VentureBeat talking about Social Capital - the word is getting out

Chris Morrison in VentrureBeat just published a post asking "Will Social Capital be the next big industry to emerge?"

I believe that the answer is Yes, but there is a need to clarify how we can go about it:

Going back to Blended Capital as discussed in the post, there is one big issue that has not been resolved yet is what is it exactly? While everybody understand at a high level the concept, or what some other people call double or triple bottom line, it is very hard from the investor prospective to figure out what you can expect from it. You know you will get less return, but how much and how do you figure out good deals and bad deals? There is an issue of estimation and measurement of success that still needs to be resolved.

One way to deal with this is what we are doing with Entrepreneur Commons (www.entrepreneurcommons.org), using debt instead of equity. Because equity creates tension between the investor and the entrepreneur, for example by forcing the issue of exit: the investor needs his money back at some point, but who do you sell too, and should you really? (the Ben& Jerry things)
With debt, everything becomes a lot easier: you know exactly when you will get your money back and how much you will get, and you can benchmark this against the market to decide whether you are comfortable with a given rate for a given "mission".

In addition to clarifying the issue, debt is a good thing because we have historical data on what can be done. Microfinance is for a big part about helping entrepreneurs in developing countries. This is debt to finance small businesses.
And "Social Capital" in the US can be done the same way, with the difference that you need more than a few dollars to help an entrepreneur here. And the good news here is that you do not need huge amounts of money in the US either: according to Inc Magazine, and looking at their Top 5000 fastest growing companies, the average capital to get started for companies in the list is $25K, and if you look at their top 500 it is $75K.
The default rates from Grammen Bank (microfinance) are 1 to 5%, so very manageable, and there is no reason why we could not do as good in developped countries.

So there is an opportunity to make a big impact, and I am convinced that Social Capital is the next big thing because we have no other choice if we want to world to become a better place...

Originally posted as a comment by mdangear on VentureBeat using Disqus.

Entrepreneur Commons Emergency Fund

From the Entrepreneur Commons website:

While Entrepreneur Commons has been focusing on early stage investment, special situations call for special action and we are considering raising an emergency fund for Entrepreneurs with existing businesses and existing customers who are now being left without credit options because of the current financial crisis.

In order to confirm the size of the need and opportunity for funding, we are asking entrepreneurs and investors to fill out the following survey:

If you are an entrepreneur - click here

If you are an investor - click here

If you are in France, a similar survey has been launched to see what could be done specifically for entrepreneurs there:
http://www.les-entrepreneurs-pour-la-relance.org/

Let's get some action going!

Entrepreneur Commons presentation at Socap08

Socap2008

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Entrepreneur Commons presentation at Socap2008


SlideShare Link

HP CMO says it all: Brands need to utilize their own "networks"

A great short video on how Brands should realize they now have a direct access to their customers and their ecosystem, and they should listen and engage.
Check it out...

Time for companies large and small to think about their Social Network Support system. And a good opportunity for me to plug in my friends at eCairn - www.ecairn.com :-)

Interesting article on the future of VCs

From Cyril Demaria:
For the first time since 1978, there was no venture capital-backed IPO in the US during a quarter, making the second quarter of 2008 the worst on the EVCA records. This was attributed to the consequences of the liquidity crisis - but is this so? In October 2006, Steve Dow already launched a first statement which rippled through the venture capital sphere, by declaring that the venture capital model was 'broken'. Too much money chasing too few deals, not enough exits, no real perspectives of substantial profits on the short term: the diagnosis was severe, especially from this seasoned partner at Sevin Rosen. This was in fact the mark of a much needed revolution in the venture capital world [click here to read more].

