Parallel Breakouts on Intellectual Capital: Deal Flow

Wednesday 14
th
May, 1530 _1630
Session reporter: Marina Tan Harper

Summary of the content of the session:
Three funds in different countries share their experience on the ground in trying to get deals into the
pipeline. While there are specific idiosyncrasies in each country, all agree that there is much room
for the ecosystem to mature and grow. All three, even at different points of the pipeline has seen
social impact on the ground for the BoP.

Objectives of the session: Joan Yao of LGT Venture Philanthropy - Philippines
To learn about how and where are the deals.

Leapfrog (Michael Fernandes - Singapore )
Leapfrog started in 2008 to help people get out and stay out of poverty. Provides safety net for 25
million to 50 million people in India, Indonesia, and Philippines. Michael co-leads LeapFrogs work in
South and Southeast Asia, bringing nearly 20 years of experience in operations, consulting and
investing.

We are helping to create an ecosystem. We have a leapfrog lab, bringing together expertise, cross
learnings, mobile payments (using mobile has made is possible for rural starts ups).

Enovent (Digbujoy Shukla India )
Ennovent, started in 2009 as a first Impact Fund in India, is an innovation accelerator that provides
services to accelerate innovations for sustainability in low-income markets in developing countries.
Ennovent Circle is an exclusive network of individual and institutional members looking to invest and
support for profit companies making an impact at the base of the pyramid. The circle offers unique
investment opportunities to make a sustainable impact at the Base of economic Pyramid (BoP) in
India while generating financial returns for investors. As a capacity building program, we scale,
networks, and bring community intermediaries, diversity to the ecosystem.

Xchange (Rico Gonzales - Philippines)
Xchange is a start-up social enterprise incubator in the Philippines, investing in high potential early-
stage social enterprises, while providing full-time mentorship to help them grow and achieve scale.
Our own operations are through an endowment. Xchange prepares social enterprises for their first
$1 million from other larger funds, i.e. we get them investment-ready. We fund a continuum:
From Grants ($50,000)..to Equity type investment ($200,000)

What we do and what I have learned:
The original deal flow is proprietary; network of advisors; direct sourcing (cold calling), work with
bigger investors for partnership; crowdsourcing (working with NPOs and FPO).
Social enterprise competitions did not work (too many);
Introduced ourselves to all partners, funders, programs in the Development and Entrepreneurial
community. Takes time for them to understand us. Create and be the network; over 1,000
islands in Philippines network is very important.
Like-minded institutions matching takes 6 12 months before an investment is made and yet
only 34 % successful


Showcase those companies that are good models for sustainability and profitability.
We tend to work in commercial space and try to transfer to social entrepreneurship
Careers workshops (those successful evangelize); we thrive on referrals.
Ideas Inc. funds less at beginning for start-up so we dont choke them and destroy enterprise at
early stage with too much funding.


Major conclusions of the session:

Question from the Audience: There isnt a business model that works yet.

Incubation is not a business model. xChange is set up as an endowment, living off earnings from
endowment for our operations. But xChange is set up as a ForProfit with expectations of a loss,
which we will write off. We hope when we are successful, some kind of returns is doable.

For Ennovent, micro-financing worked for us. Co-investors can bring in varied expertise, and
portfolio support gives diversity.

Question from the Audience: How do you go about educating other investors that you are their
market? What are you biggest challenges and frustrations?

Oxfam: frustration is non-investment related:
Creating discipline in social enterprises and no strings attached funds
Hand holding of Foundations who wants to fund social enterprises but know nothing about
social ecosystem
Structures should match with due diligence of what level of funding that matches with the
business plan, i.e. not overfund and choke them. Ensure they learn from the pilot.

Leapfrog: Grants can be useful in early stage, but the problem is putting constraints of business
reality on them. If that service is critical to the community depending on it, then deal flow (which is
not consistent) should not be the model of financing.

Ennovent: Matching funding provided. Competitions and due diligence to award, and disburse
money in tranches: pre-prototype and post prototype.

Feedback/Take-Aways:

1) Critical to develop the ecosystem for deal flow to work.

2) Bringing like-minded institutions together to be matched and understand each other. Networks
for career building, referral, shared office space/equipment synergize.

3) Co-investing works. Portfolio Investment works. Financing is more than money - It is about
bringing together diverse expertise and a broad range of viewpoint, and to see yourself in
context.