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Mitigating the risk of conflict resurgence in Colombia through blended, structured finance and multistakeholder collaboration

Crafting and investing in the first early stage investment-ready portfolio of outstanding social enterprises in Colombia

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After approving the peace accord meant to bring an end to nearly 60 years of armed conflict, we Colombians are far from letting our guards down. In fact, our state of peace is a variable that may be entering one of its most volatile periods in recent history. For a general picture of some current risk factors that contribute to its drastic variation, consider this:

  • Since 2002, more than 70,000 individuals have given up their arms and are in urgent need of opportunities to securely reintegrate into civil life. At the same time, over 6 million victims are demanding justice and reparations.  
  • Bringing technical support and protecting our rural economy is one of the main priorities for creating a stable post-conflict environment. However, inequality remains rampant and over 40% of Colombia’s 113 million hectares of agricultural land belong to less than 1% of its people.
  • The urgency behind relocating displaced communities from fragile areas is quickly leading to unregulated migration patterns that could introduce new social and environmental problems.
  • Land redistribution comes with new infrastructure demands that risk unbalancing the fragile equilibrium of some of the most biodiverse ecosystems on the planet.  While the end of the conflict does open doors to a new era of conservation in Colombia, it also means that natural resources, previously out of reach, become targets of new economic opportunities.

Colombia is an impressive example of how peace, planet and prosperity are inherently interconnected issues that cannot be solved in isolation. We need to collectively and effectively set in place permanent and sustainable capacities that address issues such as rural development, migration, justice, employment, education, health, wellbeing and environment with similar degrees of urgency and priority. Most leading voices in global development agree that advancing entrepreneurial approaches is the most effective way to take on that challenge.

The good news is that Colombians – possibly motivated by the perceived weakness of government and institutions – are problem solvers by nature. Today, the country is one of the most prominent technological hubs in Latin America, and one of the countries with the highest numbers of innovative startups worldwide. Hundreds of private and public programs have emerged to support entrepreneurial initiatives, but – as recently discussed during the Global Innovation Summit in Bogota – most of these initiatives work in isolation and continuously change their focus to attract new entrepreneurs while effectively remaining at a beta testing level.

In general, entrepreneurs – especially those in urban settings – can find a certain degree of initial support, but a hyper-competitive environment and lack of continuity hinders collaboration and capital-efficient growth.

On the other hand, social entrepreneurs – the subset that combines an economic mission with an aim to use the market as a tool to drive development – face additional challenges. Besides a systemic and widespread misunderstanding of their for-profit enterprise’s dual nature, the perceived risks resulting from their social dimension are not weighed well against the value of their social or environmental “return.” For example, selling solar panels to the bottom of the pyramid may not seem productive unless we can integrate the value of the public benefits that stem from increased wellbeing and security into the equation. Both government and investors disadvantage the narrative of social entrepreneurs and decrease their capability to access risk capital when these public benefits are ignored.

As a result, accessing capital funds, particularly at an early stage, is extremely difficult.

Social entrepreneurs and innovative, scalable ideas aimed at doing business in ways that benefit society are, without a doubt, one of Colombia’s best bets to reducing our “peace volatility.” However, this will only be possible if we can enable them to meet their missions at scale. 

In order to do so, we will find a first subset of these entreprenurs, support them and effectively bridge the collaboration gap between venture philanthropy, public funding and investment to start investing early stage risk capital into game changing ideas.

Explain your idea

Through our expertise and the recognized engagement results of our local allies, we will carefully craft the first early stage/early growth investment-ready portfolio of 10-15 outstanding social enterprises in Colombia. Around them we will build the business case to bridge the collaboration gap between government, venture philanthropy, retail and impact investors and collectively pioneer early stage capital investments into social enterprises in Colombia.

Our approach stems from the viewpoint shared in the Toniic Institute Report (see attached), which states that active collaboration of venture philanthropists and impact investors can increase the flow of impact investing capital into early stage social enterprises.

Colombia is an ideal scenario to put in place this concept to bridge the current gap between the general profile of active social entrepreneurs in Latin America and the risk and return profile expected by impact investors in the region.

However, we aim to go beyond the Toniic prescription, to build the Colombian business case for multistakeholder collaboration that includes government and international cooperation – to leverage resources for peace and reconstruction – and private corporations – to use mitigation of conflict re-emergence risk as incentive for engagement.

