15 jan platform_for_inclusive_growth_and_investment

Bertelsmann Foundation
Study on Impact Platforms
OECD – Paris, January 2019
Benjamin Hebborn, Audrey Selian
1

Key Findings of our Platforms research
Our study of 150+ platforms (25% of which participated in a detailed online survey, 17 of which were interviewed in depth)
confirms that there is widespread duplication of effort, fragile business models, and similarity of value propositions. In
particular:
● Platform data is not shareable. Taxonomies for deals, impact metrics, and meta-groupings such as the SDGs are
inconsistent at best, and incoherent at worst.
● Platforms are not sufficiently interoperable. Only 32% of platforms responded ‘yes’ to having an Application
Programming Interface (API).
● Platforms are not replicable. 47% have custom built technology, and only 32% have a licensing model.
● Platforms are not generally viable. 53% cannot cover their operating expenses, and 61.5% are funded by grants.
4

Key Findings - continued
Despite these observations, the survey highlighted a desire for increased collaboration, especially in the areas of
technology, pipeline development, and compliance.
● Collaboration is a core value. The survey response rate of 23% was significantly higher than industry average of 10-
15%, suggesting a willingness to work together.
● Collaboration is highly desirable. A significant majority of respondents (91%) indicated a willingness to explore
deeper interoperability.
● Collaboration is highly actionable. In addition to existing licensors, 32% are leveraging external platform data, and
50% are preparing to, or willing to use it
5

Key Findings - continued
6
The survey results suggest that platform stakeholders
understand the altruistic and commercial imperative to
collaborate, but are functionally or financially incapable
of advancing this understanding.
Market fragmentation is not only ineffective, it is
unconscionable; given the scale of the challenge before
the world today.
Regardless of which path to remediation is chosen, the
desired outcomes are essentially the same, moving us
more rapidly toward an effective approach to the SDGs
through:
● Increased innovation liquidity
● Increased deal liquidity
● Increased operational effectiveness throughout
the sector
Nearly without exception, platforms surveyed are
constrained by relatively outmoded ideas of data
ownership, and are at imminent risk of
disintermediation.
Further, underperforming and failed platforms
evidence a number of consistent patterns, including:
● Transaction-fee models cannot achieve sufficient
volume, despite having solved the complexities
of regulation and compliance.
● Contextually focused membership models cannot
achieve sufficient volume to meet the high costs
of curation
● Universal impact finance platforms underestimate
trust as the essential currency for achieving
efficient scale in an online-only platform.

Almost all impact platforms are
attempting to solve for the difficulty
of finding
Data, Capital, Deals or Partners
7

8
Summary
Statistics
Of the 35 platforms that responded,
● Over half (18) operate globally, with the remainder spread among major
regions
● Over half (19) focus on financial services, and 16 cover all 19 sectors
reviewed
● They have very similar value propositions that can be summarized in just
a few key words, and very similar perspectives on the problems they
address and what makes them unique.
● Three quarters (76%) are not yet live or younger than 5 years
● Over half (18) have fewer than 1,000 users each, only 3 have more than
100,000 each
● Most have raised less than $1M to fund their development and operations,
mostly from grants
● Just 9 platforms account for all of the $2.7B in capital moved

Platform age is youthful
● Three quarters (over 76%) are not yet live or
younger than 5 years
● 18% are between 6 and 10 years old
● Among the not-yet-live ones or those under 5
years old, nearly 70% are willing to partner or
interoperate with others
● Those that have been around longer are not
more likely to include APIs
9
n=35

Users levels are relatively low
● About 60% (18) have fewer than 1,000 users
each, only 3 have more than 100,000 each
● Of the largest systems (VC for Africa, Gust, TBN
or Delio), the willingness to explore partnering
and collaboration is clear
● All four of these employ for-profit structures
● Systems with between 1K - 10K users had the
most to say about the blending of impact &
finance as competing priorities
10
n=31

Money raised is largely under $1M, mostly from grants
If yes, what type of capital have you raised?
11
Have you raised funding for the development of your platform?
If yes,how much?
61.5%
44%
76.5% of respondents raised
capital to fund the development
of their platform.

