Social Enterprises and Impact Investing

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Questions and Answers

What is a common consequence of pressure from impact investors on social enterprises?

  • A decrease in the overall mission of the enterprise.
  • Increased financial transparency.
  • A stronger focus on the social mission.
  • The social impact becomes secondary to growth. (correct)

According to the content, what are the two meanings embedded in the term 'profit'?

  • Social good and shared value.
  • Tax reduction and operational efficiency.
  • Reinvestable margin and financial extraction. (correct)
  • Increased market share and brand recognition.

What is the key to eliminating financial extraction?

  • Implementing robust CSR initiatives
  • Caps on compensation (correct)
  • Optimizing any organization for social impact
  • Maximizing profits for shareholders

What is the core problem with the concept of the 'Triple Bottom Line' as indicated in the text?

<p>It creates confusion because of how profit and other motives are defined. (D)</p> Signup and view all the answers

What does 'ethics by design' entail according to the text?

<p>Building ethical considerations into a new venture from its inception. (C)</p> Signup and view all the answers

In the context of the individual assignment, what is a 'PGE Playbook'?

<p>A plan outlining the company's initial strategies for a fictional company. (B)</p> Signup and view all the answers

What is the suggested compensation level for optimal happiness, according to the text?

<p>A salary of around $75,000 per year. (A)</p> Signup and view all the answers

What is the primary focus of Impact Venture Capital (VC) firms?

<p>Funding businesses that pursue social enterprises and underserved communities. (C)</p> Signup and view all the answers

What does the assignment ask students to do regarding the 'University of Amsterdam Entrepreneurship curriculum'?

<p>Propose ideas for new courses while describing how to reinvent the current curriculum. (C)</p> Signup and view all the answers

What does the text say about equity compensation?

<p>Equity compensation should be avoided. (A)</p> Signup and view all the answers

What does the term 'mission drift' refer to, in the context of social enterprises?

<p>When the social impact becomes less of a priority in favor of hypergrowth. (B)</p> Signup and view all the answers

What is 'Balkenende norm' according to the text?

<p>A guideline of around 200,000 Euros for CEO compensation. (B)</p> Signup and view all the answers

What is a typical historic compensation ratio for CEOs according to the text?

<p>10:1 (C)</p> Signup and view all the answers

What is the suggested approach for designing a 'non-extractive company' according to the content?

<p>Designing a Sustainable Business Model Canvas, an MVP experiment, and a 'PGE Playbook'. (A)</p> Signup and view all the answers

What is the primary focus of many social enterprises, according to the text?

<p>Working on Sustainable Development Goals (SDGs). (A)</p> Signup and view all the answers

What is a core assumption of the 'one big push' approach to business?

<p>Business is a 'winner take all' / zero-sum game. (B)</p> Signup and view all the answers

What is the relationship between financial extraction and compensation?

<p>Financial extraction can be eliminated via compensation restrictions. (B)</p> Signup and view all the answers

In the context of dart-throwing, what does walking across the room and placing the dart on the target represent?

<p>Bootstrapping (A)</p> Signup and view all the answers

What is the relationship between Lean Startup and Agile, as described in this text?

<p>Lean Startup is the 'agile' of business. (A)</p> Signup and view all the answers

In the Stone Soup parable, what is the most accurate representation of the 'stone'?

<p>The vision and idea that brings people together. (A)</p> Signup and view all the answers

What does the principle of 'talking to everyone who will listen' emphasize in an entrepreneurial environment?

<p>Engaging with a wide range of stakeholders, regardless of their expertise. (A)</p> Signup and view all the answers

What is the main purpose of using the dart-throwing analogy?

<p>To explain the distinction between rapid growth and bootstrapping. (A)</p> Signup and view all the answers

What is the primary role of the poor man in the Stone Soup parable, within the entrepreneurial context?

<p>To convey his vision to gather the required elements. (C)</p> Signup and view all the answers

Software engineering concepts like 'Waterfall model', 'Agile', and 'DevOps' are used in the context to demonstrate what?

<p>That business approaches can also be iterative, like software. (A)</p> Signup and view all the answers

What mindset shift is necessary for better cooperation in business?

