The Future of Impact Business is Hybrid
Only blended capital can deliver commercial success along with robust social and environmental impact.
Poverty remains one of our world’s greatest challenges. About 767 million people – 10.7% of the world’s population – is still living on less than $1.90 per day. Roughly half of these people (389 million) live in Sub-Saharan Africa. Today, a further two billion people worldwide lives on less than $3.20 a day. These World Bank statistics remind us of an alarming fact: despite recent progress, half the world’s population still lives on a few dollars a day or less. Business has an increasingly important role in redressing this stark inequality.
PBP is connecting makers and producers in the creative manufacturing and handmade sector around the world to buyers in North America and beyond. We are giving these entrepreneurs – most of them based in low-income countries – a chance to connect with buyers in new markets that would not otherwise find them. Our aim to bring a whole new segment of businesses – mostly located in communities that lack basic services such as sanitation, reliable schools, frontline clinics or clean drinking water - into mainstream international markets so that they can pay their teams decent wages and have a positive impact their local communities.
Makers on PBP’s marketplace – 74% are run by women – have generally had less access to technology, raw material supply, a well-educated labour force, digital tools and financing. But they live in local with rich design traditions; a distinctive culture and a deep history; and talented people who do what they do because skills have been passed down from generation to generation.
"While hybrid models are not new, they are not yet mainstream and require strong operational models to truly work."
PBP is being built on a hybrid business model blending varies types of capital. We have two sets of backers: first, venture capitalists that have invested in us because they believe a more curated B2B platform with unique, authentic and sustainable products will be a winner with retailers and ultimately customers; and second, philanthropists that view PBP as an effective partner in building human capital; levelling the playing field; breaking down barriers to trade; and providing more equal access markets. In our sector, blended financing works best when philanthropists are investing in local business growth to de-risk and offset supply chain vulnerabilities so that private capital can do what it does best - build markets, drive sales, improve operations and deliver best-in-class technology.
To date blended capital has been put to work most successfully, at scale, by the ethical coffee industry. When you for example drink Starbucks you know that the coffee beans have reached us because philanthropists and donors built up the capacity of small-hold farmers and cooperatives, while private investment established an effective supply chain, distribution network and brand identity.
While hybrid models are not new, they are not yet mainstream and require strong operational models to truly work. Fortunately, public, and private investors are increasingly willing to co-invest alongside one another. It’s already clear that such partnerships can be genuinely transformative. To create real, sustainable and lasting impact, we need to be more creative, collaborative and innovative together, while bringing different and more diverse groups of people around the table.
Building hybrid models takes focus, effective and transparent planning, and clear communication with all partners. Private and philanthropic partners need to be aligned in their objectives and ready to think outside the box. What’s the downside? At PBP we honestly don’t see any.
After 20 years in economic development, which was my life before PBP, I am today a bigger believer than ever in hybrid financing models. At PBP, we will continue to work with everyone who shares our vision of this new hybrid path and is committed to making the investments that we know can impact emerging economies and poor communities in such profoundly positive and transformational ways. After two decades of work with donors on development challenges and with creative entrepreneurs seeking new markets, I am firmly convinced that such innovative business models hold out the promise of a better world – one in which makers with distinctive products from every part of the world have growing prominence in a more responsible global marketplace.