Prevailing
Patterns
● Corporate forms span the spectrum from non-profit to finance-first
structures like C-Corps, and many signal a social mission
● The majority of platforms focus on entrepreneurs & investors, then
accelerators
● There is no standardized language about what platforms do and how
they do it.
● Motivations and value propositions largely overlap, as does tech
functionality
● Business models are mostly Impact first, and service-based
● Raising financing is seen as biggest challenge, followed by community
engagement
● Majority of platforms are not earning enough revenue to cover their
operating costs
12

13
Corporate Forms are a mix
● Easily half of the platforms use for-profit
structures, and of those the majority signal public
benefit (PBCs, Co-Ops, and equivalents), are
hybrids or have the flexibility to anchor a social
mission (LLCs and equivalents)
● Irrespective of entity type, nearly all platforms
are addressing a perceived lack of impact
investors or investment pipeline
● Only a small number of classic, ‘finance first’
structures (C-Corps), and not surprisingly those
tend to be associated with businesses that have
raised VC
● The only cooperative structure surveyed is based
in W. Europe
n=34

Shared language is missing
● Over 35% of respondents felt the need to specify
in their language what they do using different
terms than those offered in the survey
● There is a high level of idiosyncrasy in narrative
and language aka. “Snowflake syndrome”
● Many respondents referred to a mix of
aggregation, marketplace and advisory services,
some mentioned fund structures of one or
another type
14
n=34
Marketplace-as-a-
Service

Raising money for platforms ...
● Over a quarter of people opted out of these
questions, suggesting it’s a sensitive topic
○ 64% have raised under <$1M
○ 28% have raised between $1M and $10M
○ 8% have raised more than $10M
● 94% of those who have built their own bespoke
technology have raised outside funding
15
n=34
Have you raised funding for your platform?
76.5%

… appears to be the hardest part.
● Finding financing is by far the more challenging
area of activity for most of these platforms;
technology seems to be the least of their worries.
● Engaging / curating community and maintaining
databases are two additional areas of relatively
higher concern.
16
n=34
37.5% 33%

17
Business Models are mostly service-based
● The half of platforms are impact first (17), and
another 9 are both impact and finance focused
● The highest revenue generating business
surveyed is running on a subscription/license
model, and is not an impact platform per se
● Business models are leaning towards service
models, with only 6 pure marketplaces that are
presumably transaction-fee based
○ That said, smaller systems (under 100
users or members) appear to be relying on
the transaction fee model
● A smattering of platforms are integrated with
banks, family offices, private equity firms,
advisory firms, or adjacent businesses
n=34

Platform revenue usually does not cover Opex
● Nearly 75% of platforms surveyed do not
generate enough revenue to cover their
operating costs, which raises serious
questions regarding their sustainability
● Those who do generate enough revenue
to cover costs appear to operate in the
sweet spot of between 1K - 10K users
18
73.3%

● Only 32% of those surveyed operating active
platforms currently have the capacity and plan
to license their technology
● Relative majority of respondents stated that
their platform is not licensed to others. A
number of respondents are either working on it
(9%) or thinking about it (24%).
● Focus of platform development tends to be
focused on in-house needs, rather than potential
synergies with other actors
Limited licensing limits spread and adoption of tech
19

Why
platforms fail
Our interviews revealed three key
patterns of platform failures
● Transaction-fee based models solved for the regulatory and compliance
issues, but failed to achieve the volume needed for sustainability
● Proprietary topical / geographic networks fail to achieve the volume of
users to make membership based models work, and confront high costs
for curation
● Field-of-Dreams builders overestimate the readiness by market actors to
form trusted relationships using online technologies.
20

Partner
Potential
● Perceptions of the competitive space are skewed and un-nuanced
● Technology is key to what platforms do, and about 50% build their own
technology, but there is openness to outsourcing.
● Top choices for outsourcing are tech itself, regulatory compliance and
customer service, suggesting some avenues for mutual benefit
● There is interest in using data from other platforms, and many are already
doing so
● Perceived benefits from collaboration include sharing investors and data.
● Among survey respondents, all but a few are interested in learning more
about a collaborative consortium
21
So to conclude, with good news…

Thank you!
Questions? Contact us:
benjamin.hebborn@bertelsmann-stiftung.de or
audrey.selian@riantacapital.ch
23

Geographic focus is mostly global
25
● Over half (18) operate globally, with the
remainder spread among major regions
● A third of respondents (11) operate in the
Americas (where 36% of total impact AUM is
allocated*), another third respondents (11)
operate in Asia (18% of total impact AUM*), and a
third of respondents (11) operate in E. and W.
Europe (21% of total impact AUM*)
● About a quarter of respondents (9) operate in
MENA and SS Africa (17% of total impact AUM*)
n=34
* GIIN Annual Impact Survey 2018
53%

Value propositions are similar
A word cloud of most frequently used terms in survey responses reveals a strong congruence and similarity in the
language used to articulate ‘value proposition’ or USP amongst the platforms. This is provisionally a good sign.
26

