Gaining Experience in Impact Investing

Berkeley-Haas Education Team at MIINT

A Move into Impact Investing

My momentous experience with the Haas Impact Investing Network (“HIIN”) started in late September. I came to Berkeley-Haas to pursue a career in impact investing, so HIIN was an obvious decision. At work, I was frustrated with the nonprofit funding model – I had an undergrad degree in finance and I wanted to incorporate social impact into my work – a career in impact investing was a natural fit. However, I neither had the experience nor the tools to make this change. I quickly learned that HIIN was much more than just another case competition. My HIIN experience provide the tools I needed to make a career switch into impact investing.

HIIN is the Berkeley part of an experiential training program called the MBA Impact Investing Network & Training (“MIINT”). It’s an international competition where MBA teams from the US and Europe spend 6 months going through the impact investing process. Teams identify, conduct due diligence on, and recommend for investment an existing early stage for-profit organization that is building social impact into its business model and is looking to raise funding in order to scale up. The winning companies receive seed investments as part of an existing funding round. In addition to the competition component, MIINT provided access to various online and in person trainings on the stages and nuances of impact investing. The competition provided access to professionals in the industry both in formal speaker and panel settings to informal lunches and coffee chats. Furthermore, the competition provided access to networking both internal and external to Berkeley-Haas. I was able to connect with fellow students interested in the same topic. Soon it became an addendum to my MBA curriculum.

Focusing on Education

I joined the MIINT education team based on my personal interests. The first step was to source a company that fit a robust set of criteria. Our team assessed over 50 companies in the education space. I was doing research for the competition that allowed me to learn more about the education industry in the US. I learned about various tools for students, teachers, administrators, professionals, etc. I learned about trends such a mass open online courses (MOOCs) and adaptive learning platforms. Ultimately we decided to work with an organization named KickUp, an analytics platform for school district directors to better tailor the professional development teachers. We worked closely with Jeremy Rogof, the founder and CEO, to analyze the market, understand the value proposition, conduct financial and social due diligence. Through this deep dive into the company, I came to understand the challenges of creating a company that provides a differentiated value and a social benefit in a market that is willing to pay for this product.

Haas Impact Investing Network Fellows 2016

My first wake up call came when we presented the company at the Berkeley-Haas investment committee presentations. We believed the company was strong, the team was qualified and the product and impact were clear. However, the probing 20-minute Q&A following our presentation strongly challenged our assumptions and highlighted weaknesses which we had failed to discover. Ultimately, KickUp’s strong value proposition that addressed a massive problem in public school education today allowed us to win the local round. We represented Berkeley-Haas at the final round at Wharton. We spent the next three weeks engrossed in research, interviews and further analysis to develop answers to the gaps the judges had identified. Our further work proved to us that KickUp was a strong investment and we presented the company to a group of investors at Wharton.

The MIINT Finals at Wharton

The two day competition in Philadelphia was a fantastic experience for the whole team. The first day consisted of coffee chats and networking events where we met the other teams and judges. Their credentials and level of commitment to the tournament were impressive. The second day consisted of the final investment presentations. We spent weeks honing our presentation and were excited to show it to the judges. In our final presentation we felt we did a good job describing the company and answering the tough questions that followed.

In the room where it happens. #MIINT2016 investment committee deliberates on wining team, led by @trelstad pic.twitter.com/LgnIA36F9C

— brianwalsh (@brianwalsh) April 9, 2016

In the end, we were not victorious. As the day wrapped up, we were awed with a presentation which showed what happened with previous winners, including Learnsprout who were acquired in a multi-million dollar deal by Apple earlier this year. Even though it didn’t win, hopefully KickUp will enjoy similar success!

Although we did not win, the experience was invaluable. Our team learned a great deal about the impact investing space, how investments are sourced, studied and eventually executed. Classes are great at providing concepts, tools and frameworks, but it is opportunities such as these that allow students to take their learnings and apply them in the real world. It was also wonderful to work closely with passionate MBAs from four continents, as well as an inspiring entrepreneur, and learning so much in the process. It is countless such activities that makes Berkeley-Haas a truly experiential program.

