Why Invest in Africa?
December 30, 2010
Jambo from Nairobi Kenya!
I’m so energized. I’ve been in East Africa for the past three days visiting tech entrepreneurs and tech investors.
While I spend about 95% of my working energy focusing on building iContact into a high-growth purpose-driven business, I like to take a couple weeks each year to travel and explore what’s going on with tech companies in other parts of the world.
This week I’m in Uganda and Kenya to find investment opportunities for the Humanity Fund, a personal investment fund I have for investing in African and American tech companies.
Why Invest in Africa?
There is so much economic opportunity in Africa, support for IT investment, and entrepreneurial energy. There’s an opportunity to make a lot of money investing in great companies while creating lots of jobs and doing a lot of good at the same time.
Africa is the least developed continent in the world. There are 1.03 billion people in Africa. Of this 1 billion (source) 65% of Africans live on under $2 per day (source) and 59% of African households do not have electricity (source), and the number increases to 69% if you only look at Sub-Saharan Africa.
But Africa is no longer about famine, poverty, and war. That was the Africa of the 20th century. The 21st century Africa is about opportunity, technology, and entrepreneurship.
You may read about Sudan, Somalia, Zimbabwe, Eastern Congo, and the Ivory Coast in the New York Times and hear about these countries on the nightly news. But these are only five of the 54 countries in Africa.
The real, untold, narrative of Africa is what’s happening in the other 49 countries. Tremendous economic growth, investment, and rapidly rising living standards. What happened in South East Asia from 1950-2000 (rapid growth and poverty reduction) is now happening in Africa from 2000-2050. Most of the world just hasn’t realized it yet.
Why Invest in East Africa?
Here in East Africa (Kenya, Rwanda, Ethiopia, Uganda, and Tanzania) the GDP has grown at an average annual rate of 7.6% the last four years compared to just 0.5% for the USA. Africa will be the economic lion of the 21st century as McKinsey proclaimed in their July Report, “Lions on the Move: The Progress and Potential of African Economies.”
Take a look at these average annual GDP growth rates for 2006-2009 from the World Bank Development Indicators GDP database.
- Uganda: 8.75%
- Rwanda: 7.925%
- Kenya: 4.375%
- Ethiopia: 10.45%
- Tanzania: 6.675%
- USA: 0.5%
Uganda was the first country I came to in Africa back in 2008 and so I decided to start investing here in East Africa and expand later. I hope someday to run a fund making investments in high-growth socially responsible companies all over the developing world.
Investing As a Way of Making a Positive Impact
This is my third time in East Africa. When I came for the first time in 2008, I held the view that the way to best make positive change was to give money away to NGOs and non-profits.
I come now with the perspective that it takes all three sectors of society (government, non-profits, and for-profits) working effectively to create sustainable economic growth and that the private sector has a huge power to make positive change in the world.
The best way I believe I can contribute to positive change is to help high-growth companies that are creating jobs expand and create more jobs. At the end of the day, the cause of poverty is a lack of jobs and productive capital. Low education, low health care, and low nutrition are the symptoms of poverty, not the causes. If you increase someone’s income they can afford better education, health care, and food for their family.
So now, I believe the best way I can use my experience and resources to make an impact in reducing extreme poverty is to invest in high-growth companies that are creating jobs in developing world.
What I’m best at is figuring out how to grow technology and internet companies. Over the next two years I hope to invest in about ten more privately owned high growth African tech companies as part of dipping my feet into the water and beginning to create a model for eventually building a private equity fund some years down the road.
I hope to be able to eventually show that it is very possible to build a microequity investment firm that gets above market returns investing in high growth socially responsible companies in the developing world.
The field of impact investing is developing rapidly and I’m glad to slowly be learning about it. To learn more check out this Impact Investing Primer from the Rockefeller Foundation and this one from the Federal Reserve Bank of San Francisco.
Existing VC Funds in Africa
In my time here and in talking to people at the Skoll World Forum in April I’ve come across the following funds that are actively making venture capital investments in tech companies in Africa.
- InReturn Capital
- BusinessPartners Kenya
- TBL Mirror Fund
- eVA Fund
- Flow Equity
- FirstLight Ventures
- Humanity Fund
- Fanisi
- Grassroots Business Fund (non-profit fund)
- Acumen Fund (non-profit fund)
- RootCapital (non-profit fund)
A more extensive list can be found on the African Venture Capital Association (AVCA) web site. Other resources include the VC4Africa and BiD Network
How You Can Invest in Africa
If you want to invest in private African companies, then you could contact the above VC funds and express interest in investing as a limited partner in their next fund. They will likely require you to be an accredited investor and be able to invest $100,000 and up. You can also find private companies yourself and invest in them directly or join an angel network that invests in African start-ups like Toniic.
If you want to dip your toes into the water of investing in African companies without putting tens or hundreds of thousands of dollars at risk, you can invest directly into publicly traded African companies. There are even Exchange Traded Funds (ETFs) that allow you to get index-fund like exposure to African markets. You can invest as little as $75 in these funds through your broker or your TD Ameritrade, E*Trade, or Scottrade account and participate in the growth of the African economy.
You may want to check out:
- AFK – The Market Vectors Africa Index ETF seeks to replicate the performance of the Dow Jones Africa Titans 50 Index. The fund represents a broad range of sectors and African countries, including exposure to some less traditional, frontier markets. Up 23% in 2010.
- GAF – SPDR S&P Emerging Middle East & Africa ETF. Seeks to closely match the returns and characteristics of the total return performance of the S&P/Citigroup BMI Middle East & Africa Index. Up 22% in 2010.
- EZA – South African ETF, up 29% in 2010.
You can also call your broker and ask them to invest directly in publicly listed firms on the Ugandan Securities Exchange or the Nairobi Stock Exchange.
For proper disclosure, as of this writing I do not own any of these ETFs but might in the future. I am definitely not a qualified securities advisor in any way and past performance is not necessarily indicative of future performance.
Thanks for reading. I hope you enjoyed this post! Please share and comment.
