Melissa featured on Acumen Fund Blog!

“Melissa spoke with us about how she plans on carving out a space for microfranchising in the world of social entrepreneurship. Clearly her plan for Allyu is ambitious, but armed with a solid foundation and an optimal network of institutional supporters (including Ashoka andAlianca Empreendedora) she is already on the path to realizing her aims. But she also shared some of the difficulties she’s encountered running a start-up; touching on problems familiar to many in this field, such as lack of capital, under-staffing, and the persistent stress put on the founder to realize their original vision.” Read more

Melissa on Why StartingBloc is AMAZING!

I attended the StartingBloc Institute in 2008. This Fellowship continues to be one of the defining communities for Ayllu. Top 3 reasons why:

1. Network – It’s cross-sector and engaged
2. Friends – Founders need all the peer support they can get
3. Knowledge – diverse perspectives, thorough conversations

Você fala português? Entrevista com nosso parceiro: Fundador de Aliança Empreendedora

Face It! Wal-Mart Makes Us Richer

By Mike Shoemaker

Economists talk a lot about “utility.”  It’s the generic term they use to refer to the joy, satisfaction, stress relief, etc. we get from the goods and services we consume. My road bike, for example, is a huge source of utility for me. A Chipotle burrito is, likewise, loaded with Mike-variety utility.

In a world where economies of scale are easy to come by, utility is cheap. And in a world where competition and economies of scale exist, utility only gets cheaper as time goes on.

A week ago, I went to Best Buy and paid about $350 for a netbook computer.  That’s insanely inexpensive considering the same amount of computing power would have cost millions of dollars and required a warehouse-size space only a few decades ago. When I got home with my new netbook, I connected to the internet and spent the next several hours entertaining myself online, all without spending a penny.

The amount of utility I got out of those transactions was, and continues to be enormous, despite the small price tag. That’s because, in a world like mine, where competition and scale economies abound, meeting my needs and satisfying my “utility requirements” get cheaper with the passing of time.

I can, of course, do without my internet and netbook. But the idea that costs decrease as scale economies and competition increase holds true for our most basic purchases as well, and the implications are hugely important.

In the developed world, we can spend a smaller and smaller percentage of our income on things like food and clothing than can our friends in the developing world. This means that 1) our wealth increases even as wages stay the same; and 2) additional discretionary income is continually freed up for purchases that may be non-essential for survival but critical to getting ahead.

The Next Four Billion, published by WRI, shows, for example, that as people move up from the base of the income pyramid, they spend about the same amount on essentials like food but spend increasing amounts on services like telecommunications and healthcare. This ability to spend more freely on telecommunications and healthcare, in turn, allows them to work more efficiently and productively and supports their journey out of poverty.

The point here is that the economic development problem is not just about increasing people’s incomes. It’s just as much about increasing relative wealth by making access to goods and services more affordable.

And that brings us to the real problem of having markets that are exclusive.  Exclusive markets not only support relative poverty and the uneven distribution of wealth but exacerbate it.

Because of their relative lack of access to companies who are able to leverage scale economies, and because many of the markets in which the poor participate are not highly competitive, they pay more for the same goods and services than we do. And the gap is only going to get wider as time passes, unless we can start to build competitive markets in these communities and find far more efficient ways to serve their populations.

For Ayllu, then, helping social enterprises scale is not simply about bringing great ideas to more and more communities.  It’s about helping to create competitive, efficient, and INCLUSIVE markets that will both help lift families out of poverty and also narrow the wealth gap.  That’s a cause worth fighting for.

Public Speaking this Week

I’ll be speaking this week in Atlanta with Gray Ghost Ventures and at the Economic Self-Reliance Conference at BYU in Provo, Utah. If you’re in the area, let me know!

New Video of our Vision!

 

Nov. 3 in Atlanta: You’re invited! How to Scale…

How Microfranchising can Scale Social Enterprise and Microfinance Institutions

• Tuesday, November 3, 2009
• 6:30pm – 8:30pm (6:30-7:00 Registration and Reception; 8:00-8:30 Program)
• Location: Fisher & Phillips LLP – 1700 Resurgens Plaza, 945 East Paces Ferry Road, Atlanta, GA (see parking and Marta directions below)
• Cost: Non-students: $10, students: free. You can make your payment at the registration table by cash or credit card. Online payment will be provided soon.
• RSVP: Please RSVP via Facebook (http://www.facebook.com/event.php?eid=182040996356) or via email at scisyp@gmail.com so we can have a reasonable headcount.

