SocialImpactandaNewGenerationofTechnology-IntensiveSocialVentures

MarioCalderiniSchoolofManagement,PolitecnicodiMilano

Thebackground.SocialInnovation:thedustandthehype.

Wewouldbeprobablytalkingaboutsomethingveryoldanddustybut:

• Blendedvalueisthenewcentrality;• Entrepreneurial structuration;• Technology matters.

Thisrevampsoldissuesandopensupnewinterestingperspectivesforentrepreneurship,financeandpolicy.

MarioCalderini- PolitecnicodiMilano

Motivation

• SocialInnovationandEntrepreneurshipareundergoingacomplextransformation.

• Thisisnotauniversalphenomenon,i.e.thisdoesnotmeanthatallformsofSocialInnovationandEntrepreneurshipwillbesubjecttosuchtransformation.

• Instead,partofitisevolvingintoaveryinterestingorganizationalhybrid(i.e.intentionallypursuingprofitandmeasurablesocialimpactobjectives),knowledge/technology-intensiveandthusdriftingfromlabour-intensivetocapital-intensiveentrepreneurialmodel.

• ThethesisofthispresentationisthatthisnewformofSocialVentureisgoingtobeaveryinterestingoptionfornewinclusivegrowthpoliciesandforanewgenerationoftechnologytransferandknowledgeexploitation,moreaccountabletosociety.

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FromSocialVenturestoInnovativeFunding

• (New)SocialVentureisnotaThird-Sector’smonopoly:itisalsotheresultofadaptivestrategiesofmainstreamfor-profitcompanies.

• Largescaleempiricalevidenceisstillmissing.Onlyimpressiveanecdotalfactsandunstructuredevidence.Moreresearchneededinthisdirection.

• ThescopeofthispresentationisalsotounderstandhowfinancialinstrumentsareevolvingtofitthenewneedsofnewSocialVentures.

• Weneedtolookatinvestmenttargetsinordertounderstandwhatinnovativefundingneedstobeorwillbe.

• SocialImpactFinanceisgoingtobewhat(new)SocialVentureisgoingtobe.

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NewSocialVentures

• NewSocialVenturesarehybridorganizations,thatwillhavetoberegardedastheoutcomeofatwofoldevolutionaryprocess:

• originatedbothfromthethirdsector,withsocialenterprisesgettingmoreandmorestructuredintermsofbusinessmodels,governanceandresources,

• originatedfromthetraditionalfor-profitsector,withcorporationstryingtoadaptthemselvestothreatsandopportunitiesgeneratedbysustainabilitychallenges

• Notauniversaltransformation,itinvolvespartofthird-sectorandpartoffor-profitsector.

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Mainstreamfor-profitcompany

SocialVenture

SocialEnterprise

AdvancedCSRInnovationModesImpactFinanceImpactMeasurementSustainableoperationsMulti-stakeholdergovernanceReputationalRiskManagement

Scaling-upandgrowthTechnology-intensivescalingImpactFInanceImpactMeasurementMulti-stakeholdergovernance

TheNewSocialVenture

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(New)Tech SocialVenture

• Tech social ventures (TSV)’s represent a unique genre of socialventure which attempts to satisfy a social need throughtechnological innovation in a financially sustainable manner.

• The concept differs from social entrepreneurship on the basisof two factors:• innovative use of technology;• replication capacity.

MarioCalderini- PolitecnicodiMilano

TheTech SocialVenture• Despitetheincreasingpopularity,thereareonlytwodistinctive

featuresthatwecanreasonablyattributetosuchentity:• hybridity• technological(knowledge)intensity

• Alltherestisanongoingtransformationprocessandthebestwecandoistoobservesuchtransformationinordertoinfertheattributesthatwillcharacterizesuchorganizationalentity,whichmanyscholarstendtoconsidernotalateralformofentrepreneurshipbutabrandnewentrepreneurialgenre.

MarioCalderini- PolitecnicodiMilano

TheTechSocialVentureandSocialImpactInvesting.

• Among many other things, the inherent characteristics oftechnology social ventures entail a fundamentaltransformation, i.e. from labour-intensive to capital intensity.

• This latter observation is the final step, only after verifying theactual consistence of this phenomenon the interest in socialimpact investing is legitimate.

MarioCalderini- PolitecnicodiMilano

Theneedforspecialisedfinance.

