Impact Summary – David South Consulting

By David South, Development Challenges, South-South Solutions

The United States’ fast-paced and highly inventive technology sector is re-shaping philanthropy and proving it is possible to do good and make money at the same time. The approach taken by these philanthropists is flavoured by their experiences in the cut-throat world of technology, where innovation is a necessity and where re-invention and risk are de rigeur. They share many of these qualities, counter intuitively, with millions of the world’s poor as they struggle day in and day out to survive and get ahead.

Differing from the Fairtrade movement – whose origins are in NGOs seeking guaranteed fair price for goods – so-called ‘venture philanthropists’ and ‘social entrepreneurs’ focus more on profit and growth. They draw their inspiration from the online networks that have rocked the business world in the past few years, and look to apply a model of constant innovation.

The past ten years have seen non-profits more and more adopt the language and methods of business. For ‘venture philanthropists’ and ‘social entrepreneurs’, business is the tool to do good. By breaking out of the narrow view of philanthropy as about giving away money, it becomes possible to see the connections between doing good and making good money, venture philanthropists argue. And as more people think this way, more tools are emerging to make it easier and easier to do.

The highly successful online auction house Ebay’s founders Jeff Skoll and Pierre Omidyar are part of a wave of new thinking from California’s high-tech Silicon Valley that is shaping the way huge sums of private capital get invested in social change.

‘Venture philanthropists’ focus on a small portfolio of grantees that make the most of the investment. By giving them large, long commitments, including money for infrastructure such as staff and computers, they don’t spend all their time fundraising. And unlike traditional philanthropists, they get in their offices and work with them like partners instead of waiting for annual reports, and they hold the grantees to quantifiable goals.

The success of Nobel Prize winner Mohammed Yunus and his microcredit bank, Grameen, has spawned an even more ambitious venture. The Omidyar Network – led by billionaire Omidyar – calculated it would take between US $50 and US $60 billion to provide micro-lending services to the entire world’s poor. The Network is currently putting together the financing to launch this new micro-lending facility across the world. According to Omidyar, private capital is functionally limitless. Look at it that way, he said recently to the Los Angeles Times, and “$60 billion is nothing.”

Billing itself as a nonprofit venture capital firm, the Acumen Fund uses the principles of design to solve the problems of the poor. Just as the Procter & Gambles (PG) and Motorolas (MOT) of the corporate world conduct extensive ethnographic research on consumers, Acumen finances companies that create systems from the bottom up. “Start with the individuals,” said founder Jacqueline Novogratz. “Build systems from their perspective. Really pay attention, and then see if they can scale.”

Under Novogratz’s leadership, the New York-based fund manages $20 million in investments in companies that fall within three portfolios: health, water, and housing. It’s not a lot of money compared with any of the traditional venture funds in Silicon Valley. But Acumen’s goal is not to launch initial public offerings. Rather, Novogratz and her team are building prototypes for new business models that measure returns in social benefits as well as monetary rewards.

“We are betting on entrepreneurs, we look for a strong management team,” said Brian Trelstad, Chief Investment Officer of the Acumen Fund. “We currently have US $20 million in investments in six countries. We hope to take that to US $100 million in the next five years. We are beginning to see a really rich pipeline developing in our investment countries and more high quality investment opportunities coming our way. We are looking for people who are passionate about their approach and who continue to build their business from the perspective of the people in need.”

Larry Page and Sergey Brin, the founders of the successful search engine Google, started their philanthropic wing, Google.org, following Ebay’s example. They endowed Google.org with stock now worth about US $1 billion. Then they followed Omidyar’s example and set themselves up as a for-profit network.

“In the old American business model, the relationships between a firm and its investors, bank, suppliers and customers tended to be very arm’s length,” says Annalee Saxenian, dean of UC Berkeley’s School of Information. “You would make a deal and report back after some specified period of time. The new business model is much more engaged. Everyone learns from one another, and there is a continuous flow of information. The firms are more specialized, but they see each other as collaborators.”

The approach, just like in the pell mell pace of the computer industry, is relentless. Just as computer software and hardware manufacturers follow a constant improvement and innovation cycle, so can social entrepreneurs.

Published: March 2007

Resources

The Skoll Centre for Social Entrepreneurship at Oxford’s Said Business School, hosts the Skoll World Forum every year to promote entrepreneurial solutions to social problems.
Ashoka: Ashoka is the global association of the world’s leading social entrepreneurs. It identifies and invests in leading social entrepreneurs with innovative and practical ideas at the launch stage. They then receive a living stipend for three years to focus on their ideas.
Social Ventures Partners: While only focused on the Seattle, USA area, SVP offers a model that can be applied throughout the global South. The vision of the founders was to build a philanthropic organization using a venture capital model, where partners actively nurture their financial investments with guidance and resources.
Generation Investment Management: Started in 2004 with former US vice president Al Gore, they only focus on investments that are long-term, sustainable and that they really believe in.
Omidyar Network: Started by Ebay’s founders, it funds for-profits and non-profits who promote equal access to information, tools and opportunities, and encourage shared interests and a sense of ownership among participants.
Skoll Foundation: The mission of the Foundation is to seek out social entrepreneurs who are already implementing successful programs on a small scale, and then through three-year awards, support the continuation, replication or extension of the program. Issues funded are: tolerance and human rights, health, environmental sustainability, economic and social equity, institutional responsibility, and personal security.
SV2: Silicon Valley Social Venture Fund: A partnership of successful technology entrepreneurs, it pools funds to support social entrepreneurs by giving money and giving time – venture philanthropy.
Google.org: It uses the talent, technology and financial resources of the successful search engine to tackle global poverty.
Acumen Fund: A non-profit venture fund that invests in market-based solutions to global poverty. The Fund supports entrepreneurial approaches to developing affordable goods and services for the 4 billion people in the world who live on less than $4 a day.
TechnoServe: Helps budding entrepreneurs turn good business ideas into thriving enterprises. With funding from the Google Foundation, they are launching a Business Plan Competition and an Entrepreneurship Development Program in Ghana.

