Money alone might improve extreme poverty; economic justice requires more. When Upaya looks for companies that create dignified jobs for the poor, we evaluate questions of reliability, safety, and fundamental respect in addition to the economic benefits.
Ten years ago this month, we were three founders of a fledgling non-profit organization. None of us had ever started nor run a non-profit. None of us had formal fundraising experience, nor were we independently wealthy. But what we did have was deep, lived experience in building programs for extremely poor communities.
Upaya Social Ventures is proud to welcome Patricia Devereux and Steve Schwartz to the organization’s Board of Directors.
“We are thrilled that Patricia and Steve are joining the Board,” said Upaya’s Executive Director Sachi Shenoy. “Each brings valuable experiences, insights, and relationships that will serve the organization well as it continues to grow,” said Sachi.
Patricia Devereux
Patricia Devereux most recently served as MasterCard’s Executive Director, Global Philanthropy. In this role, she transformed MasterCard’s corporate philanthropy program into a global program with more than 20 partners in 40 countries helping to drive the company’s financial inclusion strategy. She was also instrumental in the creation of the MasterCard Foundation, which is now the fourth largest private foundation in the world.
“Upaya is leading the way in promoting a new model for ending extreme poverty, and I am excited by the opportunity to be a part of this burgeoning movement,” said Patricia.
Steve Schwartz
Steve Schwartz is no stranger to Upaya. As one of the organization’s co-founders, he oversaw marketing communications and operations over Upaya’s first five years. In addition to his transition to Upaya’s Board, Steve also recently joined Tableau Software as the company’s Corporate Social Responsibility Marketing Manager.
“From the very beginning Sachi, Sriram [Gutta, Upaya’s third co-founder] and I talked about
While Upaya welcomes Patricia and Steve to the Board, the organization must also say a heartfelt thank you to Deepika Mogilishetty and Sonny Garg as their board terms come to an end. Each played a pivotal role in Upaya’s evolution in its earliest days and has expressed continued support for the organization in the coming years.
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Over the past four years, the Upaya team has repeatedly heard from impact investors that the pipeline of investable social enterprises in India is frustratingly thin. While these investors regularly hear about interesting concepts, they lament the lack of entrepreneurs who have the business management skills needed to lead such a venture to profitability. In fact, many leading investors have said that a social entrepreneur who does not have a sufficient command of fundamental business tools is not someone they can even really consider an entrepreneur.
Looking to turn these anecdotes into actionable information, Upaya is today releasing the first of a series of spot surveys that dig deeper into investors’ impressions of the entrepreneurs they encounter.
Titled What They Really Think: Perceptions of India’s Early Stage Social Entrepreneurs Among Impact Investors, the series provides data and recommendations to the multitude of incubators, training programs and mentorship networks currently operating in India. The report captures investor opinions about the collective critical skills and competencies of entrepreneurs, and starts a substantive conversation on improving the ecosystem for early-stage social businesses.
In “Spot Survey #1: Financial Management Capabilities,” 18 of India’s 25 most active impact investors shared their impressions of the financial management competencies of entrepreneurs they have conducted some level of due diligence on. The report looks at entrepreneurs' skills in utilizing a variety of financial management tools for decision-making. It also looks at the quality of documentation investors receive from entrepreneurs, as well as the ability of those entrepreneurs to use valuation tools to communicate the financial health and long-term projections of their companies with investors.
On 18 December 2014, the Global Impact Investing Network (GIIN), in partnership with Dalberg Global Development Advisors, released a report that provides a “state of the market” landscape analysis of the impact investing industry in South Asia. The Landscape for Impact Investing in South Asia looks at the $8.9 billion in deployed impact investment capital in six countries – India, Bangladesh, Pakistan, Myanmar, Nepal, and Sri Lanka – and paints a picture of a “diverse but growing impact investing market across South Asia.”
As the report has circulated amongst the Upaya team, four main points have jumped off the page. Some of them mirror observations we’ve seen through our own experience investing in India, and others shed light on issues we are wrestling with. In no particular order:
Two of the top five areas for impact investment in South Asia – Manufacturing and Agriculture/ Food Processing - are directly contributing to livelihood enhancement. That said, they are still only 17% of the identified market.
