Building an Epic Pipeline to Help End Poverty
By Marc Blumenthal, Executive Director Social Ventures Foundation (5-minute read)
One of the world’s foremost natural historians, David Attenborough, has issued a stark warning and a call to arms, in a Netflix documentary “A Life on Our Planet”. Attenborough draws a direct correlation between “out of control population growth” caused by poverty and the potential demise of life as we know it. He believes that if left unchecked, our population growth will tax what little natural resources we have left, by compounding our carbon emissions, our plastic waste, our water quality, and our deforestation.
Today, we are experiencing unprecedented storms, drought, forest fires, and sea level rise. The result will be an uninhabitable planet for humanity, within two or three generations, your children and your grandchildren, if something is not done.
In summary, humanity is at grave risk. The planet will recover, but we may not. But all is not gloom or doom. To reverse this path, Attenborough prescribes one strait forward but seemingly impossible challenge. We must lift the world out of poverty, by raising the living standards of the poor, without increasing the environmental impact on the planet.
It should therefore come as no surprise why the #1 UN Sustainable Development Goal (SDG) is NO POVERTY.
Globally more than 700 million people and 1 in 5 children live in extreme poverty and youth are 3 times more likely than adults to experience unemployment. This condition creates generational cycles of poverty with negative outcomes including crime, civil disobedience, drug use, wars and environmental degradation. In summary Poverty poses the greatest risk to both Democracies and the Free Enterprise System.
To meet youth employment needs, 600 million jobs will have to be created over the next 15 years. Traditional international development will not meet these needs, because it focuses on a top down-trickle down paradigm that primarily funds infrastructure projects benefiting the governments and the “haves” of a nation, with trickle down to the “have nots”. “Top down” does not move the needle on the income divide in developing nations.
I personally believe that social franchising. if developed and financed correctly, has one of the best potentials to make a difference to the planet’s environmental crisis by tackling extreme poverty. Given the enormity of poverty mitigation, social franchising is the most effective way to quickly scale outstanding social ventures that create jobs to deliver social impact to lift livelihoods. One example of a social franchise is JIBU, an African water company. It took four years of “friends and family” money to develop the franchise before it started to scale. The problem is that there are very few people who will take the risk to invest the social impact capital necessary to create a social venture like JIBU, research its market feasibility, build a set of financials, engineer a prototype and then run a commercial proof of concept before turning to social franchising to scale it.
To End Poverty, we must develop innovative franchisable social ventures like JIBU, that will create jobs to deliver social impact to reach thousands of low-income communities and millions of people. To accomplish this, we need to build a global pipeline that consists of four key elements:
(1) We need to train human resources to develop “franchisable” social ventures. To do that we need to introduce social entrepreneurship and social franchise training into the post-secondary curriculum since most post-secondary institutions don’t offer them. Post-secondary institutions offer the most fertile ground to “ideate and grow” seed stage social ventures. But to begin this process, we need to transition these institutions from talking about the UN SDG’s to tackling the UN SDG’s starting with SDG #1. This means training students in social entrepreneurship and engaging small student teams in the development of franchisable social ventures that can meet local poverty reduction challenges.
(2) Given the urgent need to save the planet, we need to infuse a “sports like culture” into the process and motivate these teams, by having them go head-to-head in National, regional, and global competitions so that the most outstanding social ventures can be identified. (Think FIFA!)
(3) We then need to award the winners of these competitions with financial investments to conduct commercial proofs of concepts so that we can affirm their venture’s financial sustainability, market receptivity and scalability utilizing social franchising.
(4) We then must find the funding to build this pipeline and make sure that over time the pipeline itself will be financially sustainable.
Funding for seed stage social ventures, including the pipeline that can bring them to life, and the funding for social franchise scaling is “the elephant in the room”. It is often referred to as the “valley of death” given the absence of investment capital in this space. International Development Agencies shy away because social venture deals are too small or too risky or not a fit for one of their silos); Environmental, Social and Governance (ESG) investors avoid them because they are risk adverse and there is no “P” for Poverty in ESG; The name brand foundations won’t take a bet, given that most of them have hung “do not disturb” signs on their front doors.
Finally, there are the handful of authentic End-Poverty social impact investors who do take small bets, but they get tapped out early and lack the financial firepower needed to build a global poverty reduction pipeline. The challenge boils down to finding an individual or entity who does have the financial fire power, understands that planetary time is short, and wants to engage in a legacy play to underwrite the pipeline construction through the development of a Fund to invest in social ventures that create jobs to deliver affordable social impact at the Base of the Pyramid.
Over twenty years ago, while I was involved in a series of deep technology startups, I coined a social franchise concept called “micro-franchising” (one person one franchise) which recognized that the fundamental employment of those living in poverty is self-employment, not employment. Although I tried to promote it, at that time, the International Poverty Reduction Industry was not ready for a sustainable business approach to poverty reduction.
So recently, I decided to try again, and four years ago I started the non-profit Social Ventures Foundation. Its mission: facilitating the development of grass roots social venture solutions to local poverty reduction challenges that can be scaled utilizing social franchising. This mission is focused on creating job producing social ventures that deliver social impact at an affordable price to low-income communities.
Most recently we have rolled EPIC into the Social Venture Institute which will identify flagship Business schools to roll out the Institute in a three Labs: EPIC Innovation Lab, the development of franchisable social venture solutions to local poverty reduction challenges, Social Franchise Lab, to train the human resources necessary to scale social franchises that have conducted successful commercial proofs of concepts and the Social Impact Fund Lab, to engage students in sourcing local deals for possible investment by social impact investment funds., ​
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The Social Venture Institute will provide the building blocks for a “pipeline” consisting of post-secondary social entrepreneurship and social franchise training; social venture development; social venture vetting through competitions; and grants for competition winners that will underwrite their commercial proof of concepts and set the stage for scaling utilizing social franchising.
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The Pipeline’s “endpoint” is an investment Fund which removes the “elephant in the room”, the unspoken fact that no one wants to invest in the Bottom of the Pyramid.