UPSTARTS

Making a Difference
Teachers and students of
the Lang Lang Learning
Potential Development
Center in Beijing, one of
the social enterprises
Avantage Ventures is
advising.

Zhang Meng
Avantage Ventures hopes to help social enterprises become self-sustaining by TOM SPENDER

M
“ y dream is to destroy the school
totally with a missile,” says the
7-year-old boy on the video.
“Every day is the same there. I don’t
like doing homework. I have no idea about
others’ feelings and the reverse is also true.
My handwriting is the worst in my class.
The teacher would punish me. I would
have to stand at the balcony for one hour.”
The boy feels this way because
he has dyslexia, defined as difficulty in
reading and writing and thought to affect
between 5 and 17% of people worldwide.
However, in the Chinese mainland
few are familiar with dyslexia, according
to Lan Zi, whose Lang Lang Learning
Potential Development Center in Beijing’s
Xizhimen district is the country’s first
school to offer specialized training for
dyslexic children.
This lack of awareness means
millions of dyslexic Chinese children go
undiagnosed. Some are even punished
for their learning difficulties by parents
and teachers who don’t understand the
cause of the child’s problems and the ways
to address them. It also makes raising
money to finance the Lang Lang Center’s
continued operation difficult – which is
why Lan Zi wants the school to operate as
a sustainable business generating its own
income through tuition fees rather than
relying on donations.
“Without proper help these kids
might end up on the streets. They could
become gangsters. So this work is very
meaningful,” says Lan Zi. “If we are
financially independent then we can offer
this training to more children. Donations

22 China International Business | November 2010

just aren’t stable.” banking.
The Lang Lang Center is just the “Investing in a social enterprise is
kind of social enterprise that Yvonne Li and not about getting the money back, it’s
her company, Avantage Ventures, hopes to about giving people dignity,” says Li. “If
help. A former investment banker, Li and you hand them money they will always be
her partners started Avantage Ventures dependent on you. If you invest in them
in 2008 to you support them in their belief that they
help such have the ability to do something and create
enterprises income of their own. And if the investment
develop does well, investors get their capital back
resources and can go and re-invest in the sector.
and con- “The aid model is really important
nections in war-stricken countries or during natural
with in- disasters, such as the earthquake in Haiti
vestors. or the floods in Pakistan. But there are
The Lang also models that allow social enterprises
L a n g to thrive on their own without aid money
Center and if they can then it’s better for the NGO
is one sector and less burden on the government.
of about So why not?”
50 such B e s i d e s t h e L a n g L a n g c e n t e r,
Avantage is working with Canyou, a
software company in Shenzhen run by
a person with a disability, whose 700
employees also have a disability (see
October CIB ). The company needs working
capital in order to scale up his business.
On the environmental side, Avantage is
working with Hebei Jing Long Husbandry
Pig Farm, which is looking at a scheme to
capture the methane from pig waste (which
otherwise contributes to global warming)
and use it to generate clean energy that
can be used to power the farm and sold
into the grid. The process also creates a
substance known as “bio-sludge”, which
can be used as a fertilizer, reducing
reliance on chemical-based fertilizers.
“Social entrepreneurs have both
Spender
their ability to scale up their activities if
they are trying to attract funding.”
Li’s decision to make a difference
by starting Avantage grew out of her
work in investment banking, when she
served on her firm’s committee advising
charities. As part of her committee
work, she organized a trip for some of
her colleagues to a school project run by
the China Literacy Foundation in rural
Shanxi.
“Afterwards, five people came up to
me and said the trip had changed their
lives. That trip gave me more satisfaction
than anything else in the job. It was a huge
sign that I had no feeling for the numbers
game even though I was in finance.”
Later, while she was examining
a structured equity product based on
carbon credits that she described as
“awful, highly speculative and possibly
even damaging to the environment,” she
became interested in the carbon market.
“It was commercial in one sense
so I could still use my commercial skills,
but it had the greater purpose of helping
the environment. And that’s what really
prompted my decision to leave the
banking sector,” she says.
Tw o y e a r s a f t e r i t s f o u n d i n g ,
Avantage Ventures is now in the process
of raising money so it can also invest
directly in the social enterprises that it is
currently advising.
Last month, Avantage held its first
social investment forum in Hong Kong,
an event that brought together poten-
tial investors, social entrepreneurs and
experts on the sector, including Jose

an innate desire to make a difference Maria Figueres Olsen, a former president

and strong business acumen. They are of Costa Rica and an expert on climate
m

innovative in how they approach both the change and sustainability.

