Alison Bukhari

It is maybe a telling thing that if you Google ‘blended capital’ you get reams of literature about blended ‘value’ and but very little on blended ‘capital’. It seems that we are all striving to make the case for achieving social, environmental and economic impact from emerging businesses, and yet not prepared to admit that a combination of capital is vital if we are to really achieve both financial and social success.

Social impact doesn’t come without considerable support for the experimental stage of an organization’s development. If the substantial costs of such things as social impact measurement, market creation, training and high-calibre senior management are taken from investment capital, then sadly the business case for projected financial returns becomes unattractive to even relatively patient investors. And yet without all these early-stage inputs, it is highly unlikely that social impact can be successfully created.

Last Wednesday, through Dasra, I hosted a panel discussion where I brought together the ecosystem of support that currently exists for one of our social business portfolio organizations, Under the Mango Tree, to discuss this very topic. We presented the work of social entrepreneur Vijaya Pastala and her honeybee initiative in India, and then the kind of capital she requires was elaborated upon by myself, Richard Alderson of UnLtd India, and mentor and advisory board member Hemant Patel, also an interested investor who has already supported her with some grant funding. One of the overriding challenges that came through strongly was the need for people and skills and, at this stage, grants rather than immediate debt or equity. She has interested funders waiting for her to reach investment readiness, but to get there their funding is not quite suitable.

Vijaya is interested in livelihoods and passionate about agriculture. She is not in social enterprise to be the ‘honey queen of India’. She wants to improve farmers’ lives. However, building market access for her farmers achieves her goal. The more honey she can sell, and the more high-end honey she can tempt people into desiring, the more farmers she can work with. Pollination is the reason she exists, because pollination increases the crop yield of India’s poorest farmers by hundreds of percentages. It is agricultural productivity that is her driving force, with honey as the by-product, but business is what will bring her sustainability and scale beyond that which grants alone could ever do.

Its probably rather clichéd to draw on the language of Vijaya’s business to expand this discussion, but she opened the evening by saying ‘it’s not about the honey, it’s about the pollination’. I wonder if we can take pollination as a metaphor for innovation in funding? It’s not about the money, its about a cross-pollination of capital!

One other speaker on Wednesday was the inspiring Gita Patel, a veteran of the venture capital world, having founded Trapezia – the first fund dedicated to investing in women – who dedicates 30% of her time to social business. Gita is on the board of Oxfam’s Enterprise Development Program and her combined experiences have brought her to the conclusion that four capitals are always required to blend social and financial value: Experimental Capital (grants), Loan Capital (to build discipline and support capital expenditure), Equity Capital (to ensure skin in the game and a more engaged and committed funder) and finally Engagement Capital (which Gita described as a combination of intellectual and social capital and maybe even influence capital). It was so refreshing to hear about this enlightened model and to have a plea to the audience from someone from the commercial sector to think more creatively about how to fund social business.

The Shell Foundation, Oxfam and other organizations are willing to stand up and advocate for grant capital to accelerate the success of social businesses. What I find interesting, however, is that it is extremely rare to find a single donor or investor prepared to give blended capital support to one organization. Either you are a philanthropist and give grants or you are an investor and you invest – and never the twain shall meet. Chatting with Paul Cheng of CAF this week, he agreed with my point and said it was a bit like the two sides of the brain that people find hard to simultaneously engage. His recent successful blended capital deal for Fair Finance is a fantastic model and case study for us all. It involves philanthropists, Venturesome and three banks; however, everyone is sticking to their own strict vertical. No one donor is blending his capital.

Dasra is really excited to have managed to break this mould. For the first time, as our cohort 6 graduate in March 2012 from our Dasra Social-Impact executive education programme and take part in the Village Capital funding competition, each of the four winning businesses will exit with $75,000 in convertible debt. In addition, Dasra will manage a $25,000 grant towards capacity building and a period of investment readiness support. I’m not sure exactly if we have persuaded philanthropists to invest or investors to grant, but it is exciting to see a blended approach take shape.

Perhaps I am simplifying things and perhaps I am ignoring a host of examples where this kind of funding has been raised, but currently I am not aware of many examples of a blended capital approach from a single funder, and I would love to learn more from people passionate about this approach and with stories to share.

Alison Adnitt is director of investor relations at Dasra