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP’s South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South’s innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.

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ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2023

Youth Surge in the South: A Great Business Opportunity

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

The world’s youth population (those between the ages of 12 and 24) has now reached a historical high of 1.5 billion – 1.3 billion of whom are in developing countries (World Development Report 2007). Nearly half of the world’s unemployed are youth, and the Middle East and North Africa alone must create 100 million jobs by 2020 to meet demand for work.

Some 130 million people between the ages of 15 and 24 cannot read or write. This enormous cohort of talent and energy in many countries of the South goes untapped. Many youths lack access to quality employment and education opportunities. Yet knowledge of business could make the difference between success and failure for these young people, especially when they come from poor families with few choices. Business is also a great way to help harder-to-reach young people such as child soldiers, young girls, youth affected by HIV/AIDS, gang members, and orphans.

“The youth bulge is happening and it is an enormous opportunity or an enormous challenge: how are all these young people going to have productive and valuable livelihoods and contribute to their communities?,” said Fiona Macauley, founder and president of US-based consulting firm working with entrepreneurs, Making Cents International. “Policy makers are only just realizing they need a change of perspective on health issues, issues of poverty, the education system – all of it needs to respond.”

Micro-entrepreneurship, where risk is low and the amount invested small, offers the most realistic route into business for youth in countries where more formal opportunities are absent. While concepts like micro-credit and social lending have taken off, youth have not received the attention they deserve, according to Macauley. She has also found financial services need to change to encourage youth to save, while also opening up to give them access to credit for micro-entrepreneurship.

To address this problem, Making Cents is organizing a Youth Microenterprise Conference on September 1-12, 2007 in Washington D.C. in order to start building the links and networks between groups working with youth businesses, and to build a global movement for youth economic development. It will tackle three themes: the role of youth, sector strategies, and building partnerships.

“It is important that entrepreneurship is mainstreamed into the school system,” continues Macauley. ”That youth are getting good skills the private sector are looking for: how to budget, costing and pricing, developing entrepreneurial mind sets, problem solving, leading groups, researching, how to be problem solvers. If we can get this into the high school and the elementary school level, imagine how different the workforce would be?”

Other initiatives that are focusing on youth entrepreneurship:

South African Breweries Limited has been providing seed capital to youth businesses run by 18 to 35 year olds through its KickStart program. Successful youth enterprises to come out of the program have included Golden Sunset Fresh Produce, started by 27-year-old Alwyn Jepha to help pay for his law school studies. Starting on a small scale producing vegetables and fruit, the business has grown substantially, making in a month what it once made in a year. The KickStart grant enabled Jepha to buy irrigation equipment and to scale up his operations. At Zanopt, Khetla Leqola has been producing afro-centric optical frame styles, meeting a market need not being met by the global brands. KickStart enabled Leqola to buy the equipment required to produce the frames and run his office.

The Barbados Youth Business Trust has an excellent web portal for youth, with practical tips on starting a youth business and good examples of young people actually doing it. At 29, youth entrepreneur Ailene Harrison-Malcolm found herself unemployed. She had long noticed the lack of clothing for full-bodied women in Barbados, and decided to open her own store, Full Elegance Boutique in 2002. She was able to tap into a mentoring scheme run by the government’s Youth Entrepreneurship Scheme toget a loan. It is this kind of joined up support that youth need.

Published: May 2007

Resources

World Development Report 2007: Development and the Next Generation
World Bank’s Youthink! Website for youth: Click here
The Entrepreneurial League System: Professor Thomas S. Lyons and Gregg A. Lichtenstein have a established an entrepreneurial mentor scheme based on the baseball farm team concept targeting poor communities. Read more about this at Collaborative Strategies.
Students in Free Enterprise (SIFE): A non-profit organization in 40 countries, it organizes students on university campuses to develop community outreach projects that achieve their five goals: market economics, success skills, entrepreneurship, financial literacy, and business ethics.
Young Americas Business Trust; Latin America: Acts as a ‘catalyst for young entrepreneur development in the Americas through business skills training, partnerships, leadership and technology.’
Youth Business International (UK): An international organization providing disadvantaged youth with business mentoring and funds. They helped 2,000 youth in 2006.
UN Youth Employment Gateway: Click here