• Demand-side– Withdrawalofwelfarepolicies– Newtechnology-intensivesoluti;ons tosocialproblems;– Re-engineeringsocialinterventionmodelsforprevention;– Needforinnovativefinancialsolutions:payforresults;

• Supplyside– Generatingandseizingnewinvestmentopportunities;– Sourcingnewcapitals:mobilizecapitalthatwouldnotbemobilized

throughtraditionalphilanthropicschemes;– Reputationalissuesandimpact-washing

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TheOthersideof(Tech)SocialVenture:SocialImpactFinance

• The term social impact finance is referred to a resourceallocation strategy in which capital is intentionally used tofinance projects that generate a blended value.

• The purposeful allocation of financial resources to initiativesthat can deliver measurable societal impact (social andenvironmental) alongside financial return.

• Provision of finance to organisations with the explicitexpectation of social returns that are clearly defined a priori,are not an incidental side effect of a commercial deal and afinancial return of at least a repayment of capital is expected.

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Source:Wilson,K.E.(2014)

VenturePhilanthropy

ImpactInvesting

The“Blended Value”mantra

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Matchingdemandandsupply

• Weshouldnotrepeatthemistakesmadewithhigh-techentrepreneurship:sophisticatingthefinancialinstrumentsbeforetakingcareofnurturingasufficientlyconsistentcapitaldemand-side;

• SocialEntrepreneurshipisaconsistentphenomenonbutthecandidatestoreceivingcapitalforgrowtharestillveryfew;thestrategicandpolicyissueistohelppotentiallyscalableventurestoreachasortofmezzaninelayer(intermsofmanagerialstructuration,robustnessofbusinessmodelandgovernance)wherethecanbeeligibletoreceivefinancialsupportforsocialimpactspecializedinstruments.

• Theimportantefforts:capacitybuilding,investmentreadinessaccelerationandscalingup

MarioCalderini- PolitecnicodiMilano

MezzaninelayerBusinessmodelarchetypes

IMPACT FINANCE

SOCIAL VENTURE

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WhytobetonnewSocialInnovation/entrepreneurshipasanewindustrialpolicyoption?

• Bringfreshgenuineindividualmotivationstothecauseofentrepreneurship;

• Anewopportunitytofosterearlygrowththroughinnovationprocurement:social(civic)procurement;

• Ainnovationpolicyoptionthatismorefriendlytotheprevalentindustrialspecializationmodel,industrystructureandinnovationmodeofmanyEuropeancountries;

• Anewgenerationofinclusiveinnovationpoliciesabletostitchupthelacerationbetweensocietyandinnovation.

• Anewformoftechnology-transferensuringsocialaccountabilityofresearch.

• Anoptionforfuturecohesionpolicy.• Anoptionthatcanbecomplementarybutnotlateraltomainstream

industrialpolicies.

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Arealoptionforindustrialpolicy?

• Anecdotalreflection:inanykindofEU-fundedcall/competition/prizeinthefieldofsocialinnovation,thereisasystematicover-representationofproposalsfromcountrieswherede-industrializationandunemploymenthitharder.

• SocialInnovationisperceivedasanalternativeoption:policymakershouldcometotermswiththis.

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Arealoptionforknowledge-basedgrowth?

• Scientificknowledgeexploitationandtechtransfer:thevalueofresearchhasbeentraditionallyconveyedtosocietythroughtheintermediationoftheindustrialsystem,whichhastakencareofexploitingknowledge,translatingitintoeconomicvalueand(partially)givingitbacktosociety.

• Butwhatiftheindustry(oraknowledge-intensiveindustry)isnolongerthereincertainareasofEurope?Norealoptionforknowledge-basedgrowth.

• Thealternativeistothinkof(Tech)SocialInnovationandentrepreneurshipasawaytoconveythevalueofknowledgedirectlytosocietyintheabsenceofaconsistentindustrialoption.

• Ultimatelythisisagoodreasontoaddressspecificpoliciestofosteranewgenerationof(Tech)SocialVentures.

MarioCalderini- PolitecnicodiMilano

Urgentissues

• CapacityBuilding,Acceleration,Investmentreadiness,and“mezzaninebusinessmodels”;

• Nonlinear,demand-sidepoliciesandecosystembuilding;• Metricsandmeasurementinfrastructures;• Integrateimpactfinanceandpublicfinance;• Afteradvocacy,demonstrate.

MarioCalderini- PolitecnicodiMilano