Next, I’ll be posting about the entrepreneurs I’ve met in my first three days here in Africa…
- Ryan, Nairobi, 30.12.10
You’re Invited: A Metropolitan Safari for Rwanda at iContact
November 2, 2010
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Opportunity Collaboration 2010 Recap
October 20, 2010
I went to Opportunity Collaboration skeptical. Why was a conference on poverty alleviation being held at a beach resort in Mexico?
I left Opportunity Collaboration on Tuesday morning in awe of what the conference had accomplished. It was a rare masterpiece of an ‘unconference’, organized by Jonathan Lewis of MicroCredit Enterprises, and put on by COO Topher Wilkins with the help of quite a strong team of volunteers.
While I would rather have been less separated from the local communities of Ixtapa and Zihuatanejo, Mexico, I must admit the setting did serve the purpose of allowing the 300 attendees to connect deeply in a relaxed environment.
The attendees, called “delegates”, were a mix of entrepreneurs, social entrepreneurs, investors, foundation directors, and non-profit directors. The conference also welcomed 50 Cordes Fellows which greatly added to the age and geographic diversity of the crowd.
The conference ran from Friday night through Tuesday night. I left Tuesday morning to get back to iContact as we have a very big week getting ready to move 235 team members this Friday to our new offices in Morrisville.
The schedule for each day looked something like:
8am – Swim in Pacific/Breakfast
9am – Colloquium for the Common Good (Discussion on a Reading in a Group of 25)
11am – Open (we used it to convene a group of millennial social entrepreneurs each day)
12pm – Lunch, with breakout groups called cluster forks
1:30pm – Wellness time – Soccer, kayaking, volleyball, sailing, archery
3pm – Collaboration Challenge (topical discussions)
5:30pm – Open for 1-1 meetings
6:30pm – Dinner, with breakout groups called cluster forks
8:30pm – Companies and Causes – 60 Second Pitch Session
10:00pm – Networking on the Deck
There were no panels and no keynotes. This led to people having the time to connect in deep conversations. It was one of the more enjoyable long weekends I can remember in my 26 years of life. Having the opportunity to engage deeply with some of the most innovative practitioners in the field of poverty alleviation and social entrepreneurship was immensely inspiring and beneficial.
Being laser-focused on getting iContact to an IPO in the next couple years and now having a great staff who can attend our 25 or so company trade shows each year, I’ve scaled back the number of conferences I attend in the past couple years. I tend to limit it to Summit Series, the Skoll World Forum, Renaissance Weekend, and a couple investment bank or analyst conferences per year. I will now add Opportunity Collaboration to the select annual list.
Why Did I Choose to Come?
OppColl was talked about heavily when I was at the Skoll World Forum in Oxford in April and came recommended to me by people whose opinion I trust–Nathaniel Whittemore of AssetMap, Kim Scheinberg of Presumed Abundance, Jonny Dorsey of Global Health Corps, Mike Del Ponte of SparkSeed and Ben Abram of Westly Group. And so I signed up, not really knowing what would come of it.
My interest in being at OppColl was four-fold.
- Vacation & Strategic Reflection: After working non-stop since February on our $40M Series B fundraise at iContact it was good to take three days off for a mini-vacation. Any time I can get out of my normal environment I find I can think more clearly about our strategy and get a big picture perspective. It turned out to be quite a valuable experience just from an iContact perspective, as there were a number of deep discussions on leadership I gained from and I wonderfully ran into at least ten of our customers who I always love connecting with about what they think about our company and product and what their additional needs are.
- A Passion for Ending Extreme Poverty: A large part of my interest in attending goes back to a lifelong passion I have of wanting to be part of a generational movement to end extreme poverty in our lifetimes and learn all I can about the topic. In a world with so much, it just does not make sense that 2.5 billion people live on under $2 per day and 22,000 children five or younger die every day in the developing world—most needlessly from preventable disease and starvation. I think I can make the biggest difference in extreme poverty in the mid-term via investing and private-sector job creation, but I’m very aware that it requires all three sectors (government, business, and civil sector) to work together. To actually create sustainable economic development the trifecta of transparent, non-corrupt, responsible, and well-run government, civil sector (NGOs/NPOs), and businesses must exist. OppColl does a great job of bringing together folks from all three sectors to collaborate.
- Nourish International: The non-profit organization for which I serve as Board Chairman, Nourish International, is at an important point in its history. It is transitioning from a completely donor-reliant model to a more sustainable model that includes a portion of its revenue from earned income. I came to connect to other non-profit directors and board members that have successfully created substantial earned income models for their organizations.
- Humanity Fund: I launched a small personal investment fund called the Humanity Fund in January. Going to OppColl was perhaps the easiest way to connect directly with the leaders of the microequity field. Through the Humanity Fund we invest $10k to $100k at a time in socially responsible high-growth for-profit businesses in Africa, Latin America, and the USA. This is a small effort for now in which I want to dip my toes into the water and make a couple investments per year as a way of gaining some learning lessons, getting exposure to high-growth businesses in “frontier markets” and investing in creating jobs in high-growth socially responsible businesses that are growing quickly. My hope over time is to show that it is very possible with the right structure, even with the challenges of transaction costs, trust, and liquidity, to achieve above-market returns by investing in microequity and investing in the missing-middle of SME financing in which growth capital simply is not presently available.
The People
Of the 300 delegates, the folks I spent the most time with at the conference were:
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I already have a sense a number of these will turn into lifelong friendships.
I also connected with some key people in the emerging and fascinating field of microequity and impact investing:
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I was also particularly impressed by the economic potential (in addition to the social impact) of ventures of:
The Colloquium for the Common Good
The morning “Colloquium for the Common Good” offered an opportunity to connect deeply with a group 25-30 randomly selected delegates through two hours of discussion on a set of readings related to poverty alleviation (though I must admit I still struggle to understand why we were asked to read Antigone for day two). Our colloquium group was moderated by the well-known photographer Paola Gianturco. On the Saturday night a group of the millennial generation social entrepreneurs decided to have an ad hoc “indigenous community cultural immersion exercise” and went dancing in Ixtapa for a few hours so I regrettably missed out on the Sunday morning discussion of Antigone.
