Friday, April 15, 2011

On-Ramping to the Next Economy: Financing Innovation, Sustainability, and Resilience

Today's columnist is Stephen Huddart from the J.W. McConnell Family Foundation. Stephen writes:
According to one feisty audience member at a conference I spoke at in Phoenix recently, growing US indebtedness and a weakening dollar will result in the US dollar losing its role as the world's reserve currency. As other countries elect to price their transactions in Euros, gold, or something else, they will dump their unwanted dollars, driving the greenback even lower. Consequently, he insisted, it's time to think about creating local and regional currencies, along with the militia we'll need in order to protect ourselves when the US government goes bankrupt.
This cheery scenario was offered at the Resilience 2011 conference, where Michele-Lee Moore and I were presenting a paper-in-progress about the role of intermediaries in directing grant financing to local implementation of social innovations. We contrasted this with an ecosystem approach, where multiple funders and advisors have access to an open platform that supports innovation within a particular domain - be that geographical (e.g., Arizona), thematic (e.g., healthcare), or both.
Without subscribing to the alarmist and defeatist rhetoric of our commentator, we can agree that resilient local economies are an important element in any innovation ecosystem. This point was underlined at a roundtable I attended at the David O'Brien Centre for Sustainable Enterprise at Concordia University last week, where students and faculty spoke enthusiastically about their work on environmentally sustainable technologies ranging from micromachines to "inward-looking architecture" (an age-old concept that offers material, space, and energy gains by building around central green spaces or atria). The discussion took a despondent turn however, when the subject turned to financing. The consensus view was that the innovations they are working on are hampered by a lack of access to investment capital. "We have the ability to generate solutions," said one participant, "but there's not enough specialized funding to properly test or take them to scale."
This may be about to change. A team based at MaRS and led by Adam Spence is developing a Social Venture Exchange (SVX) - a concept also emerging in the US, the UK, Singapore, South Africa, and elsewhere - that would provide a platform for capitalizing social enterprises. To be listed, projects would have to meet financial as well as social or environmental criteria.
As Mr. Spence explained to me recently, such exchanges can be readily scaled to support local or regional economies. Eventually, they would form part of a network of similar exchanges, allowing specialization to occur - a Vancouver-based exchange could carve out a niche around open source ventures for example, while Montreal might develop particular expertise around green building technology. With a common software platform, and shared metrics on social and environmental impact, all nodes in the network will be able to speak to one another.
It is interesting to note how the Keystone Off-The-Shelf (KOTS) project introduced in these pages last year (Bailetti, 2010) and updated in this issue could help to populate such an exchange with a flow of promising ventures. As an intermediary with the ability to catalyze and add capacity to an emerging innovation ecosystem, KOTS represents a promising innovation in its own right. Its first application - Carleton Entrepreneurs - will be of interest to universities, venture philanthropists, and intermediaries who seek to develop domain-level interventions. Add an open access, crowd-accelerated innovation platform like openIDEO, and it is possible to discern the outlines of a new set of economic relationships, harnessing collective capacity to turn our complex challenges into systems of continuous social innovation.
And where will the investments come from? Well, for many individual and institutional investors, blended returns that consider financial and social or environmental goals are preferable to those that consider financial return alone. Add "local" to that mix and you have a platform that should attract patient risk capital from municipalities, community foundations, universities, pension funds, and others with a stake in creating resilient, innovative local economies. In the final analysis, this movement depends on a commitment to making a collective effort to reshape markets in the public interest, rather than to a race to protect and monopolize benefits for a select few.
Establishing such market mechanisms as a means of creating more resilient local economies should be a priority for governments, and leaders in all sectors. In Canada, this work is currently being led by The Task Force on Social Finance, whose report on the subject is an excellent primer.
Alternatively, we could consider that militia idea.

No comments: