Innovations in Philanthropy: Paying it Forward with Thriive

One of the highlights of my recent trip to Vietnam was seeing innovative philanthropy in action.  US-based nonprofit Thriive is creating win-win-win situations all around with its pay-it-forward grassroots philanthropy model.  Thriive pioneers a model that democratizes philanthropy, a concept that many of us think is only for the likes of Bill Gates and Warren Buffet, especially in these difficult economic times.

Thriive takes everyday people, all of them small business owners in developing countries, and transforms them into local community heroes.  

So how does Thriive work?  It gives equipment capital loans to small business owners.  When it’s time to repay the loan, the loan borrowers repay it forward in the form of goods and services they provide to their community.  When applying for the loan, the borrowers must already have a clear ‘repayment’ plan that details the social needs in the community that its ‘repayment’ will help address.  

What’s brilliant about the model is that the borrowers usually create jobs in their sector, and often train young people to set up their own businesses in the same sector.  It may seem like potential competition but in fact they are merely expanding their supply chain.  

One savvy mushroom farmer borrowed money to expand her mushroom farm and train other women to grow mushrooms that she commits to buying because she is unable to meet the current demand for mushrooms on her own.

So far, all Thriive borrowers have continued giving to their communities even after their loans have been repaid.  In Vietnam, Thriive borrowers join the Thriive Business Association where the borrowers connect with one another and develop ways to support each others’ businesses and the community through a service or product barter system.  For example, a carpenter helped a small incense shop install a wooden door that it had not been able to afford. 

The Thriive model makes a great deal of economic sense.  These businesses need capital to grow their businesses and once they do, they can create economic value by creating more jobs in the community.

 Thriive offers a non-interest bearing loan that is more attractive than regular commercial loans.  But Thriive is also creating an equally important kind of value – social value in the form of creating or strengthening closer and tighter caring community bonds. This is what ultimately leads to supportive and resilient social infrastructure in times of crisis.  

The Thriive Hue team has already shown its savvy understanding of this concept by linking all the Thriive businesses to the local disaster response organization in Central Vietnam, a part of the country that is prone to destructive flooding.  All Thriive borrowers commit to providing certain supplies in case of flooding emergencies.  

It was great to see the links between the entrepreneur-philanthropists and the community.  Prior to my visit, I had thought Thriive helped to 'seed' philanthropy in low-income communities. But after meeting the Thriive borrowers and learning about their many philanthropic activities prior to Thriive, I realized that in most cases, Thriive helped to formalize, nurture and grow existing small-scale community-building initiatives.  

Some of the Thriive borrowers may have already been low-key community do-gooders but the Thriive model shines light on their good deeds and provides additional resources to ramp up their community building activities.  

During my visit, I was fortunate to be able to participate in a Thriive repayment ceremony.  Two Thriive borrowers, both tailors, gave custom-made pajamas and school clothes for abandoned elderly and children with special needs respectively. There were smiles, tears and hugs all around.   

 

The Danger of Funder-Driven Social Entrepreneurship

I work with start-up social entrepreneurs and people often talk to me about new ideas they are hatching up. These conversations are usually full of energy and excitement, with the aspiring entrepreneur talking a mile a minute about a great idea they have for a venture and why it will be a great solution to a particular problem.

These individuals are passionate about the impact they want to create, but also passionate about starting a business to do so. Their excitement and willingness to take on the challenges that come with launching a venture shows.  

Recently, however, I’ve had some conversations that don’t follow this pattern. Instead of the usual excitement, I sense hesitation and reluctance. I ask these “aspiring entrepreneurs” why they want to start a business.  “My funders suggested I start a business and use the profits to help my nonprofit organization be more financially sustainable” is the answer.

Somehow, it seems, social entrepreneurship has gained the reputation of an easy solution to a nonprofit organization’s shortage of donor funds. Instead of funding the nonprofit’s work, some funders now see it a better use of their funds to help the organization start a side business that will then continuously fund the nonprofit.

In theory it sounds simple, if the donations aren’t coming in start a business and supplement your revenue with the profits. Unfortunately, it’s not simple at all. Entrepreneurship is not for everyone. It takes a certain personality, someone who is knowledgeable and passionate about a particular industry, is stubbornly persistent, and has an appetite for risk and an ability to deal with many ups and downs and constant uncertainty.

Early-stage investors say that it’s all about the people and the idea is secondary. You can have a great business idea, but the wrong people will not be able to implement it. Or you can have an average business idea, and the right people can make it a great business. As with everything else, some people are suited for entrepreneurship, some are not.

Because the right entrepreneur is such a key factor, we cannot assume that every nonprofit organization will have the right person on the team to launch an enterprise. Most in fact will not.  Starting a business, social or not, is very risky, and the failure rate of start-ups is incredibly high. Many successful entrepreneurs succeed not on their first try, but on their second, third, sometimes fifty-sixth.