We will develop a new risk/return profile and a new type of early stage angel investor in Colombia. Our solution is a robust, actionable plan led by Irrazonables Colombia and Mobilizatorio – Purpose that leverages upon:
• Proven international training methods from the Unreasonable Institute, an organization highly recognized for taking social enterprises towards financial readiness. 90% of global fellows have raised over US$100M in investments during their first year after completing the Institute’s training.
• Risk and wealth management pro bono consulting (currently in negotiation).
• Legal support from Thompson Reuters Foundation (currently sourcing local partners).

In general terms, this is what we will do:
1. Consolidate the integration and participation of [1] Government [2] the private sector and [3] the overall entrepreneurial ecosystem in the country and a curated group of global actors.
2. Conduct a widespread call for ideas across the country – partners include the broad network of www.elavisperomov.org and socialab.com owners of the largest open innovation platform on the planet with +475K.
3. Select and train 10-15 entrepreneurs through a series of 7 consecutive full immersion hyper-acceleration unreasonable labs carried out systematically over a period of 9-11 months.
4. Train local capital holders at the Bootcamp Irrazonables Colombia 2017.
5. Parallel to these efforts, construct the portfolio prescription to consolidate 10-15 of our outstanding social entrepreneurs in an investment opportunity that uses blended financing of funds for peace and reconstruction, and structural enhancement solutions.
6. Invest and support.

Who Benefits?

1. Society overall, and in particular, the beneficiaries and clients of the first set of social enterprises we train and scale.
2. Social enterprises overall, by becoming part of a new narrative built around the business and legal case that encourages early stage risk capital investment into social enterprises through innovative finance, blended capital and structural enhancement solutions.
3. The overall impact investing and social enterprise community, by setting in place and testing a business model, which if successful, can become an actionable and replicable case study.
4. Local investors who are interested in becoming part of the impact investing field but don’t know how.

How is your idea unique?

We stand at the opportunity to pioneer early stage capital investments into social enterprises in Colombia that are uniquely positioned to reduce the risk of conflict resurgence.
To do so, we will pull from large and medium scale blended financing experiences that will serve to structure and prepare for success. Some examples include the IFC’s blended US$385 M in concessional investment capital to support projects in agriculture and food security or GroFin’s Pan-African tiered structure fund, designed to reduce risk by offering short-term debt options and enable investors to build confidence in their businesses.
Unreasonable Institute is globally recognized as one of the most effective accelerator programs for social entrepreneurs on the planet. In Colombia, we are positioned as one of the main actors working towards the development of social entrepreneurs. Movilizatorio is recognized as one of the major and most effective civic engagement platforms in the country.

Idea Proposal Stage

  • Full-scale roll-out: I have completed a pilot and analyzed the impact of that pilot on the users I am trying to reach with my idea. I am ready to expand the pilot significantly.

Tell us more about you

UNREASONABLE INSTITUTE, is globally recognized as one of the most effective accelerators for social entrepreneurs in the world. Particularly known for achieving success in getting entrepreneurs to an investment ready status and facilitating startup capital investments. 93% of 150 global fellows remain active and have collectively raised over 100M in startup capital investment. The system is predicated on an ecosystemic fully immersive approach that have proven results globally and in Colombia. During 2016, our organization IRRAZONABLES COLOMBIA, launched Unreasonable Labs Colombia (http://unreasonableinstitute.org/accelerator/colombia-2016/) engaged a network of more than 300k people and identified nearly 300 social entrepreneurs in the region.
MOVILIZATORIO is a citizen engagement and social innovation lab for Colombia and Latin America and is part of the Purpose Labs Network. We work to empower citizens and strengthen civil society organizations. We have an interdisciplinary team with experience in civic technology and have worked with organizations such as the Rockefeller Foundation, FOMIN, Compartamos con Colombia and the Swedish Cooperation Agency. Through our alliance with Purpose and The Behavioral Insights Team, we have access to international networks for research and development of civic technologies, as well as offices in Bogotá, Colombia and New York, United States.

In 2016, we launched our first incubation www.elavisperomov.org which currently has 33,000 members. El Avispero is a digital platform and an in-person network of leaders, working to make the vision of a country in peace, free of corruption, equitable and respectful of the environment, a reality. El Avispero has received the Turner Award for Social Transformation awarded by the Nobel Peace Prizes and a Prize for Citizen Mobilization of the Ministry of Information and Communication Technologies of Colombia.

Expertise in sector

  • 1-2 years

Organization Filing Status

  • Other

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Team

Thank you very much! We really appreciate that you can abstract the simplicity of the solution for such a complex problem like early stage financing into social entrepreneurs. We are, indeed, stronger if we work together.

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