The readings for the Colloquium included:
- A Letter from Birmingham Jail by Martin Luther King, Jr.
- The Brothers Grimm, “The Wonderful Musician” (story)
- Antigone (play)
- Virginia Woolf, Three Guineas (essay selection)
- Frantz Fanon, “On Violence in the International Context”, from The Wretched of the Earth (essay)
- Hernando de Soto, “By Way of Conclusion,” from The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (chapter from study)
- H.D. Thoreau, “Economy,” selections from Walden (essay)
The Millennial Social Entrepreneurs
We used the 11am hour two of the days to convene a group of younger entrepreneurs and social entrepreneurs to mind-map out on a whiteboard what we are currently doing to be part of ending extreme poverty. Then we shared our plans for scaling our impact over the next four decades and being part of the global movement to actually end extreme poverty by 2050. This was perhaps the hour of discussion I most looked forward to each day. Being able to map out the role I hope to play and gain feedback and go deep with Saul Garlick of ThinkImpact, Jonny Dorsey of Global Health Corps, Mark Hanis of the Genocide Intervention Network, Ben Abrams of Westly Group, Asher Hasan of Naya Jeevan, Leticia Casanueva of CREA, Amity Weiss of Rwanda Nziza, Mohamed Ali Niang of Malo Traders, and Elizabeth Dearborn Davis of Akilah Institute was intriguing and energizing.
Lunch & Wellness Time
Lunch provided ample opportunity to join a breakout “clusterfork” or have 1-1 meetings with other delegates. Example Cluster Fork topics included:
- Do Gooders With Spreadsheets
- Building Wealth and Assets Across Borders
- Money and Power for the World’s Poorest Women Through Savings
- Impact Investors: Get More Deal Flow
- Preparing the Next Gen Global Leaders
After lunch we had time to relax or exercise. Having 90 minutes built in each day for “wellness” was unique and much appreciated for a conference. I kayaked, played soccer, swam, and even trapezed during this time.
Collaboration Challenges
The 3pm sessions convened groups of 30-40 in a chair-circle format to discuss a particular topic. My favorite “Collaboration Challenge” was the Millennial Social Entrepreneur themed session on Monday, particularly when we split off into a group to discuss for-profit social entrepreneurship and how to use the great power of markets and investment capital to increase social impact.
Some folks in the room thought that by definition you couldn’t be a social entrepreneur if you ran a for-profit business. No consensus from the group emerged, but I along with others made every effort to make the point that the entrepreneur who runs a socially responsible enterprise, regardless of entity structure, is a social entrepreneur. Personally, I define a social entrepreneur as a “problem solver who takes action.” To me, there are for-profit social entrepreneurs and non-profit social entrepreneurs and in some cases you can actually make a larger social impact by choosing to organize as a for-profit and be able to access capital and talent markets more effectively.
Example topics for Collaboration Challenges included:
- Profits and Pitfalls in Social Investing
- Fattening Up the Food Supply
- Jobs at the Base of the Pyramid
- Poverty and Pollution: The Poisonous Paid
- Conscience of a Capitalist
Companies & Causes
Finally, each night after dinner was capped off by “Companies and Causes” a 60-second pitch session run by R. Paul Herman, author of HIP Investor. Perhaps 40 of the attendees pitched each night.
These pitches were generally good, with the sole exception of the unfortunate rule that if you combined into a larger group you would get as much as 3 minutes each instead of 1 minute. This caused the room to lose energy and the hour long pitch session to go 90-100 minutes, beyond the interest of most attendees who ended up hanging out instead in the adjacent bar. Overall, “Companies and Causes” was a great new addition to the conference, however I’d recommend keeping every pitch to 60-75 seconds next year. Less truly can be more.
Each night seemed to end with a spontaneous group of 20 and 30-somethings swimming in the Pacific.
So Should You Go to OppColl Next Year?
And so, if you’re working in the field of social entrepreneurship broadly defined, are interested in meeting the CEOs of entrepreneurial ventures that have a huge potential for both financial and social return, care deeply about humanity, or care deeply about actually ending extreme poverty in our lifetimes, Opportunity Collaboration is probably the best conference to come to for the deep relationships it affords.
It is not the best conference for content or big-name speakers–the Skoll World Forum on Social Entrepreneurship is much better for that–but it is the best conference I’ve been to for facilitating the creation of deep, meaningful, beneficial relationships that can help both parties make an increased positive impact in the world. The conference is not inexpensive, so if funding is an issue be sure to apply early for a 2011 Cordes Fellowship.
Hope to see you there in 2011!
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Were you there? What were your experiences? Do you wish you were? Is it justifiable to have an expensive conference on poverty alleviation at a resort if it brings great people together who in fact due to the connections they make are able to more effectively scale their social impact and more quickly end extreme poverty? We’d love your comments.
A Tour Inside the iContact Durham Offices (And Zappos and Google)
September 10, 2010
iContact will be moving to a new office building in Morrisville, North Carolina next month.
We moved to Durham from a two-room office Chapel Hill in December 2004 when we had 11 employees and were called Broadwick. We actually fit the entire office in one U-Haul truck when we moved!
Now six years on, we’ll be taking 240 employees to Morrisville and have space to grow to 550.
I took an hour today to take a few photos of our current office and put them together with a few older photos from our 2009 decoration contest to create a tour off our current office space. I hope you’ll get a bit of a sense for our fun, creative, and energetic culture as you take a look. We’re not quite Zappos or Google yet in terms of the creativity of our physical environment (see below), but we’re working on it.
For the sake of preserving a bit of our unique culture and sharing what it is like inside the iContact physical environment, here is a tour of our current iContact Space via Scribd. Enjoy!
