SOCIAL ENTERPRENEURSHIP AND VENTURE PHILANTHROPY

ALI SALMAN

Training Workshop at LEAD

ali.salman@developmentpool.org

2nd November 2007

OUTLINE

• SOCIAL ENTREPRENEURSHIP – CONCEPT– CHALLENGES – CASE STUDY

• VENTURE PHILANTHROPY – CONCEPT– CHALLENGES– CASE STUDY

SOCIAL ENTREPRENEURSHIP

• Entrepreneurship – Creation of Value AND Wealth

• With Social Entrepreneurship….• Product, becomes

– Pro Poor

• Market, becomes– Bottom of Pyramid (the 5 billion market)

• Bottom line, becomes: – Double (Access to Poor and Return to Shareholders)

More on Concept-SE

• Pro Poor is not a low-priced edition!

• Its about a new price-performance relationship!

• In most of BoP, shortage of talent exists, therefore work must be deskilled.

Source: C.K. Prahald, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits

Basic Economics

• Small Unit Packages (?)

• Low Margin per unit

• High Volume

• High Return on Capital Employed

Source: C.K. Prahald, The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits

Marketing Strategy

• Don’t just sell a product; sell value!

• Invest heavily in education of customers.

PARADIGM SHIFT

• By its very nature, success in BoP market will break existing paradigms (Grameen).

TRENDS

• HOUSING FOR THE POOR

• THAR DEEP: WATERING IN A CONSERVATIVE WAY

• MICRO FINANCE

• RENEWABLE ENERGY

• INEXPENSIVE LAPTOPS AND ICTS

• CHECK OUT: www.nextbillion.org

Break

• Questions and Discussions

CASE STUDY: PANI GHAR

• Concept

• Pilot

• Challenges– Winning trust of a sizable customer base– Creating Local partnership – Delivering Service

Key Lessons and Risks

• Market Size: Buying Intent Estimation can go wrong as poor customers may mix up between need and demand.

• New Markets: Social Entrepreneurs find it hard to ‘sell’ those products, which have remained either free or under-priced.

• Buying Power: Purchase power estimates can go wrong, as persons with lower income have higher tendency to hide their income.

Key Lessons and Risks

• Unintended Beneficiaries: As Social Entrepreneurs, we might end up selling our products to non-poor. (P/G Experience)

• Regulatory Risks: Regulator does not understand the grey area between for-profit and non-profits. (P/G experience)

• Double Bottom Line: It implies additional accountability, which has costs.

Risks Mitigation

• GO UP, CLOSE AND PERSONAL: Most of the risks are based on poor information about customers and weak communication systems.

• TAX HOLIDAY/ TAX REBATE FOR SOCIAL ENTERPRISES: If corporate world can be offered monetary incentives for investment, then why not social enterprises?

Break

• For tea, this time!

VENTURE PHILANTHROPY

• Combination of Venture Capital Model with Philanthropy to create a viable and growing non-profit.

CONCEPTS

• Deep Investment Analysis• Leadership• Relationships• Power of Networks• Making the Greatest Impact• Funding What Others Do Not• Performance• Strategic Assistance

TRENDS

• QARSHI FOUNDATION– Health and Education

• CARE FOUNDATION (BAREEZE/SEFAM INDUSTRIES) – Education

• ALI FOUNDATION (PACKAGES)– Culture– Education

Break

• Any questions?

Venture Philanthropy

• Case Study

• Why I have chosen SKMT?

• SKMT has become a sustainable organization, and is a significant player in the cancer treatment.

VP: PRECONDITIONS

• Charisma • Alternative to Charisma? Deep and prolonged

personal commitment of the leader• Trust • Team • Initial Capital/Seed Money • Must adhere to a real problem and propose a

real solution– Can we define ‘real’ being in terms of money? – “A Real Problem is one for which a solution is

provided, people are ready to spend money.”

VP: Launching Pad

• International Quality Standards • Wide and diverse resource base (over a million donors in

mass contact in 1994-95 contributed 120 million rupees i.e. 120 per person!)– Revenue from treatments – Zakat– Donation – Other Income – Started with a base in Zakat and Donations; now Revenue is

almost equal, if not more, than Zakat and Donations combined.

• Public Attractions (Fund Raising Programmes) • Technology (SMS, E Banking)

Skaukat Khanum: Revenue Base

Total Revenue

-500

1,0001,5002,000

Rev

enu

e (R

s. M

illi

on

)

Financial Information of Shaukat Khanum Cancer Hospital & Research Center

-

100

200

300

400

500

600

700

800

Reven

ue (

Rs.

Mil

lio

n)

Revenue Zakat Donations Other Income

VP: Getting Results

• Institutional Capital – Long term vision– Very well paid (above market) staff

• Knowledge Platform – Which Cancer Patient should be given a

priority is a decision governed by the probability of cure and recovery.

• Sustained and High Quality Pro Poor Welfare System

SE AND VP COMPARED

  NATURE

INVESTMENT

INCENTIVES

PRICING

PRODUCT

MARKETS RESULTS

SOCIAL ENTERPRISE

FOR PROFIT

OWN+ LOAN+ EQUITY

SALARY + SHARES

NOT FREE

TAILOR MADE

BOTTOM OF PYRAMID

*ACCESS TO BOP*PROFITS

VENTURE PHILANTHROPY

NOT FOR PROFIT

OWN+ CHARITY

SALARY + BONUS

VARIES

STANDARD

BOP PLUSRICH

*SUSTAINABILITY

AT CROSS ROADS

• Microfinance and Health Care: The Coming Convergence

• Socially Responsible Funds

• Managing NGOs with Venture Philanthropy Models.