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Thursday, April 29, 2010

Announcing Toniic: Aggregated Angel Investment for Social Impact

By Nathan Wyeth

Giin and Toniic.

Given the chance, who wouldn't want to be an angel?  This term for investors who go in at the seed stage of new ventures makes doing so sound like a bucolic pastime. Marrying this with the opportunity to be instrumental in starting a world-changing, disruptively-innovating social enterprise sounds even better. 

But there are few things that are heard more frequently among people trying to start that very enterprise, especially those working on the ground serving base of the pyramid segments, than that angel impact investment is nearly impossible to locate, let alone access.  

And on the flip side, to be fair to potential investors, early stage social venture investment can be incredibly difficult.  Unlike tech angels who turn around to fund new web companies after their own goes big, at this stage (and Echoing Green Fellows start cranking out IPO's) many impact-oriented angels are new to the type of business they are hoping to invest in.  Even if they are familiar with a sector like mobile phones or agriculture, they are certainly new to many of the hybrid value chains that social ventures exist within, or in the case of global development, new to a particular market segment or geography.

Therefore, complementing the Global Impact Investment Network (or GIIN), which is focused on building the industry-wide standards and investing frameworks for such a market, Toniic (no acronym, pun intended) intends to aggregate the early-stage investors who will populate this market - as the first action-oriented angel network specifically for around impact investment.

Clearly Toniic has a sense of humor, but as you can read below they also have some big plans.  At its most expansive, Toniic intends to be an open, global network of angels working together to learn how to be effective impact investors.  More than a single pool of capital, Toniic will be a pool of investors out of which myriad combinations of interests and specialities seem likely to emerge.

The network will be launching officially in the summer, but as rumors have started to percolate in the Bay Area, I wanted to speak with Sean and Morgan, co-founders of Toniic along with Lisa and Charly Kleissner of the KL Felicitas Foundation

Nathan, NextBillion.net: Sean and Morgan, thanks for the chance to talk with you today.  NextBillion readers will be eager to know - what is the story of Toniic?

Sean: In conversations with some of the leading investors who are now getting involved in Toniic, we were lamenting how difficult it is to find mentors for social entrepeneurs.  The truth is, mentorship can come most naturally - it's not a forced obligation - when you're invested, literally, in a new venture. 

At the same time, at Labrador Ventures, we work closely with a set of angels in Silicon Valley who are tech oriented and who have built trust by working together, so I've seen the benefits of aggregating angels in other sectors.  We've seen some informal aggregation in impact investing already - Charly and Lisa Kleissner of the KL Felicitas Foundation have been leaders.  And so the idea for an expanded network coalesced around these conversations. 

NB: What will Toniic be and do?

Sean: There's a lot to be figured out in impact investing, both in general and for individual investors as they get started.  So this is intended to be a safe place, so to speak, for investors to band together as they work in this sector. Toniic is intended to be a network of peers. 

Something that's central to making Toniic valuable to its members, and making this kind of investment easier, is trust.  Losing money together is not a way to build trust.  You build trust by working together.  By talking about investments together, bringing deals to the table, building skillsets in this area together, we think people will invest together and with more confidence than on their own. 

NB: It sounds like you're thinking a lot about growing angel impact investing as a whole.  What's the status of Toniic's membership?  How do you envision growing? 

Morgan: So far we have about 30 angels at the table, after three meetings.  We're intending for this to have a chapter structure, so Toniic is starting out mainly in the Bay Area, with some representation from places nearby, this is a structure that can grow.   It gives us the ability to be both broad and deep.  

There's a lot of interest among this group in international investment and the diligence process for international angel investment can obviously be really difficult.  Toniic's structure is intended to address this in a couple ways. 

First, among our members, for example in a given week at least one member is likely to be on the ground in a place like India where another member might be looking at an investment.  Moreover, down the road a Mumbai chapter would do even more as a resource for a Bay Area investor who wants to do work in India but doesn't have the local connections there. 

NB: I hear a lot about the need for better intermediation between investors and entrepreneurs in the social investment space.  It seems like this is intending to be that, no?

Sean: Well, more important to me than intermediation is aggregation.  Specifically, aggregating the capital, which draws the entrepreneurs.  And the investors of course are more able to act because they have peers to work with to figure out the deals.  At this point, we're looking at 25-50 potential deals per month. 

And it has not been too hard to get scale -  at our first meeting, we had represented around the table a dozen people and $120-200 million intending to go into impact investment.  So right there, we were one of the largest socially-oriented equity "funds" in the world as far as I know.  We've obviously only grown since then.  

NB: What kind of investments are you looking at? How are you approaching profit and impact? 

Morgan: So far, we've looked at things as varied as biofuels in Burkina Faso, remittance platforms for the Phillippines, rain capture technologies - it's been diverse.  But we will be driven by what members want, including what members themselves bring to the table.  The first deal that's really being looked at is one that was brought by one of the leaders of the group.  

Sean: In the same way, rather than wade into definitions of social investment, we are letting people bring to the group what they are interested in.  We're not staking out a position, as Toniic, on what level of return people should be looking for on their investments.

NB: In narrowing from the total deals you look at to the ones that go in front of the Bay Area group, are there other hard criteria that you have set out in terms of the stage, size, sector, or kind of impact in the investments that Toniic will discuss?

Morgan: We will be consistently surveying members to ensure the deals we bring forward best fit investor interests. The interests of current members are greatly varied; thus we are open to a wide variety of sectors and sizes. The unifying thread is that, regardless of sector or location, we focus on projects that have the potential for scalable, systemic impact.

NB: Are you looking for new people to raise their hands and start Toniic chapters elsewhere, or is that a process that will happen in a more managed way?

Morgan: These people are already finding us. We are more than happy to connect with anyone interested in founding a chapter, and will work out the details together.

NB: So it seems pretty broad.  Which leads to the other question Next Billion readers will likely want to know the answer to: how to get an investment-ready social venture in front of Toniic's members? 

Morgan: We are in the process of building our website with a clear submission process, but in the meantime entrepreneurs are welcome to send clearly investment-ready projects directly to me - morgan.simon@gmail.com.

NB: In that case, best of luck to Toniic, and I hope you're ready to read a lot of pitches that I have a feeling are going to come your way!

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