Even if a nonprofit organization has someone on the team who has an entrepreneurial drive and the right skills and experience, launching an enterprise will take time and resources. For most businesses that do become profitable, it is a matter of years and many resources invested.

Funders encouraging a nonprofit to become enterprising must consider how much of their time staff will need to devote to the effort (or how much it will cost to hire a good management team) as well as the financial resources needed.

In addition to the risk of failure, another potential negative consequence is the effect on the nonprofit’s core activities if staff are devoting time to starting a business.  There have certainly been examples of nonprofit organizations that have established business ventures that have become profitable and contributed back to the revenues of the parent nonprofit.

Important factors for success, however, are the right people to lead the venture, and a business opportunity that can leverage a core competency of the parent nonprofit organization. A social enterprise is a powerful tool when used in the right circumstances. But expecting it to be a sure way for a nonprofit to add to its revenue streams is almost sure to result in a stressed out entrepreneur and funder, lost funds, and a loss of focus on the primary work of the nonprofit.  

Finding entrepreneurial DNA in Cambodia

Some say that entrepreneurs are born not made. At Synergy, we are often asked to help organizations become “more entrepreneurial”, but it’s not that simple.

You can't just teach someone to be an entrepreneur.

I don’t know where they come from and can’t quite describe them
in words, but I know them when I see them.

On a recent field visit to Cambodia, I met two individuals who despite growing up in an environment that has generally not been conducive to producing entrepreneurs, have that “something” we have come to call“entrepreneurial DNA”.

I met Ruthy, a young, serious looking guy the day after he had completed a run across Cambodia to raise money and awareness for Small World, a co-working space he founded where Cambodia youth can explore entrepreneurship and creativity. Despite the fact he must have been exhausted after 10 days of running, Ruthy spent over 2 hours energetically answering our countless questions. I was so impressed hearing about why he wants to foster entrepreneurship in Cambodian youth to the different activities through
which he inspires other young people to explore creativity and innovation. From the poster paper on the wall listing question Small World’s members wanted to explore, to product samples and prototypes, to a mini ping pong table (to encourage thinking differently), evidence of budding ideas were everywhere.

Later that week I met Kim, the local project manager for Brooklyn Bridge to Cambodia. BB2C imports treadle pumps that enable small-scale farmers to efficiently water their fields and grow high cash crops during the dry season. On the way to visit farmers using these pumps, Kim chatted in great English and gave us insights into Cambodia. She also told us about her work with BB2C, laughing as she explained that often, when she first comes to a village, they call her “the cheating NGO”. This is because she comes to explain the value of buying a product to them, not to bring free snacks and give things away. Kim explained how her family’s farming background helped her understand the value of the pumps, and why she felt selling rather then giving them away would ensure the pumps got to the farmers that would value them most. When we arrived at the farm, I watched her chatting with the farmers, checking on the pumps, jumping in to remove a mouse stuck in a pump and wading knee deep into a swamp to clean a hose. The great “salesperson” she is, she already had other farmers waiting to find out how to get a pump.

 It is this kind of enthusiasm, resourcefulness, critical thinking, passion and ability to overcome countless obstacles that we look for in entrepreneurs.

More than good ideas, good entrepreneurs are what is hard to find. When investing in early stage ventures, we are really betting on the entrepreneur.

I’d say these two young people are a pretty good bet.
 

Discussing Impact Measurement at the Lien Centre for Social Innovation

This April,  I  had  the  opportunity  to  spend  an  afternoon  discussing  impact measurement with nonprofit leaders in Singapore at an event hosted by the Lien Center for Social Innovation at the Singapore Management University.  I shared my own views on measurement in philanthropic and impact investing, but also learned a lot from the participants.   As I often work with nonprofits or social ventures  on  designing  their  own  impact  measurement systems,  it  is  always interesting  to  hear  what  issues  and  challenges  these  organization  face  when measuring their impact.  

Key takeaways:

 Measuring impact should not be a burden imposed on an organization by a funder, rather a management tool that helps an organization ensure it is operating effectively

 Organizations that do preventative work, such as drug use, face an extra challenge  in  measuring  impact  as  it’s  hard  to  prove  an  organization prevented a problem that did not happen!  

 In  social  investing,  the  financial  metrics  used  are  the  same  across  the board but impact metrics differ greatly from organization to organization.  Although there will always be subjectivity in a funder choosing a social investment  opportunity,  if  we  can  begin  to  use  common  metrics  for impact it will be possible to benchmark and compare social returns in a given sector.

 The IRIS metrics are becoming widely adopted throughout the impact and philanthropic investment sectors, they are simple and relevant, and can provide a way for social investors to begin benchmarking potential social returns in different sectors.