Building Blocks for a New Kind of Venture Capital

The Entrepreneur Commons mentioned on Igniter.com in a post discussing the components that would make up core building blocks for a new kind of venture capital:

The key in this lies in the interdependence between the micro-funds and the commons. The commons nutures and convenes community. Funds add some fuel and spark by investing and catlyzing conversations. The ventures serve themselves through supporting each other and participating in the commons.
I’m continuing to refine this as I move toward a working example and will continue to think out loud as I go. And if you haven’t checked it out - take a look at the Entrepreneur Commons being led by Marc Dangeard. He’s farther along and is tackling similar issues as he goes. The similarities and even more so, the differences, are interesting and good fodder for conversation.IGNITER, Oct 2008

Check out the whole article.

Entrepreneur Commons in Les Echos

Les Echos (French equivalent of Financial Times) just published an article on Entrepreneur Commons. You can read it here (in French)

Reframeit!

Just downloaded the Firefox extension from Reframeit.
This is a great tool that allows you to comment on any page on the web, and see comments by others. It should make the experience of reading the news (for example, it apply to any content really) way more interesting.
I like that you can create group that are public or private to share your comments with people who care about one issue or another.
Another great step forward for us users...

Take away from Socap2008

I was at Socap2008 today, and the one thing I will remember from the sessions I attended is this recommendation to people who want to change the world to "follow the money":
great entrepreneurs like Bill Gates or Warren Buffett are doing philanthropy because they recognize that there are things to do beyond building great companies that make a lot of money. And when they decide to address an issue, it becomes an important issue for the rest of the world.
This is excellent news...

The one flag I have on this is that this process feels like it may be fishing in the dark: if you take a flashlight and point towards the water, you will attract a lot of fish. But if your goal is to remove all fish from the pond it may not be the best way. What happens to things that are not important to the rich guys?

It is great that people at the top of the pyramid are helping people at the bottom, there should be one more things they do when they get into it: instead of (or in addition to) focusing on "mission driven" efforts and on addressing specific issues, they should also consider investing in platforms (people, basic infrastructure) that will allow people who need help to help themselves.

For example: funding non-profit (that I see as beta test programs to establish blueprints), then help them evolve from cost centers to zero-cost or profitable centers by either becoming for-profits (as happened with micro-finance, MFI being turned into profitable businesses) or becoming programs that are licensed to the government because they are fixing social issues better than how the government was doing before (as Tom Siebel is doing with the Meth Project).

I believe that this is what Muhammad Yunus recommends when it talks about creating hybrid structures. And this is where philanthro-capital really will meet social capital.

And since this is my blog: if you are Bill Gates and you are reading this, this is why you should consider invest in the Entrepreneur Commons :-)

The Entrepreneur Commons on Change.org

From Nathaniel Whittemore on Change.org:

What if peer-to-peer loans weren’t just a tool of international development? What if, even more, they were about more than individuals? What if peer-to-peer loans could be leveraged to create communities of support and opportunity around innovative enterprises?
Marc Dangeard is building Entrepreneur Commons to do just that.

Read more...

Financial Markets and Social Capital

At a time when Financial Markets worldwide are going crazy, you get depressed if you look at your portfolio: the capital you had accumulated in there is vaporising.
What you have left, and I love the words, is your social capital, the one that describes "trust and giving between family, friends and communities". Hopefully you have accumulated some of that if you want to be able to go through the bad times without too much hardship.
This social capital is one that grows when you give, rather than when you take, and it does not decrease when you use it right: a really wonderful thing.
What is interesting is that the same words also describes "a business serving a community purpose", and I see a lesson here that this is what we should focus on if we want to avoid going over and over again through these bubbles and busts.
The answer has been here always, in the definition of the concept itself, but we forgot to pay attention: Social Capital is where we need to look for an answer to get us out of this cycle of crisis. The success of microfinance has shown us that it is working for poverty in developing countries, it will help resolve our other issues in other places...

93% of americans want companies to have a presence on Social Media Sites

From ReadWriteWeb:

According to the 2008 Cone Business in Social Media Study, 93% of Americans believe that a company should have a presence on social media sites and 85 percent believe that these companies should use these services to interact with consumers. Cone, a Boston-based consulting firm, also found that men are far more likely to interact with a company through social media than women are. 56% of consumers believe that a company is providing them with a better service by interacting with them on social media sites.