 

From Charity to Change: A Dynamic Approach to Building a Better World

By Joe Dougherty

On the first day of December, Mark Zuckerberg and Priscilla Chan celebrated the birth of their daughter, by announcing their intention to direct 99% of their Facebook shares to a new philanthropic venture, the Chan Zuckerberg Initiative, which will seek to “advance human potential and promote equality.” The announcement was met with a fair amount of criticism, mostly centered on the couple’s decision to make the Initiative a (potentially profit-making) corporation rather than a private foundation, like the Bill & Melinda Gates Foundation. Critics like ProPublica’s Jesse Eisenger point out that Zuckerberg and Chan did not donate to charity but rather, “created an investment vehicle” which is subject to fewer legal restrictions than a nonprofit or a foundation and thus leaves Zuckerberg “completely free to do as he wishes with his money,” including investing it in profit-making ventures. This observation is certainly true… and it was certainly a good move for Zuckerberg and Chan, if they truly wish to advance human potential and promote equality.

Here’s why: Charity, traditionally, is how the social sector helps meet a need that government or private companies don’t address – like sheltering the homeless or helping former prisoners find jobs, for example. This type of direct charity is important and, unfortunately, still very necessary. But most foundations – even well-established ones like the Rockefeller and MacArthur Foundations – have long since moved beyond traditional charity to seek lasting social change. Instead of just feeding the homeless or helping former prisoners, they are also addressing the root causes of homelessness and asking why so many people are in prison in the first place. Rather than perpetually filling the gaps left by government and markets, modern philanthropists are exploring whether governments and/or the private sector can permanently close those gaps. This is old news, and most people would agree that it makes more sense to look for sustainable solutions rather than stop-gap measures – in other words, philanthropy should not simply apply band-aids to society’s wounds but rather, help create a healthier society.

The Social Impact Collective: Using Philanthropy and Community to Deepen Social Impact

We are excited to introduce The Social Impact Collective – a new opportunity for individuals and families who have the commitment and financial means to make transformative, lasting change in their communities and the world. The Social Impact Collective (socialimpactcollective.org) is anchored by a hybrid educational experience that begins with an in-person weekend (the Discovery Weekend) together at the inspiring Miramar Farms in Half Moon Bay, California, in March 2016. At the conclusion of the Discovery Weekend, members will have access to a custom-built, 6-week online course that helps them complete a social impact plan that will deepen the commitment and impact of their philanthropy. Members will have the opportunity to use this platform to form groups and giving circles, share information, and access tools that shape philanthropic decision. The group will reconvene at the conclusion of the online learning segment to share their impact plans and celebrate the philanthropic commitments they make.

Ben Mangan, Executive Director of CSSL and co-faculty director of the Collective, explains the genesis of the Program: “The launch of the Collective is a natural extension of Berkely-Haas’ global leadership on social impact. We have so much insight to share, and such a powerful network to leverage to position others to foster lasting change. In many ways, the Social Impact Collective reflects Berkeley’s mandate to serve the public good as a public institution.” The Collective brings this vision to life by leveraging the world-class educational assets of UC Berkeley and other leading institutions and organizations to guide members in their social impact journeys.

Community Partner Spotlight – ImpactAssets

ImpactAssets
http://impactassets.org
Ron Cordes, BS 81, Founder and Board Member

Like many successful new enterprises, ImpactAssets began as a way to address an unmet need. Ron Cordes, Haas BS 81, needed advice on investing the assets of his new family foundation. He quickly fell into what he calls the “5% – 95% conundrum”. Advisors pushed the foundation to have a grant budget equal to 5% of its assets and invest the rest. “Why can’t we have an impact with our other 95%?” Ron pushed back. The answer to that question led to ImpactAssets, a nonprofit financial services company whose mission is to build the field of impact investing and provide investment opportunities to a wide range of investors.

Ron Cordes, BS 81

ImpactAssets is a 501(c)3 nonprofit public entity designed to be a field builder and to create an ecosystem to benefit the field and the public at large. It is also a financial services company committed to being financially accountable with a sustainable revenue model based on earned income. It manages $150 million in assets, having surpassed an initial goal of $100 million last year. It engages the field in two main ways;

1. acting as a catalyst, promoter and supporter of impact investing, and
2. democratizing impact investing by providing financial products accessible to small investors.

Kim Wright-Violich Puts Real World Investment Decisions in the Hands of Students

Kim Wright-Violich: Putting Real World Investment Decisions in the Hands of Students

Tonight’s homework: pick a nonprofit to receive a $100,000 impact investment.

That’s the assignment for students in Real World Impact Investing, a class designed and taught by the former CEO and President of Schwab Charitable, Kim Wright-Violich. Wright-Violich exposes students to the impact investing continuum – from philanthropy to for-profit investing. The course culminates in teams pitching a $100,000 investment.

