Live Blogging from Social Capital Markets 2008

Posted by Xavier on 10.13.2008 at 3:08 pm

David Murphy, CEO of Better World Books, and yours truly are speaking at the inaugural Social Capital Markets in San Francisco. This is truly a landmark event – the first conference I’ve ever heard of based on investing with a social impact.

David is speaking in a session on “pitching your ideas”. On the panel with David are:

Ben Black from New Cycle Capital. New Cycle just closed a $30 Million fund to invest in conscious companies.

Karyn Barsa, CEO of Investors Circle, was formerly CEO of Smith & Hawken and COO of Patagonia. Investors’ Circle is a network of socially conscious angel investors.

Moderating is Tess Reynolds from New Door Ventures.

Interestingly, I bumped into a fellow couchsurfer, Jon Gosier, in the audience. He’s doing fascinating things with incubating programming talent in Kampala, Uganda.

Ben says that a warm introduction is key. In this day of LinkedIn and Facebook, any entrepreneur worth their salt ought to be able to make a connection with the funder you want.

David stressed the point about building a long-term relationship with a funding source. At Better World Books, we knew the team at Good Capital for nearly 18 months before we agreed to a deal where they would invest to help grow Better World Books. Over that time, we grew a level of trust and a depth of personal relationships.

Ben says that its very important to match the stage your venture is at with the funding you need. If you are just starting up, you don’t want to contact an expansion stage fund.

Karyn says to start a pitch with an eye-catching stastistic. What is the magnitude of the problem you’re trying to solve? At Better World Books, one of our core stats is that 1 in 7 people worldwide can’t read. Another is that books are the most purchased product online in worldwide.

Ben wants to know exactly who you are as a person. If you invest in a business, you’ll be joined at the hip with a person for seven years. You want a record, starting from high school, of tenacity. He also wants to hear about the team. Who are the all-stars who you’ve surrounded yourself with?

No matter how long you are told that you have to pitch, you really have 5 minutes, says David. During that first five minutes you have to establish a story. In the case of Better World Books, the story is all about how in college, you probably paid too much for textbooks and felt like you got next to nothing when you brought them back to the bookstore. The segues to the first book drive we ever ran, at Notre Dame’s campus for the Robinson Community Learning Center.

Ben says you’re going to get a lot more nos than yeses, but each meeting is a great opportunity to learn more about your business and make further connections.

Question to Karyn – what about the current economic situation? Karyn says that multi-stakeholder investment is the future. We’re going through a financial reordering, and that is a lot of what we’re working on with Social Capital Markets. She and Ben are still out there looking for deals.

Question: what’s a “social deal” and what’s a “regular deal”? Ben says that they look for businesses that have more positive social impact the bigger they get. They’ve invested in a company that helps people get out of debt and another one that promotes energy efficiency.

Question: how do you judge risk in a social investment? Ben says that part of the question is how big can your big wins get? 40% of venture-backed businesses will fail, so you obviously are taking on risk.

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