<p>From a scarcity to an abundance mindset (D)</p> Signup and view all the answers

Which of the following is NOT mentioned as a requirement for non-extractive companies?

<p>Establishing a strong market dominance (D)</p> Signup and view all the answers

What did the open source community achieve that relates to non-extractive entities?

<p>Used contract law to establish their framework (D)</p> Signup and view all the answers

According to the content, what does a good product-market fit entail?

<p>It ensures alignment between product offerings and market demand (B)</p> Signup and view all the answers

What is implied as a potential outcome of DIY approaches to business entity forms?

<p>It might inspire legislative changes for non-extractive entities (A)</p> Signup and view all the answers

What role do taxes play in supporting entrepreneurs according to the content?

<p>They help create social safety nets that reduce entrepreneurial risk. (D)</p> Signup and view all the answers

What is suggested about founders and their financial stability in the Post Growth Economy?

<p>Founders should have a reasonable salary and pension to ensure retirement. (D)</p> Signup and view all the answers

According to the content, what is the general attitude towards entrepreneurial risk?

<p>It is considered significantly overrated. (A)</p> Signup and view all the answers

In the context of the Post Growth Economy, what is emphasized about the financial structure of businesses?

<p>It should be self-funding and manageable within reasonable limits. (A)</p> Signup and view all the answers

What is a key reason founders seek to ‘cash out’ according to the content?

<p>To ensure financial independence for retirement. (B)</p> Signup and view all the answers

What percentage of shareholder support do shareholder proposals submitted by gadflies win on average?

<p>47.8% (A)</p> Signup and view all the answers

What is the minimum shareholding requirement for submitting a shareholder resolution in the UK?

<p>100+ shareholders and 100 GBP (D)</p> Signup and view all the answers

Which of the following is NOT a way to maximize proxy votes?

<p>Maximizing returns for shareholders (B)</p> Signup and view all the answers

What is the main reason for the high share capital requirements for submitting shareholder resolutions in some countries?

<p>To discourage frivolous proposals (D)</p> Signup and view all the answers

What is the approximate market share of the two leading proxy advisory firms, ISS and Glass Lewis?

<p>95% (B)</p> Signup and view all the answers

What is a potential issue with the use of index funds for corporate governance?

<p>Index funds typically have a passive approach to voting, which can overlook important governance concerns. (A)</p> Signup and view all the answers

Which of the following is NOT a proxy advisory service mentioned in the text?

<p>ProxyVote (D)</p> Signup and view all the answers

What is the main reason why asset owners often rely on proxy advisory services to make voting decisions?

<p>Asset owners lack the resources and expertise to conduct thorough research. (B)</p> Signup and view all the answers

Flashcards

Mission Drift

A situation where a company's initial focus on social impact gradually shifts towards profit maximization, often driven by investor pressure.

Impact Investment

A type of investment focused on generating both financial returns and positive social or environmental impact.

Non-extractive Company

A business model that minimizes its negative impacts on society and the environment, often prioritizing long-term sustainability over short-term profits.

Minimum Viable Product (MVP)

A framework for designing and testing a product or service with a minimum viable feature set, allowing for rapid iteration and learning.

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Bootstrapping Plan

A process of developing a business plan based on sustainable practices and limited external funding.

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Sustainable Business Model Canvas

A business model canvas that incorporates social and environmental considerations alongside financial sustainability.

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Triple Bottom Line

A framework for evaluating a business model based on its impact, financial viability, and environmental sustainability.

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PGE Playbook

A framework for planning and implementing a business model with a focus on post-growth entrepreneurship, emphasizing social impact and sustainability.

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Ethics by Design

A concept in ethical business practice, where ethical considerations are integrated into the very design and development of a product, service, or company, rather than being treated as an afterthought or a mere compliance requirement.

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Compensation Caps

A principle advocating for fair compensation to employees, with a focus on eliminating excessive executive pay and promoting a more equitable distribution of wealth within an organization.

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Fair Compensation

A compensation model that encourages growth, innovation, and social responsibility by prioritizing fair wages, employee well-being, and a reasonable compensation ratio between executives and employees.

