When I first started out in social impact investing, it was hard to find anyone writing or talking about it (apart from my boss at Venturesome, John Kingston). But the tables have turned, and in the recent Alliance special feature, ‘Markets for good: removing the barriers’, we had not just one article but several from around the globe! It’s a joy to think that the field is now at a point that such an esteemed and diverse group of contributors can come together and debate the issues raised by Monitor Inclusive Markets’ report Beyond the Pioneer: Getting inclusive industries to scale. For me one big issue the report raises is the role of government vis-à-vis impact investing in addressing social problems.
Beyond the Pioneer is framed as an exploration of the barriers faced by social/impact enterprise (‘social ventures’ as we label them at Nesta) when attempting to scale up their operations. Many of the responses to the paper looked through the lens of social/impact investing and its role in overcoming those barriers.
In my opinion, the barriers to scale faced by social ventures as identified in the paper (at the level of the firm, value chain, public goods and government) are a helpful framework to consider what is needed to tackle any complex problem, ie it is a means of exploring a whole system of innovation around a need (as Vineet Rai points out in his contribution). It shouldn’t surprise us that solving persistent social problems effectively, at meaningful scale and with longevity, requires interventions beyond the level of a single firm. I agreed with Guillaume Taylor that the lessons from Monitor Inclusive Markets’ developing world experience have plenty of resonance with our experience making impact investments within the UK’s developed economy and government structures.
So I want to respond to the special feature on five particular points that speak to my experience investing in UK social ventures operating at the boundaries of private, social and public sectors in education, social care and local communities.
Start with the impact
The first is a simple one that arises throughout the special feature: the absolute importance of being impact focused and developing strategy from that starting point. We mustn’t assume that starting or growing a venture is the best route to impact (as Uli Grabenwarter and Fabio Segura point out in different ways). Yet this point got lost where the debate looked at ‘the sector’ versus ‘the mainstream’. Our pragmatic approach at Nesta is to not worry too much about sector, legal status, intention to make profit or not, but to focus on how can you have the best effect on the problem for the greatest number of people.
Balancing the push and pull
The second point that resonated is the interplay between demand and supply of product/service, or as some described it ‘push and pull’ (again, I liked Guillaume Taylor’s observations about developed markets on this point). That ventures will find it easiest to scale when there is a balance between the two is obvious. For example, our portfolio company FutureGov has been developing digital tools to improve social services for over five years and pushing to get them adopted, but a change in its market (government funding cuts and a digital first policy) have brought demand closer to balance with its supply. But I think we must be careful here about using the cold language of ‘push’ or ‘creating demand’ when what we are describing could easily be seen as at best paternalism (‘we know what is good for you’) or at worst self-interest (payment protection insurance, for example). Democratic representation through government (or other means) has an important role in overseeing and representing people in this push-pull tension.