Gexsi is a newly established, independent start-up whose shares we have transferred to the Good Impact Foundation. With Gexsi, we are consciously reviving an older brand – The Global Exchange for Social Investment. It has its own history. We are thus demonstrating how ambitious our project is.
Although there are now hundreds of organisations helping to develop the social entrepreneurship sector worldwide, the question of the appropriate form of financing for social innovators remains unresolved. Even twenty years after the idea of a marketplace for social investments was first outlined.
2001 – 2005
The idea was born
One of the crucial points of bringing about the idea of Gexsi was the Geneva-based Schwab Foundation for Social Entrepreneurship. In 2001, the foundation launched an initiative to make it easier for social entrepreneurs to access capital: Gexsi – The Global Exchange for Social Investment.
The idea was to create a marketplace that would bring together (high-)wealth individuals, foundations or financial institutions with outstanding social entrepreneurs who needed capital. Even then, it became clear that many of the challenges that today are described on a global scale as Sustainable Development Goals could be solved at the local level with smart business models.
The idea was approached with great vigour. However, it soon became apparent that money and projects could not easily find their way together. The form of money that social entrepreneurs need with their innovative ideas would have had to be invented first: Classic investment capital, which – depending on the project and country risk – has to be repaid at a high premium, isn’t affordable for most social entrepreneurs. Funding by foundations often fails because charitable law does not recognise hybrid organisations such as social enterprises. When Andreas joined Gexsi in 2005 it was still located as a charity in London. Even at that point it was already clear that the original plan of a “Global Exchange for Social Investment” would not work.
2005 – 2008
Founding of the Gexsi Charity
Andreas joined GEXSI in 2005 at the invitation of Maritta Koch-Weser. Maritta Koch-Weser, former member of the Board of Directors of the World Bank and Director General of IUCN (World Conservation Union in Geneva) took over the Schwab Foundation project at the beginning of 2005. She recognized that social enterprises at an early stage needed investments driven by a philanthropic mindset rather than commercial investment capital. She immediately converted the GEXSI Ltd in London, founded by the consortium, into a non-profit charity. Shortly afterwards she set up a small team in Berlin as part of a public-private partnership project with GIZ. The idea: to use the extensive network of contacts to help social entrepreneurs* worldwide find investors who are willing to forgo part of their returns for more impact and to pitch their concepts.
This hand-picked mentoring service was a success insofar as it met an enormous need. However, Gexsi lacked a suitable business model. The role of intermediary in a market where clients – young social entrepreneurs – generally had no money to pay for services is ungrateful. At the end of the sponsored pilot phase, the services had to be discontinued as far as possible. This also had to do with the different expectations of the initial start-up consortium. Most of them had been attracted in 2001 with the idea of setting up a self-supporting if not highly profitable impact venture.
In retrospect, it is certainly no coincidence that the Gexsi team first developed concepts in this phase that provided for a radical strategic shift. Under the working title “social bill” or “round-it-up”, a plan was developed. The question was whether the daily rounding up of bills, which we all know from restaurants or cafés, could be transferred to other areas: in shops, for online purchases, for monthly credit card statements, etc. Initially this was supported by the Open Society Foundation. The plan was then developed in order to make it easier for the Gexsi team to make a profit. Away from a focus on individual ultra-high net-worth philanthropists towards a commitment from as many people as possible all over the world. The primer focus was on three countries: Germany, Brazil and initially also Great Britain. In Brazil, it was Maritta Koch-Weser’s commitment in particular that led to the development of the Arredondar initiativ. In Germany, the Germany rounds off initiative had developed parallel to us.
Gexsi had founded an association called “Social Stock Exchange e.V.” for further scaling. Following the example of the Sao Paulo Stock Exchange’s donation initiative the association pursued the goal of using the infrastructure of stock exchanges to develop marketplaces for good donation projects. However, the concepts were not driven by the idea of specifically supporting social innovators or social entrepreneurs, rather the term “social investments” was used synonymously with donations for classic non-profit projects. The original goal of closing the financing gap for social entrepreneurs remained distant for the time being.
