This is a CTP of initiative: Ashoka Germany
This CTP details the developments related to one of AGs most influential and successful spin-off, the Financing Agency for Social Entrepreneurship (FASE). The event is considered a CTP in the life of AG as, although it was not the organization’s first spin-off, it was the first initiative that was created after the clarification of AGs purpose, highlighting their aim to build an ecosystem for social entrepreneurship in Germany. Therefore, it was also the first spin-off to respond to one of the universal needs of social entrepreneurs that the organization identified in their major study in 2011 and to become highly successful. “It defined part of the legacy of Ashoka Germany and it also caught on internationally. I think it’ll become probably the biggest idea export of the German office across Europe”. FASE is based on the concept of hybrid or blended finance, and it is operating in the space between donors and market investment. What lead to its creation was the need for being able to “syndicate individual deals, so it could accommodate the different risk-return expectation”. The interviewee was able to get the support of venture capitalists, creating instruments in the field of impact investment which were similar to the ones already successfully used by investment banks in fully profit oriented sectors. The CTP changed the traditional structure of how Ashoka, donors and Fellows were relating to each other. The traditional model, which still guides how most Ashoka offices are set up, is to “have a donor community around Ashoka, then [funding] trickles from there, over in some small ways to fellows”. This set up did not only cause frustration sometimes when donors directly funded Fellows but more importantly was not able to support the needs of Fellows effectively. The social enterprises that AG was supporting had not been growing as much as they would have wanted and according to the interviewee, this was due to the lack of appropriate financing. "In Germany, we had not much of an impact investing trend at the time when you had one high-rearing organization, which is a closed fund done by a couple of families, and they provided financing to a handful of fellows at the time at fairly high, very high mid-term expectations." The interviewee recognized that the model of closed fund impact investing “just mathematically speaking, would never be an impact to those fellows." He realized that there was a community that “could fund fellows at lower rates of return with a higher risk”. In addition, the event can be considered a CTP also because it introduced a major change regarding what was thought to be possible and how financial instruments were created for the sector they operated in. “I felt that impact investing had it sort of upside down, you know, you start from the investment, and you look for, if anyone is interested in this type of model, and it turns out there isn’t very much demand for it. Whereas if you turn it back on its feet, you start with the demand and then you aggregate it to the instruments over time.” Furthermore, the CTP also meant the creation of a new legal structure for both AG as an organization and in terms of how investment deals are made. On the one hand, for AG FASE meant the creation of a separate legal entity, that due to the later introduced regulations is quite unique within the network. On the other hand, “legally it does not come with investors being part of the governance”. “You simply get the right to share the revenues, but you don’t get a board seat for example. So that’s become fairly popular now, it’s a deal structure that was not around.”
Within AG, the interviewee was the motor of the process that led to this CTP. Apart from the support of the entire Germany team, he was also encouraged by some donors as well. In addition, they also had a “senior advisor group around FASE” with whom the interviewee had co-invented the innovative solution. They also serve as “insurance policy for the thing going bad. If they were to lose their money, it wasn’t going to be only [the interviewee’s] fault.”
The CTP initially did not involve contestation within the network of Ashoka, as “it was not up for the question”. The interviewee never asked for permission before establishing the spin-off. However, later on, the CTP was met by opposition from the founder, despite the fact that he was also “critical about impact investing”. The interviewee recalls the following experience regarding the contestation of the CTP: “I mentioned it to [the head of Ashoka Global] in a… while we did it, in a way that I knew, was not going to cause any problems, but he later, he called me, and said: do we really have this subsidiary now? Did I sign off it?” According to the interviewee, the contestation was mostly due to the high financial and reputational risks involved in the initiative. Thanks to the approach of the interviewee direct contestation of the establishment of FASE was avoided. However, the CTP significantly influenced the similar future endeavours of all Ashoka country offices. "Two years after FASE came into existence Ashoka Global announced that it would have to sign off … for every new subsidiary.” The CTP had also caused controversy outside of the network as FASE meant serious competition for closed funds, venture and social beneficial funds. It became “harder for them to get interest from social entrepreneurs”. However, they “still are in some ways a good friend of Ashoka. Their job has just become more difficult”.
The CTP was preceded by conscious planning and it developed out of a complex outreach and needs analyses carried out in 2011. The interviewee had a strong belief in the success of the initiative even before the CTP and that also influenced the choice they made regarding the name of the spin-off. “To me, it was clear that FASE might, you know, if successful, it could take off in ways that it couldn’t with the Ashoka name.”
The CTP involves several learning points that are still influencing not only the operations of AG but the social entrepreneurship ecosystem in general both in Germany and abroad. After the CTP, providing Fellows with help in securing investment for growth has become something that “Ashoka is expected to cover”. The model of hybrid finance has also become more and more present across Europe in different forms. Although “no other country has started a separate entity” – due to the newly introduced requirements of Ashoka Global – several offices started similar internal activities. The CTP has also strengthened the notion within AG that it is better to ask for forgiveness than permission, especially in the case of entrepreneurial initiatives. “The significant innovations at Ashoka never happened with approval”, usually a successful initiative is starting at a grassroots level and then “trickling down or trickling up to the organization”. Furthermore, due to the CTP “membership in Ashoka both as a fellow and as a donor becomes far more valuable, because you’ve got more options to engage in the same community.”
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