Prepared for the Synapse Board of Directors

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(No Transcript)
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The Synapse Fund was officially launched at the
Clinton Global Initiative, a high-level
international gathering in New York City in
September 2005
There is a dramatic amount of untapped
agricultural income in Africa and other poor
countries right now to be earned by increasing
productivity and sales within countries and
across national lines within the continents where
the developing countries are...I want to thank
the Synapse Market Access Fund for helping to
build this strength and the capacity of
grassroots producers in rural communities Willia
m Jefferson Clinton, September 17 2005, New York
City
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The Synapse Fund Vision
MISSION AND VISION

• The Synapse Fund aims to alleviate poverty by
  addressing a critical issue in developing
  economies and emerging markets the lack of
  affordable financing to small businesses. By
  providing SME financing, as well as the
  accompanying market access development, Synapse
  helps build the individual firm and the
  surrounding community, ultimately contributing to
  overall economic development in emerging markets.
  Further, by working with local intermediary
  financial institutions (IFIs), Synapse
  contributes to the institutional development of
  the financial sector.
• Synapse operates on the cutting edge of
  philanthropy by applying investment strategies to
  charitable giving. It identifies businesses and
  organizations with viable business models and
  innovative approaches to opening new markets and
  cultivating opportunities for grassroots producer
  products. Candidates for funding in this new
  model of venture philanthropy are measured by
  three fundamental criteria
• Scalability
• Sustainability
• Impact
• With these pillars in place, modest initiatives
  grow into robust and far-reaching market access
  solutions. And once funded, investments are
  carefully monitored, guided and supported by
  Synapse in order to achieve long term success and
  self-sufficiency.

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The Synapse Fund Vision

• BUILDING MARKET ACCESS
• Creating new partnerships
• Breaking exploitative relationships
• Creating institutions for market development
• FILLING THE FUNDING GAP
• Providing funding for small businesses too large
  for traditional Microfinance, but too small, or
  too marginal for commercial loan products
• FOCUS ON SCALABILITY
• Focusing on mainstream products and services
  provided by poor producers, working to diminish
  market barriers, develop new channels to exiting
  markets, and promote sales for increased
  livelihoods

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The Synapse Fund How it Works
INVESTMENT PHILOSOPHY
The Synapse Funds model of venture philanthropy
uses market concepts as a driver for designing
effective social products and services, and is
based on the following key elements

• A knowledge-based partnership The Synapse Fund
  takes an active role in recipient organizations
  by providing expertise and closely monitoring
  progress.
• Investment in long-term business plans The
  Synapse Fund makes long-term investments in its
  portfolio businesses to ensure growth and
  sell-sufficiency.
• Accountability for results process The Synapse
  Fund actively monitors and evaluates its
  portfolio of social investments using internal
  benchmarks
• Provision of both cash and expertise The
  Synapse Fund provide both financial resources and
  professional services to its investment
  recipients
• Low-interest loans The Synapse Fund will
  provide low-interest loans, deliver
  capacity-building and market linkages via
  partners, thereby creating incentives for strong
  performance
• Reinvestment The Synapse Fund will reinvest
  capital to create a virtuous cycle of capacity
  enhancement and market leverage
• Exit Strategy The Synapse Fund will identify
  investment opportunities that are able to use The
  Synapse Fund to achieve the goal of future
  self-reliance.

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The Synapse Fund How it Works
EVALUATION
The Synapse Fund will actively monitor and
evaluate its portfolio of social investments
using internal benchmarks. These benchmarks will
be tailored to the specifics of each project, and
will include compliance requirements for the
investment organizations management team.
Further, they will distinguish clearly between
outputs and outcomes, focusing on long-term,
systemic capacity enhancement for all investment
partners. The Synapse Fund will provide oversight
and technical assistance to ensure the success,
and eventual self-sufficiency of its portfolio
investments. In setting its performance goals,
The Synapse Fund will focus on the following core
metrics

• loan performance
• market expansion
• job creation
• innovation
• mission adherence

