Thursday, March 30, 2006

Investment banking and eBay

The talk here at the Skoll Forum today and yesterday has been centered around bringing investment banking approaches into funding social entrepreneurship -- starting with Al Gore talking about his private equity firm and followed up by a series of sessions today around mobilizing masses of funds from the regular financial markets (e.g. by securitizing streams of income from microloan repayments). It crystallized for me when Jan-Olaf Willums introduced Jacqueline Novogratz from Acumen as one of the people actually getting funds for venture philanthropy from the common people -- and she had to demur by saying that Acumen probably didn't get funds from the common people, and in fact that the elite had a responsibility to help out the masses of people who live under $4 a day. And Jed Emerson noted that he had had to go back and brush up on his understanding of finance to be able to "hang" with the people he thought were key to solving the social capital market conundrum (i.e., bankers).

This makes me, of course, feel like a fish out of water. Or at least swimming upstream. The issues this panel has raised -- whether using grant funds to prime the pump to encourage private sector willingness to lend to sectors, areas, and income groups that the private sector would not otherwise lend to or invest in -- is exactly the kind of thing that the World Bank Group can and does do, and I lose heart listening to them for several reasons. First, organizations that have been officially tapped to do this sort of thing have been in this business for 50+ years and not yet made a real difference (cf Bill Easterly). So new organizations doing exactly the same thing will work only if the organizations that have been tapped to do this are structurally unsuited to the purpose or the new orgs are a lot more efficient. Second, it's demoralizing to think that the people who are notionally "in charge" (which makes me feel oddly leftist) are the only people who can make a difference. It's just a downer to think that the people with money and access are the ones who will come into save the day. Third, it perpetuates the power imbalance that has always ruled this space, and I have a hunch--which I can't prove--that somewhere, somehow, this power imbalance has a pernicious effect.

2 comments:

Sombit said...

It would be interesting to learn how venture philanthropy firms like New Profit select which entrepreneurs/projects to support. Did we ever find out why they supported us? What's the ROI for them, apart from the "feel good" factor? I'm asking this not as a rhetorical question, but as the ignorant student.

mashenka@dc said...

I think in the case of New Profit -- it was because they knew Kickstart, and Kickstart was a New Hero, and the donations through our site were being matched by the Skoll Foundation. So very clear ROI -- in this particular case ...