Harvey Koh

SOCAP12 was bigger than ever before. Some 1,600 social entrepreneurs, impact investors, funders, advisers and other ‘social capital markets’ participants packed into Fort Mason Center on the San Francisco waterfront by day, and bounced from reception to merry reception by night. It was a four-day feast of rousing plenary addresses, meaty panel discussions, funky design workshops, private roundtables and those all-important side meetings, against a stunning backdrop of Pacific Ocean blue studded with America’s Cup sailing yachts.

But the word was that SOCAP12 was also more serious than ever before: while continuing to showcase inspiring entrepreneurs with the potential to help solve big problems, it also held up a much-needed mirror to the burgeoning field of impact investing. On the first morning, my colleague Katherine Fulton described how impact investing is at a crucial inflexion point, past its early days of budding promise but not quite established as a powerful force for good. She warned of the risk of a bubble forming, as investor expectations race ahead of realities on the ground. Kevin Starr from Mulago Foundation echoed this on the second day when he said that ‘the biggest risk we face is that this will be a market for nothing – not impact, not profit’. Matt Bannick from Omidyar Network observed that so many investors are ‘waiting around for fabulous deals but not doing the work up-front to generate those deals’. Our own panel session called attention to the ‘Pioneer Gap’ in funding and support that strangles innovative new models long before they become investable.

This is the Bay Area, of course, so no sooner had the impending crisis been announced than came the solution ideas flowing thick and fast. In a series of sessions through the week, Omidyar Network called on investors to ‘prime the pump’ – investing in early-stage social enterprises and focusing on building whole sectors, not just firms. In a similar vein, our own team advocated the practice of ‘enterprise philanthropy’ to create the more flexible, risk-tolerant capital required to close the pioneer gap. Meanwhile, Kevin Starr described Mulago’s practice of ‘liberal impact investing’, lending at zero interest and buying equity stakes with remote prospects of exit, where there is potential to achieve outsized impact.

Elsewhere at the conference, the Markets For Good initiative was launched to tackle another big problem with impact investing today: the poor measurement and articulation of impact itself. This challenge is neither new nor unique to impact investing, but it presents grave problems when ambiguous social impact is delivered alongside crisply measured (and very tangible) financial returns. Led by the Bill & Melinda Gates Foundation, the Hewlett Foundation and the financial services technology firm Liquidnet, this effort aims to upgrade the information infrastructure of the social sector so that we can have transparent and effective ‘markets for good’ in the way that we have markets for capital and for products. It was just one more sign that we are now starting to move beyond the heady enthusiasm of the early years to the serious business of working out how we will use these new tools to really change the world.

Harvey Koh is an Associate Partner with Monitor Group’s Inclusive Markets Unit, based in Mumbai. Follow him on Twitter @HarveyKoh

Were you at SOCAP12? Have you considered subscribing to Alliance magazine as a great way to stay up to date with current discussion on social investment? Have a look at our subscription form for more details about what Alliance can offer you.