columbia capital markets presentation oct 2010
DESCRIPTION
Prof Bugg-Levine's presentation on capital markets.TRANSCRIPT
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Innovations in financing development solutions
Antony Bugg-LevineBusiness Innovations in International Development
October 2010
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How will I find capital to grow my development-focused business?
How can I assess the capital raising strategy of a business plan?
How can I make investments that support business innovations for development?
How can I build a business solving these problems for others?
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• Retail investors
• HNWI
• Private bank clients
• Family offices
• Private foundations
• Institutional investors
• Sovereign wealth funds
• Development finance institutions
• Government
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Supply (Buy-side)
Demand(sell-side)
Intermediation
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Supply (Buy-side)
Demand(sell-side)
Intermediation
• Retail investors
• HNWI
• Private clients (UHNWI)
• Family offices
• Private foundations
• Pensions
• Taxes
• Commercial banks
• Trading platforms
• Wealth advisors
• Private banks
• Investment funds
• Institutional asset managers
• Development finance institutions
• Treasury department
• Sovereign wealth funds
• For-profit businesses
• NGOs (e.g. Scojo)
• Suppliers (e.g., smallholder farmers)
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Where is the money?
Retail bank
High net worth
Private bankFamily office
Insurance fund
Pension fund
DFI
Foundation endowment
ODA
Corporate investment
Government support
28
23
17
30
20
0.21 (flow)
0.6
0.12 (flow)
US$TR
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Retail savingsHigh net worth
assets
SWF
Insurance funds
Pension funds
Foundations (US)
Private giving (US)
DFIs
ODA
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1. Retail investors
2. HNWI
3. Private bank clients
4. Family offices
5. Private foundations
6. Sovereign wealth funds
7. Development finance institutions
8. Institutional investors
9. Government
Po
ten
tial
inve
stm
en
t siz
e
Impact investment appetite/independence
9
2
6
7
8
4
5 3
1
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Where is the money?
Retail bank
High net worth
Private bankFamily office
Insurance fund
Pension fund
Capital/accountInvestor discretion
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The Scott Budde Problem…
ERISA
Make impact investments…
$700MM commitments
At scale
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• Retail investors
• HNWI
• Private bank clients
• Family offices
• Private foundations
• Institutional investors
• Sovereign wealth funds
• Development finance institutions
• Government
• CCI note invested in community housing
• Grameen loan guarantee
• Syndicate microfinance loan
• School finance fund
• Charter school guarantee
• CDFI cash deposits
• China investments in Africa
• Loan for new roads
• Electric car company loan
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Social enterprise
Social enterprises stuck in the middle when trying to raise funds
Social return
Charity/ non-profit
~20%
For-profit business
0%
Risk-adjusted financial return
-120%
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~20%
Impact investing industry emerging to fund social enterprise
Social return
-120%
0%Risk-adjusted financial return
Examples:
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~20%
Impact investing industry emerging to fund social enterprise
Social return
-120%
0%Risk-adjusted financial return
Examples:
Double-bottom line trade-off
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~20%
Market-rate impact investing
Risk-adjusted financial return
Social return
-120%
0%
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~20%
Market-beating impact investing
Risk-adjusted financial return
Social return
-120%
0%
Examples:
generation__
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~20%
Can impact investing become a stable equilibrium?
Social return
-120%
0%Risk-adjusted financial return
Examples:
Business discipline
Social metrics
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Opportunities for entrepreneurs
Investment firms
• Structure deals
• Make investments
NGOs• Raise capital
• Fund management
• Advisory
Start-up firms
• Asset management
• Investment banking
• Advisory
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Capital raising examples
• Private foundations• Family offices
$20MM
• Private foundations• Family offices• (U)HNWI• Corporate customers
$50MM
• Private foundations• Family offices• HNWI• DFIs
$102MM
$16MM$1.5 Billion
• Venture capital (Sequoia)
• Angel investor• Family office• Commercial bank