Broadly speaking, manufacturing and agri-processing are two broad areas under which our team has focused its livelihood development efforts and we are excited to see them crack the top five areas for impact investment.
However, the fact that the two segments combined are still a smaller percentage of the impact investment market than each of the top two categories - Financial Services and Energy – shows that we still need to expand the conversation about job creation and its social benefits in the impact investment community.
“There is also a need to bring less-exposed enterprises into the fold in a number of countries. Even in India, where formal networks of entrepreneurs exist, it is difficult to find enterprises that are not part of these networks.”
This point really hits the heart of one of the biggest challenges in the impact investment space – pipeline. Right now, too many impact funds are only looking at the businesses that self-identify as social enterprises, and are only doing due diligence in that limited pool. The result is a sort of “social venture ghetto” where a subset of entrepreneurs are continually showcased together at business school competitions and conference panels, thus creating the impression that they represent the full scope of social ventures in the space.
Not coincidentally, the investors who have been successful are the ones who have not limited their purview to that ghetto. For Upaya, the majority of entrepreneurs we support do not necessarily self-identify as social enterprises, but simply as businesses operating in poor communities. Friend of Upaya Artha Initiative has taken a similar view of the issue with their Artha Venture Challenge, a competition that has uncovered several great companies outside of the mainstream social enterprise conversation. In both cases, Upaya and Artha have had success in finding the types of investment opportunities that were sitting outside the standard impact investor conversation but are having a positive impact through their work.
“[In India] funds are shifting toward a less opportunistic and more hypothesis-driven approach to selection; in this new approach, these funds start with the identification of a problem in a given sector, then identify a potential solution (hypothesis), and subsequently seek organizations that contribute to this solution.”
Among the team we’ve long been wary of the proliferation of impact investing funds whose portfolio companies are united only by a broad notion of “positive impact” rather than a specific type of change they are working toward. Our concern is that, without a unifying objective, funds will scatter investments across a variety of issue areas and miss the opportunity to aim significant resources at a specific problem.
Of course, Upaya has developed its own hypothesis – support Small & Growing Businesses that can be large scale employers in ultra poor communities – and are pleased to see that others are starting to bring their own theses into sharp relief. I would certainly point to our friends at Omnivore Partners as a great example of what can happen when a fund pursues clear and measurable outcomes in a specific area (in their case, agricultural supply chains).
In India, “foreign funds are prohibited from investing in debt and, as a result, most of the capital from [foreign] impact funds is deployed through equity instruments. Consequently, small domestic funds are emerging to fulfill the need for early stage debt.”
Accessing affordable working capital debts is a continual challenge for many SGBs in India, including some of Upaya’s partners at various points in their early lifecycle.
For much of the past year, our team has worked with domestic lenders to find creative and effective working capital solutions for our partners. What they are now coming to see that, while smaller domestic lenders are playing a role, these funds still have a big gap to bridge if they are to fulfill the credit needs of SGBs. It is an issue that Sreejith, Tanya, and the team are working hard on, and we are all glad to see this observation in the report.
Upaya was profiled in the 12 December 2014 edition of the Seattle Times. In the article, Upaya co-founders Sachi Shenoy and Steve Schwartz talk about the organization's evolution, the challenges of the work, and how the Upaya model is changing lives.
Extreme poverty is an unavoidable reality in India. The first time I traveled in the country — as an inexperienced and idealistic 20-year-old backpacker — I was shocked by the families living on the street, the children begging for food, the old women breaking rocks on the side of the road.
I wondered what could be done to help these people — the poorest of the poor. Some travelers gave them money, others didn’t. One (loosely) quoted the Bible by saying “Sarah, the poor are always with us.”
Everyone seemed convinced that extreme poverty was an intractable problem beyond straightforward solutions.
But Sachi Shenoy disagrees. She says these “ultrapoor” just need jobs.
