Skollar Catch-Up: Shawn Smith on “the valley of death”

This is the first in a series of posts featuring the current work of Skollar alumni. This post reconnects us with Shawn Smith, generic Skollar and SBS graduate from 2009-2010.  You can follow all his latest thinking on twitter.

Life has moved quickly since leaving SBS, and it’s very hard to believe I just completed the Skollar program in December.

On landing back in Vancouver, Canada, I accepted a lecturer position at the Beedie School of Business at Simon Fraser University, contributing to undergraduate social innovation programming. I’ve also worked on a variety of consulting projects through the Equilibrium Partnership, a small social impact consultancy launched by a group of SBS classmates in 2010.  We’ve been reasonably busy, and our work includes contributing to the well received Impact Investors Handbook released this spring by CAF Venturesome, work with Earth Institute and a large mining client in Mozambique, and other more policy related work. My current engagement with this team involves leading planning for a proposed social innovation centre to be located in Vancouver. My long-term ambitions seem to involve an avocado farm in Ecuador, but that’s  a longer story for another day.

What I want to reflect upon today are some trends and challenges I’m noticing in the seed stage funding space. Through my continued work on the Board of Global Agents and Education Generation – two organizations I started before attending SBS – the so called “valley of death” stifling early stage entrepreneurs tackling global poverty has been top of mind.

Let me explain:

Global Agents is currently accepting applications for our 2011 Global Catalyst Initiative (GCI). This is a great opportunity for one of two $40,000 partnerships to accelerate your idea; this is meant to support the testing and development that is so critical at the early stages of a venture, or as we say, to get you from “pilot to proof of concept”.

This initiative is intended as a small part of the solution to a broader problem. As impact investing matures, we’re beginning to see a crowd gather at the upper end of the pipeline, with investors looking for market or blended returns from more established ventures, or taking relatively sure bets on high impact later stage organizations.

However outside a few exceptions (microfinance the largest), deal flow is tough, and investable enterprises and entrepreneurs are few and far between. One of the reasons – impact investing lacks a well developed network of seed stage funders and support to efficiently identify and accelerate high potential new ideas.

Global Agents’ GCI is in part a response; while investors struggle to deploy dollars, start-up ideas languish, with entrepreneurs unable to garner sufficient support to prove their idea can work. Traditional start-ups know this as the ‘valley of death’; you garner early energy and support to launch, but just run out of money and time before you can work out the kinks.

We believe that providing a relatively small amount of funding and support at this critical stage allows time to challenge assumptions and test models, before trying to scale. Our goal is to help move high impact projects from pilot to proof of concept, and on to larger funders. We want more projects across that ‘valley of death’, more groundbreaking ideas reaching their potential, and more inspiring entrepreneurs given room to grow.

There are a lot of reasons why its tough for investors to invest in earlier stage organizations, not least of which are the naturally higher risk at this earlier stage, asymmetric or incomplete information and the cost of due diligence and management for small investments. We might argue that a fear of failure, despite much talk of embracing it, also plays a role. Interesting models such as Village Capital are evolving, and after a very lively seed stage session in 2010, we see SOCAP 2011 shifting some of its attention to entrepreneurs and early stage ideas this September in San Francisco.

Launching in 2010, we are testing and evolving our own model, while building pipeline partners and making connections with later stage investors. We hope to play a role in finding these solutions, and we invite you to join us – either as an entrepreneur through the application below, a funder with an interest in connecting with early stage ventures, or just someone with the knowledge and energy to help us learn how to make this work.

More information on the 2011 Global Catalyst Initiative can be found here. Applications are due August 15th:

To be considered, applicants must fit the following criteria:

  • Global Agents to be a majority or significant early funder
  • The venture has been operational for no more than two years, and has an annual operating budget of under $150,000 USD
  • Projects are beyond the idea phase, having at least begun to pilot their idea
  • The organization is dedicated to monitoring and measuring social impact
  • If applicable, local community has been closely involved in project development and implementation
  • You or a co-founder are prepared to work full-time on your venture, with the ambition to have impact on a global scale

Please note:  Global Agents for Change is a registered Canadian charity, and as such is only able to spend money on our own projects in pursuit of our approved charitable objects. GCI funding is not invested capital (debt or equity), nor a grant – GCI partners act as our legal agents in the field, implementing an agreed set of activities, paid for by Global Agents funding.