Hey Stefan, good to have you here
They would if it fits their general investment thesis, but there is no specific focus on inclusive business
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Good to see you too! Itās been too longā¦
i think you point on how far the opportunity is from the core business is very valid. this has determined the direction for us also
And of course itās a matter of cash. A self-managed fund makes sense only with a significant volume. The funds we saw have at least 60million Euros. A direct investment could build on existing capabilities and require much less funds, and so would engagement in a third party fund.
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There is another benefit in direct investment - ability to attract co-investors. businesses expertise reduces the risk of investment for other co-investors
Our third and last question today:
Q3: The approach is still quite fresh, but more and more companies are getting interested in CIV. What can we do to really get CIV to fly? What are some of your lessons learned when it comes to CIV?
Q3
One problem I see is that companies will not do CIV if they do not recognize inclusive business as a strategically important topic. It is good to see more and more companies are starting to see social and environmental problems as opportunities to create products, but in the case of inclusive innovation the question is how to convince companies that inclusive business fits with their core business?
The problem is that the customers of an inclusive business are often not the customers of the company. What is meant with inclusive business, is business that addresses people that are normally excluded. For example, an inclusive healthcare business would target people that currently have no access to healthcare. But if you are a healthcare company, these people have no access and thus are not your customers. Therefore if you only listen to your existing customers, you would never prioritize the underserved.
An inclusive business almost always means that the company would need to prioritize a new type of customer, which they are currently unable to reach with their existing channels. These are important reasons for companies to not prioritize inclusive business.
A solution may come from the company employees (their social intrapreneurs) that can make the case why an inclusive business is strategically important.
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A3: I think articulation of business benefit in a very direct way needs to be hammered repeatedly to the less imaginative ones to create space for CIV. The other actors in ecosystem, particularly the incubators and impact investors, can play an important role. The discourse around āpossibilitiesā need to expand for businesses to get interested in CIV
To our audience: we look forward to your questions!
We need to get the idea into the mainstream Corporate Venturing conversation to raise awareness. Existing vehicles can be used to invest in inclusive businesses, and broader objectives could come on the radar screen of mainstream venturing practitioners. Having the discussion play at the big venturing conferences and media would help.
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I think there is in principle interest and also capital available. What seems to be missing are a big enough number of businesses that are investable and have a certain level of maturity that also allows to exit the investment after a certain - not too long - period of time. Corporates would need to increase their appetite to manage this domain professionally, similarly to how they manage their standard venture capital strategies, i.e. dedicated professional teams, clear mandate, linkages into business strategies and growth trajectories in emerging economies, sufficient understanding of local conditions etc.
Third Party Funds that companies can participate in are also helpful. Companies can get acquainted with CIV in an easy way without building structures internally. They can benefit from a specialized team and existing network. And typically they can leverage their own investment with public contributions. Founders Factory Africa is a pioneer in this regard.
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A3:
Ā· First, making the organization leaders experience the market by going on the ground could be an effective way to foster CIV. I personally got even more interested when I personally saw how startups were leading the groundbreaking operations and when I experienced the impact they had on the communities.
Ā· Then, Peer to peer exchanges across companies in Webinars like these ones helps to connect and to power oneās energy to keep on going, when it seems very few people are with you on the ride. Often, few people in corporates are working on these things; so, itās important to find others to exchange about their experience.
Ā· Finally, having reliable research on Inclusive Business is really helpful to justify the relevance of CIV and consequently invite companies to invest more resources.
Donors can also advance the approach with special calls and funding vehicles. Partnership funding to MNCs is typically provided with the rationale to cover the risk during proof-of-concept phase. But establishing a startup-corporate partnership for scale up comes with its own risks and challenges. And while there are many good reasons to venture into inclusive businesses, margins and total profits are usually still lower than in mainstream business.
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A3: In short, various blended finance mechanisms could help to reduce the opportunity cost of CIV for corporations that arenāt going into the impact space under duressā¦
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In our experience itās very difficult to have āmainstreamā corporate CVC manage impact investments or investments in social businesses. They have difficulties in understanding social entrepreneurs motivations and communication is difficult. At Schneider we created a dedicated VC team for impact and social investments. The expectations are that tis team should be much more open internally and much more active on external communication than the āmainstreamā VC team.
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On the peer to peer, we hope to bring this topic to the Impact Fest in The Hague in November, and to other forums (hopefully also mainstream) next year. I will be happy to keep you in the loop and hope to see many of you there again!
this is exactly what worked in our case. our promise to raise co-investment and blended solutions, and a well articulated benefit to supply chain got us the go-ahead
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Ventures is part of the BizLab jury to select the teams. So, they look at all teams at the moment of selection. If there is a fit with their thesis, they do followup meetings. Additionally, ventures looks for their own Startups.