“In India we estimate that there are almost 400 million people living under the extreme poverty line. ... One of the root causes (is) unemployment and underemployment” explains Shenoy, executive director and a co-founder of Seattle-based nonprofit Upaya Social Ventures.
Upaya — which recently received a grant from The Seattle International Foundation, the foundation that funds this column — hopes to address that unemployment by investing in business ventures that have the potential to expand and employ those who otherwise have few, or no employment opportunities.
Shenoy says she was inspired to start Upaya while working for a microfinance organization in Delhi, India. Microfinance is a development approach that lends money to poor people, usually for small-business ventures. She says the microfinance approach tends to focus on the “midlevel poor” — people who made $2 to $4 a day — rather than the “ultrapoor” — those who make less than $1.25 a day.
“There was a cutoff for being too affluent and then there were people we would do surveys on and say, ‘These people are too poor; they’re too much of a credit risk,’ ” says Shenoy, describing the selection process for microfinance applicants. “That’s when my interest got piqued ... If we’re really trying to alleviate poverty, what do we do about the extreme poor?”
Her answer was Upaya, which focuses on entrepreneurs who have ideas with big business (and thus big employment) potential. They offer investment (not loans) with the hope of creating jobs for those often left behind by microfinance.
“You can think of us as the angel funders for small businesses in India,” says Shenoy, explaining that Upaya makes a point of working with entrepreneurs who may have trouble attracting traditional investors or securing bank loans. The investments (usually between $10,000 and $75,000) go to businesses from areas that have a large concentrations of “ultrapoor.”
The goal is to help grow promising businesses with capital as well as mentorship. In exchange, business owners promise to hire the poorest people in their region as jobs are created.
In the past three years, Upaya has invested in six businesses, ranging from a dairy collective to a company that makes “luxury paper” out of rhino and elephant dung, and an operation that turns fallen palm leaves into biodegradable plates. All told Upaya ventures now employ more than 1,100 people in jobs that pay, on average, between $2.25 and $4 a day.
It’s still a tiny paycheck for a tiny percentage of the millions living in desperate poverty. But it’s enough to move those few from that dangerous ultrapoor category to the more stable midlevel-poor group. At this level people can begin to secure housing, eat regularly, keep kids in school and even address chronic health problems — all developments that Shenoy says they’ve seen among workers employed by their Upaya ventures.
Creating stable, decent-pay jobs in some of India’s poorest (and often) rural communities is a difficult business. Shenoy says their first business (the dairy collective) endured religious unrest and droughts in the first year. It was an experience that taught them to think in “contingency plans” and to closely consult with entrepreneurs about specific needs (special accountants to help prevent corruption and bribery, for example).
But it’s worth it to reach those who might not otherwise be reached, says Steve Schwartz, a fellow co-founder of Upaya. For him, the mission boils down to one of simple belief.
“The best way to get someone out of extreme poverty,” says Schwartz, “is to pay them better than someone living in extreme poverty.”
Maybe the “ultrapoor” aren’t such an intractable problem after all.
Sarah Stuteville is a multimedia journalist and co-founder of The Seattle Globalist, www.seattleglobalist.com, a news site covering Seattle's international connections. Sarah Stuteville:sarah@seattleglobalist.com. Twitter @SeaStute
Upaya Social Ventures is honored to announce that it has received a 2014 Light a Fire award from Seattle Met magazine, and is the first ever recipient in the publication's “Acting Globally” category. The Light a Fire awards were created three years ago by the magazine as “a celebration of organizations and individuals who make Seattle – and the world – a better place,” according to the publishers.
Co-Founders Sachi Shenoy and Steve Schwartz accepted the award from the publishers at an event held at Canlis restaurant in Seattle on October 21.
“This is a really exciting opportunity to celebrate this new approach to poverty alleviation and economic development with the Seattle community that has supported Upaya since the very beginning,” said Schwartz.
“It is also a great chance to shine the spotlight where it really belongs – on the entrepreneurs who are building these remarkable businesses and the individuals who are receiving steady employment for the first time,” he said.
In addition to the award, Upaya is being profiled in the November issue of Seattle Met magazine. The magazine will be on newsstands starting October 25.