Please join the SCIS Young Professionals and WAM Atlanta on Tuesday, November 3rd, for a global panel event, Beyond Microcredit: Can Microfranchising Scale Social Enterprises?  Ayllu Initiative, Social Venture Group of Gray Ghost Ventures and a microfinance professional from WAM Atlanta will lead an active discussion to determine the role of franchising in scaling productive activity at the bottom of the pyramid.

About Ayllu and Melissa Richer:
Melissa Richer is Executive Director of The Ayllu Initiative, a US-based ‘hybrid’ nonprofit whose purpose is to scale social enterprise, bringing market-based solutions to poverty into new markets. Specifically, Ayllu will group together social enterprise ‘microfranchises’ and work with microfinance institutions to create product offerings for these microfranchise clusters.  Melissa currently lives in Brazil, where Ayllu is launching a pilot program in collaboration with local organizations, microfinance institutions, and communities.  Melissa previously worked for Ashoka, an organization that supports social entrepreneurs who solve social problems in innovative, systems-changing ways. Melissa is a native of Philadelphia and a 2007 graduate of Duke University.

About Arun Gore, Managing Director and Principal, Gray Ghost Ventures Social Venture Fund
Arun Gore comes to social venture capital investing after executive roles in information and communications technology companies. Arun has supported Gray Ghost Ventures with financial, market and industry evaluations of Indian investments as well as the governance of its existing portfolio companies. In addition to this, Arun has run a consulting practice since 2006, which includes managing joint ventures for T-Mobile, establishing Indian operations for US firms and promoting private equity investments for start-ups. Arun previously managed market operations, budgeting, vendor financing, and streamlined operations for T-Mobile USA.  Before joining T-Mobile, Arun led the international operations of SAI Inc., an energy and oil field supplies company. Arun has a BSc Science from India, a BS in Accounting and an MBA in Finance from the US.

About Social Venture Group of Gray Ghost Ventures:
GGV’s Social Venture Group is a for-profit social venture capital fund capitalized by investment partners committed to its vision for social impact investing. They invest in social enterprises internationally.

About WAM Atlanta:
WAM Atlanta is an organization devoted to assisting and promoting micro-entrepreneurs and microfinance initiatives while also advancing and supporting Atlanta women working in microfinance and microenterprise development through education and training, by promoting leadership opportunities, and by increasing visibility of women’s participation and talent in microfinance.

Announcing Ayllu-Aliança Partnership

Ayllu is thrilled to announce partnership with Aliança Empreendedora, a Brazilian organization that creates opportunities for microentrepreneurs. Together, we are launching a 12-month pilot in Curitiba, Brazil.

How it Started:

Not too long ago Melissa (Ayllu Founder) and Rodrigo Brito (Aliança Founder) sipped coffee on a bustling Sao Paulo corner. It was June 2008 and they’d met through Ashoka – Melissa, then an Ashoka employee, had helped coordinate an event in Brazil, and Rodrigo was featured at the event as a Fellow well-known for his work pioneering low-income markets in Brazil. Rodrigo encouraged Melissa to consider launching Ayllu in Brazil. One year later she moved to his hometown, and the rest is history. Ta-da partnership!

Why did we partner? The core problem that Ayllu seeks to solve is how difficult it is for social enterprises to be sustainable by reaching economies of scale – to survive, they must have access to enough volume of supplies and customers that prices drop and they can make a profit. The only way we can create access to economies of scale is by partnering with organizations that have access to it. Aliança is one of these organizations. From Aliança’s perspective, Ayllu creates access to outside market-solutions that can create new jobs and tackle community problems. Additionally, Ayllu is building a microfranchising ecosystem, a high-potential market for the poor in Brazil that has lacked a catalyst thus far.

Aliança is one of the best run and fastest growing nonprofits we have ever come across. Not only does Aliança have partnerships with platforms like Walmart and Banco Real (one of Brazil’s largest banks), but it is also structured to incubate other initiatives that are in line with its mission. All of these initiatives happen to be founded by people under 30 years old (Rodrigo is 27), so the partnership will provide a great peer mentorship community as well.

Organizational Background:

Aliança Empreendedora was founded in 2005 and its purpose is to include low-income entrepreneurs in the economy. Aliança specializes in the ‘points of access’ a poor entrepreneur needs to succeed, such as access to credit, training, peer support, distribution and supply channels, product design. Aliança creates access through cross-sector partnerships with the government, private sector (i.e. Walmart), and the social sector. It also nurtures complimentary, independent efforts that serve microentrepreneurs, including Impulso (microcredit), Solidarium (distribution to mass markets), SAGA (entrepreneur training and support), and now Ayllu (social enterprise & microfranchising). Learn more about Aliança in the videos below.

