Kandama: A Social Enterprise in the Midst of the Pandemic and the Valley of Death

Note: This article is written in partnership with British Cambridge College.

On August 19, 2017, four years ago, we officially launched Kandama Social Enterprise in Makati, Philippines. Kandama is a social enterprise (SE) that aims to facilitate the empowerment of indigenous women in Julongan, Kiangan, Ifugao and to stem the tide of deforestation within the area.

August 19, 2019- Weavers from Kiangan, Ifugao with Kandama's partners and key personnel

             August 19, 2017- Weavers from Julongan, Kiangan, Ifugao with Kandama's partners and key personnel

At the time, Kandama's founder, Victor Mari C. Baguilat Jr., just finished the Singapore International Foundation’s 6-month Incubation program called Young Social Entrepreneurs Program (YSE2015). Armed with nothing but confidence and a lot of passion, he left law school and ventured deeper into a social entrepreneurship journey. 

YSE, YSE 2016, SIF, Kandama, Kandama Social Enterprise

Kandama founder Victor Mari C. Baguilat Jr.'s pitch at the Final event of the Young Social Entrepreneurs Programme of the Singapore International Foundation, 2016.

Into the Valley of Death

The valley of death generally refers to the early stage of a startup where it experiences difficulty in covering the negative cash flow before it finds a repeatable, scalable business model that is profitable.

Valley of death, Kandama

In one of his lectures at the Asian Institute of Management, Professor Dan Songco mentioned that the valley of death of a regular business entity is approximately four years (other literatures, however, say that it is 3-5 years). The valley of death of a social enterprise, on the contrary, is much longer, Professor Songco estimates it to be 7 years and that an SE is in trouble if it cannot break even yet in 2 years. These estimates do not consider the pandemic situation that we are in, which means that the valley of death is most likely even longer. Many social enterprises risk failing prematurely due to sheer lack of funding (Gompers and Lerner study place it at 90%), and in a pandemic environment, the rate of SEs failing will be considerably higher.

(Note: In other literatures, the valley of death is a market failure that is referred to as the strategic financing gap.) 

strategic financing gap, kandama

What is a social enterprise?

For most Filipinos, a social enterprise is a foreign concept, partly because we do not even have a legal definition for such. And while the British Council states in its most recent report that there are at least 164,473 social enterprises in the country, incubation programs for social enterprises are mildly visible in the Philippines relative to our neighboring countries like Malaysia and Singapore. 

Essentially, a social enterprise is defined by the British Council  (2015 report) as “businesses that exist to address social and environment needs, [and] focus on reinvesting earnings into the business and/or the community.”

To make things clearer, there are three standards for a social enterprise:

First, is the impact or the core mission (if the core mission is merely profit then it is not a social enterprise; it doesn’t have to be social/ environmental mission first, it can be both). 

Second, income source (if 75-100% of income comes from grants, then it is more of an NGO than a social enterprise).

Third, the use of surplus (in social enterprises, the value created and captured are shared— at least 50-60% of earnings are shared with the community, yet profit sharing with owners and shareholders are still allowed).

Why is an SE’s valley of death 7 years?

We can think of three reasons why it is longer than usual.

First, while early-stage investors including impact investors like to see the hockey-stick growth graphs typical of tech pitches, social enterprises think about growth not as an end in itself but as a way to serve their mission. Hence, it is more difficult for SEs to traverse the valley of death, which extends it to an estimated seven years.

Second, while regular businesses focus largely on creating and capturing value, SEs are expected to do both and at the same time share the captured value to the community, instead of simply reinvesting it back into the business. 

Third, social and environmental problems are complex and complicated; they require systemic change, hence, SEs can’t just plug into an existing infrastructure that’s part of the problem they’re seeking to address. There are instances where the social impact expense of community organizing exceeds the capital investment of starting the business. Conclusively, the amount of resources needed in terms of time, money and expertise are greater lengthening the valley of death that an SE has to traverse.

Why is Kandama a Social Enterprise

There are three standards to a social enterprise as mentioned above: first, the core mission is to address a social and environmental problem; second, the source of income is generated through business practices; and last, the surplus is significantly funneled back to the community to address a social or environmental problem.

