This is a guest post from Alex Rossides, the founder of Growth Philanthropy Network, the organization behind the Social Impact Exchange. Alex’s post is a follow up to my post last week profiling the Exchange and my post yesterday envisioning the future of social stock exchanges in the year 2033.
By Alex Rossides
Thanks to Sean for envisioning the future of social stock exchanges and for his recent write-up regarding the Social Impact Exchange as an early form of such exchanges, developed in partnership with Duke University and Robert Wood Johnson Foundation.
Sean helped clarify a key difference between for-profit stock exchanges and social exchanges – in the social sector there is no price per share and stock is not exchanging hands. But, the broader analogy holds of an exchange that matches buyers and sellers i.e. investor and nonprofit organizations with an explicit promise of standards and transparency.
Exchanges in the for profit sector are the focal points for capital marketplaces. One primary function of stock exchanges is to enable the efficient flow of capital to growing companies so they can finance their economic activity. The social sector does not currently have exchanges to enable a more efficient transfer of capital to scaling nonprofits to finance their social initiatives.
As Sean pointed out, the member-driven Social Impact Exchange is designed in part to help play this role in the area of growth capital. It has a number of collaborative funding venues to connect high-impact, growing nonprofits to funders, based on transparent investor information, such as its online investment platform, National Investment Fair and Business Plan Competition to be held at its June 2010 Conference.
The Exchange is designed however to facilitate the exchange of more than just dollars. Its two other equally important goals are to (1) serve as a learning community and forum to develop and share knowledge on scaling, and (2) serve as a common ground where members can help build the field of scaling together. The focus on more than capital is an example of how the unique qualities of the social sector may help create social stock exchanges in the future that differ from their brethren in the for-profit sector in ways that could be better suited to the goals of social progress.
In the social sector, exchanges can be built with a focus on collaboration and networks that compound our learning, magnify our financing and accelerate the development of marketplaces that drive social progress. Exchanges can become true community resources, that provide opportunities to jointly build necessary field infrastructure and enable organizations across the sector to work together to solve our toughest social problems. They can combine the action oriented transactional nature of exchanges, with joint knowledge and infrastructure building to create social sector marketplaces.
The Social Impact Exchange is an early attempt to do just that. Its structure consists of working groups where members can work together on important field initiatives such as developing investment standards for scaling organizations, supporting the work of growth intermediaries, identifying models that work in different issues, sharing knowledge, and creating new products and distribution channels for scaling which the field can leverage. It is designed to be a cross-sector initiative so that we all have a hand in creating a more effective marketplace for financing positive social change.
Social stock exchanges, whether they are local, national, international or issue based, hold the great promise of combining collaborative, mission driven activities with marketplace structures to enable philanthropic capital to flow towards its greatest good. By 2033 let us hope that philanthropic capital distribution will be more results driven, based upon quality due diligence and business planning, better financial reporting, greater transparency, shared standards and enhanced accountability.
But, by 2033 social stock exchanges could also be nexus points for marketplaces where large numbers of funders aggregate to find high-quality organizations that they collaboratively fund in amounts large enough for nonprofits to execute multi-year strategies. They could be environments where business models of capital and information intermediaries thrive because they can more effectively broker capital rounds and information services, and where nonprofits that qualify can finally attract capital efficiently in one place based on the impact of their work.
To get there will be hard work and slower than we’d all like, but by working together we have an opportunity to realize a vision that enables us to make progress on our most difficult social problems and hopefully improve the lives of millions of individuals.
One Comment
Sean/Alex, these paragraphs caught my attention:
“The Exchange is designed however to facilitate the exchange of more than just dollars. Its two other equally important goals are to (1) serve as a learning community and forum to develop and share knowledge on scaling, and (2) serve as a common ground where members can help build the field of scaling together. The focus on more than capital is an example of how the unique qualities of the social sector may help create social stock exchanges in the future that differ from their brethren in the for-profit sector in ways that could be better suited to the goals of social progress.”
“In the social sector, exchanges can be built with a focus on collaboration and networks that compound our learning, magnify our financing and accelerate the development of marketplaces that drive social progress. Exchanges can become true community resources, that provide opportunities to jointly build necessary field infrastructure and enable organizations across the sector to work together to solve our toughest social problems. They can combine the action oriented transactional nature of exchanges, with joint knowledge and infrastructure building to create social sector marketplaces.”
You’ll read something very similar in the 1996 P-CED paper on reforming capitalism:
“By going with the normal flow of free-market enterprise and the emerging replacement of monetary capital with intellectual capital as the dominant form of basic enterprise capitalization, it becomes easier to set up new companies primarily on the basis of invested intellectual capital. (See Post-Capitalist Society, by Peter Drucker). In plain English, socially responsible and forward-thinking companies can be set up quickly and cheaply–and these companies have indefinite potential for earnings and localized, targeted economic development. The initial objective is to develop model enterprises and communities, then implement successful strategies from those models into surrounding communities regionwide or nationwide, as needed.”
“Top-notch education is leaving the confines of physical campus and four walls. A student in remote Zaire, given an Internet connection, can become a Duke-educated Master of Business Administration, while remaining mostly in his or her home village to the village’s benefit. The prospect of such decentralized localization of education and economic activity allows a great deal of autonomy, freedom and self-determinism in the village’s own character and identity. It need not be a risk to cultural heritage and integrity to benefit economically; the means by which such benefit will occur, how local citizens can have food, shelter, health care, and a basic sustaining human standard of existence can be determined at the local village level and then communicated at the regional, national, and global level simultaneously at virtually no cost via the Internet and a web site. It is this basic level of human sustenance, coupled with self-sustaining enterprise to provide this basic level of support, that I refer to as sustainable development — which is just another way of saying “people-centered” economic development.”
http://www.p-ced.com/1/about/history/
Why should it not be just as valid as a case for a social capital market?
Jeff