[p2p-research] The Role of Social Stock Exchanges

[Ryan]

  Sent to you by Ryan via Google Reader: The Role of Social Stock
Exchanges via Tactical Philanthropy by Sean Stannard-Stockton on 12/8/09

This is a guest post from Alex Rossides, the founder of Growth
Philanthropy Network, the organization behind the Social Impact
Exchange. Alex’s post is a follow up to my post last week profiling the
Exchange and my post yesterday envisioning the future of social stock
exchanges in the year 2033.

By Alex Rossides

Thanks to Sean for envisioning the future of social stock exchanges and
for his recent write-up regarding the Social Impact Exchange as an
early form of such exchanges, developed in partnership with Duke
University and Robert Wood Johnson Foundation.

Sean helped clarify a key difference between for-profit stock exchanges
and social exchanges – in the social sector there is no price per share
and stock is not exchanging hands. But, the broader analogy holds of an
exchange that matches buyers and sellers i.e. investor and nonprofit
organizations with an explicit promise of standards and transparency.

Exchanges in the for profit sector are the focal points for capital
marketplaces. One primary function of stock exchanges is to enable the
efficient flow of capital to growing companies so they can finance
their economic activity. The social sector does not currently have
exchanges to enable a more efficient transfer of capital to scaling
nonprofits to finance their social initiatives.

As Sean pointed out, the member-driven Social Impact Exchange is
designed in part to help play this role in the area of growth capital.
It has a number of collaborative funding venues to connect high-impact,
growing nonprofits to funders, based on transparent investor
information, such as its online investment platform, National
Investment Fair and Business Plan Competition to be held at its June
2010 Conference.

The Exchange is designed however to facilitate the exchange of more
than just dollars. Its two other equally important goals are to (1)
serve as a learning community and forum to develop and share knowledge
on scaling, and (2) serve as a common ground where members can help
build the field of scaling together. The focus on more than capital is
an example of how the unique qualities of the social sector may help
create social stock exchanges in the future that differ from their
brethren in the for-profit sector in ways that could be better suited
to the goals of social progress.

In the social sector, exchanges can be built with a focus on
collaboration and networks that compound our learning, magnify our
financing and accelerate the development of marketplaces that drive
social progress. Exchanges can become true community resources, that
provide opportunities to jointly build necessary field infrastructure
and enable organizations across the sector to work together to solve
our toughest social problems. They can combine the action oriented
transactional nature of exchanges, with joint knowledge and
infrastructure building to create social sector marketplaces.

The Social Impact Exchange is an early attempt to do just that. Its
structure consists of working groups where members can work together on
important field initiatives such as developing investment standards for
scaling organizations, supporting the work of growth intermediaries,
identifying models that work in different issues, sharing knowledge,
and creating new products and distribution channels for scaling which
the field can leverage. It is designed to be a cross-sector initiative
so that we all have a hand in creating a more effective marketplace for
financing positive social change.

Social stock exchanges, whether they are local, national, international
or issue based, hold the great promise of combining collaborative,
mission driven activities with marketplace structures to enable
philanthropic capital to flow towards its greatest good. By 2033 let us
hope that philanthropic capital distribution will be more results
driven, based upon quality due diligence and business planning, better
financial reporting, greater transparency, shared standards and
enhanced accountability.

But, by 2033 social stock exchanges could also be nexus points for
marketplaces where large numbers of funders aggregate to find
high-quality organizations that they collaboratively fund in amounts
large enough for nonprofits to execute multi-year strategies. They
could be environments where business models of capital and information
intermediaries thrive because they can more effectively broker capital
rounds and information services, and where nonprofits that qualify can
finally attract capital efficiently in one place based on the impact of
their work.

To get there will be hard work and slower than we’d all like, but by
working together we have an opportunity to realize a vision that
enables us to make progress on our most difficult social problems and
hopefully improve the lives of millions of individuals.

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