Looking for some inspiration for the physical environment we want to create in our new space in Morrisville, I also put together a deck of pictures from Zappos office and Google’s office that I figured would be worth also sharing…
The Zappos Offices – Las Vegas, NV
Zappos Offices – Las Vegas, NV –
The False Tradeoff Between Financial & Social Responsibility
September 2, 2010
There is a perception out there that there is a tradeoff between social responsibility and financial responsibility. You can’t do both, people say. You can’t have your cake and eat it too. Well, very fortunately the data just doesn’t support that perception.
Can you actually be more socially responsible and increase shareholder value at the same time?
The Only Social Responsibility of a Company Is To Increase Profits for Shareholders
In 1970, Chicago-school economist Milton Friedman proclaimed in an article for New York Times Magazine that a company’s only social responsibility is to increase profits for its shareholders. In the 1980s Ronald Reagan, Margaret Thatcher, George Bush, and the Ayn Rand star-pupil Alan Greenspan turned this credo into de facto policy gospel.
There is passionate and meaty debate whether externalizing environmental damage and exploiting a work force is okay if there is no law or regulation against it. There is another debate whether these practices actually maximize long-term profits or the present value of future cash flows.
For a moment, let’s take this 1970 proclamation at face value and assume that an executive’s responsibility is to increase returns for company shareholders. Let’s agree that executives and board members do have a fiduciary responsibility to seek to gain a return on the capital invested in their organization, particularly if they work for a publicly-owned company or a company that is not a wholly-owned private corporation.
So this begs the question, can you do both–increase social return and increase financial return?
Can You Be More Socially Responsible & Financially Responsible?
Raj Sisodia, David Wolfe, and Jag Sheth recently published “Firms of Endearment: How World-Class Companies Profit from Passion and Purpose.” In the book, they share the results of a study in which they looked at companies that were especially socially responsible–they call these firms “Firms of Endearment” or FoEs. They compared the shareholder returns of these socially responsible firms with the S&P 500. What they found was that the firms that were socially responsible outperformed the S&P 500 by 9x.
These Firms of Endearment grew shareholder value 1025% in the last ten years while the S&P 500 returned 122%. Even when you compare the Firms of Endearment vs. the blue chip success stories profiled in Jim Collins’ Good to Great, the Firms of Endearment win. The firms profiled in Good to Great returned 316% while the FoE’s returned 1025%.” Here’s the graph from their web site.
Financial Returns of Socially Responsible Firms Vs. S&P 500 and Good to Great
Now, by no means does this data prove conclusively that more socially responsible firms create higher shareholder returns. The data show only correlation, not causation. The reality could simply be that firms that happen to be socially responsible happen to be in more profitable industries and so they can afford to give more to the community and create better work environments. But nonetheless, the point is clear– investing in being a socially responsible company certainly does not by definition go against shareholder interests and in many cases enhances shareholder returns.
iContact Case Study
Earlier today, I published a case study of social responsibility at iContact. In it, I shared the why and the how behind our social and environmental efforts at iContact over the past year including examples of how iContact has reduced costs and increased employee engagement through our efforts. As I wrote in the case, the benefits to date from our social responsibility efforts included:
- Vendor cost reductions of $40,000 driving estimated net savings of $19,000 per month.
- Increased employee engagement and excitement to be working at our company (which we believe will lead to greater passion in people’s work, additional discretionary effort from team members, increased productivity, lower regret employee turnover, and an increased ability to attract the best and the brightest).
- Increased customer acquisition and customer retention from customers who are coming to us and sticking with us because of our social responsibility programs.
- Additional press coverage from Entrepreneur, INC, and the Raleigh News & Observer that is helping us recruit the best and brightest and gain additional customers and partners.
So in fact, at least so far, we have been able to show both tangible and intangible benefits that connect the investment we are making in social responsibility with direct economic net benefits to our financial results and thus to the increase of shareholder value.
A False Tradeoff
While it would be nice to have even better data and employee surveys comparing before and after our work at iContact, there is substantial anecdotal evidence supporting a conclusion that in the case of iContact, increasing investment in social and environmental responsibility so far has increased profits, and will contribute very positively to increasing shareholder value in the many years to come.
So does increasing social and environmental responsibility always increase shareholder value? No, it does not. But in many cases it can and does and the Firms of Endearment study provides a fascinating basis for a likely connection between the most socially responsible firms and those who produce the highest return for shareholders. Investing in being a socially responsible company certainly does not by definition go against shareholder interests and in many cases enhances shareholder returns.
There does seem to be substantive and significant evidence showing there the tradeoff between social responsibility and financial responsibility is false and in fact social responsibility in many cases aligns with increasing financial profitability.
Comments/Thoughts?
Thanks for reading. I’d love to know your thoughts in the comments on social responsibility, effective CSR programs, whether being more socially responsible helps or hurts a business, and whether your shopping decisions could be influenced by whether a company is responsible or not.
Case Study: The Results of iContact’s Initial Foray Into Social Responsibility
September 2, 2010
Here is a case study sharing the initial results of of iContact’s efforts around social responsibility.
The post was first published earlier today on Change.org.
Wanting to Experience More Meaning at Work
In October 2009, I went through some challenging experiences that caused me to realize that life can be very short. Out of these experiences, I came to the conclusion that I wanted to align my values with my work at iContact to the extent possible. I wanted to see a direct connection between the work that iContact was doing and making a positive impact in our community and the world.
As Chip Conley writes in Peak, I wanted to be able to experience and see “meaning” at work and in my work. The humanity within me was dissatisfied with the comm only-held belief that the sole purpose of business is to maximize short-term profits, regardless of the impact on the world as long as one stays within the law.
I saw the purpose of business as creating value for humanity and profits a result of successfully pursuing this purpose but not the purpose itself. This extreme dissatisfaction with the Milton Friedmanesque view of the world could be a Gen-Y or Millennial phenomenon as our generation has grown up learning we cannot build a prosperous, stable, and secure world by externalizing environmental costs and exploiting other parts of the world.
While our generation may be particularly attuned to social and environmental issues, I think seeking meaning at work is a higher-order, but universal need. It is simply reality for the large majority of workers (particularly the smartest and most driven talent) that they want to be able to be part of something meaningful–in their contribution to the company, in what the company achieves with its business, as well as the ways in which their business goes about creating that value for society.