Images by To

enterprises that Avantage is working with
across Asia.
Instead of relying on continued
philanthropy to keep going, social
enterprises look for investment to reach
sustainability and expect to eventually pay
their investors back.
The term social enterprise was
coined in the West, where the idea
developed out of the aid model. It
is now taught in universities and
qualifying enterprises are often eligible
for government grants and preferential
social sector and business,” says Li.
Indeed, there’s plenty of desire to
make a difference in Asia, Li says, but
Asian social enterprises are less visible
than those in other regions because of the
number of different languages spoken
in Asia, lower levels of English language
proficiency and the Asian cultural trait of
doing things in a quiet and understated
manner rather than bragging about one’s
achievements.
“With the dominance of English
it takes a longer time for Asians to be
heard,” says Li. “And there are a lot
of unsung heroes in Asia who just
don’t talk about it. It’s an Asian cultural
characteristic. It absolutely does hinder
At the forum, Avantage launched
its investment club, called the Impact
Investment Circle, which is not a fund
of pooled capital but is instead a way
for investors to gain access to well-
run social enterprises that need capital.
Over 120 investors from across Asia and
Europe had the opportunity to hear about
multiple social investment models and 15
said they would join the newly launched
club.
“We said to investors: here are the
enterprises, they all have very strong
entrepreneurs, competitive advantage,
sustainable business models and we’ve
done all the consultation and due diligence
– now get on with it,” says Li.

China International Business | November 2010 23

UPSTARTS
She expects investment into social
enterprises to follow the pattern set by
investment into microfinance, a decades-
old industry now worth USD 20 billion.
The first investors gave money in the
form of grants, expecting no more return
on their investment than getting their
initial capital back, and then they became
greedier as they saw the returns that the
industry was able to generate.
“It’s a fairly new concept in Asia
so they won’t have really high expecta-
tions initially. But as things become more
mainstream more institutional investors
will come in expecting a return. As it
develops more players who will help the
sector become more professional and
sophisticated,” she says.
But to Li, social enterprises offer
greater value than a normal commercial
investment because of the social benefit they
bring.
“To me, social enterprises are the
future,” says Li. “Social enterprises don’t
have a pure profit motive, but if you could
put a value on the social or environmental
impact that they have, this would increase
ADVERTISEMENT
24 China International Business | November 2010
Yvonne Li of Avantage Ventures the value of the organization. That isn’t
valued in today’s society. We are trying to
promote a sector which would value it.”
Back in Xizhimen at the Lang Lang
Center, Lan Zi says she hopes to set up schools
to help dyslexic children all over China.
Her calculations are simple.
Assuming an average of 10% of children
are dyslexic, there are about 500,000
dyslexic children in Beijing, Shanghai
and Guangzhou alone. That’s a market
of USD 500 million based on tuition fees
of around USD 1,000 per year. With just
a 1% share of this market, Lang Lang
can generate USD 5 million in revenue,
enough to be sustainable.
The value to Chinese society of pre-
venting hundreds of thousands of children
from missing out on an education is
Image courtesy of Avantage Ventures
incalculable.
“In Chinese we have a saying: ‘xian qu,
xian lie ’, which translates as ‘he who goes
first, dies first’,” says Lan Zi. “We want to go
first but we have no intention of dying.”
And hopefully with the help of
Avantage Ventures, the Lang Lang center
will be able to reach its goals. ■