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Innovative Finance Models - How do we finance our model (Funders: What are…
Innovative Finance Models - How do we finance our model
Streams & Assets - What do you already have?
3rd party payer :check:
think about who else you are creating value for?
can be gvt, corporate, non-profits investor, foundation
:checkered_flag:
Outcome payments:
payments for achieving a goal. E.G - Improve the maths and science ability in a community and get ex payment
Jeanne - Sanlam interested in maths education. Could we package a program for them for Funda Maths
Subsidising the sale of a product or service
What are the motivations for the 3rd party to give something away
e.g Development mandate - how would subsidising be more effective?
Business mandate - how could paying for this product or service help businesses expand or grow into new markets?
Data :check:
What type of data are you collecting for your business.
key to figure out markets
Consulting :check:
provide knowledge and services to other organisations
Can you create speciality knowledge that other organisations can leverage?
Consulting needs to align to your
impact thesis
Distribution Channels :check:
Can you act as a distribution channel for another company?
eg Colalife
make sure that you are providing the same messages (no mixed message)
Education and training :check:
what other segments of a population can you work with?
unemployed youth to run informal learning environments
:explode:
Potential: Scientific and engineering process. Sell this process
Potential: Learnership for unemployed youth who run informal learning environment. How could you use technology to prove the work history for someone.
Subscription model
:check:
Can you sell a monthly / holiday program for the long term?
creating a payment option for a good or service
How do you sell your product / service in a way that opens up to new markets
Insurance
How can you make revenue out of making sure something doesn't happen (reducing risk) - e.g Lumkani
Revenue sharing :!?:
How could you build a business sharing revenue with another business using a different business model?
e.g azuri + zuku created a pay as you go satellite TV package targetting households without electricity in the kenyan market
Leasing :!?:
How could you lease out part of your building / equipment / other assets to other businesses to create other revenue streams?
Due Diligence
Potential: Bursary providers
Enterprise development :fire:
Are you working with local organisations that might be interested in funding or that corporates would be interested in putting into supply chains e.g
Edge Growth
:!?:
Funders: What are different types of funders?
Impact investors
Key: Impact thesis
Banks
Potential: Could we use debt to launch our programs
Corporates
CSI / Grants / BEE capitals / SED funds
Catch a fire / for good- marketing help / auditing help :checkered_flag:
Foundations
Government
Never have government as your first customer
consider playing with the local and municipal governments
:!?: consider identifying municipalities that are doing purely in maths and science and pitch them to informal education
Department of Small Businesses: Structure as a for profit and make minimum turn-over and you will get funding.
Development agencies
typically want to work with orgs that already have some funding that they can leverage
Institutional Investors: Don't get out of bed for less than $20 mill. E.G pension funds are particularly keen on long term benefits.
Crowd funding
5 types -
how could we leverage this?
:fire:
Peer to Peer
Equity
Hybrid
royalty
donation
reward based
Databases
Impact Base
Impact Case
Impact Alpha: daily email tracking investments on impact investing
Platforms
Devex
convergence - blended finance
USAID
Academic centres:
Bertha centre e.g
Intermediaries & consultants
key first steps:
identify blockages and where values are sitting?
exploring opportunities
risk/ return/ impact profile
when speaking of Risk/Return/Impact changes the traditional risk return model into a 3 dimensional model, the focus of which is to maximise all 3.
Use this tool to assess that your RRI aligns with the RRI of your funder.
::explode:
multi-stakeholder partnerships
involves pulling several types of funders
e.g Gavi Model
Acre Africa: worked with MPesa, Seed companies to provide crop insurance for small holder farms.
Business model innovation
M-Pesa:
the Pay as you go model, e.g SolarZuku
M-Kopa:
solar as a service.
Tugende:
lease to own model
Sanergy:
use pay per use, use micro-finance and sell on the waste to organic fertiliser
Lendable:
debt platform focused on PAYG focused models. They create a secured note / structured note.
Real & Perceived Risks
Real Risk:
Are risks that actually happen or have happened in past. We are able to use data from the past to price the risk
Perceived Risk:
Misconceptions about what the real risk is. examples are of Micro-funders.
Perceived Risk and Impact Axis:
Funding Structures
Impact risk:
what if the project doesn't have the impact that is projected.
Risk mitigation funding structures
Outcomes Based Contracts:
Payment by results
Results based finance
Results based aid
Advanced market commitment
Conditional cash transfers
Pay for success
Impact Bonds
Infrastructure + bonds
Inducement prizes
Quasi-Equity Instruments
Social loans
Social Milestones
instead of financial milestones use social milestones to a grant debt or equity agreements.
Early Stage Risk:
How viable is this project?
Risk mitigation funding structures
Venture Philanthropy
:fire: Omidiar, LGVT
Convertible grants
- can convert to grant or debt.
Scalability Risk
: what if the innovation doesn't scale?
Risk mitigation funding structures
Incubators
Innovation lifecycle funding e.g DIV, tonic network
Manager Risk:
Generally perceived risk
Guarantees:
large orgs with a strong balance sheet provide the "insurance" in the event that a project / fund fails
Blended finance:
focuses on leveraging funds
Liquidity Risk
: what if we can't get our cash out?
Risk mitigation funding structures
Patient capital
secondary market -e.g IIX and the Womens Livelihood Bond.
Exit Risk:
can't get money out.
Venture Debt