Helping small and mid-sized companies communicate more easily with their customers and reducing paper usage from direct mail had a positive value to society, but could we create meaning in other ways, perhaps in how we went about building our business, the culture we created, and how we gave back?
I could no longer compartmentalize my life between the for-profit financially-focused work I did and the not-for-profit charity-focused work I did.
And so, going into 2010 I made it one of my priorities to substantially expand our Corporate Social Responsibility (CSR) efforts at iContact.
Case Study: Social Responsibility at iContact
Since 2007, iContact has been giving away 1% of it’s payroll to 501(c)(3) non-profit organizations in our communities locally and globally, but just giving away money was the easiest thing to do–and not nearly enough. We also had an annual Habitat for Humanity company house building day each July and and we adopted a handful of foster children each winter to provide gifts for them. But again, this is the basics of what every company does–almost as a check-the-box whitewashing effort to just be able to say “well, we do something.”
These initial efforts were a start, but not enough. If we were going to make CSR a key differentiator for our company for attracting and retaining A+ talent and attracting customers who care about the world, we needed to do so much more. If our culture was going to be centered around creating a tangible direct connection between the work our employees did and true-meaning and value creation for the world, we needed an integrated CSR program.
iContact’s Corporate Social Responsibility Program
And so, taking a page from the playbook of Marc Benioff, we created the 4-1s CSR Program, modeled in part after the 1/1/1 Integrated CSR Program that Salesforce.com has so successfully implemented after Marc’s experiences at Oracle in the late 90s left something to be desired for corporate service.
The 4-1s CSR Program added giving 1% of product, 1% of time, and 1% of equity to our original program of giving 1% of payroll.
On January 8th, 2010 we rolled out the 4-1s program to our employees at our annual kickoff meeting. We explained that each team member would receive 2.5 extra days of Paid Time Off per year to volunteer in the local community which we would track via an AppExchange add-on called VolunteerForce, that we were taking 1% of the shares of the company and pledging them to the iContact Foundation, that we would give iContact away from free to any non-profit in North Carolina, and that we would continue our program of giving 1% of payroll away and matching employee contributions up to $300.
I was thrilled to have a formal CSR program in place. When Entrepreneur Magazine wrote an article about the 4-1s program in April giving us our first major press about the effort, I was careful to share that this was just the beginning for us. We have so much to learn about CSR.
Who knew if this was the right or best structure for integrate corporate philanthropy. What mattered is that we had something formal and significant in place and could learn and improve as we went.
Becoming a B Corporation
In May, we took our next major leap in our effort to turn iContact into a leader in social responsibility for venture-backed companies. After speaking with Drew Tulchin at Social Enterprise Associates, I knew if we really were going to be a Triple Bottom Line company, we had to have some type of external help putting in place a tracking system for our social and environmental impact. The next weekend I serendipitously met Matt Kopac at at Sunday brunch with a group of Durham friends. Matt had just finished up an MBA at Yale and was looking for work in the area with a non-profit or socially responsible enterprise. He had done work with VisionSpring and had been in the Peace Corps in Benin. We brought Matt on, initially as a half-time consultant.
Matt’s assignment was simple–put in place a measurement system for social and environmental impact, manage our 4-1s CSR program, and help us put in place the changes necessary to become a B Corp. B Corps are are a new type of corporation that use the power of business to create public benefit.
When we first took the B Corp assessment, we scored 67 points. The assessment graded us within five categories: accountability, consumers, environment, employees, and community.
We then underwent an eight week process that Matt led to conduct an environmental/energy audit and supplier audit and put in place some needed changes to policies and sustainable supplies.
On June 30th, we finally passed the 80 point threshold needed. B Lab officially certified iContact as a B Corp! We had reached the next milestone for our process of becoming a leader in social responsibility and creating company culture that tied the work each employee did every day with meaningful impact, and we received a signed Declaration of Interdependence.
Tracking our Social & Environmental Impact
Once we became a B Corp, we needed a way to be able to track our social and environmental impact. Matt Kopac worked with our internal Salesforce.com administrator to install PULSE into Salesforce AppExchange, which is free for B Corps.
Below is a screen shot of PULSE showing a few of the environmental metrics tracked within PULSE for iContact.
In Salesforce PULSE we track the following social and environmental metrics in beautiful graph format in a location that is accessible to every iContact Employee. You can imagine how much easier this system makes it to track and view our triple bottom line metrics.
Current PULSE Social Impact Metrics Tracked
- Total Energy Consumed
- Energy Consumption Per Employee
- Total Water Use (Liters)
- Total Water Use Per Employee
- Total Irrigation Liters Used
- Sheets of Paper Used
- Recycled Paper Used as % of Total
Current PULSE Environmental Impact Metrics Tracked
- Dollars Contributed to Non-Profits
- Number of Non-Profits Contributed To
- Value of In-Kind Contributions
- % of Sales of Giving
- Number of Jobs Created
- Staff Turnover Rate
- Number of Non-Profits Given Free Product
- % of 4-1s Non-Profits as Customers
- New 4-1s Non-Profits Per Month
- 4-1s Non-Profits Emails Sent
- Number of Non-Profits Trained
- Number of B Corps as Customers
- Monthly Employee volunteer Hours
- Cumulative Volunteer Hours
Building Employee Engagement With Changemakers
To further our connection to employee-driven change we created an employee-led group called Changemakers. We now have a Social Changemakers Committee and an Environmental Changemakers Committee that meet monthly and come together once per quarter to make their recommendations to the company.
While putting in place the structure initially needed coordination and buy-in at the highest levels of the organization, to expand our efforts and integrate the values and ethos of our company permanently into our culture we need the energy, support, and word of mouth of individuals at every level of the organization.
Making the Connection to Meaning at Work
Back in November 2009 I was speaking to an iContact employee who told me, “If you can connect the work I do at iContact to making an impact in the world I would be so much more passionate about coming to work everyday.” This was a key moment for me in making the immediate connection between ‘meaning’ at work and the incremental discretionary effort employees are willing to put into their jobs.