The Ayllu Initiative was founded in September 2007 and its purpose is to scale market-solutions to poverty. Ayllu is a ‘market maker’ that introduces existing, mature social enterprises to new markets using ‘microfranchise clusters.’ Ayllu lowers the transaction costs of market entry by connecting social enterprise (through local partnerships) with resources like capital (microfinance), managerial talent, and sales channels. By catalyzing microfranchise ecosystems, Ayllu makes it possible for high-impact social enterprises to operate more efficiently and grow exponentially.

The Partnership: Pilot Launch

Aliança creates opportunities for low-income entrepreneurs to participate in the economy and Ayllu brings business opportunities to these entrepreneurs. Aliança will incubate Ayllu through access to its infrastructure, communities, and cross-sector network. Ayllu will take the lead on project execution. The partnership will be part of Aliança’s partnership with the local government to bring 20,000 low-income entrepreneurs from Curitiba (1% of population) into its network in 2010.

The 12-month pilot is broken down into 2 phases: Pilot Development (first 6 months) and Pilot Launch (last 6 months). Ayllu and Aliança will select 3 social enterprises from outside markets, and coordinate their entry into 3 Aliança communities in the city of Curitiba. It will do this by introducing at least 15 total microfranchises in pilot communities.

During the first 6 months, Aliança and Ayllu will select ‘semifinalists’: potential communities and potential social enterprises. Community needs (problems) and demands (what they want to change) will be identified. Ayllu will conduct a feasibility study for each social enterprise in each community. In month 5, the 3 final social enterprises and 3 final communities will be selected.

During the next 6 months, Ayllu and Aliança will launch the pilot. Aliança will recruit a group of potential microfranchisees and the social enterprises will select microfranchisees from this group. Ayllu will work with Aliança microfinance arm, Impulso, to launch a microfranchise portfolio. It will work with Aliança’s training arm, SAGA, and social enterprises to prepare the microfranchisees for launch. After launching, the microfranchisees will receive Aliança’s continued support in management, credit, and sales.

Initial Findings: What does Social Enterprise look like worldwide?

Evan Chen joined our team last spring and is an undergraduate at the University of Pennsylvania’s Wharton School of Business. He has spent the last 5 months mapping out social enterprise globally. This blog post is the first of several in which Evan shares and reflects on his findings.

The purpose of my research, which is still ongoing, is to map out social enterprises around the world.  Since Ayllu’s mission is to scale the most high-impact market-solutions to poverty, we needed to understand how we fit into the social enterprise space. While the list I’ve created is not exhaustive, my research creates the foundation for Ayllu to understand social enterprise from a high-level. Over the summer while I was back home in the Philippines, I scoured possible information sources for high-performing businesses that make money by making a difference in poor communities.

I developed a system to categorize social enterprises and used these categories to identify trends. We paid attention to mission, target demographic, location, maturity, growth models, and microfranchise potential. The list also maps technologies for the poor and Multinational Corporations (MNCs) that use microfranchising in low-income markets. When I began researching, we wondered how Ayllu’s definition of social enterprise stood up to the reality of what’s going on in low-income markets. Our definition was: a social enterprise is a profitable business that solves a root social or environmental cause of poverty.

After consolidating the first 3 months of research, I’m glad to report that Ayllu’s definition of social enterprise holds upwell. I was able to compile a list of 90 social enterprises (not including MNCs and other tracked entities) and our findings reflected the exponential growth in social enterprise in recent years.  We identified market-based solutions to a range problems such as healthcare, food security, water, sanitation, energy, and internet technology The most mature and common social enterprises were in the areas of healthcare (23%), clean water (14%), and renewable energy (18%). These three industries seem to be making a lot of progress in entering low-income markets.

Given the range of social enterprises, our next question to answer was: How many of these social enterprises could be scaled through a microfranchise model? Microfranchising is the systematization, packaging, and replication of a model. For example, Vision Spring has been using its “business in a backpack” concept to provide quality eye care through local women who sell reading glasses. Many social enterprises are still early-stage and are not yet expanding, however 22% of the social enterprises we identified currently use microfranchise models to scale. I found that 75% of the social enterprises we mapped had developed, were planning to develop, or could potentially develop microfranchise models.

