The elea Way

A Learning Journey Toward Sustainable Impact

Vanina Farber, Peter Wuffli

• Verlag: Routledge
• Jahr: 2020
• ISBN:
  9781000226003
• Auflage: 1
• Thema: Business
• Thema: Business Ethics

Social entrepreneurship and impact investing contribute to a more inclusive capitalism and bring innovative solutions to global challenges, such as fighting poverty and protecting planet earth. This book offers practical advice on how to best integrate entrepreneurship and capital for impact and innovation by using elea's philanthropic investing approach to fight absolute poverty with entrepreneurial means as an example.

Written by two leading experts, the book summarizes insights from elea's 15-year pioneering journey, from creating an investment organization, choosing purposeful themes, and sourcing opportunities, to partnering with entrepreneurs for impact creation. This includes suggestions on how to lead impact enterprises in such areas as developing strategies, plans, and models; building effective teams and organizations; managing resources; and handling crises. Using real-life examples, this is valuable reading for entrepreneurs, investors, executives, philanthropists, policymakers, and anyone curious about entrepreneurship and inclusive capitalism.

1

Searching for
Entrepreneurial Qualities

The first component of our new formula for capitalism is entrepreneurship, but what exactly is entrepreneurship? One of the most famous definitions of entrepreneurship comes from Professor Howard Stevenson, who holds the entrepreneurship chair at Harvard Business School. He said, “Entrepreneurship is the pursuit of opportunity beyond resources controlled” (Eisenmann, 2013). More specifically, “pursuit” indicates a singular, relentless focus, whereas “opportunity” points to the pioneering, innovative characteristics of entrepreneurship. “Beyond resources controlled” means the constant condition of resource constraint under which entrepreneurs operate. We like this definition, as it points to the mindset, role, and task of an entrepreneur rather than to his formal or institutional positioning. Entrepreneurs can be found in any organization and at many levels.

Related to this is the concept of social entrepreneurship, which was launched by Bill Drayton (the founder of Ashoka) as a primary force for social change. Ashoka (www.ashoka.org), which was founded in 1981, systematically identifies and supports social entrepreneurs (i.e., Ashoka fellows) to mobilize a global network of changemakers and enable learning from their innovations. Ashoka has likely inspired many other similar global initiatives and platforms that identify, evaluate, acknowledge, and support social entrepreneurs. Examples of this include the Skoll Foundation, the BMW Foundation, and the Schwab Foundation for Social Entrepreneurship at the World Economic Forum.

What distinguishes social entrepreneurs from other, more commercially minded entrepreneurs? Professor Filipe Santos, Dean of the Catolica-Lisbon School of Business and Economics, argues in his article “A Positive Theory of Social Entrepreneurship” that social entrepreneurs predominantly focus on value creation by seeking sustainable solutions to problems, whereas other, more commercially minded entrepreneurs are primarily driven by value appropriation (i.e., extracting profits), which is based on a desire to secure a sustainable competitive advantage for their organization. According to this theory of social entrepreneurship, value is seen in a holistic way, without differentiating between economic and social value, and it extends beyond single organizations to include positive externalities, such as improved education or better living conditions for underprivileged people. Santos says: “Value creation from an activity happens when the utility of society's members increases after accounting for the resources used in that activity. Value appropriation from an activity happens when the focal actor is able to capture a portion of the value created by the activity” (Santos, 2009, p. 8).¹

1.1 elea entrepreneurs in the limelight

Now let us review four long-term success stories from elea's investment portfolio, which illustrate the motivations, mechanisms, and results of creating impact and innovation. In the remainder of this book, we will frequently come back to examples either taken from these four investments, from other investments in the elea portfolio, or from other organizations that we have gotten to know over the years.

1.1.1 Angaza: Pay-as-you-go (PAYG) makes socially impactful products affordable²

The problem

One important aspect of absolute poverty is the shortage of cash. Whenever a poor household has an excess of cash, there are powerful forces at work that tend to immediately lead to consumption, thereby reducing the amount left for any meaningful savings. Satisfying immediate and diverse needs of family members, such as compensating for insufficient income, solving health problems, or coming up with money for school expenses, will always compete with saving cash for even very small investments into impactful goods or risk cushions. This makes it very difficult for families to acquire socially impactful products that could substantially contribute to reducing poverty. Take for instance solar panels and lamps, which provide reliable and clean energy for lighting and could enable access to educational offerings or income-generating activities at night in the world's many off-grid areas – where still over one billion people have no access to electricity. However, although many lamps with robust and suitable technologies were developed to address this problem, sales in areas with very low incomes are often disappointing because of a lack of affordability.

The solution

Angaza deploys pay-as-you-go (PAYG) technology in solar products and other electronic devices. PAYG is a mechanism by which customers pay in small affordable amounts in proportion to how much they use these products/devices. Angaza's solution consists of three components: 1) metering and monitoring technology that is embedded into devices by their manufacturers to control payments and unlock the device if sufficient cash is available, 2) a mobile app that allows sales agents to offer and manage consumer financing for their solar device using mobile money, and 3) a cloud-based back-end solution that allows manufacturers and distributors to monitor the products sold and their usage, as well as the respective payments. As a business to business (B2B) solution, at the end of 2019, Angaza partnered with more than 25 manufacturers and over 200 distribution partners. Its products are integrated with over 40 mobile-payment platforms and are available in over 50 countries, reaching more than 1.8 million customers. Thanks to Angaza's technology, people who could previously not afford solar products now have access to electricity and light.