Special thanks to longtime supporter Tim Wade for nominating Upaya for this award!
A few interesting articles and a podcast from around the internet.
Exhibit A for the “too much money is chasing too few entrepreneurs” case:
“An April 2014 study by Intellecap, a strategy advisory firm, highlights the gravity of the situation. Of the $1.6 billion invested in social enterprises since 2000, around 70% was in the financial inclusion space (both microfinance and non-microfinance). Of the investments that went into other sectors—including agriculture, energy, education, healthcare and livelihoods—about 67% was in just 15 enterprises.”
The article also does a great job of breaking down fund economics to explain why more patient investments in ecosystem are virtually impossible. Overall, it is a great look at the challenges faced by early stage entrepreneurs in India.
This article is a nice look at how small investments in quality control and chain of custody management allow dairy companies and farmers to profit more from their efforts.
The connection between pro-poor business models and higher-end goods is growing. Here in Seattle, we have Theo Chocolate, a company that is working hard to create maximum social benefit in their supply chain. To absorb the higher costs Theo has had to create a $4 chocolate bar but rather than cutting costs, the company’s founder Joe Whinney has set out to create the best darn luxury bar he can. And Theo is not alone – the work Arthur Karuletwa is doing with Starbucks is very much in the same spirit
This is a fascinating interview with Intellecap’s Aparajita Agarwal as she talks about social enterprise in India, the differences from working in Africa, and the constant battle entrepreneurs face when they’re trying to differentiate themselves.
Most interesting for me was the point about entrepreneurs trying to make their idea feel truly unique. I suspect much of this need is driven by interactions with impact investors and the benefit narrative those investors are trying to build around their work. Unlike traditional investors who can look simply at the financials and management team in their due diligence, self-defined impact investors often need to have their imagination captured by the social benefits of the business. As such, entrepreneurs often try to tell a story about how their product or service is “revolutionary” or “innovative,” when the reality is that their business might be most socially beneficial and profitable if they could focus their efforts on the fundamentals.
There is a saying that has been floating around Upaya for a long time that seems relevant here – sometimes a business is not innovative for what it is doing, but for where it is doing it. This interview shows we might not be alone in that thinking.
The re-launch of upayasv.org is more than just new layouts, photos and fonts. It also is an opportunity for us to bring a new voice into the global conversation about ultra poverty, employment, and entrepreneurship.
The people who make up the Upaya team each bring a unique set of experiences and perspectives to the organization. I would say twice a week I wake up to an email with some article, video, or podcast that one of my colleagues is struck by, and it usually sparks a fascinating dialog among people looking at a single issue from a variety of different angles. Think of it as a cross between Squawk Box, Stanford Social Innovation Review, and Guy Kawasaki’s How to Change the World blog, with a dash of boringdevelopment.com thrown in for a bit of pragmatism and humor. We always thought that one fine day we would start sharing these conversations with the world, and that day has now come.
So what can you expect from this blog? More than anything, it will be a candid look at the conversation around a new approach to extreme poverty alleviation. Sometimes the conversation will be more academic, other times it will be more casual, but it will always give you an opportunity to learn something new. We will write for entrepreneurs and investors, students and social innovators, philanthropists and philosophers alike, and welcome all readers to share their thoughts in the comments section.
As we set out, we have four types of posts in mind:
One last promise - you have my word that this will not just be a megaphone for updates about Upaya. That what our News page is for. This blog is a place where we can stretch our legs, talk about critical issues, and hear from those who are interested in the same issues we are.
So there you have it. We’ll try to post a few times a month to start, and more frequently as we continue to grow. Questions and comments are always welcome - just give us a shout.
- Steve
Upaya co-founder Steve Schwartz talks job creation for the ultra poor on Rainmakers.tv
The past few months have marked an exciting period in Upaya's evolution - our team has had the opportunity to share our story with some incredible groups, we have forged new partnerships to expand the breadth and depth of our work, and our partners have been acknowledged broadly for their successes.
Upaya Social Ventures is a registered 501(c)(3) nonprofit organization.
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