In literally “mapping out” social enterprises, I found that 44% of the solutions were based in rural communities, another 32% had a presence in urban and rural communities, and 18% had a presence in only urban communities. Why are there so many social enterprises in more remote communities? Although rural-urban migration is a major problem in developing countries, why is it that we haven’t seen so much innovation and concentration in the urban market? It is possible that rural communities are easier to impact more quickly, or that because they have less potential access to goods and services, they are targeted… Why do you think this is so?

India dominates the social enterprise field by leaps and bounds. 24% of the social enterprises on our list are operating solely in India. Why is India so far ahead? What cultural, regulatory, geographic, and socioeconomic factors may explain this? Other high-potential markets that caught our attention are Mexico, Brazil, the Philippines, Thailand, Ghana, East Africa, and South Africa.

While my research points to the viability of social enterprises, their ability to traverse borders and continents, and the frequency of microfranchising as a scaling tool, there are many more questions that beg exploration. As Ayllu digs deeper in this area, we will continue to share our questions, learning and reflections with you. We also hope to publish the findings of our market research and pilot launch next year.

If you have questions, comments and suggestions to help Ayllu improve our market research, leave us a comment below!

*This Research is ongoing and is not publicly available. If you’d like to participate, we’re interested in collaboration with research institutions and invite you to get in touch!

Twitter Colleagues: Melissa & Mike meet in Person for 1st Time

In April after 1.5 years of trying, and failing, to launch a good website probono, twitter changed Ayllu’s ‘life.’ We learned how to use wordpress and in reading ‘how to blog’ articles, Melissa saw that twitter seemed important, so she created an account. Then everything changed. We put out good content so people ‘retweeted’ (forwarded) it. Soon we had lots of followers and our reputation grew. We were featured on other blogs and later asked to write for Beyond Profit Magazine and NextBillion. Most notably, twitter introduced Mike (@soccapital) to Melissa (@melissaricher). Mike began volunteering virtually…this is the story of how we met online and in person!

We strategically asked tourists and NOT New Yorkers to take this photo in Grand Central.

Mike Shoemaker:

I work everyday with people I’ve never met in person.  It’s entirely common in today’s world of virtual commuters and geographically dispersed workforces. You have virtual introductions over phone or email, followed by conference call after conference call, email after email. If you’re lucky, one day you may finally have the opportunity to meet face-to-face.  In the meantime, you better figure out how to make it work.

Meeting Melissa at The Feast, however, was a different scenario altogether.  We didn’t meet through a mutual acquaintance or based on the recommendation of a friend or colleague. There was no org chart or business process or other association forcibly linking us together; no “excuses” for having spent hours on the phone and over email discussing Ayllu and its direction. In true 21st century style, we met through Twitter based solely on a mutual interest in bringing social enterprise to communities around the world.

I’m making it sound very idealistic, but the great irony here is that  there were no external forces stopping our New York “reunion” from being a total disaster. I could have turned out to be an overbearing control freak, or I could have found Melissa to be entirely neurotic, and there would have been nothing stopping us from parting paths right then and there.

Obviously that didn’t happen. In fact, it couldn’t have been more opposite. We didn’t miss a beat, picking up our first in-person conversation right where we had hung up the phone a couple of days before, and we spent the next several days charting out Ayllu’s course for the coming twelve months.

All in all, a pretty amazing experience.

Melissa Richer

Mike flew into NYC for The Feast Conference, and then we worked for 2 days on consolidating the progress that was made in Brazil into a pilot and pitch. Leading up to the big meet, lots of people had expressed skepticism. I’ll admit, the night before he arrived I didn’t sleep very well; I tried to ignore doomsday scenarios flashing through my head (this actually happened: In one dream Mike had a Darth Vader costume and said ‘Melissa, I am your Failer’).

Actually, meeting was easy. I felt like a high roller at The Feast with Mike by my side, even without any dice (funding) yet. The next 2 days we got to imagine ourselves as corporative executives in the conference room overlooking South Manhattan that was graciously provided to us by a Board Member. This high-rise office with highly awesome uniball pens helped us think about high-impact change.

We had a blast working together – both of us like coffee and pacing, and I had a glimpse of what it would be like if I had a full-time business partner (it felt like going from stone age productivity to space age).

If you don’t make friends on twitter, you should. Mike and I met so many people at the feast who we know by avatars (twitter pictures) and twitter names (like @montero, @endeavoringe, @beunreasonable). I wonder what twitter will serve up next?