As Chip Conley wrote in Peak, If you can tie in “meaning” into the workplace you will get orders of magnitude more productivity our of your team. Too often companies are meaningful lifeless entities that are focused on short-term profit maximization rather than maximizing sustainable value creation for human beings, what actually maximizes long-term profits.
Meaning has three components to it–
- Personal Meaning – how the job ties into to the individual’s life goals.
- Work Meaning – the significance of what the individual is enabling the company to achieve and the understood connection between their work and company success.
- Organizational Meaning – the significance of what the organization succeeding means for human society.
So in the “Employee Hierarchy of Needs” money is at the bottom which creates base motivation, recognition is in the middle which creates loyalty, and meaning is at the top which creates inspiration.
What iContact Employees Think About Social Responsibility
So, has the social responsibility initiatives we’ve undertaken so far created added meaning for our team members, and can it for yours?
Here are a few examples of the comments we received from our employees so far either via Salesforce Chatter (shown above) or via the Culture Committee Meetings…
- “It makes me more excited about the company I work for.”
- “It’s a rare opportunity to be a participant in a company such as iContact.”
- “iContact is a diverse group of individuals from all walks of life that come together as a team to both achieve and help others succeed.”
- “iContact is a dynamic team-centric company that effectively balances customers, employees, and the world.”
- “We have a holistic approach to business in terms of our impact on all stakeholders”
- “We do business differently, our employees are empowered, we work hard and play hard, and we are actively committed to helping others.”
But the impact is not only in increasing employee engagement, but also increasing customers and partners that expressly seek out wanting to work with socially responsible companies.
Here is an unsolicited email we received from one of our partners to illustrate this…
“I was impressed by the iContact’s commitment to reaching beyond themselves to serve their community. to work toward making a positive impact on our community. It made my decision easier knowing I had found a company to work with that was like minded. As I work with my customers I make sure they know that we chose a company as a partner that would extend their reach.”
What We’ve Accomplished So Far
In the first eight months since we’ve expanded our efforts:
- We’ve launched the 4-1s program (1% product, 1% payroll, 1% time, 1% equity)
- Our employees have participated in 75 community service events logging 1,100 service hours tracked via VolunteerForce
- We’ve installed Salesforce PULSE to track our environmental and social metrics
- We were approved as a B Corporation
- We conducted and published an environmental audit
- We’ve hosted a non-profit workshop at our office
- We’ve launched the Changemakers Group
- We’ve launched the iContact Culture Committee
The Beneficial Economic Impact of Social Responsibility
So the hard-to-measure long term impact of improved employee retention and recruitment and customer growth and retention are no doubt positive factors in our long-term financial return models for our social responsibility program–but what about the hard-nosed measurable short-term economic analysis? Certainly this effort has to have cost us more money than it saved us, right?
In fact, this effort toward becoming a socially and environmentally responsible company will actually save us money, not cost us money.
SOCIAL RESPONSIBILITY = COST SAVINGS
One of the ways this has been possible is because B Labs has a network of over 300 B Corps and companies that want to access the economic buying power of B Corporations. Once our current contracts expire and we’re able to move to the discounted solutions, we expect to realize about $40,000 per month in savings from being a B Corporation while we are spending a total of $21,000 per month of all of 4-1s Program. Significant credit goes to Salesforce.com for offering a 75% discount off list price to B Corps.
In fact, in our five year financial analysis model of our social responsibility efforts, we came out with a five-year IRR of 54% for the conservative case model and 132% for the expected case model.
So we’ve gained a quadruple benefit from social responsibility efforts of:
- Mid-term existing vendor cost reductions of $40,000 driving estimated net savings of $19,000 per month ($228,000 per year).
- Increased employee engagement and excitement to be working at our company (which we believe will lead to greater passion in people’s work, additional discretionary effort from team members, increased productivity, lower regret employee turnover, and an increased ability to attract the best and the brightest).
- Increased customer acquisition and customer retention from customers who are coming to us and sticking with us because of our social responsibility programs.
- Additional press coverage from Entrepreneur, INC, and the Raleigh News & Observer that is helping us recruit the best and brightest and gain additional customers and partners.
Conclusion
We’ve got a long way to go still in working toward becoming an example for how other venture backed companies can invest in social responsibility. We’ve still got a lot to learn. It’s been a great start and we look forward to much learning to come.
Thoughts/Comments?
I’d love your thoughts and comments. How has your company implement Corporate Social Responsibility? What other programs have you seen that have been responsible? Do you wish your company were more socially responsible? What impact would that have on your desire to put in full effort at work?
Announcing iContact’s Series B Investment
August 30, 2010
Eight years ago when Aaron Houghton and I met at UNC, we never fathomed we’d have the opportunity to build the nascent iContact into a great global company based here in North Carolina. As iContact passes 225 employees and $40M in annualized sales, we see an opportunity to do something rare—to build a venture-backed IT company here in the Triangle from start-up to IPO. Today, we’re announcing a critical milestone on our journey.
I’m thrilled to share the wonderful news that iContact has closed on $40 million of Series B venture capital funding from JMI Equity of Baltimore, Maryland. We worked with Allen & Company out of New York as our investment bank advisor in this round.
This $40M comes in addition to the $13.3M we’ve raised so far from our investors IDEA Fund Partners, Updata Partners, and North Atlantic Capital.
We’ll be using these new funds to make significant investments in sales and marketing, back-end technology, our product features and usability, global expansion, and of course our people that drive all of our success.
Over the past eight years we have been on a growth spurt, increasing from $2M in annual sales when we raised our first round of funding in May 2006 from IDEA Fund Partners in Durham to $40M in annual sales today four years later. We have been fortunate to find great people to join us at iContact as employees and investors. We would not have been able to get to this point without the amazing team that is with us.
For us, this is just the beginning of building a company that will be here in North Carolina for many decades to come. iContact’s vision is to “build a great global company, based here in North Carolina, for our customers, employees, and community.”
