Our journey
Our big idea: small, high impact
Over the past 25 years, the world has seen a sustained proliferation of small and medium enterprises in low-income regions. These companies have one unifying feature: through their activities they seek to create positive social and environmental impacts within the areas they operate. These businesses are the heart of impact investment, a young and growing asset class within the financial world.
Since its development, the field of social entrepreneurialism can be characterised by the following structural features:
- The field is remarkable for the number of dynamic, highly committed and innovative social entrepreneurs, especially those who develop business models aiming at base-of-the-pyramid markets, to help the very poor;
- There is no lack of capital to finance good projects - there is plenty of investment capital as well as development aid and foundations interested in supporting social entrepreneurs that fight poverty.
Despite the existence of social entrepreneurs seeking investment support, and the prevalence of available investment capital, the market still does not effectively work. This is because there are fundamental barriers that impede social entrepreneurs who seek to alleviate poverty and generate a positive return.
Why?
For us, the answer is straightforward in nature: in high-return sectors such as clean tech there already exists a fully developed venture capital market, which provides risk capital to start-up companies.
A ‘social business venture capital market’ currently does not exist. Indeed, this market hardly even exists as a pilot-stage project, or as a nucleus of a functioning venture capital market mechanism.
Sadly, the impact investment sector can also be typified by the following observations:
- Social enterprises mostly do not offer a return potential that allows traditional venture capital firms to invest in - these organisations are being held to the same standard as companies whose sole aim is to generate a positive commercial return without any associated social and/or environmental upside;
- Most charities and development aid institutions are among the most risk-adverse institutions in the investment world –the logic of an upfront risk capital approach does not exist in the world of charitable foundations and development aid – that is for example, a charity invests in 10 social business start-ups - 3 will fail, 5 will struggle to survive but not be commercially robust, and 2 will enjoy commercial success to make the whole investment circle an attractive, alternative development path;
- Social entrepreneurs will struggle to gain financing from local financial institutions even when social venture capital provides additional financial or in-kind support.
In our assessment there are already sufficient matchmaking platforms for projects that are highly profitable and investment ready.
There is, however, a lack of project development and support from social business angel entities to enable early-stage enterprises become investment-ready. There is also a paucity of guidance for committed social impact investors who, through their financial contributions and a social business outlook, are seeking to create positive social and environmental benefits in low-income regions throughout the world.
As a consequence, good ideas – those that generate positive commercial returns and enable and support communities in developing regions - die before getting ready for market.
These are the raisons d’être for GEXSI, The Global Exchange for Social Investment.
GEXSI is different. GEXSI has a social business venture capital approach.
This is our vision: We are working towards a world where new entrepreneurial ideas to fight poverty, flourish.
