Patient capital is vital for early-stage investing when the company must confront significant challenges to disrupt an industry. At this stage, few other than philanthropy-based patient capital will take the financial risk the company needs for experimentation.
After attending the recent gathering of power players in the philanthropic world, known as the Global Philanthropy Forum my head was spinning with facts and figures documenting the magnitude of the seemingly intractable problems the world faces today.
How do you scale a social enterprise in a sustainable manner? The unlikely answer to the question is found in Girl Scout cookies, or more specifically, in the scaling strategy used by Girl Scouts nationwide to sell over 200 million boxes annually and generate over $700 million.
They certainly didn't come up with the idea of solar lighting replacing kerosene. The idea had been around for a while. And, solar has been getting a lot of buzz lately. But most of the companies offering solar solutions don't see the 1.6 billion people as a real market.
As the movements of social enterprise and cause-integrated business mature, a new funding model is proving that scaling innovations for poverty alleviation in the developing world can be both possible and profitable.
The true issue here is not whether for-profits play an important role -- it should be clear that they do -- but rather how to encourage the right kind of for-profits to address the social needs of the poor.