Sector focus is comprehensive
● 56% (19) focus on financial services
● 47% (16 of 19) are totally sector agnostic
● Of those with existing Application Programming
Interfaces (APIs), over 70% take a multi-sector
approach;
● Of those with no APIs, nearly 70% are focused on
financial services.
27
n=35
56%
47%

User profiles are typical
● A relatively uniform view of ‘who matters’
prevails in these platforms: entrepreneurs and
investors, followed by accelerators
● It is interesting that only one third of platforms
include development financiers and government
agencies in their systems, when these are by far
those positioned to deploy the most capital at
scale
● “Other” included corporates, NGOs, service
providers, investment managers, indigenous
leaders and tribes
● The brokering of technical expertise / assistance
is an unmet need among the platforms surveyed
28
n=34

“Do you build your own technology?”
● 47% of
Respondents
build their own
technology
● The dysfunction
we are trying to
solve for in the
Development
sector is
mirrored by us,
those who are trying
to solve the problem.
“Could you work without it?”
Technology is key to what platforms do...
29

… but are open to outsourcing.
30
● If outsourcing was an option respondents were
most likely to outsource tech development (29%)
followed by regulatory compliance (19%)
● Those who have not built their own technology
tend to be slightly more likely to be ‘impact first’
● For those who have built their own technology,
maintaining it is less a challenge vs. finding deals
and managing regulatory compliance
● Even amongst those who have built their own
technology, 50% have not built APIs
n=31

Are you interested in using data from other platforms or
databases?
Some already use APIs & data from other platforms
● Only 6% of those with APIs in place are not
interested in or using data from other platforms
and databases; all the rest are open to doing so
● Of those who ‘don’t know’ about APIs, the
majority categorize themselves as ‘impact first’
31

What could peer platforms bring you?
Number 1 concern about the future your platform :
Are you keen to learn
more about or
participate in a
consortium of
platforms working on
inter-operability?
32
91%

Key motivations are often overlapping
33
Marketplace Marketplace-as-
a-service
Platform-as-a-
Service
Membership
network
Consulting/
Advisory
‘Problem
being solved’
Duplication of effort; time
spent fundraising,
searching for deal flow;
lack of capital flow at
scale; financing gap under
$1M; ability to provide
service that banks can’t.
SDG financing Aggregating deal flow;
bringing actors together
that would otherwise not
cooperate; help
institutions manage digital
marketplaces; support
accelerators;
democratising capital;
transparency; meritocracy
Lack of awareness;
building equitable
economy
Sustainability challenges in
low-income markets;
building bridges between
phases of capital
requirement; education
and awareness building to
justify infrastructure;
access to business
mentors and online
resources
‘Unique’
Offering
Centralized repository of
critical business
intelligence data; 1st to
market w/ pre-IPO impact
ventures; investor-
focused; partnership with
big bank; impact method
dev’d with big 4; infra built
with BAFIN license;
crowdlending approach
raises accessibility
Brings together dynamic
ecosystem of
entrepreneurs, investors,
large and small companies,
non-governmental
organizations, UN
agencies, incubators
Universal impact profiles
that create a global
standard; comprehensive
interactive ecosystem map
in X country;support of full
accelerator program life
cycle; built with top tier
institutions; size (600K
co’s), reach (191 countries,
6 languages); standardized
reporting, QSBS tax law;
ability to built private
networks
Active network; eclectic
group of foundations,
HNW families, and
investment managers w/
AUM $3.5 trillion
Partnership approach
(sharing in risk and return);
global network of mentors
and experts; connection of
investors with enterprises;
work with both buy and
sell side; sector and
geographic specificity

Competitive insights are blurry
● Perceptions of competition are disparate, and
include companies that present themselves as:
○ Networks
○ Off the shelf SaaS products
○ Fund or funder offerings
○ Membership organizations
○ Mobile payments platforms
○ Blockchain systems
● There is mixed and overlapping signalling in this
ecosystem, pointing to a need to juxtapose
complementary offerings and functionalities
effectively and intelligently
Global Innovation
Exchange
F6S
Screen door
Sales Force
FrontFundr
OMX
Purpose Capital
M-Pesa
New Chip
NextGen
duurzaaminvesteren.
nl
Envestry
Sharein
Hub
dealroom
34
Grand Challenges
Canada
Mission Investors
Exchange
Crunchbase
Angellist
Social Capital
Right Side Capital
500 Startups
Regen Network
Toniic
Investors' Circle
Mission Investors
Exchange
Confluence
sdg-investments.org
younoodle

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