Social Venture Capitalism

http://www.forbes.com/sites/ashoka/2014/03/31/how-philanthropists-and-investors-can-work-together-to-create-social-change/

Currently there is a strong likelihood that my PE will not be in microfinance as originally anticipated.  As worrisome as that is for the impending literature review I may have the chance to work in a place much more interesting.  This article describes the approach of many new social ventures.  The article provides the example of Aravind Eye Hospitals - a group of hospitals around India providing low cost yet profitable eye-care to the rural poor in India.   The Hospitals got their start when a philanthropy donated the seed money to the founder much in the same way a venture capital firm would provide seed funding for a start-up.  UnLtd. India -the organization I might be interning at- describes itself as a social venture incubator and occupies a role similar to a social venture capital firm.  One of the problems for Aravind was that he had to rely on funding from philanthropists because profit margins were too low for traditional venture capital firms.  If he did go to a venture capital firm he would have to focus on distribution models that centered around profit margins where as by getting a donation he could focus on a distribution model that focused on distribution. This is where UnLtd. India comes in.  They are a non-profit themselves donating the profits from an endowment that is held in trust for them.  This consistent source of funding allows the organization to give  seed funding to social ventures in the same way Aravind got his funding but at the same time providing many of the services and networks that venture capital firms often provide to their investees.  This model is so cool because it uses the tried and true structures of capitalism for social ventures.  It lets the ideas and the know-how emerge organically from the places it operates in then finds them and gives those ideas funding.   Usually in the development world the funding and ideas originate from the same space which has often left the combination wanting.  Either the ideas aren't perfectly situated to a developing country given that they were developed elsewhere or the idea is local but the funding is hard to come by. Basically its a model that has combined the strengths of Easterly's searchers with the funding from developed nations.