Adaptive finance hacks to support a proven systems funding deployment model.

The single biggest barrier is funding. Foundations are more comfortable funding “big ideas” – ideas that work on paper. The private sector seeks financial returns – too often today exorbitant returns. Government, meanwhile, is hamstrung by politics, incumbency, regulatory capture and corruption. Yes, there are exceptions to these patterns. But they are exceptions. Indeed, we are applying because we know from experience that materially significant funding can dramatically expand the use of adaptive practice which, in turn, is the only way to fundamentally shift today’s failed practices, including the failed practices of finance.

Our work is not country specific and can be applied anywhere in the world. Current initiatives in North and South America, Europe, Australia. Ereddo and its activities are described above. Often challenge efforts are still born without systems funding to energize challenge teams. The following hacks are building out our proven, and scalable systems funding deployment model. Combining adaptive practice with a proven systems funding model is a powerful and much needed combination to address our SDG challenges. HACK 1 Deliverable: Governance documentation/operating manual for the challenge deployment fund - governance documentation exist and is documented in dispersed format over many different projects and discrete applications over a 30-year period. It needs to be consolidated as a set of guidelines that can be used by funders and challenge teams. Answers questions such as: 1. Criteria for a qualified participating team. 2. Criteria for a qualified challenge.  3. Describe/agree on some quick/easy process to get to qualification of participant and challenge. 4. Describe the fund structure, decision making, cash disbursement and internal controls.  5. Describe "what success looks like” in terms of outcomes  HACK 2 Experiment with and deliver a simple 5-capitals Excel valuation model that recognizes that all forms of capital require a seat at the table in project or challenge evaluation. Purpose: a simple indicative project evaluation tool. (Porritt - 5 capitals) (learn from Commonland - 4 Returns Framework, Bhutan Happiness Index, SROI…) Putting a value on the claim of each form of capital can be debated for 3 lifetimes and still be contentious, so whilst international initiatives are under way to define “rational” valuation methodologies for different types of capital, it is proposed to allocate an equal undivided economic interest of 20% to each of the 5 capitals. It is less of a legal construct than it is a governance framework within which to recognize economic interests and cooperate. The underlying value here is partnership, mutual benefit, and harmonized collective interest. HACK 3 Deliverable: Develop an experimental adaptive, perpetual long term bond term sheet to unlock institutional capital. (“Unity Bonds”) Hypothesis: 1. Social development challenges/projects require patient long-term capital as any commercial start up does. 2.  Equity markets from VC to public have an impatient short term return focus. 3. Bond markets provide longer-term stable funding as well as access to massive institutional funding pools. 4. Using SAFE like instruments, structured as bonds convertible into the next round of funding in the development cycle of a social enterprise a funding continuum can be established to provide quasi equity capital to social enterprises. We have identified circa 20 different bond types with a commensurate library of information. Distill from this pool a wireframe term sheet to engage with institutional funders for consultation.  Some tools: 1. Insurance (ART, credit insurance, performance bonds, cell captives, self-insurance, regional reciprocal cross insurance) 2. Blended valuations (mark to model, 5 capitals, the commons) 3. Subordination (capital structure ranking, 1st loss, blended finance, capital guarantees) 4. Adaptive approaches (finance process, challenge execution, accountability, sprints, budgeting) 5. Blended bond structures (perpetual, impact, performance, nature, green, climate) 6. Collective governance structures & processes 7. Convertible agreements (grant to equity, grant to debt, debt to equity, debt to grant) 8. Outcomes based contracts (revenue-based financing, redeemable equity, recoverable grants, flexible repayment, community buy-out, outcome linked loans, impact bonds) 9. Land trust/coop structures (rights of nature, community commons, golden share)

Our expectation is that a professionally structured systems funding model have the potential to significantly increase systems funding liquidity available to social enterprises globally. It could become a way shower for others in the philanthropic field.