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Compensation Ratio

The ratio between the highest paid employee's salary and the average employee's salary within a company. It reflects the disparity in compensation levels and serves as a gauge of income inequality within an organization.

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Boring but Necessary Businesses

The concept of focusing on everyday, essential businesses, often considered more mundane, that contribute to a sustainable future by providing necessary goods and services, even if they don't directly align with specific Sustainable Development Goals.

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Security by Design

A methodology in cybersecurity that emphasizes the integration of security measures from the initial design phase of a system, product, or service, rather than adding security as an afterthought.

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Optimizing for Social Impact

The process of integrating social impact considerations into every stage of a business, ensuring that the company operates in a way that benefits both people and the planet.

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Eliminating Financial Extraction

Eliminating practices that extract wealth from individuals or communities without providing fair compensation in return.

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Business is Creative Alignment

The art of aligning different interests to create successful business outcomes.

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Good Product-Market Fit

A company's ability to create a product that aligns with the needs and desires of its target audience.

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Abundance Mindset vs. Scarcity Mindset

Moving from a mindset of limited resources to one of abundance, recognizing that there's room for everyone to succeed.

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Concullle

The collaboration between competitors, often resulting in mutually beneficial outcomes.

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Winner-Take-All Mentality

A scenario where a business believes that success is achieved through rapid growth and market dominance, often neglecting sustainable practices and customer needs.

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Bootstrapping

A strategy of starting and growing a business with minimal external funding, relying on internal resources and profits to fuel expansion.

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Agile Business

A method of business development that emphasizes rapid iteration, continuous learning, and customer feedback, adapting strategies based on real-world data.

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DevOps

A model of software development focused on rapid iteration, collaboration between developers and operations teams, and continuous delivery, aiming for faster and more efficient software releases.

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Stone Soup Parable (in Business)

The process of finding and integrating resources from various sources to create a product or service. It's about aligning interests and leveraging complementary strengths.

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Darts Analogy (Business Growth)

A comparison of two approaches: striving for rapid growth without focus on customer needs, and building a sustainable business gradually by understanding customer needs.

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Talking to Everyone

Talking to as many people as possible to understand their needs and gain valuable insights, even if they don't seem like potential customers.

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Sustainable Business Model

A business model that emphasizes the creation of value for both customers and society, prioritizing long-term sustainability over short-term profits.

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Taxes for Social Good

The idea that businesses should contribute to society by paying taxes, even if this means forgoing tax breaks. This acknowledges the benefits businesses receive from societal infrastructure and social safety nets.

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Paying It Forward

The argument that entrepreneurs have benefited from social safety nets and should contribute back to the system through taxation rather than seeking special tax breaks.

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Overrated Entrepreneurial Risk?

A concept that challenges the traditional notion of 'entrepreneurial risk' by emphasizing that Founders in Post Growth Economics (PGE) typically have stable salaries and pensions, which reduce the risk of failure.

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Leveraging Success for New Opportunities

The idea that founders in PGE can utilize their existing resources and networks to create new opportunities rather than solely relying on cashing out for retirement.

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Self-Funding in Post Growth Economics

A core principle in Post Growth Economics (PGE) where businesses are designed to be self-funding, meaning they generate revenue and resources to support their operations and social mission without relying on external funding sources.

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Shareholder Gadflies

A group of individuals who actively attempt to influence corporate governance practices through shareholder proposals, often advocating for improved transparency, accountability, and social responsibility.

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Shareholders

Individuals or institutions that hold shares in a company and have the right to vote on corporate matters, such as electing the board of directors.

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Shareholder Proposal

A document that outlines the proposed changes to a company's operations or governance structure, submitted by shareholders for a vote at the annual meeting.

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Share Capital Requirements

The percentage of shares required for a shareholder to submit a proposal for a vote at a company's annual meeting.

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Proxy Advisory Services

Companies specializing in providing research and recommendations on how to vote on shareholder proposals, often influencing a significant portion of shareholder votes.

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Pass-Through Voting

A voting method where asset managers, often holding large portions of shares through index funds, delegate their voting rights to a third party, potentially leading to less scrutiny of specific proposals.

