Thursday, April 1, 2010

Career transition spending a few learning-filled years at McKinsey, I recently decided to move on.  Hard to put into words the gratefulness for the experience.  Of course, the rigor and difficulty that led to the crazy hours and intensity were there, but at the same time there was much to be learned and wonderful people all along the way.  Might share a longer post on my experiences at the organization, but more time needs to pass before I’d be able to have a holistic perspective.


I next will be joining Armonia, a venture capital firm in the nascent field of “impact investing.”  Impact investing is really interesting – it’s basically the idea that society can use capital markets to promote social & environmental benefit (in addition to financial benefit).  So, just like any VC firm, the job here is to look for great ideas that can generate financial returns, but that’s only 1 part of 3.  If you’ve heard the term “social entrepreneur", you’re familiar with impact investing, because those are the folks that are being invested in.  The Monitor Group put out a really great report on this a little while back.


Impact investing matters because it’s so needed right now.  There’s many ways service is provided in this world:

+ 100% For-profit (think about how valuable Google or AT&T has in many ways been for society all while purely seeking financial return)

+ Non-profit (Red Cross)

+ Gov’t organizations (United Nations, International Monetary Fund)

+ Philanthropic organizations (Gates Foundation, Robin Hood Foundation)

However, even with all of this, there’s a hole.  A lot of times, if someone has a great idea that serves people in a town or a few villages, it’s hard to get more money to do it in other places unless there’s some possibility of financial return for the people putting in the money.  That’s where social entrepreneurs come in.  They create businesses that generate financial return (above 0%) for at least a portion of their investors, thus keeping money coming in and quickly scaling the idea to reach more people in need.


This is why orgs such as Grameen Bank or Kiva thrive.  They seek to help people en masse, in fact, that is the reason for their existence, but they do it by attracting the money of the masses.  There are TONS of people who would give to a good cause if it actually generated money on top of it.  All of this has been in the public sphere since Bill Drayton started Ashoka in the early 80’s, but after Muhammed Yunus won the Nobel Prize a few years ago, it really got a boost.


One of the bigger reasons I’m grateful for joining Armonia specifically is its belief in the patient capital model.  Traditionally, investors come in, get their financial returns, then leave.  This doesn’t work well if you have an entrepreneur who has a really promising idea but would take a little while to develop it.  Investors don’t have the time, so they don’t bother investing.  If this is a social entrepreneur, the world has potentially lost out on a solution that could serve many people.  Patient capital recognizes this hole and solves it by not looking at financial returns in a short-term mindset (this is practiced famously by Acumen Fund).


Because this is a nascent field, it’s unknown what will happen over the next decade.  I believe it’ll become huge, but I also believe it doesn’t matter compared to the internal shift that happens in myself and others from taking on the challenge.  My friend, a successful social entrepreneur, once told me, “You know Birju, I don’t mind going down, but i’m not going to stop putting my full trust in people.  If I go down doing that, it’s not a bad way to go.”  Indeed :)