After enjoying tremendous patronage and success in its two previous editions, Sankalp, a platform that catalyzes impact investments into sustainable and scalable social enterprises globally, is back again this year. Scheduled to happen in the first week of May, Sankalp Forum is an initiative backed by Intellecap, a social-sector advisory firm serving corporates, non-profit organizations, development agencies and governments working in developing markets. Their idea is to bring together 400+ social enterprises, 150+ impact investors and 150+ sector stakeholders on a common platform with the objective of accelerating the enterprise scaling process. We at YourStory caught up with K Sree Kumar, the CEO of Intellecap recently and in this exclusive chat, he speaks about the Indian impact investing scene and the ecosystem that Sankalp seeks to create.
What is special about the Sankalp Forum?
That it is a platform designed to attract impact investments into social enterprises is known. But Sankalp is special because it goes beyond just the money. We're looking to build sustainable and scalable enterprises. This year, we intend to engage stakeholders all year round through forums in India, Africa and USA, workshops, mentoring, and an online networking community. Also, it's a question of approach. We at Intellecap strongly believe that for long-term sustainability, someone somewhere in the value chain has to make a profit. Otherwise, the enterprise is going to run out of either money or interest. Profit motive and social objectives can be balanced and the balance can and will be discussed.
We understand that patient capital is one of the things you're looking at. How is patient capital important for the scaling of social enterprises?
Well, there is this perception that capital investments are severely conditional and to some extent, it's probably true. Filters applied include ticket size of the investment, stage at which the enterprise is, sector that it falls under, etc. Patient capital offers a way out through some of these issues. Take ticket size, for instance.
There are small social enterprises doing some phenomenal work. But they probably won't get funded because the amount that they're asking for is too little. For people who do the funding, it's easier to manage one large investment rather than 20 small ones. So, these enterprises end going to grant-making organizations. Patient capital allows flexibility in terms of the amount invested (say, in the range of $50,000 - $100,000). We can also look at milestone-based reporting rather than year-based reporting. These measures will help social enterprises scale quicker.
There are a lot of bright business ideas out there. But great ideas need to be packaged in a certain way so as to attract investments. So, besides patient capital, there's a need for mentorship, incubation support, capacity building etc.
Tell us about your thoughts on the absence of Indian impact investors. What do you think are the constraints and challenges that need to be overcome in order to ensure more investments into businesses with social objectives?
At Intellecap, we're quite conscious of the absence of Indian social investors. Sure, there might have been a few investments here and there. But we can't think of too many of scale. In fact, we plan to discuss this at the Sankalp Forum.The thing is most enterprises subject to the FIPB (Foreign Investment Promotion Board) are short of Indian money. Some of them are actually telling us that they don't want any more foreign money. And that's enforced currently by the various FIPB requirements for smaller non-public enterprises.
Also, the fact is that institutionalized social enterprise funding originated in the West. In India, there is awareness and interest in giving back to society. In fact, a lot of people do so, but in a very ad hoc manner. A number of people with some amount of surplus money (and sometimes, even if there's no surplus) donate to charities or give away grants. Personally speaking, I'm not against grants or anything like that. But I believe that if the metric is going to about how much money has been given away, then it can lead to some perverse incentives. The idea is to measure outcomes, rather than the actions.
Institutional mobilization is lagging behind in this space and that is because of the lack of faith amidst Indian investors. Scandals, too, have played their part in eroding faith. So, the challenge is to organize ad hoc individual-level funding in the form of institutional investment.
Social enterprise funding often gets the 'high risk, low return' tag. What's your take on that?
It's called 'high risk' because it is not properly understood. The space, as such, is in the pre-professional stage. And I would argue that the 'low return' is unfair. After all, social enterprises do deliver so much more in terms of developmental outcomes. Ultimately, it's about deciding what the metrics are going to be. Considerable amount of work is happening on this abroad, in places such as London (the Social Stock Exchange) and Singapore (Impact Investment Exchange Asia) and we are involved with some of them. So, if I were to coin a tag, I'd go for 'low information, high unmeasured outcomes'.
So, what is the ecosystem that Sankalp is trying to create? What would be the benefits?
In the short-to-medium term, the aim is to see a significant increase in investment into social enterprises. And by investment, I'm not speaking only about the money. That's a very important part of it. But the real value addition would in building business acumen and intellectual capital. Also, for social enterprises, there is no such thing as a set of universally-accepted positive outcomes. We can only measure success when we have defined what success is. So, Sankalp should promote discussion on this within the ecosystem.
The medium-to-long term vision is to obliterate the distinct differentiation between a social enterprise and other enterprises. With the idea of multiple bottom lines, the line is beginning to fade. We need assessment parameters that go beyond just the monetary returns. We look forward to the day when the people and planet objectives are as vital as the profit objective.
Sankalp is inviting nominations on www.sankalpforum.com from promising businesses for the Sankalp Awards until February 28, 2011. The Awards and Winners Package will be presented at the Sankalp Forum on May 5 & 6, 2011 in Mumbai. If you're a social entrepreneur, do check out http://conta.cc/fUTxkH. Also, do let us know about your thoughts on this story. You can write to us firstname.lastname@example.org.
Sriram Mohan | YourStory | 24th February 2011 | Bangalore