Thank you Dominique for pointing this one out...

Very good article on why social investment is slow to take off

From Kevin Jones and the Stanford Social Innovation Review, read this.
The article is a very good explanation of why we need efforts like the Entrepreneur Commons...

"Capitalism is a half-developed structure" - Muhammad Yunus

With the crisis happening now, the words from Muhammad Yunus "capitalism is a half-developed structure" come back to mind.

And what he develops in the first chapter of his book "Creating a world without poverty - social business and the future of capitalism" resonate even more deeply:
"Capitalism takes a narrow view of human nature, assuming that people are one-dimensional beings concerned only with the pursuit of maximum profit. The concept of the free market, as generally understood, is based on this one-dimensional human being. Mainstream free-market theory postulates that you are contributing to the society and the world in the best possible manner if you just concentrate on getting the most for yourself."

The result is supposed to be a system that self adapts to situations and self corrects because people are dedicated to that one mission of maximizing profit.
The problem is that it does not work, as we can witness now on the financial markets.
Instead of self adjustments we get regular market failures, not exactly what the intent was.

What I see happening really is that creative mathematicians have invented financial products that generate big multiples out of nowhere and purely from speculation, allowing them to rip huge profit out off businesses or real estate properties regardless of the value they truly represent. Bubbles that end up blowing up.

If we are going to fix this system, I would like to follow Muhammad Yunus train of thoughts:
"The presence of our multi-dimensional personalities means that not every business should be bound to serve the single objective of profit maximization"

This is also what Bo Burlingham puts forward when he presents "Small Giants - companies that choose to be great instead of big".

When the sun goes down somewhere, it goes up somewhere else. This crisis is an opportunity, let's hope we learn to come back to the basics of what business should be about: adding real value on the ground, rather than maximizing financial ratios.

VCs and their relationship with the entrepreneur

I read recently from a VC on the GigaOm blog:

we are also working on behalf of our limited partners to provide a return on their investment and that, in some instances, can admittedly result in a conflict of interests between us and the entrepreneur

For a VC to write this is at the minimum an understatement, there is a HUGE conflict of interest between a VC and an entrepreneur:
- the VC is paid by investors (LPs) to generate for them as much of the value as possible from a given business. What matters is how much the return will be in the end.
- Meanwhile, the Entrepreneur is trying to generate value from the business for himself.

To say that you could work in the middle to keep both happy cannot be true: if you are a VC your job is to generate as much value as possible for your LPs and nothing else. Your duty goes to fulfilling the engagement made to the person who trusted you with his/her money, no choice if you want to keep the LPs trust and your job as a VC.

What is probably true is that they may try to make it as painless as possible for the entrepreneur, but this is a very different proposition. In the end, we know where the value generated goes when VCs are involved: LPs first, whether they are comfortable with it or not.
It does not mean that you should not work with them, but clearly you should know what you are getting into...

Not everybody is loosing on Wall Street

From the New York Times:

Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.

That's $19.1 just to show up for the job. Congratulations for the negotiation skills!
In my book, you get money when you add value, but I am not sure where and how value can be measured in this case. From what I see, the real value was in getting the contract. But if you are good enough to convince people to pay you just for being involved, good for you. In the end the blame goes to whoever agree to granting you such a big gift with no restriction.
Despite the contract, I would feel bad about taking so much money when people at the bottom are struggling, but that's just me, and probably why I am not up there with the other guys, which is fine thank you :-)
Mr Fishman is not to blame, but his case is a striking example of how screwed up the system is. No wonder Wamu ended up where they are now...
And the sad thing is that I am sure there is a lot more of this going on around Wall Street.
Hopefully this crisis will allow us to really rethink how we do things on the financial markets. What is happening is no accident, more like the normal consequence to playing too much with the numbers to the point where what we do becomes completely disconnected from the reality on the ground. Somebody messed up with the modeling and the statistics, forgetting that there are real people and real businesses behind the spreadsheets.
Forget the kids out of business school, anybody involved with finance should spend some mandatory time working in a real business with a down to earth salary before they are allowed to do what they do. Maybe this will make a difference and allow then to keep their sense of reality when they get into playing with the big numbers.
From the layoff that are happening in New York, London and all over the place, a lot of the financial guys are getting the lesson now.
Too bad we have to learn the hard way...

