1. ENTR 4800: Social Entrepreneurship
Class 7: Impact Investing and
Social Capital Markets
Monday, November 1, 2010
Instructors:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)
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2. © Norm Tasevski & Karim Harji

3. © Norm Tasevski & Karim Harji
Agenda
• Kiva.org
• What did we learn – Last Week?
• Overview of Impact Investing & Social Capital
Markets
• Activity: In the Investor’s Chair
• What did we learn – Today?
• Next week
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4. © Norm Tasevski & Karim Harji
Last Week – What did we learn?
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5. Ethical Investing
Mission-Related Investing
Responsible Investing
Venture
So, what are we talking about? Philanthropy
Program-Related Investing
Charitable Giving
Social Finance Impact Investing
Donations Value-Based Investing
Socially Responsible Investing
Environmental,
Blended Value Social and
Governance
Social Investing Screening
Triple-Bottom-Line
Mission-Driven Investing
Sustainable & Responsible Investing
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6. © Norm Tasevski & Karim Harji
The Looking-Glass World of Nonprofit Money
TRUE or FALSE?
F• The consumer buys the product
• Price covers cost and eventually produces profits, or
F else the business folds
F• Cash is liquid
• Price is determined by producers’ supply and
F consumers’ ability and willingness to pay
• Any profits will drop to the bottom line and are then
F available for enlarging or improving the business
• Investment in infrastructure during growth is necessary
F for efficiency and profitability
• Overhead is a regular cost of doing business, and varies
F with the business type and stage of development
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Full article available at: http://nonprofitfinancefund.org/files/docs/2010/NPQSpring05.pdf

7. © Norm Tasevski & Karim Harji
The Spectrum of Markets
FINANCIAL CAPITAL IMPACT INVESTING PHILANTHROPY
MARKETS MARKETS (GIVING MARKETS)
RETURN Financial Return Financial + Social Return Social Return
MEASUREMENT Financial Performance Measurement Financial + Social Measurement Social Performance Measurement
• Debt • Debt • Grants
INVESTMENT
TYPE • Equity • Equity
• Retail (mutual funds, online brokers) • Retail (online micro finance) • Retail (offline channels, online
• Institutional (Exchanges, Alternative • Institutional (Impact Funds, giving, Donor Advised Funds)
PLATFORMS Trading Systems) emerging platforms) • Institutional (Foundations)
AVERAGE
TRANSACTION About 5% About 10% About 30%
COST
FINANCIAL SOCIALLY
CAPITAL RESPONSIBLE
MARKETS INVESTING
MARKET SIZE Social Screening and
Shareholder Advocacy
$5 Billion $300 Billion
$50 Trillion $7 Trillion
SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD

8. © Norm Tasevski & Karim Harji
Social Finance Continuum
Purely Philanthropic Purely Commercial
Social Enterprise Socially
Organization Traditional Non- Traditional
(Non-Profit & For- Responsible
Type Profit Corporate
Profit) Corporate
Non-financial
Social mission with Profit driven with
mission (social
Primary Goal minimum social and/or Profit driven
and/or
expectation of environmental (economic value)
environmental
financial return objectives
value)
Below-market
Market-rate capital
Donations and capital, or mix of
Capital (including SRI Market-rate capital
Grants donations and
investments)
market-capital rate
Subsidized rates or
Charge for
Beneficiaries pay mix of full payers
Products and Market-rate prices Market-rate prices
nothing and those who pay
Services
nothing
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Jed Emerson (2003) “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation ”