2008 – 2013
Gexsi as Social Startup Incubator
The next phase was thoroughly entrepreneurial. Andreas had met the young entrepreneur David Diallo in Berlin. Together they developed a new business model. The idea: Let’s set up social businesses ourselves instead of being crushed between investors and founders as brokers. With some starting capital from David’s proceeds from the sale of the company myphotobook, GEXSI Capital Partners GmbH was founded. In the following years, the GmbH founded and managed several social businesses in exotic countries like Madagascar or the Republic of Congo. In 2008, Gexsi carried out a study for the WWF that analysed the potential of the Jatropha bush with its oleaginous fruits. The question was to what extend the bush could be used to combat soil erosion in semi-arid areas worldwide and to strengthen local, energy-autonomous economic cycles. Building on this knowledge and network, David and Andreas founded a local venture in Madagascar together with other partners. At the same time, Moringa, a tree widespread in Madagascar, was discovered. From the leaves a powder could be produced that could specifically combat malnutrition in children. The idea was to cross-subsidized the usage for children through the sale of the high-priced “superfood” to Europe. After a military coup in Madagascar, the halt of the school feeding programs and the legal uncertainty for investors, the two ventures, Plantinum and Elimentaire, had to be stopped.
At the same time developments in the Republic of Congo were different: here, together with a wealthy family from Germany, a social business was set up. The business operates an eco-lodge in the middle of the Congo Basin, near a research station that observes the largest worldwide population of lowland gorillas. The revenues go to the neighbouring national park and are used for local community projects. GEXSI’s had plans for an investment fund, Rainforest Connect, which was to transfer the concept to other regions. Unfortunately this plan had to be stopped after a risk/return analysis. However, the lodge still exists and can be visited. The approach of the own spin-offs was not scalable, so that the question of the pioneering strategy was once again on the table.
2013 – 2016
Gexsi as Impact Investing Agency
In this phase, the “GEXSI” brand largely receded into the background. Andreas continued GEXSI as a boutique agency for social impact projects that focused on strategic networking and consulting projects. In 2013/14, for example, Gexsi conducted a study for the German Federal Ministry for Economic Cooperation and Development (BMZ). The study examined business models that help protect biodiversity. Subsequently, he founded a cooperative in Hamburg together with the Social Impact Lab Hamburg and Futuro Forestal that reforests sustainable tropical forests where they no longer exist today. The wealth of experience with impact-oriented investments and development financing was useful for various consultancy projects for development agencies and NGOs such as Welthungerhilfe.
A particular opportunity to help shape the ecosystem for social enterprises was presented by Marcello Palazzi. He asked whether Gexsi, as a country partner of the B Lab Europe Foundation, would like to found the German chapter of Certified B Corporations. The corporation can be discribed as the world’s largest network of companies whose success can be measured significantly by the benefits to society. This was a strategic lever for Gexsi. But with the price that the original idea of a platform that helps close the funding gap for social innovators was pushed further into the distance.
Gexsi as Digital Platform for Social Investments
The search for the great idea of a platform that would give social enterprises visibility and capital gained momentum again from 2016 onwards. Together with Patrik von Sosense from Zurich, Andreas developed concepts for a digital investment platform fed by donations. At the same time, David started a pilot called Good Search in search of monetization models for the Good Impact media platform. This project was driven by Kevin, whose handwriting is also reflected in today’s platform. One year later, www.gexsi.com went live.
Today, Gexsi is what was planned in 2001: a Global Exchange for Social Investment. But with a much stronger driving force. Instead of a few very wealthy people financing innovative projects through Gexsi, hundreds of thousands of people will in future be able to generate money for the social entrepreneurship sector. Simply through their daily web search on the Internet. The more people participate, the greater the share that we can divert from the approx. 100 million euros that are generated daily via search queries and put them into a good cause.
The big advantage is that the funds can be used much more flexibly than in dialogue with major donors and investors. Since it is legally advertising revenue, there is no restriction to use the money only for the promotion of NGOs in the classical sense. We can support any project, no matter how innovative, and break new ground in the process. And this is exactly what we intend to do.