The entrepreneurs

Lesley Marincola, founder and CEO of Angaza, grew up in Phoenix, Arizona. She comes from an entrepreneurial background without being conscious of it. Her father created his own computer software business, and her mother, a medical doctor, built a successful private practice in pulmonology. Her older brother Bryan would later join Angaza and become its Chief Technical Officer. Lesley's fascination with emerging markets started in middle school. She spent her summers volunteering, living, and working in emerging countries, mostly in Latin America. This was her first taste of living in off-grid rural communities.

Early on at Stanford University, having completed her undergraduate degree in product design and a master's degree in mechanical engineering, Lesley discovered her interest in product design and engineering. In the “Design for Extreme Affordability” Master Class at the Hasso Plattner Institute of Design (the d.school) at Stanford University, Lesley combined her interest in emerging markets with engineering. While at university, she worked on a student project with a solar-light manufacturer. Her task was to make solar energy affordable for emerging-market consumers. To achieve this, Lesley built a solar concentrator that increased the power output of solar panels. Although she did not walk away wanting to start her own company, the project opened her eyes to the scale of opportunity for energy access. She learned through personal experience how wonderful rural life is and how tight-knit these rural communities are. Even though these communities are remote, they are often plugged into the global digital economy, and increasingly so. With regard to product design and engineering, Lesley has developed a passion for building things with her own hands and taking them from point A to point B. She likes to see the things she is working on and to understand the basics, such as gears and linkages, and how those come together to form physical products.

After graduation, Lesley began working at a design consultancy in Mountain View, California. She considered this as her dream job, because she had always wanted to be a product designer. She worked on projects spanning consumer electronics and automotives to medical devices. However, Lesley continued with the d.school project in her free time. The summer after graduation, Lesley travelled to Tanzania to test her solar-energy ideas on the ground and continue prototyping. Even after starting work, Lesley would spend evenings and weekends working on her ideas. Finally, after a year and a half of juggling her job and her passion, Lesley knew she had to make a choice. Having a full-time job meant that she could not move the project in Tanzania as fast as she wanted to. She thus decided to quit her job and concentrate fully on her solar project. Looking back, she does not recall being apprehensive about quitting her full-time job in Silicon Valley; for her, it was so normal to be an entrepreneur and to take that leap of faith, and Stanford University had fostered this mindset in their students as well. She had some savings that allowed her to pursue her passion, and she also had faith that she would be able to find a job if things did not work out.

elea's investment

As a result of a scouting tour to East Africa, elea got to know Angaza in 2012. As a Silicon Valley start-up that targeted poor customers, particularly in Africa, the company did not appeal to Silicon Valley venture capital firms at that time. Consequently, elea became the first institutional investor in Angaza and provided advice to them on many levels, such as strategy, organizational development, marketing and sales effectiveness, and leadership development. In 2013, elea made a sizable investment in a convertible note issued by Angaza. At the time, Angaza employed five people and had invested less than USD 750,000 from friends and family, angel investors (i.e., successful individuals who invest small amounts in promising start-ups to promote entrepreneurship), and prize money from competitions and grant-giving non-governmental organizations (NGOs).

Impact, innovation, and financial returns

Initially, Angaza just planned to produce another solar lamp with a PAYG mechanism. The company's strategic move from a lamp manufacturer to a PAYG technology provider, which was substantially influenced and supported by elea, planted the seed for global industry leadership in this field and for a great impact story. After a substantial financing round in 2015, Angaza closed another financing round of USD 10.5 million in 2017, which was led by Laurene Powell Jobs' Emerson Collective (a social change organization) and was joined by Rethink Impact, Salesforce Ventures, Social Capital, and the Stanford StartX Fund. Only one year later, Angaza reached an important milestone when it became evident that more than 5 million people in over 50 countries had benefited from their technology since inception. East Africa accounts for 60% of the company's sales, but the company has expanded rapidly by entering markets in West Africa and South America. At the end of 2019, Angaza employed 70 people, and current expectations are that the company will experience a tenfold growth in revenue and a threefold growth in personnel over the next four to five years. In light of this growing success and social impact, Angaza recently broadened its vision by positioning the company as a “software provider that powers businesses to the last mile.”

While the principle of PAYG is ages old, the innovation of Angaza's model was in coming up with a very robust, cost-effective technical solution that combines hardware and software and considers both economic and technical conditions in poor countries. In addition to servicing a well-established, installed base of customers, Angaza also collects a huge and highly valuable amount of data on the household behaviors and consumption patterns of people at the base of the pyramid.³ Achieving broad acceptance for this approach was by no means easy. Angaza invested a lot of effort in awareness building, training, and educating distributors and users. This investment has not gone unnoticed. In 2018, Lesley Marincola received global recognition for her work. She received both the Ashden Award and the Skoll Award, the most coveted prizes in the social-enterprise space. In addition, the elea Chair for S...