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INDEX Act

Legislation designed to improve the voting process for index funds, empowering them to exercise their voting rights more actively.

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Duopoly

A situation where a small number of companies dominate a market, leading to reduced competition and potentially less innovation.

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Study Notes

Post-Growth Entrepreneurship

  • Presentation by Dr. Melanie Rieback, University of Amsterdam
  • Focuses on the concept of post-growth entrepreneurship, a movement advocating for non-extractive business models, questioning current growth-driven systems.

Open Source License

  • Slide deck licensed under Creative Commons (CC BY-SA 4.0)

Fundamental Questions

  • Is growth good?
  • What is financial extraction?
  • Who is the startup ecosystem working for?

Objectives

  • Achieve system change vs. fighting symptoms
  • Provide actionable alternatives for:
    • Entrepreneurs
    • Corporations
    • Governments
    • NGOs
    • Financial industry

Course Outline (Part I – Introduction)

  • Setting the stage
  • Speaker introduction
  • Making business personal:
    • Importance of personal values in business
  • Business as activism/art/spirituality/creative expression

Course Outline (Part II – Status Quo)

  • Questioning business:
    • Examining the flaws in the current business models
  • Financial extraction + growth
  • Silicon Valley Model
  • Capital/Scale/Exit
  • Startup Ecosystem
  • Business education
  • Incubators + business schools
  • Social enterprise
  • Building blocks
  • What is wrong? (greenwashing)
  • How to fix it?

Course Outline (Part IV – PGE Methodology)

  • Micro-level (personal)
  • Meso-level (business)
  • Macro-level (economics)

Course Outline (Part V – Infrastructure)

  • Reinventing:
    • Startup Ecosystem
    • Investment and Finance
  • "The New Normal": how can we move forward together?

Course Outline (Other Parts)

