Social entrepreneurship is one more avatar of entrepreneurial ecosystem, where firms try to solve social problems. New York City-based Acumen is a non-profit social venture fund that invests in such initiatives by raising funds through charitable donations.
Talking to The Hindu , Acumen’s founder Jacqueline Novogratz says philanthropy is a powerful tool for social entrepreneurship, and it is a space to watch out for in India.
What has been the scene in social entrepreneurship since you started your fund in 2001?
The world was a different place in 2001. We had just seen the dotcom boom and the crash. But, very quickly, I would say because of three real factors, you saw an explosion of interest in it.
One was that you saw for the first time a proliferation of wealth across the world. And, more individuals, who earn their money in a networked economy, were looking for a different way to do philanthropy.
Two, you saw technology connecting us in the ways you never saw before.
Three, you saw the raise of the social entrepreneur — individuals who wanted to use tools for business to tackle social problems. Since Acumen was started in 2001, we have seen over 300 impact investing funds come online and proliferation of social entrepreneurs.
And, I would add fourth generational piece that we did not anticipate when we started Acumen, which has been the most thrilling of all. That is the millennial generation across the world, which sees the world in a very different way.
How effective are grants way of funding when compared to venture capital or private equity funding?
I always make a plea for nuance that there is an element in grants that can enable lack of accountability just like with venture there is an element that can create impatience that will destroy a company to make sure that the investors are paid. So, we need it all. We need smart grants, particularly at the pioneering or blueprint phase of a company's development.
When you are trying to figure out how to bring solar or any of the affordable off-grid alternative energy to rural villages in Bihar, which the market has written off and the government has written off, you need some grant money even to being to understand how to solve the problem. Once you got the blueprint created, then I would say you need patient capital, which is philanthropy-backed investment capital. But you are creating more accountability for results, because you have blueprint and you want to see if you get it to a point where you can attract more traditional capital. Then, the impact investors can come in, and then the longer term and more traditional investors. By then, you may have surpassed the venture guys. So, I actually think that all of these different kinds of capital are needed if you are going to build an entrepreneurial ecosystem that is for a truly inclusive economy.
Indian billionaires are also opening up to philanthropy. Recently we saw Infosys founders selling stake for philanthropic purposes. What is your take?
I think it is so exciting when you meet someone who is Acumen supporter like Nandan Nilekani and Rohini Nilekani … the thoughtfulness and wisdom of someone who not only created a large scale ‘for profit company’ that has provide so many lakh jobs but also who has worked in government and understand the process. How lucky are we to see these kinds of individuals serving as role models to whom much is given and much is expected? And, they are now spending this next chapter of their life very specifically focused on how do we make society better using the tools that they have at their disposals? Philanthropy is a powerful tool, particularly when it is used with markets in collaboration. What is happening with Indian philanthropy is at the early stage, but it is a space to watch. I believe you will see more creativity and risk taking.
In terms of regulations, what would you like to see the Indian government do?
Right now, you can’t use philanthropic money for investing in for profit companies. So, I would see that change. And, we have seen that regulatory environment change in other countries around the world, including South Asian countries as well. And, accountability for that will result in seeing the impact on the ground. Also, the money comes back to that fund and gets re-invested. And, that is a very powerful new way of fixing philanthropy. There are other areas, which can also be looked at.
For example, if we look at building toilets, given that it is a major programme of Prime Minister Narendra Modi, to enable financing of toilets means we have to recognise that micro-finance can be used. The toilets have to be deemed productive and not just consumptive, because there are indirect benefits that will help family income and others. It should be a top-down approach, and we need the policies and models.
What are new areas where social enterprise can thrive in India?
Education and healthcare delivery to the poor are the sectors to watch out for. In healthcare, we need more entrepreneurs looking at not only specialty and secondary health, but also primary health. It is a very difficult but exciting space if you want to impact the poorest. If you look at Prime Minister Mr. Modi’s focus on energy and sanitation, there is enormous opportunity for entrepreneurs. I feel this the moment for unbelievable innovation. And, the level of entrepreneurial energy and social orientation that you see in India is breathtaking. I think we will see an explosion in the best way.
sanjay.v@thehindu.co.in
