The BS test for social entrepreneurs: 5 questions every impact investor should ask

The world loves the story of the lone crusader (who happens to be young, attractive, and usually from an elite university).  Social entrepreneurs, specifically those from the United States and occasionally Europe who are flocking to the Global South to save the poor while living large, are the latest answer to all the “failures” of the non-profit and public sectors.  And there are plenty of “impact” investors ready to fund them, and foundations ready to crown them with admiring awards.  It’s all good, except for the fact that many of these (expensive!) ventures fail to deliver any value.

Some investors have set up shop in the Global South so that they have a front-row view of the action and can get their hands dirty.  Many other investors are unwilling or unable to do this.  As a result, social entrepreneurs sometimes take advantage of the fact that potential investors are not always savvy about the targeted markets and contexts.  Over the last few years of meeting a lot of entrepreneurs, I have come up with a few basic rules of thumb that may help investors better separate the truly great ideas from the ones that are pretty unlikely to succeed.

#1 Where is the entrepreneur based?  Or spending most of their time?

If you were starting up a new company in Silicon Valley, would you spend most of your time in Tokyo?  Of course not!  You’d be living and breathing the challenges of getting everything up and running on the ground.  Trust me that there are many additional levels of complexity when you try to do this in a developing country—from electricity, to establish occupancy in an office, getting permits, to the informal powers that will inevitably expect a cut if you want to avoid their wrath.  None of this can be done remotely. 

If the CEO is spending less than 80% of their time onsite, I’d be deeply skeptical that a.) they actually know what’s going on, and b.) that they are qualified to talk about whatever problem they are solving.

Sunday morning round up

1. Finally! Academics check to see if practitioners actually read what research results, and more importantly, if the research informs their actions at all.  My favorite findings:

• Practitioners like to share articles with other practitioners—learning is a chance to engage with colleagues in a unique way
• Practitioners know that academics often talk down to them, and think that academics often underestimate what they don’t know (and can learn from practitioners).  As in:

“The problem isn’t that the practitioners don’t understand the researchers. That’s a pretty arrogant assumption on the researchers’ part. It’s more the other way around: The researchers don’t understand the dynamics that the practitioners must live with. Why not have training sessions run by practitioners for researchers?”

2. Bangladesh’s bKash is now the second largest mobile money in the world with 12 million individual accounts.  mPesa better watch out—Bangladesh has close to 150 million people (more than Tanzania, Kenya, AND Uganda combined), so there’s still a lot of room for growth.  Especially with others like BRAC in the ecosystem working on innovative ways to incorporate bkash into development work.  See the piece my colleague and I wrote for Impatient Optimist on how BRAC supported bkash in its early days, and what we’re doing now to promote adoption at the organization level.

3. Implementation is harder than public commitment, but some of the recent pieces on what’s happened in the wake of the Rana Plaza factory tragedy demonstrate just how much of the motions afterwards was about maintaining public relations versus solutions that actually create safer environments for workers.  The Dhaka Tribune reports on how the monitoring bodies set up by the US and European-based buyers can’t seem to be bothered to work together or even agree on a common set up standards—making life much more difficult for factory owners trying to understand and comply with them. 

FYI, a few weeks ago the same newspaper wrote another good piece about factories that are closing for safety reasons, and worker protests about the loss of jobs.

The sticky truths of development

It's a great feeling when I read an article and find myself nodding "yes" emphatically with the author.  This week I came across two gems that captured so many important sentiments beautifully, which saves me a lot of hard work!

William G. Moseley had a piece framed as "graduation advice for aspiring humanitarians," but has much broader relevance.  His parting comment is a wonderful mantra:

"Do it because you enjoy it, develop deep knowledge of certain places, linger at the grassroots and be humble about the limits of your knowledge."

Too many people prioritize breadth over depth.  Many CVs these days boast "development professional with experience in over 25 countries," which in my mind translates to "I stayed in a 5-star hotel for a few days, traveled around the capital city by car, and sat in air-conditioned offices drinking tea the whole time."  Measuring your knowledge and experience in passport stamps is a bad idea.  My travel acuity scale, on the other hand, is way better.

Win-win situations, peace of mind, and other first-world luxuries

It’s been the perfect weekend.  A beautiful drive through tea gardens, misty mountains, and remote canals.  After finishing up a light lunch at a luxurious resort, we piled back in our rented van to start the drive back to Dhaka.

We’re on a winding country road heading back to the highway. We came around a sharp bend quickly and found ourselves on a collision course with an oncoming lorry filled with bricks. Luckily for us, he swerved and dented just the back of our van.  But unfortunately for him, the other side of the car took the brunt of the impact when he hit a tree, shattering the windshield and badly damaging the front side.

Both cars stopped, and our driver got out. A worker in the other truck jumped off the back and began to howl in agony while gripping his hand, not unlike the professional soccer players do when trying to convince the referee of foul play. The other driver was angry and on his phone, making calls. The police happened to be heading our direction, and stopped when they saw what’s going on.  Locals started congregating as well.

A few minutes later our driver hopped back in the car, and we started to drive away. 

“Where are we going?” We asked. 

He said, “They said that we could go.” 

That was easy. For about five minutes, anyway.