How Brands and their evangelists should manage blogs

Just like with the internet websites of web1.0, companies are slowly getting into social media and web2.0: many companies today have blogs, and try to establish a presence in the blogosphere through them, with the help of evangelists who monitor what is going on and mix with the crowd to spread messages. As a sign of this, Inc Magazine reports that "31% of the CEOs of their Inc500 companies maintain a blog or social network and for the most part they love them."

Having a blog is a great step forward.

Having evangelists is even better. 

The next thing is to try to manage this social media effort and retain within the enterprise the IP that is being created by the evangelists working for the company.

Because the thing with Social Media is that many people/companies have blogs, many people comment of other's people blog, and evangelists tend to have their own blogs in addition to blogging on the company website. Even regular employees (non-evangelists) have blogs, and they may also do great work for the company there. So the reality is that conversations are happening all over the place, and there is no real central place where the company can measure what is  going on, and analyze the results of the work being done over time. And there is no point is trying to bring the conversations back into a central place, because it is not going to happen. People want to do what they do where they are, not where you tell them to. 

So the next option is to at least gather in a central place references to all these conversations, thus allowing readers on the company website to travel from one discussion to another other easily. And because references to these conversations are kept in a central place, you can also measure what is happening: how many posts, how many comments in how many blogs, and how many visitors on these blogs. Data which accumulates over time to also show you the trends of your influence and your impact on the blogosphere.

Think about it as something like Delicious, except designed for blogs because bookmarks are not enough, what you want with blogs are the RSS feeds that keep the flow of posts going.

A service I use to do all this for my Entrepreneur Commons project is eCairn (www.ecairn.com - and as a disclaimer you should know that yes I am connected to this company).

Within eCairn, I started building a list of blogs that talk about entrepreneurs, VCs and funding in general. And I monitor this list on a regular basis, sometimes commenting on the blogs when it is relevant. When I do, I can tag that post, as a way to keep track of the fact that I did comment on this blog in case I want to go back.

(the RSS feed for these posts where I commented is http://conversation.ecairn.com/post/feed?key=Qf4X4Cxiw392Ri6oWewwulHfA4H6E9Nn&title=Get+the+filter%27s+RSS+feed&with_filter=49, and it is also exposed in a widget on this blog)

Doing this, I started participating in conversations happening here and there. I sometime receive replies to my comments, and I also reply to other people's comments. Everytime I do this, I add the person's blog to my list, because if they said something that was relevant to me here, they may do it again.

Over time my selection of blogs has grown from something that was based on the declared intent of the blog (blogs about entrepreneurship, VCs or funding) to a selection of blogs that includes more of the same, plus blogs from knowledgeable people who do not always blog about these specific subject, but have shown interest and some level of expertise on the subject at one point or another.

And this evolution can be tracked: I know how many blogs I started from, where I am today and how I got there; I know how many posts I found relevant through my browsing, how many I commented on, and how many new bloggers I got involved with (through their blog) from these conversations.

I can do this by myself, and I already get more than a regular RSS reader would give me, and I can include other people to do it with me: we are now several partners working on the Entrepreneur Commons project from within the eCairn service.

For any company I believe that it should be the next step forward, as a way to track what is happening on a given product, or what is happening with the brand in general. The value you get from being able to manage this process is huge, I see it as the real promise of Social Media delivered: the eCairn tool allows monitoring and engagement, the perfect backoffice tool for a marketing team.

Imagine for example that you launch a campaign:

- you can immediately measure the effect of that campaign in the blogosphere, you can reinforce the message by commenting as appropriate on blogs (or do damage control if not all goes as expected). And you can correlate the campaign to a measure of the buzz generated. 