Though innovation is difficult, GTN will seek
to create metrics that capture a business
innovation capacity per benchmarks established in
loan agreements
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The Synapse Fund How it Works
By providing financing and market access, Synapse
is building individual companies, the surrounding
community and contributing to overall economic
development in emerging economies. Further, by
working with local entrepreneurs and financial
institutions, Synapse helps to create an
environment that enables sustainable growth and
market development.
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The Synapse Fund Projects
Project Kenya Smallholder Farmers Investment
Company, Ltd. (KESFIC) Kisumu, Kenya   KESFIC, a
co-op of small farmers in western Kenya, has
traditionally purchased raw groundnuts from rural
markets at low prices during harvest season and
then sold them at a premium in urban markets when
supply is less available and prices are higher.
While its gross profits have increased, KESFICs
growth has continued to lag. Using Synapse
funding, KESFIC will be able to transition beyond
the basic bulking, storage and trading of
groundnuts and into value-added production.
Synapse partners for this project are TechnoServe
(providing business development services and
marketing support to KESFIC) and Kenya Rural
Enterprise Program (KREP) Bank, as the
intermediary financial institution.   Projects
Under Development/Review Site visits were made
in August 2007 to seven small businesses in
Brazil. Immediate prospects for Synapse were in
honey processing and Brazil nut production.
Meetings are currently scheduled with General
Mills, Nordstrom and other interested companies
in Synapses network to define how these small
producers could potentially be integrated into
their supply chains. Additional proposals from
more than one dozen countries in South Asia,
Latin America, and Africa are being reviewed.
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Realities and Challenges
CHALLENGES
Over the next 6 months, The Synapse Fund faces
three primary challenges Capitalization It is
essential that Synapse raise additional capital
to make further investments. Operations Synapse
needs to build internal capacity to establish
Fund operating procedures, build internal
investment capacity, build broad interest in
Synapse and trading networks, and assist in the
capitalization process. Cultivating Relationships
with Potential Investees To become a legitimate
and robust social venture fund, Synapse must
expand its network of partners around the world.
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Realities and Challenges
CAPITALIZATION
As with any fundprofit-making or social
investmentThe Synapse Fund will need to raise a
significant body of capital to make investments
and establish lasting operating procedures. As
The Synapse Fund continues to extend loans, much
of the investment capital is cycling through the
organization. However, the loan terms will not
foster significant internal capital growth.
Accordingly, a successful round of capitalization
is critical to the long-term investment capacity
of the organization. It is also likely that, like
all social venture funds, capitalization and
operations funding will be an ongoing activity
for the organization. As noted in the operations
section, we project that Synapse will need to
engage a part-time development officer within the
next 2 years.
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Realities and Challenges
CAPITALIZATION
The Synapse Fund has committed to raise 3.0
million by December 2007. Within the next 3
years, The Synapse Fund will amass a body of
investment capital valued at approximately US 10
million. For this undertaking, we will need the
financial and technical support of high net worth
individuals, corporations, venture capitalists,
multilateral institutions, private foundations,
and country governments.
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Realities and Challenges
OPERATIONS
The Synapse Fund has brought on board a manager
and global consultants with expertise in venture
capital and SME development finance. With this
team, we have laid out the vision of the Fund,
core values and basic investment critera. Prior
to investment initiation, The Synapse Fund will
need develop both organizational capacity and
detailed investment planning tools.
Organization Investment
Organizational Planning Schematic Detailed investment criteria
Seed Round Planning and Execution Terms of Engagement
Fund Development Beyond Seed Round Guidelines for Oversight
Staffing Evaluation Metrics
Strategic Partnership Cultivation Identification of investment targets
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Realities and Challenges
INVESTMENTS
Synapse will need to continue to selectively make
decisions among potential investments. In the
short-term, Synapse will look to initiate
investments with comprehensive scope across
sectors, and with strategic geographic
distribution. Within this context, there are
several possibilities 1. Synapse could focus on
critical sectors where funding gaps exist, and
where strategic intervention could result in
market growth.
Agriculture,
textiles, tourism and crafts are promising SME
sectors. 2. Synapse could set goals for
geographic distribution of investments

With investments slated for
Africa and South America, Asia, Synapse could
look to other regions for future investments.
Alternatively, Synapse could focus attention on
Central Asia, building a strong investment
portfolio before expanding to other regions. 3.
Given the widespread distribution of effective
SMEs, Synapse could respond to donor demand in
investment development.

