The Philosophy of Hunger: Why Impact Capital Is So Challenging

This post was contributed by guest writer Carolynn Duncan, Founder of NW Social Venture Fund  and Moderator for a discussion on Impact Funding at the upcoming Elevating Impact Summit.

Imagine you have an apple, and someone that is hungry approaches you, asking “Do you have an apple?”

How do you respond? Do you give the apple to the hungry person?

Do you sell the apple to the hungry person?

Perhaps context matters. Is the hungry person at your house – your young child? Would it make sense to charge a child for the basic necessities? Probably not, because they are unable to provide economically for themselves, and because that is your responsibility as an adult, and as their caretaker, not theirs.

What if you are a business owner of a grocery market, and the hungry person is a customer? Would you jeopardize your employees’ paychecks, and reduce shareholder profits, in order to give away product to someone who by definition (a customer with a budget) should pay?

When do we give? When is it appropriate to encourage people to work for their resources and necessities, to resolve their own problems relying on their own capabilities, resources, and frankly, purchasing power? When in failing to give, do we individually and organizationally, contribute to perpetuating social ills, even if indirectly? When is it appropriate to ask that a person who benefits from the labor or product received, be required to commit resources or capital in exchange, under the business model of fair market economics?

Philosophically, these complexities demonstrate why impact capital is so challenging. Business and philanthropic giving, previously, have been fairly siloed. You made money in one vehicle, and you gave it away in another. Tax codes, legal entity structure, the actual flow of capital, the expected revenue streams attached to either the for-profit or non-profit entity, and the organizational structures themselves were very straightforward, but now these are all in flux in ways they never have been.

With so many widespread economic systems losing their formal infrastructure and becoming almost DIY — democratization of publishing, global connectivity through social networks, spread of the Internet and mobile technology, flexibility and transience of the labor force, on-demand manufacturing via 3D printed technologies — this movement is now shaking up the philanthropic and business sectors, too. Now, change makers of both privately-owned and public charity entities are getting creative, creative in how they blend financial + business principles with best-of-practice philanthropic metrics, narrative, and mission-driven organizational tools, and this movement is manifesting in the latest incarnation of giving: “social impact,” “social venture,” and “impact investing.”

This discipline that is emerging requires an entirely new vocabulary around giving, business, results, hybrid entity formation, intent, impact metrics, organizational structure, capitalization, motivations, and other key functions of individuals and organizations trying to make it possible to do well financially while doing really good work, and to further extend the ability to do really good work, by making charitable work profitable, or in the very least, self-sustaining financially. And it’s very, very complicated. To say the least of impact at scale, attempting to solve these buy vs. give vs. sell vs. donate vs. invest dilemmas, in ways that can truly affect millions of people and global economies.

“Philanthrocapitalism” is one of my favorite words for it. Venture philanthropy, too. Impact entrepreneurship – impact capital, what exactly does this entail, how is it done, who are the players, how does it work? How do you measure impact, how do you integrate the business model of high-scale entrepreneurship and venture capital, with the compassionate nature of philanthropic and humanitarian work at the international, world-changing level?

These are questions our team have been tackling directly since late 2011, when we launched our think-tank, Social Venture Society, and subsequently began development on the Northwest Social Venture Fund. We have been putting minds and hearts together to tackle these dilemmas, and more importantly, move forward to pave paths for impact capital and scalable social entrepreneurship, here in Portland and the surrounding NW region. It’s exhilarating.

There are days that are terrifying, too, as we stand on the forefront of the international impact investing movement and work with Limited Partners, foundations, private philanthropists, angels, NGOs, entrepreneurs, technologists, other fund managers, students and the academic community, to struggle through the complexities and build what we hope will become institutionalized best practices for doing early-stage impact entrepreneurship and venture capital-style impact investing really well, and to identify change makers who are, or can become, comfortable with building a scalable business model around a humanitarian challenge.

We’ll be at the Elevating Impact Summit Summit, and we would absolutely love to hear *your* views on these dilemmas, to better understand how you tackle the philosophy of hunger (so to speak), and what we can all do together to make impact capital a very viable component of our capital, business, and philanthropic network here in Oregon. You can also reach our team and learn more about our priorities in this work at www.nwsvf.org. See you on June 20!