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Before I attended SOCAP last week, I had only a fuzzy idea about the world of social entrepreneurs and impact investing. I didn’t think it had anything to do with my company, Bellwether Materials, because, even though we have a socially responsible business with a deep green product I viewed our C Corp as a regular building products manufacturer.
A couple years ago, one of our advisors suggested getting involved with impact investors. We did sign up and we are now a GIIRS rated company, but most impact investors are interested in Africa, India, and South America, not the U.S.
Last week at SOCAP, I found out that I am a social entrepreneur. Not only do we have a product that does no harm to people, animals, or the environment, we also plan to create 40,000 rural American jobs within five years. We were set up to be profitable with no financial sacrifice necessary for us to provide social good. We may not have an ROI that threatens Google, but it will be respectable.
All the ideas that went into developing Bellwether Materials were discussed at SOCAP. It is so amazing to know that other people think like we do and believe these ideas are important. My company started with a desire to help people without destroying the environment. At SOCAP, almost 2,000 people were exploring the same issue. This is especially exciting since a few years ago, the only goal was figuring out salaries and stock options.
The amazing thing about impact investing is that it opens the door to alternative sources of funding for businesses, here and abroad, who want to contribute to social good.
Charitable organizations have traditionally been set up to help those in need, but while they have provided temporary assistance, they have not been able to solve the underlying problems. Starting here in San Francisco, we have a homeless problem. The term, “homeless problem” means that people don’t have a place to live other than the streets. To solve this problem, some kind of safe living situation needs to be found for those who have no money for rent.
However, the charitable solutions I see are providing homeless people with sandwiches, blankets, jackets, a cot for a night, health care and other peripheral, temporary services. These people are not sandwichless, or jacketless, etc. — they are homeless. If all the money that is given to these services is instead put into purchasing buildings with low-income units we would be much further along in solving this problem.
The same issues arise in Africa. Charities provide classes, medicine, clothing and so forth, but what every family needs is someone with a job that provides a dependable income. If the life of a child is saved by medicine, but that child has no food, no access to education or further health care, what kind of life will the child face? If the adults in the family had jobs, they could pay for medical care and education and they would also have a level of self-respect that comes from being self-sufficient.
As far as I am aware, every sub-Saharan country in Africa is much worse off now than they were under colonialism in spite of trillions of dollars of aid. So for all the money and effort, charity in Africa hasn’t worked. If you look at China and India, they are building their economies with home-grown solutions. Not perfect, but they are moving in the right direction.
[pagebreak]The right direction is creating jobs. This is where impact investing really shines — and not just abroad.
There are many people who would start businesses if they had the money to do so. Unfortunately, in the US, 94% of angel/venture money goes to men (rather than women) and most of them are developing IT products. Computers are useful tools but they won’t save the world. Having access to Google is not equivalent to having an income.
Small businesses create 67% of all new private sector jobs.
In the U.S., funding small businesses, especially those started by women, could have a profound effect on unemployment. Not only do these small businesses create jobs, but the return on investment can be used to invest in more businesses. Because the American business culture is ancient and deep, investors probably don’t need to spend much time mentoring.
However, investing in Africa, for example, should include long-term coaching and education. Just dumping money into an African business is not always helpful. What if it fails? What impact does failure have on them? For the typical Silicon Valley entrepreneur, failure means, let’s start over. For most others, it is the end of their professional careers.
I spoke with the Minister of Education from Botswana a couple of years ago. He was concerned that while his people used technology, they had no idea how it worked. They thought there were spirits or tiny people involved. In addition to education, investors need to understand the culture they are investing in. Tribal and gender issues are huge in sub-Saharan Africa and can’t be ignored. Other cultural artifacts, like the “Concept of Limited Good” where another’s success means less for you is a pervasive underlying reason for many destructive decisions.
If impact investors’ portfolios consisted of some American companies, especially those owned by women with non-IT products or services, and some in more interesting places like Africa or India, it’s possible that the American companies’ profits could support investment abroad.
With foundations and charities moving into impact investing, they need to hire business savvy people and put more money into management. If charities supported job creation, they could raise some money that way rather than being dependent on the begging bowl. I am aware that there are laws controlling how nonprofits raise money, but as we’ve seen with the B Corp, laws can change.
SOCAP provides a truly wonderful platform for discussing ideas about how to save the world by supporting social entrepreneurs. It’s jobs, not charity, that will save us all.
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Priscilla Burgess is CEO, co-founder, and co-inventor of Bellwether Materials, an award-winning, triple-bottom line company that manufactures deep green building insulation made from an agricultural by-product. Before founding Bellwether Materials, she ran her own management consulting business. She has traveled all over the world, asking questions about how people work and from that, has developed several models and many opinions about the best way to grow a flourishing business. Follow Priscilla on Twitter: @byburgess.image: Jayson Carpenter. All rights reserved.