9. © Norm Tasevski & Karim Harji
The Social Capital Market
Intermediaries
Non-Profits
Socially Responsible Investment Credit Unions
Social Enterprises
Commercial Investors Social Stock Exchanges
Social Purpose Businesses
Venture Philanthropists Community Loan Funds
Co-Operatives
Foundations Rating Agencies
Entrepreneurs
Taxpayers Associations
Social Economy Organizations
Supply Demand
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10. © Norm Tasevski & Karim Harji
Social Finance Across Canada
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11. © Norm Tasevski & Karim Harji
Serge LeVert Chiasson
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12. © Norm Tasevski & Karim Harji
Supply of Finance
Fixed Public Private
Cash
Income Equity Equity
Higher risk Lower risk
Guarantees Lower risk Higher risk
Subordin
Grant Private Senior
ated Cash
Support Equity Loans
Loans
-100% -90% to -10% 0% 1% to 7% 8% +
Capital-protected Commercial-return
Grants “Soft” Investments
investments investments
Very soft debt Market-rate debt
“Blended return” equity
Social returns only Mix of grants and Equity
Soft debt
other capital Full commercial returns
Willing to take below-
Willing to lose Social benefit can be a
market return
some money requirement
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Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”

13. © Norm Tasevski & Karim Harji
Financing Options – Over the Social
Entrepreneurship “Life Cycle”
MORE EQUITY-LIKE
GRANTS
SOCIAL VENTURE CAPITAL FUNDS
ANGEL INVESTMENT VENTURE CAPITAL
PROGRAM-RELATED INVESTMENT/RECOVERABLE GRANTS
FORGIVABLE LOANS
SOCIALLY RESPONSIBLE INVESTMENT FUNDS
BELOW-MARKET DEBT
MARKET-RATE DEBT
MORE DEBT-LIKE
IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT
Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social 13
Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestme

14. © Norm Tasevski & Karim Harji
Supply: Major Players
Source: Social Venture Exchange (SVX)
DEBT EQUITY
VANCITY CAPITAL CORPORATION
($50k to $10 mil)
CAIC: MORT.
(Up to $500k)
SCP INVESTECO
(Up to $300k) (Up to $2 mil)
CAIC: ENTERPRISE
(Up to $50k) RENEWAL FUND
(Up to $2 million)
ACCESS COMMUNITY TSX CLEANTECH CLUSTER
CAPITAL ($10 - $100+ mil Deals)
CAPE FUND
(Up to $5k) ($1 - 7.5 million)
OTTAWA COMMUNITY LOAN FUND
(Up to $15k)
$0 $500,000 $1 million $10 million $100 million

15. © Norm Tasevski & Karim Harji
Aligning Supply and Demand
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Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social
Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.

16. © Norm Tasevski & Karim Harji
Adam Spence
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17. © Norm Tasevski & Karim Harji
Why Intermediation Matters
• Scale = reduce transaction and search costs
• Investment readiness of ventures
• Common language and industry standards
• Risk assessment tools
• Assessing social value creation
Who will build (and pay) for these
intermediaries?
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18. © Norm Tasevski & Karim Harji
Alterna Community Alliance Housing Fund
• Created to address Ottawa’s affordable housing shortage
• Provided low-cost financing for second-mortgage financing
• Structured as investment grad instrument offering a five-year GIC ROR
• Took 7 years before PSAC was able to find a “risk-free vehicle” to do this!
Carleton Centre for
Public Service Alterna Savings Ottawa Community
Community
Alliance of Canada Credit Union Loan Fund
Innovation
• Invested $2m to • Structured an • Non-profit • Intermediary that
create the fund investment vehicle responsible for helped to align the
• Committed to to provide market screening projects interests of the
responsible rate of return as that are groups
investing well as direct • Affordable to • Suggested
• Market rate of social impact those most in alternative models
return in a • Provides need drawing on
“vehicle” that operational / • Affordable in the research and
fulfilled fiduciary admin. support long-term experience from
responsibility • Constructed by the US and UK
unionized
workers
Adapted from: Causeway, SiG, Volans (2009) “Building The Case for Social Finance in Canada” 18

19. Break
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20. © Norm Tasevski & Karim Harji
Exercise: In The Investor’s Chair
• Which business is suited to which type of
investment?
• Which business would you invest in?
• What can you improve on to pitch to investors?
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21. © Norm Tasevski & Karim Harji
What did we learn?
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22. © Norm Tasevski & Karim Harji
Next Week
• Jon Packer, Idea Workshop
• Deliverable: Have Questions Ready!!
• Readings
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