During ongoing fundraising
operations, the Fund could offer donor
stovepipes, creating earmarked investments for
regions of interest, or even named funds for
donor cultivation.

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Realities and Challenges
LEGAL STATUS
The Synapse Fund was launched as a project of the
Global Fairness Initiative (GFI) As the Funds
fiscal sponsor, GFI assumed overall programmatic
responsibility for Synapse, and maintained a
relationship with Synapse, akin to a public
education fund, maintaining overlapping staff
and operations, but with different boards. As
of August 13, 2007, The Synapse Fund was
separately incorporated as a independent 501(c) 3
nonprofit corporation. All Synapse donations go
directly to the Fund and are fully
tax-deductible. Checks can be made to The
Synapse Fund.
Pro-Bono Legal Representation The law firm of
Edwards Angell Palmer Dodge LLP has offered to
be the pro-bono legal council for Synapse. EAPD
has helped Synapse pursue its own tax exemption,
and will help draft loan contracts, and will
ensure compliance with US laws.
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Into the Future
LONG RANGE PLANNING
As The Synapse Fund matures, many of the
operational questions that exist today will begin
to be answered. It is our hope that the growth
arc of the organization leads it to focus on
building market access and financial access for
SMEs in many parts of the developing
world. Synapse will remain a linked to the
Clinton Global Initiative (CGI). CGI provides
Synapse an international platform for donor and
investment development, and currently acts as
both an action motivator and an engine for
accountability. The Synapse Fund has made very
public commitments to the international community
to deliver vital services to the developing
world. As an independent 501(c)3, The Synapse
Fund will remain an operational and philosophical
reflection of the Global Fairness Initiative
(GFI). The search for innovation, and developing
scalable enterprises that extend globalizations
benefit to the worlds marginal populations are
GFIs core operating principles. As an
institution, GFI maintains a very small
institutional footprint, with extremely low
overhead costs, and remains nimble and adaptable
to meet emerging needs.
89 of GFI income is expended on program work
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Into the Future
BOARD OF DIRECTORS
The Synapse Fund has been fortunate to attract
the highest caliber of individuals to serve on
the Board of Directors, representing
international scope and impressive depth in
venture capital, socially-responsible investment,
social philanthropy and informal-sector business
operations. At this juncture, Synapse personnel
envision various potential roles for Board
members Assist in capitalization Identifying
and/or cultivating high net worth individuals,
outreach to foundations and corporations,
assisting with fundraising events, etc Assist in
the development of organizational operations and
loan-making technical materials


As Synapse will follow many of
the basic tenets of venture capital investment,
the experience of Board members in this area will
be vital in the operational development of the
institution. Inform Synapse staff on program
interests, geographic interests or fundability of
projects and presentation materials

As relative outsiders,
Synapse Board members can be vital sounding
boards for program development, and can suggest
investment ventures of personal interest.
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Board of Directors
Grant Aldonas President, Splitrock
International Steven Bennett Chief of Staff, The
Brookings Institution Eileen Kotecki President,
Hawthorne Group Barbara Krumsiek President and
CEO, the Calvert Group Janet McKinley Chair,
Oxfam USA Sally Painter Vice President, Dutko
Global Advisors Todd Peterson Synapse General
Counsel, Edwards Angell Palmer Dodge LLP Sonal
Shah GlobalDevelopment, Google.org Karen
Tramontano President, Global Fairness Initiative
Ricci Wolman Business Consultant
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As global citizens, we all have an inherent
responsibilityto each other and to future
generationsto work together toward a more
inclusive and sustainable prosperity. The
Synapse Market Access Fund is designed to help
realize this dream by providing critical market
access and support to the working poor throughout
the developing world.William Jefferson
Clinton, September 2005
The Synapse Market Access Fund 410 First St SE,
Suite 300 Washington, DC 20003
1.202.479.7158 synapsefund.org