Core mission

The core mission of Kandama remains to be the empowerment of indigenous women, the preservation of culture and the protection of the environment and the rice terraces. The social mission of Kandama is stated in the latter's Articles of Incorporation, Assessment and Planning Documents, Research Studies, and in media interviews. 

kandama, kandama weaver, kandama social enterprise

The above mentioned social and environmental problems are complex and interconnected. Hence, more in-depth investigation is necessary to nip the problems in the bud. 

In 2020, Kandama’s founder alongside his other teammates from the Master in Development Management program of the Asian Institute of Management conducted several studies on the community of Kandama. In particular, they visited the weaving centers and met up with members of Lih'han Di Immipugo, which is the weaving community supported by Kandama. The researches conducted are as follows:

  1. Rapid Area Assessment [joint research with Learning Team 2 (LT2): Zaka Rahim, Emmer Nunag, Tisha Caburian, Raffy Amos, Victor Baguilat Jr.]
  1. Feasibility Study on Sustainable Tourism in Kiangan, Ifugao [LT2 joint research]
  1. Rapid Gender Analysis
  1. Strategy Paper on improving Kandama’s response to the needs of the weavers in Julongan village, Kiangan, Ifugao during the Covid-19 pandemic 

The amount of time, money, and expertise devoted to understanding, assessing, and analyzing the development problems in the community to generate a sustainable development project is evidence of the commitment of Kandama to its core mission. 

LT2, AIM, MDM, Victor Baguilat Jr., Kandama, Kandama Social Enterprise, Kandama Weave

Asian Institute of Management, Master in Development Management students {LT2) with Kandama personnel and weavers in Kandama's weaving center. (L-R: Kandama Chief Community Executive Rachel Baguilat, LT2 members Tisha Caburian, Zaka Rahim, weaver's husband and their son, weavers Sally Agustin and Joan Ballatong, Kandama founder and Chief Executive Officer, Victor Baguilat Jr., also of LT2

Source of Income

The source of income of Kandama is largely from private funds and not from any grant, although it received technical and other non-financial forms of assistance from other organizations. Hence, Kandama is a bootstrapped social enterprise start up. What this means is that we started lean without help of outside capital or financial grant. We continue to fuel growth internally from cash flow produced by the business and in some instances, such as when the pandemic happened, through personal savings and personal loans.

Use of Surplus of Social Impact

Given the change in the market landscape brought upon by the pandemic, Kandama’s search for a repeatable, scalable business model is being revisited. In the past, however, surplus was used to finance the construction and repair of two weaving centers and the donation of ten hand looms, and more than 1,000 kilograms of threads to Lih’han Di Immipugo, Kandama's weavers. On top of that, three weaving workshops were sponsored by Kandama, one of which is in partnership with the Philippine Textile and Research Institute. It also sponsored an empowerment workshop using the process of Appreciative Inquiry and a Planning and Assessment Training facilitated by Bing Roncesvalles of Asian School of Development and Cross-Cultural Studies and Sally Ababa, National Director of Operation Mobilization Philippines.

kandama weavers, Lih'han di immipugo, kandama, appreciative inquiry

Lih'han Di Immipugo weavers at the Assessement and Plaining Training; 22-23 March 2019, Julongan, Kiangan, Ifugao

Kandama workshop

Lih'han Di Immipugo weavers with trainers Sally Ababa and Bing Roncesvalles whith Kandama Chief Community Officer Rachel Baguilat at the Assessement and Plaining Training; 22-23 March 2019, Julongan, Kiangan, Ifugao

Current Challenges 

Social distancing measures and the shrinking Philippine economy have definitely hit Kandama’s operations. On top of that, the lease of one of Kandama’s weaving centers has expired and we are looking for a new location to set up our new weaving center.

The way forward

  1. Continue the search for a repeatable and scalable business model using Steve Blank’s Customer Development process. While pivots and iterations are being conducted, more proof is needed to validate Kandama’s business model in a COVID situation.
  2. The Rapid Gender Analysis conducted in 2020 and the Planning and Assessment document generated in 2019 provide deep insights into the needs of the community. A multi stakeholder and ecosystem collaboration is required to address the needs of the community.
  3. Continue community engagement and current revenue generation efforts.

kandama weavers

"The landscape in Ifugao has changed a lot. And it is caused by socio-political factors. The ancestors manage because of BAYANIHAN. The challenge of the present-generation Ifugao is how to maintain BAYANIHAN, which can be done through setting up of COOPERATIVES."

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