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Intellectual Capital: Incubating Social Purpose Organizations for Success

May 14, 2014
Speakers: Calvin Chin, Rishab Malik, Sati Rasuanto, Cliff Prior
Moderated by: Grace Sai
Session reporter: Anh Ton

Social purpose organizations (SPO) are an important cog in the venture philanthropy value chain.
One of the concerns venture philanthropy organizations in Asia have is the lack of opportunities to
put capital to work because of a lack of a sufficient number of such organizations in the region. As
such, incubating SPOs is critical if venture philanthropists want to achieve the greatest possible
The incubation of SPOs can take various forms depending on the nature of impact that is being
sought by the organization. Budding SPOs need financial as well as non-financial support, and
venture philanthropy organizations need to be well-equipped to provide support across different
areas such as supporting monitoring abilities, training of employees, human capital management,
advice on fundraising and marketing and impact measurement, among others.
In this panel, Calvin Chin, Rishab Malik, Sati Rasuanto, and Cliff Prior represent the three largest
Asian social markets, and they each have a very distinct theory of change.
GSF India (Rishab Malik - RM)
GSF India has a presence in three of the largest tech start-up scenes in India: Delhi, Mumbai,
Shanghai, and Bangalore. We run a workshop driven, 15-week mentor program. We have been
around for 2 years and have invested in 40 companies. About 15% of them can be considered social.
Our thesis is around the pre-seed stage. We have had three exits to series B financiers and one
company was acquired by Facebook. We are not typically considered an impact investor—it was by
coincidence that our investees were social, but we are looking more into the space.

Transist Impact Labs (Calvin Chin - CC)
Transist is based in Shanghai and has funded 17 companies with up to 500k USD in support. We are
building our own products as well. Our GSF accelerator batch model provides strategic expertise and
brand value. As far as our incubator goes, we have been around for 2.5 years. But we’ve engaged
over 1000 organizations from five years ago. We have had no exits yet.

Endeavor Indonesia (Sati Rasuanto - SR)
Endeavor is a “high impact entrepreneurship” organization. We believe that not all entrepreneurs
are same—entrepreneurs can from developing countries as well. We have a network of over 3,000
mentors. We look for companies that already have a business model and revenue of at least 1 to 5

million. We are not a funder, but a mentoring platform. We have global and local mentors who are
pro bono to our entrepreneurs.

UnLtd (Cliff Prior - CP)
We believe talent is everywhere, and what entrepreneurs need are seed funds, confidence, etc. We
have about 1.5 thousand people in our entry stage, and the UnLtd model has been adapted in other
organizations. We are a shared learning network with an aim to help speed up the process of success.
We work at every stage of the life cycle, from the pre-prototype stage to pre-seed funding to series
A financing.

Question from Grace: Who funds the capacity builders? The intermediaries?

RM: LPs. It’s usually one of three types: HNWI (angel investors); other funds who want to see early
exposure to emerging markets; institutional investors.

CC: LPs. We have one ultra high net worth individual. Social Purpose Organisations (SPOs) are best at
driving sustainable social impact and attractive for financial returns. In China, social markets are best
right now [because of the high demand for sustainable growth].

SR: We are funded by individuals. Then, when the entrepreneurs ‘make it’, they give back. We did
some research and found that if Endeavor had been a fund, we would have had a 2.9 ROI. Looking at
that, we started the Catalyst Fund. Board members pay and mentors also pay. They do it so they can
network with each other, but they also want to give back.

CP: The National Lottery Distributor. We have an endowment from the national lottery, but startups
also pay dividends. We used to be 100% funded by the endowment, but now it is about 38% funded
from the endowment.

GS: The hub started as a 90% membership model. By the 2
year it was down, to 68%. We want to
push it down to 45%.

Q: As you can see, only Transist and UnLtd actually position themselves as impact incubators.
[Meaning social impact is built into their mandate]. Can the other incubators talk about how they
fell into the social impact space?