Building a Unique Company, For the Long Term
We are working on building a unique company, one that sees social and environmental responsibility as additive to success not counter to it, one that invests heavily in building a fun and creative place to work, and one that cares about maximizing value created in the long term not profits generated in the short term.
Our business philosophy says “The purpose of business is to solve human problems and that if we focus on creating positive value for our customers, employees, and community we will maximize financial return for our investors and shareholders.”
We will use these new funds to invest in building iContact into a customer-focused socially responsible high-growth company with a wonderful work environment and company culture. We are glad to be part of the conscious capitalism movement that the B Corporation community is forwarding and wish to provide another example for what a socially responsible company with a great employee culture can become.
Our Three Promises
These new investment dollars will enable us to better fulfill what we call our Three Promises. Our Customer Promise is to “help SMBs succeed and grow.” Our Employee Promise is to “create a wonderful work environment that attracts A+ talent.” Our Community Promise is to “make a positive wake in our local and global communities.”
Our Customer Promise
Working toward our Customer Promise, we have recently rolled out our brand new MessageBuilder to our 65,000 customers and 700,000 users that has been under development for the last year. MessageBuilder makes it extremely easy for anyone to create a beautiful, professional, effective communication. We currently have 110 templates with the new MessageBuilder and will have hundreds more by year end.
We will also be rolling out the brand-new iContact for Salesforce next week, which has been in limited release for the last six months. We acquired Ettend.com in April to enable added event marketing capability for our customers. These product investments are in addition to an upgraded back-end infrastructure, an expanded QA team, and a six person in-house User Experience Team who talk to customers and users to help us design extremely easy to use features and functionality.
Our Employee Promise
Working toward our Employee Promise, we will be moving to brand new company headquarters on October 24th in Morrisville, North Carolina in Perimeter Park within the Lenovo Campus that will allow us to expand to 550 team members.
We have recently implemented on-site monthly massages to add to our list of unique employee benefits like on-site car washes, Bagel Mondays, monthly lunches, unlimited free sodas, and a culture that encourages Nerf gun battles, dressing up in drag, and creative expression.
Our Community Promise
Working toward our Community Promise, we rolled out our 4-1s Corporate Social Responsibility Program which includes giving 1% of payroll, 1% of product, 1% of equity, and 1% of time back to the community.
For 1% of payroll we will contribute $150,000 in 2010 to 501(c)(3) non-profit organizations. For 1% of product, iContact is now free of charge to any North Carolina non-profit to send newsletters up to 10,000 subscribers. For 1% of equity, we have committed 1% of the equity in iContact to the iContact Foundation to endow the foundation with funds to expand our ability to give back permanently.
For 1% of time, we have provided each employee 2.5 additional days off per year to volunteer in the community during business hours. When we started the year, I set a goal of 1000 hours of community service in our first year. iContact employees have already completed 1200 community volunteer hours and it is only August!
Special Thanks
We worked with Brad Wolosen, Jit Sinha, Bob Nye, and Krishna Potarazu from JMI Equity’s Baltimore Office on this fundraise. Brad and Jit will be joining Aaron, myself, and Carter Griffin from Updata on our Board of Directors.
We used Allen & Company to represent iContact as our investment bankers on this transaction, working with John Griffin, Dave Wehner, Kemp Webber, and Michael Melnitzky.
We worked with Joey Silver and Sarah Loya out of DLA Piper’s Atlanta office and Neil Bagchi of Bagchi Law, with Mark Burnett, Kathy Fields, and Maggie Wong representing JMI at Goodwin Proctor.
Special thanks go to our internal deal team of Tim Oakley, Ben Redding, Bryan Conner, Robert Plumley, and Susan Harrison and to our full Senior Leadership Team who endured two months of due diligence requests while still getting their day jobs done.
Our goal is simple—build a financially successful socially responsible company based right here in the Triangle that becomes the global leader in email marketing software and services for SMBs.
Thank you to all of our customers, employees, investors, mentors, advisors, and supporters who have helped us get iContact to this point and here’s to the road ahead!
How Do iContact Employees Describe Our Culture?
August 29, 2010
In my post Friday on the most important business lessons I’ve learned at iContact, lesson ten was:
“10. If you create a great culture (a fun work environment filled with people who are high performers and who care about their work and their impact on the world) you will be able to attract and retain better people who will be much more engaged and productive and create a much more financially successful company.”
Recently I’ve been reading four wonderful books that have helped me ‘go to school’ on the tremendous value of building company culture and the revenue growth than can be achieved when you can align profit, purpose, and meaning for your team. These are:
- Peak: How Great Companies Get their Mojo from Maslow by Chip Conley
- Firms of Endearment: How World Class Companies Profit from Passion and Purpose by Raj Sisodia, Jag Sheth, and David Wolfe
- The Dream Manager by Matthew Kelly
- The Future of Management by Gary Hamel
This post is to share a bit about what the iContact Culture is like today, in the words of our current employees. In future posts I’ll describe an effort we’re about to embark on to make the iContact Culture a core part of what differentiates our company, with the help these authors, many of which Tony Hsieh of Zappos turned me on to.
How iContact Employees Describe Our Current Culture
Last week we held our first ever Culture Committee Meeting at iContact over lunch one day. I started off by asking the group to write down words that described our culture.
The words that came up more than once from the group were:
- Fun
- Creative
- Community-oriented
- Energetic
- Challenging
These were pretty powerful words.
Other words mentioned by employees to describe the iContact culture were:
| Dynamic | Respectful | Socially Responsible | Diverse | Casual |
| Optimistic | Open | Service-oriented | Unique | Sustainable |
| Inclusive | Engaging | Encouraging | Ever-changing | Family-like |
| Motivated | Fast-moving | Compassionate | Growing | Helpful |
| Mission-focused | Intellectual | Professional yet wacky | Agile | Thoughtful |
How Would You Describe the iContact Culture In a Sentence to a Friend?
