3 Agri
- Uber
- Gates Foundation
- Babban Gona
- SafeBoda
- Segovia (thesegovia.com)
- GiveDirectly
- Institute for Financial Management and Research (IFMR)
- Afrimarket
- International Development Innovation Alliance (IDIA)
Topics:
- Venture Capital, “VC approach” to A&D, Exit strategies
- Social innovation, Investment
- Scalability, Startup journey, Growth, Reach, Impact
- Evidence, Impact Evaluation, Randomized Controlled Trials, Peer review, Analytics
- Agricultural extension
- Currency risk
- Risk, Risk management, Risk measurement
- Remittances
- Poverty
- Public Subsidy System
- Remote rural areas, digital services
- Feminist International Assistance Policy
- Development Impact Bonds
- Inter-agency partnerships, Openness, Transparency, Accountability
Places:
- Washington, DC
- Rajasthan state, India
- Tamil Nadu state, India
- Nigeria
- Kampala, Uganda
- Morocco
- France
- Canada
EPISODE CRIB NOTES
Download an automated transcript
Washington, DC, August 2017
03:17
Global Innovation Fund
GIF launched in 2014
Joint Venture by US, UK
Invest in innovation, solve development challenges
Charity that does venture impact investment
For ideas that scale through public sector or markets
Emphasis on innovation, rigorous evidence, potential to scale
“Venture capital approach”: Entrepreneur-led
As opposed to strategy-driven
No “theory of change”
Looking for entrepreneurs to ask “how can we help you”
USD 10M stake on EM3 Agri
Rajasthan-led
“Uber for tractors”
To provide machinery to smallholders
Large farmers have a lot of tractor downtime
Cracking agricultural yields
“We found the entrepreneur, started a dialog, supported him”
А journey of impact and profitability
06:47
Does VC bring a new energy to the field?
Stephen: Is the VC approach the new normal across A&D?
“It’s complementary”
Alix used to work at the Gates Foundation
Strategy-driven, high-impact
VC works when thinking about engaging with private sector
Blended-finance
“There’s often a mismatch between risk, resources” when making entrepreneurs and organizations work together
GIF looks to fill that gap
“We can take on a different set of risks”
“We can be quite patient”
“We can put social return front and center”
Profits are great, but social returns are the goal
Interesting payoffs
Nigeria’s Babban Gona
Agricultural extension
“Pretty difficult place to work” for public, private, NGOs
GIF makes a deal but willing to take on currency risk
Other partners are encouraged to jump, in USD
“We might not see a return here” but it’s not a grant
GIF’s role paves ways
Discoveries in the possibilities of global finance
10:12
On currency arbitrage and exit strategies
GIF is a hybrid
“If we exit and make a profit”, any returns will go back to the charitable mission
But the organizations must commit to deliverables
“It’s our job to be first in class” on impact measurement
Accountability, Evaluation, Controlled Trials
Babban Gona’s data on agricultural quality
“We are confident our farmers will see measurable improvements”
But it is not enough
The agreement binds the fund with an impact evaluation
GIF will reach out for an impact evaluation grant
“We need rigorous evidence”
Evaluators can be in-house, or third party
Working on building internal analytics, reporting on social impact
Inform ongoing, current investment
Build knowledge on breadth and width of impact
Not all high-impact ventures affect lots of people
Probability of scale
SafeBoda – safe drivers in Kampala
They wear helmets, customers too
Data about lives and money spent on surgeries at Kampala’s hospitals support the potential
Segovia (from the makers of GiveDirectly)
SaaS, makes it easier and cheaper to deliver cash transfers
“It could reach tens of millions of people”
“How would you compare SafeBoda and Segovia?”
That’s the challenge
15:48
Global challenges portfolio optimization
GIF – committed to openness from the get-go
“Surprised by the ideas”
130+ applications per month on GIF’s home page form (“open window”)
“We also actively source deals”
Spending time on countries, accelerators, incubators
“We make sure we invest in local entrepreneurs”
“We rely on a process” borrowing from VC and academic research
The team “is not made of experts and specialists”
They constantly consult with peer reviewers
On depth, breadth
Then look at the entrepreneurial teams, are they able to handle challenges
Can we help them to?
Meaningful benefits for people living under USD 5/day
(chances to help the middle class notwithstanding)
Then rigorous evaluation, and potential for impact
Early stage pilot investments encourage “smart risks” at GIF
No randomized controlled trial
Looking for traction
Over growth comes evaluation
Almost a rite of passage
Some projects come with rigorous evaluation already, looking to “de-risking, pressure-testing”
“We try to be practical”
Funding decision goes to a GIF-external committee (no Alix, no GIF board)
“Friends to GIF” but unbeknownst to the process
Mutual accountability
20:52
Are you ambitious about being there for everyone at every stage?
“We do have the potential to stay with entrepreneurs through their journey”
Initial investments range between USD ~200K – 12M
Accepting at any stage
“We love to co-fund, co-partner”
Practical, pragmatic
“We can say no” if our read of the data don’t add up
“We discipline ourselves”
25 deals so far, “relatively early stage”
Exit strategies looking
Babban Gona’s point of entry was at USD 2MM
“We were not there at the pilot level”
23:51
Do you find differences in profit and non-profit?
Equity means shared ownership, “together”
“We must make sure we like each other”
Not like applying and waiting to hear back
Give and take
“We’ve had to adjust the process” often overpassing long form
Exit strategies are being reconsidered today, industry-wide
“What’s your catalytic change approach”
Randomized controlled trial with Tamil Nadu government
Impact on anemia of iron fortified rice delivered through Public Subsidy System
Institute for Financial Management and Research (IFMR) works there, has an exit strategy
Namely, empower the government to handle rice delivery itself
How such a contract is written?
Capacity building
28:42
It takes a village of generalists
“We embrace technology, but we pursue a broader idea of innovation”
Government reform
Remittances
Can we still make it easier and cheaper?
Moroccan-French woman founded Afrimarket
Salient mobile remittance, payment issues in rural areas
Wiring money to businesses, schools?
Making people don’t have to “cash out” in remote locations
“The last digital mile”
32:54
How do you avoid risk and what makes it so risky?
A barrier of innovation is risk measurement
And matching risks to institutional appetites
How to measure brand new risks, and who can bear them?
GIF’s role is to “be a little ahead of the market”
It’s a mechanism for agencies to get in
The matching exercise is a conversation on risks, returns, venture support
“You should be able to bear the risks you’re able to help mitigate”
36:07
What’s the plan
“The pressure to do more with less will continue”
“It will be a driver for the sector as a whole”
Get smarter about partnership, resource allocation
Companies will “graduate” from GIF into other agencies, maybe private VC
Need for alignment of the support community
GIF to focus on social impact
“We don’t have a targeted return”
GIF will grow
Might open up niche funds
Funder partners to expand
“As we continue to navigate our own journey”
38:35
Alix-t of her favorites
“I do love Twitter”
Canada’s Feminist International Assistance Policy
Development Impact Bonds
Partnerships among aid agencies, openness
International Development Innovation Alliance (IDIA)
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