  • Who Am I?
  • Making Business Personal
  • Business as Activism
  • Business as Art
  • Business as Spirituality
    • Eastern Religions (Buddhism, Taoism)
    • Semitic Religions (Judaism, Christianity, Islam)
    • Ancient Greek and Roman Philosophies
  • Business as Self Expression
    • Hero's Journey (Joseph Campbell)
    • Synchronicity and Scavenger Hunts
  • Financial Extraction:
    • The Story of the 11th Round by Bernhard Lietaer and Charles Eisenstein
  • Questions About Growth
  • Growth Curves in Business by Kate Raworth
  • Silicon Valley Model
    • Capital
    • Scale
    • Exit
    • Valuations
  • Pump and Dump
  • Who Pays For This?
  • Unicorns
  • Term Sheets Matter
  • Liquidation Preference
  • Multiples + Participation
  • Preference Stacks
  • Why Founders Accept This
  • Business Education
    • General Education
    • Business Schools
      • Case Study: EC10 Walkout
      • Critiques of current business schools
    • Startup Incubators
      • Batavia Industrial Center
      • High-Tech Incubators
      • Conflict of Interest
  • Social Enterprise
    • Systemic problems require systemic solutions
    • Blaming individuals/consumers is counterproductive
    • Consumer choice implies the availability of viable and cost-effective alternatives
  • Social Enterprise Building Blocks
  • Social Mission
    • Commitment to social mission and Triple Bottom Line
    • Writing into statutes to make it legally binding
    • Attempts to overcome shareholder primacy
    • B Corp movement
  • Low-Profit Entity Forms
    • Official legal entity forms
    • Feature asset locks
  • Non-Profit Entity Forms
    • Foundations as companies
    • Examples (universities, hospitals, Wikipedia)
    • Foundation-owned companies
    • Hybrid forms are common in social enterprise
  • Steward Ownership
    • Led by Armin Steuernagel (2017) and Purpose Foundation
    • “Self-ownership”, profit rights separated from voting rights
    • Golden share: “poison pill”
  • Cooperatives
    • Co-ops as a stakeholder governance model
    • Worker-owned/employee-owned
    • Stakeholder ownership
    • Platform cooperatives
  • Sustainability
    • Ecological sustainability (climate change, biodiversity)
    • Resource usage (reduce, reuse, recycle)
    • Ecological regeneration
    • Rebuilding non-monetized human relationships
    • Cradle-to-cradle approach
  • Inclusive
    • Transparency (financial data, KPIs, strategic information)
    • Participatory
  • Local
    • Business focused on stimulating local ecosystems
    • Community shops, pubs, community banks
    • Decentralized organization (Buurtzorg)
    • Horizontal organization
    • Note: separate issue from blockchains, cryptocurrency, etc
  • Charitable
    • Percentage of profits to charity
    • No-dividend companies for solving human problems
      • Type 1 and Type 2 companies
      • Examples (Arvind Eye Care Center, Aga Khan University Hospital
  • What's Wrong With Social Enterprise?
    • Social enterprise being extractive
    • Greenwashing
    • Social mission statements covering harmful business models
    • Mission drift
    • Impact watering down over time in favor of growth
  • Profit's Double Meaning
  • Limits to Growth
  • 1972 report
  • Post-Growth Economics
  • Degrowth
    • Thought leaders (19th century, Décroissance, etc)
  • Doughnut Economics by Kate Raworth
  • New Economics
    • More Thought Leaders (Douglas Rushkoff, Charles Eisenstein, etc)
  • PGE
    • Definition of PGE
    • Main elements of PGE (Bootstrapping, Flat Growth, Non-extraction)
  • Beyond the SDGs
    • What are the SDGs?
  • Ethics by Design
  • Cybersecurity and ethics parallels
  • Compensation Caps
    • Elimination of financial extraction
  • Who Is PGE For?
  • Bootstrapping
    • Why bootstrapping is important
  • Capital is a distraction
  • Extraction Hurts Businesses
  • Network Effects + Economies of Scale
  • Playing Darts
    • Analogies of hypergrowth vs. bootstrapping
  • Software Engineering
    • Similar Concepts (waterfall, agile, DevOps)
  • Bootstrapping Principles
  • Stone Soup Parable
  • My Version of the Parable
  • Talk to Everyone Who Will Listen
  • Preach to Your Choir
  • Start Small
  • Refactoring
    • Keeping overhead low
    • Refactoring repeating activities
  • PGE Playbook
    • Act I and II getting started
  • Possible Non-Extractive Companies
  • Business Model Recipes
  • What Does This Look Like In Practice?
  • PGE Startup Bootcamp
  • Journey (place, time)
  • Location
  • Ideation
  • Check-In
  • Community (nature, peer learning, presentations, art, culture)
  • The New Normal
  • Online PGE 10-Week Incubation Program
  • 2022 Cohort
  • Monicah Muhoya (PGE 2021)
  • Part IV: PGE Methodology
  • Micro-Level (Personal)
    • Personal Qualities (vulnerability, patience, communications, listening, self-care)
  • Meso-Level (Business)
    • Collaboration vs. Competition
    • Business is Creative Alignment
    • Implementing Non-Extraction
  • Sales and Marketing (product-market fit, evangelism, earned media)
  • Management (horizontal management, holocracy, sociocracy, teal)
  • Intellectual Property (patents, copyrights, trademarks, open-source)
  • Law (mediation, visual contracts)
  • Pricing (different pricing strategies, cross-subsidization)
  • Taxes (non-extractive business and tax breaks)
  • Retirement (financial sustainability and avoiding exploitation)
  • Macro-Level (Economy)
    • Governments (role in entrepreneurial enterprise, socializing costs)
    • Global Development (extractive business' impact)
    • Universal Basic Income (UBI)
    • Modern Monetary Theory (MMT)
    • Central Banks
    • Dutch Central Bank (DNB)
  • Part VI: Finance and Investment (political act of investment, money flows)
    • Extraction in finance
    • Stock buybacks (case study: Apple, Meta)
    • Engine No. 1
  • "Woke" Finance War
  • "Anti-Woke" Activism
  • Leveraged Buyouts (LBOs) (Case Study: Elon Musk's LBO of Twitter)
  • ESG Investing
  • The Problem With ESG (taxonomies, environmental and social issues)
  • Conclusion
  • Group Assignment (Feb 12)
  • Questions?

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