RM: That’s true. GSF accidentally stumbled on the value of impact returns, and we’re still looking at
what the best source of capital is. Is it debt, grants, or something hybrid?

Questions from the Audience
What advice do you have for someone who is starting an incubator?

What are the common challenges for setting up in different markets?
How do you define success?
Should your theory of change be sector agnostic?
How do you find organisations to incubate?/How accessible do you make yourself?

RM: For us, we define survival as success. If the company can go on and raise further rounds, it is
successful. Our metrics are valuation and survival.

CC: [On finding the right organizations to work with] Know your primary goal first. Is it to learn? To
maximize impact? Use that as the starting point to find the right partner.

SR: Success for us is in building ecosystems. In some more traditional sectors, people don’t
understand what mentoring is. For example, we had one entrepreneur who started in affordable
housing and then made it big. We connected him to a major real estate developer who immediately
told him, don’t go into real estate development (hotels and luxury homes)—stay in affordable
housing. Because if you go into real estate development, you will compete with me. And if you
compete with me, you will fail. So entrepreneurs need to be connected to learn these kinds of things.
We want to link up to people in the know, and have one generation of entrepreneur mentor the
next. We take a long range view. As for deal flow, it is mainly through referrals.

Question from Grace: Are venture philanthropists and impact investors too limited in where they
look? There was a Rockefeller study that suggested that we are looking too much at intention and
not enough at impact. Should we use the end result rather than the intention as the starting point
of how we invest?

CP: [Unequivocally] I have to go with intention. Just look at big pharmaceuticals like GSK *if you’re
considering impact alone]. Look at what they done and the net harm they have caused. But it’s true
that both intent and impact have to go together; we have to look at things through a wider frame.
It’s very inefficient to use regulatory frameworks alone to create good impact.

Question from Audience: So far there hasn’t seemed to be much discussion on the social criteria for
selecting organizations. Can you talk more about that?

CC: All screening is on social terms.

CP: Money is a currency and social good is a commodity. We look at organizations who internalize
impact in their business models.

RS: We created markets, but now markets control us. Can we somehow incorporate social harm
into prices?

Question from Grace: Some people are now coming around to the thinking that the solution is
more important than the organization. For instance, Teach for America is now a very well known
model. Its founder did not care to expand TFA but allowed other entrepreneurs to adopt and
adapt it to their own countries. So what are your thoughts on finding open source models to fund?
Do you fund the entrepreneur, the enterprise, or the idea?

CP: This is a collaborative economy. You need the entrepreneur who can adapt the model that
creates innovations that can be shared. Inventors may not be able to implement ideas. It’s the
entrepreneur who can.

GS: Can we get final words from our panelists?

CP: Challenges differ so much and so little. The journey of the entrepreneur is universal. But when
you look at things by country, what informs that journey is so different.

RM: Our incubation business is about 5 years old. There is not yet enough of a track record. Taking
the entrepreneurship view is most helpful at this point.

SR: We have to be ecosystem builders. We have to take the long haul look. We need to re-energize.

CC: If anyone wants to collaborate or share ideas, talk to me.

Major Conclusions of the Session:
We are still in the early phases of incubating social purpose organizations. We need the patience to
let things grow organically, but we also need to drive a lot more human and social capital into the
space if we want to see change happen more quickly. Financial capital, as important as it is, is not
enough. We need a lot of mentoring and relationship building in the sector. We also need to be clear
about our intentions and the impact we want to create.

Takeaways of the Session:
 Impact and intention are closely related and can be confused with one another. We need to
broaden our view and think about whether we are being too narrow in how we engage with
social purpose organizations.
 The time to build the social ecosystem is now. We need to look at the long haul and
encourage one generation of entrepreneurs to train the next.
 The entrepreneur, the enterprise, and the idea all form a collaborative economy. Ideas drive
change, but we need entrepreneurs who can implement ideas. At the same time, a sole
entrepreneur can do little without support from an enterprise.