I then asked the group to write a sentence they’d use to describe iContact Culture to a friend. Recently I’ve been describing the culture as a “high energy performance based culture that cares.” The group wrote:
- iContact is an open, supportive, and respectful place where employees can make their setting their own and have a say in influencing their own experience
- iContact is an organization that is driving forward the deliverance of a product surrounded by a team that shares their personal excellence with the world
- iContact is a diverse group of individuals from all walks of life that come together as a team to both achieve and help others succeed
- iContact is a company that consciously seeks uniqueness
- iContact is a dynamic team-centric company that effectively balances customers, employees, and the world
- iContact has a fun atmosphere where each individuals ideas and work are recognized
- iContact is comprised of interdependent teams working to solve problems together
- iContact is an exciting place to work due to the energy put forth by each employee every day
- iContact understands that individual and team growth equals company growth
What Makes the iContact Culture Unique?
I then asked the group to share some of the things they felt made iContact unique as a company. They wrote:
- We are fast-growing while becoming open and more agile as we grow
- We believe in what we say and we act based on that belief
- We practice openness
- We have a holistic approach to business in terms of our impact on all stakeholders
- We are a socially responsible company
- We are transparent and have lots of giving back opportunities and a comfortable dress code
- We have unique wall murals
- We do business differently, our employees are empowered, we work hard and play hard, and we are actively committed to helping others
- We interview candidates to determine not if they are the best individual candidate but whether someone is going to fit in the team
- We have a commitment to the community and the 4-1s CSR program
- We have unique benefits like free unlimited sodas, monthly massages, annual car washes, Monday bagels, monthly lunches, monthly birthday cakes
- We produce a monthly YouTube company news video featuring sword fights between bees and knights, dancing, rapping, chocolate grasshopper eating, Batmen superhero fights, iron chef competitions, parades, and cross-dressing
- We have smoke machines and disco lights at monthly company meetings
- Our CFO has dressed up like a cheerleader and Michael Jackson
- Our CEO has shaved his head when we hit
- We have big anniversary celebrations with hot air balloons, dunk tanks, bouncy castles, inflatable slides, fire eaters, magicians, bluegrass music, and Carolina BBQ
- We go to the Durham Bulls baseball and Carolina Hurricanes hockey games as a company
- We have pot luck lunches, waffle and pancake parties, 3am code deploys, lots of plants and balloons, new hire donuts in technology, and Finance/HR annual ice cream socials, and summer picnics
So it’s fair to say we have a rather unique culture at iContact already.
But iContact is about to move into a new home in Morrisville, NC on October 23rd. We can use this opportunity to do even better.
I’ll be writing more about our company culture and our journey in the coming days and months.
Videos of the iContact Culture
Here are some of the videos that have been part of defining our unique culture over time, from the iContactTV YouTube Channel…
How We Do Meetings at iContact
Celebrating our 7th Anniversary at iContact
Celebrating 5th Anniversary at iContact
50,000 Customer Celebration Parade
Dressing Up as Tina Turner and Michael Jackson to Celebrate $2M in Monthly Sales
iNews Digital Short: Chocolate Covered Grasshoppers
The 10 Most Important Business Lessons I’ve Learned
August 27, 2010
Here are the most important business lessons I’ve learned building iContact from 2 to 220 employees over the last eight years.
- Just get started, have a bias toward action, and don’t get stuck in analysis paralysis.
- To grow your sales, it is critical to calculate the lifetime value of an average customer, calculate what you’re currently paying to acquire an average customer (total monthly ad spend divided by customers acquired in that month), determine the maximum you’re willing to pay to acquire an average customer, and scale your marketing scientifically by testing relentlessly and finding the channels in which you can acquire customers for less than your maximum acceptable customer acquisition cost and then growing spend within those channels.
- Never raise more equity capital than 1x your current annualized revenue (monthly revenue x 12). If you raise too much money too soon you’ll give up too much ownership and control of your company and be tempted to spend the money in ways that aren’t carefully controlled. Wait to raise a large round until you have proven mathematically than $X amount of additional spending with generate $Y amount of additional revenue. (once you figure out #2 this is easy).
- If you choose to raise money, raise it from investors you like and get along with well. You’ll have to hang out with these people for the next 3-7 years, make sure you enjoy spending time with them.
- After the first year or two, your success is determined by the people you hire, not by you. Stop trying to do everything yourself. Scale yourself by hiring people more experienced than you in their field as soon as you can afford to.
- Every member of the team should have a significant portion of their compensation based on the company’s success and their department’s success, quantified and communicated clearly in advance.
- Your job as CEO is not to micromanage/tell your team members what to do, but rather to hire experienced people who can do their jobs better than you could, collaboratively set numerical goals, and hold your direct reports accountable for their performance individually and as a team.
- Once you get past the start-up phase when you’re responsible for everything, the five parts of a CEOs role are 1) Set strategy and vision 2) Manage the senior team 3) Communicate with stakeholders 4) Oversee resource allocation and 5) Build the Culture.
- It is possible to become more socially and environmentally responsible and increase your financial returns at the same time
- If you create a great culture (a fun work environment filled with people who are high performers and who care about their work and their impact on the world) you will be able to attract and retain better people who will be much more engaged and productive and create a much more financially successful company.
I’ll be writing more about building a great company culture in the next post.
What lessons have you learned over the years in business? What do you think about these lessons?
The Brand New iContact.com – Oh My How Design Standards Have Changed!
June 22, 2010
In late 2002 I met my business partner Aaron Houghton at the October meeting of the Carolina Entrepreneurship Club on the UNC campus over Chic-Fil-A nuggets. At the time, Aaron ran Preation and I ran Virante. We partnered to launch IntelliContact Pro, which became IntelliContact in 2005 and then just iContact in 2007.
Today, iContact is a 205 employee company here in Durham, NC with 64,000 customers and 700,000 users. Our marketing and IT teams launched a brand new web site today on icontact.com. As a former web site designer myself, it’s been fascinating to see the site evolve as design standards have changed.
Let’s take a trip down memory lane to show how the web site has evolved over time…
Which one was the worst? Which one was the best? What do you think of the new site?
2002 |
2003 |
2004 |
2005 |
2006
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