Wright-Violich secured the capital for students to invest from Echidna, LLC. Founded by Google’s first employee, Echidna supports girls’ education in the developing world through donor-advised funds. Wright-Violich and Echidna started the class to tap students’ talents and to educate future leaders in impact investing. After the final investment decision is made, Echidna will distribute the funds and monitor the investment.

From 2000 to 2011, Wright-Violich served as CEO/President of Schwab Charitable, which offers donor-advised fund and charitable trust services. She grew the organization from a start-up to one of the ten largest charities in the country, attracting over $5 billion in charitable assets. There, Wright-Violich introduced numerous innovative programs to facilitate charitable asset management, including the first-ever microfinance guarantee program using donor-advised fund assets.

Leading Schwab Charitable taught Wright-Violich the power of a blended for-profit/non-profit approach to scaling social impact activity; in her words, “If you can harness the commercial markets and the motives that drive markets toward social improvement, it is much more powerful than charitable giving alone.”

“Of course,” Wright-Violich adds, “some important mission-driven activities do not lend themselves to earning revenue or traditional capital investment, but when such an opportunity is discovered, change can occur at an unprecedented rate.”

To that end, she has drawn on her experience to assemble a curriculum packed with readings and guest lectures by luminaries in the social impact field.

Among the guest speakers she featured were Dr. Madhav Chavan, the founder and CEO of award-winning education nongovernmental organization Pratham;co-founder of Room to Read Erin Ganju, and nonprofit consultancy FSG’s founder, Mark Kramer.

“Kim and the class don’t need to work really hard to… simulate something that happens in the real world,” said one of her students, former Leapfrog Fellow and MBA student Tom Pryor. “It is the real world.”

Unique among business school classes for providing students the experience of making a direct investment in an organization, Real World Impact Investing is one of three experiential learning courses offered by the Center for Nonprofit Leadership at Berkeley’s Haas School of Business.

Laura Callanan’s Response to Impact Investing Articles

Recently a new round of impact investing articles have come out.  The Chronicle of Philanthropy published It’s Time to Cut Through the Hype of Impact Investing which is a synopsis of a new report, Making Impact Investable, and The Stanford Social Innovation Review When Can Impact Investing Create Real Impact. Laura Callanan responds to these articles:

Laura Callanan

I am always encouraged to see folks thinking and writing about impact investing.  I force myself to remember that 20 years on this idea of “doing well and doing good” is still eye-opening for many people.

But I find myself feeling a bit glum and crotchety. For all the ink spilled – some by me – on this topic, we still lack (in the words of Jed Emerson and Antony Bugg-Levine) the “Apple IPO” of impact investing.  Perhaps more importantly we lack a robust set of compelling examples – with real, proven track records — that an investor can earn a meaningful return while generating a social benefit.

I have written grant proposals, and run a family foundation. I have managed the endowment at the Rockefeller Foundation and the Wallace Foundation.   I have published on social impact assessment, lectured on strategic philanthropy – and handed big wads of cash to elderly women in Mali who came up to me and opened their hands for help. So I understand the complexity both of funding social change for meaningful impact, and investing to maintain philanthropic purchasing power.

I would humbly ask that we focus today on the investing half of impact investing — to prove that folks driven by impact can be successful at generating financial return.  We realize measuring impact is a whole can of worms in itself, and will certainly want to know whether these investments are delivering on their impact promise.  But if they don’t make good as investments, the discussion will be moot.  And at this point, the discussion has been going on for so long I’m afraid people may stop listening.

Laura Callanan is a visiting scholar at Haas. She has vast experience as a consultant, author, and teacher in the field of social innovation. Laura recently spoke at a SoCap panel on impact investing, data, and pay for success. Watch the video below.

From Potential to Action: Bringing Social Impact Bonds to the US

March 6, 2013

Haas School of Business, UC Berkeley

Schwab Charitable Philanthropy Speaker Series: Social Impact Bonds

Social Impact Bonds (SIBs) are at the forefront of financial innovation for scaling proven social impact programs. Laura Callanan, author of McKinsey & Company’s ground-breaking report on SIBs, will examine this new outcome-based approach to scaling and the role played by each stakeholder group: government, nonprofits, impact investors, and evaluation advisors. Carla Javits, CEO of REDF, will discuss her organization’s proposal to implement a pay for success program in California.

There is considerable buzz about