- you can do all this as a coordinated effort, with a complete team of people involved, so that you can handle as much as you want. And when people move on to another job, the info from what they have done stays with the company. They may control their own blog, and the audience around it, but you keep track of the relevant posts that were made, the bloggers that were engaged, etc...

Outside of specific campaign, you can also do on-going work of maintaining a presence in the blogosphere, and build up the audience through engagement with bloggers. You can measure how many blogs you engaged on, which is another great indicator of the work being done by the marketing team (who they talk to, who they know, and how influential these people are - from the traffic of their blog, which gives me a feel for my addressable audience).

As I commented recently on a post from Open Forum, in addition to what the author calls the Web triumvirate (website - blog - support discussion board or forums), companies should seriously consider now adding a fourth pillar: proactive Customer Service in the form of blog monitoring and bloggers engagement - call it Blogosphere Relationship Management

The Now Web vs. Blogosphere Relationship Management

Just read a post on TheDeal.com talking about the Now Web
And the post mentions Twitter and Disqus as example of these services in the Now Web.

While I like the concept of Now Web, I believe that Twitter and Disqus belong to 2 very different worlds, at least for now.

I see Twitter as an equivalent of a virtual water cooler where people can come and discuss once in a while (even though some people seem to live there). Disqus on the other hand is a tool to manage conversations with the blogosphere and engage with bloggers. One is truly in the Now, the other is more in the "building over time".

When a blog is equiped with Disqus, or IntenseDebate (what I have on my blog), you can post comments, track replies but also get more info on the bloggers who commented, what other conversations they have other places, what blogs they publish on. With these tools you can accumulate over time records of conversations and connections with bloggers, you can build your personal intellectual property outside of your own blog and you can build a reputation within the group that emerges naturally from all these interactions.
And Twitter is a good complement to let the crowd now that you are doing all these things.

So for Disqus or IntenseDebate rather than Now Web, I would talk Relationship Management, and the good news is that if they can be categorized as such they are one step closer to the enterprise, and therefore one step closer to cash for the entrepreneurs and their investors.

No question in the end that both will make it to the enterprise, as Yammer demonstrated this week at TechCrunch 50. The way we function within and without the enterprise is changing, it will be interesting to see how far this goes...

Inc500 statistics support Guy Kawasaki's plan B

I was happy to read yesterday that Guy Kawasaki is bringing some light on the realities of Silicon Valley, away from the hype and what the newspapers like to show on the front page.
And the timing is perfect, because this week I just received the special issue of Inc magazine where they give us some good statistics on what is happening in the trenches. The numbers give a good prospective on the relationship between VCs and Entrepreneurship - facts from their top 5000 (five thousand, no mistake here, this is what they give us):
- median amount of capital to launch the business $25K
- only 3% of the top 5000 received venture capital
Guy's plan B is right on: forget VCs if you can, this is expensive money anyway, and just focus on building the business with what you have.
Meanwhile I will keep working on the Entrepreneur Commons to help with the "Friend and Family" part, the initial funding that can make all the difference.

The funding gap gets bigger

From TheDeal.com:

$40 billion was invested in U.S.-based startups across all sectors during the past 12 months, compared to $36.2 billion during the year leading up to Aug. 31, 2007. The rounds got fatter, too, as there were 3,084 deals in the past year versus 3,219 in the previous period.

More money, less deals, the funding gap in the US is getting bigger. This is not going to help entrepreneurs trying to start their businesses, I see this as a flag that things are not improving when it comes to financing startups.
Meanwhile the same post mentions that the number of European deals only decrease slightly while the total amount spent is 5% less. So I assume from what I read (there is no number there on this) that the funding gap is decreasing in Europe, something good.
I wish we could see that trend in the US, it would certainly help entrepreneurship. With the economy as it is, it is time for the spreadsheet guys to give the entrepreneurs some room back...