Social Enterprises 101

By Jessica van Thiel

There’s a lot of chatter these days about Social Enterprises (#socents), a relatively new way of doing business, that we believe is a ‘movement’ in the entrepreneurial world. It seems millennials (in general) are the driving force behind the trend that’s resonating with all generations and revolutionizing the way people do business. Because ‘socents’ are fairly recent, there is little research about their successes, failures, and what makes them tick.

As with all new things, people are following social enterprises to see if it is indeed a successful and revolutionary new way of doing business or if it’s just the trend of the moment.

Social Enterprises: what are they?

Social entrepreneurship, according to Harvard Business Review, “has emerged over the past several decades as a way to identify and bring about potentially transformative and societal change.”

Social Enterprise Council of Canada describes social enterprises as– “businesses owned by non-profit organizations that are directly involved in the production and/or selling of goods and services for the blended purpose of generating income and achieving social, cultural, and/or environmental aims.”

The main identifying characteristic of social enterprises is that they are businesses which have a greater purpose and in general aim to ‘do good’ while making a profit.

Social Enterprises: key challenges

The first and most significant challenge of a social enterprise is that it is not an easy way to raise revenue. Most socents take years before they break even, let alone start generating funds. Long term commitment and subsidizing are essential and are hard to find. That’s why a common way of seeking funds is through crowdfunding campaigns such as IndieGogo or PinUp.

But even then, nothing is certain, and balancing a social enterprise’s social and financial priorities is extremely challenging.

The second challenge we’ve observed is the difficulty of selling a new idea. In most cases the idea has not been proven to be successful yet, and is therefore not free of risk even though it may hold great potential. It’s difficult to ‘pitch’ an idea that hasn’t yet proven results; and it’s next to impossible to deploy on the idea without the money to do so. It’s a bit of a ‘chicken before the egg’ dilemma and it can be one of the most frustrating aspects of starting a social enterprise.

As explained by Sarita Douglas of Demand Media, “A social enterprise faces the same issues that any traditional business faces in its growth and operations. But social entrepreneurs also face unique challenges in delivering the social value, social returns or social impact of the enterprise in addition to commercial value”.

Benefits: success is possible

In order to succeed, social enterprises must comply with both social goals and significant financial constraints. The initiative must be financial sustainable, otherwise the project will require a constant flow of subsidies, charity and donations that traditional non-profit organizations heavily rely on; that are, in nature, unsustainable and difficult to secure.

Many social enterprises maximize their impact through collaboration, co-operation and social innovation. They tackle traditional business problems in a different way; and scale of business doesn’t necessarily equal scale of impact.

One common practice among social entrepreneurs is to share ideas with peers. For us, building relationships and networks to maximize impact has been essential. Rather than worrying about competitors, we’ve taken on the strategy of sharing information and connecting with our peers in the effort to gain insight, industry ‘best practices’, and future contacts.

We recommend brainstorming with experts and contributors to help find solutions to common industry problems. Simply put, the more people are inspired and join your “movement”, the more likely others will take notice and in turn, make resources available.

Much work is yet to be done to discover all of the benefits of running socially responsible and economically sustainable organizations. The bottom line is this: a social enterprise is a business. It needs to be run by professionals with commercial experience who understands financial planning, scaling and growth as well as social issues.

References:

Social Enterprise Canada
http://www.socialenterprisecanada.ca/en/learn/nav/whatdotheysellmakeanddo.html

Social Enterprise Council of Canada
http://www.socialenterprisecanada.ca/learn/nav/whatisasocialenterprise.html#sthash.yi6uhiPC.dpuf

Social Enterprise UK
http://www.socialenterprise.org.uk/blog/the-challenges-of-scaling-up-social-enterprises/

Management Study Guide
http://www.managementstudyguide.com/social-enterprises-advantages.htm

Harvard Business Review
https://hbr.org/2015/05/two-keys-to-sustainable-social-enterprise

An Influential Impact Investor Offers Advice for New Social Entrepreneurs

By Shivani Singh

Advice for a new Social Enterprise

“I have committed to being as helpful as I can”, is why Mr. Solomon took a call with me. He had responded immediately. He agreed to share some expertise with this new social entrepreneur, a follower from Twitter.

Joel Solomon

 

 

 

 

 

 

 

 

I had been researching, studying and interviewing for our new social enterprise, PATHFINDER, when I met Mr. Solomon. I was fortunate enough to have spoken with a few successful people, each of whom had been so kind. While every conversation had been educational, I found increasingly, that “social enterprise” and “impact investing” etc. are rather specialized concepts. The idea of using business as a force for good has only gained traction over the past few decades. Expertise remains concentrated among those who have spent years working in the industry themselves.

Joel Solomon co-founded and runs Renewal, “a collection of organizations that utilized the powerful tools of business and philanthropy in support of long-term societal solutions.” Mr. Solomon, himself a successful private financier, has affected several socially viable operations. He has empowered many people through his work and commitment to a better world. Our conversation turned out to be as targeted and helpful as I imagined it might be.

I had 30 minutes on the phone. The question was as follows:

“What advice would you offer a brand new social enterprise? Please focus on how to attract attention and funds.”

Mr. Solomon spoke of 3 keys areas he believes to be critical to building a brand and raising funds. Master these, and a social enterprise is well on its way to legitimacy, perhaps even success:

1. Access, which referrers to one’s own network distribution. How many contacts can introduce one to money, or to events and circumstances that boast money?

2. Knowledge, about where the money is. There are specific institutions that offer seed capital, such as incubators and venture capitalists. There are organizations that promote equity crowdfunding. There are showcases one can participate in, for admittance to a particular audience and network. And then there are wealthy individuals who are looking for causes to get involved with. One needs to search hard, find these organizations, and work with them.

3. Lists, of potential bridges to private money. The goal is to maneuver oneself into situations where there is wealth aplenty. Know that building and executing these lists may be tough, as the exercise challenges one to step out of one’s bubble of comfort. How best does one get to, and represent oneself in a situation of power and wealth? What might hold one back? The intention is to capture as much stage and glory as one can while of course, championing the cause.

And of course, finally there is the “art of engagement”. Mr. Solomon briefly summarized characteristics of successful people everywhere, such as intelligence, strategy, personality, presentation, being realistic etc. The better known attributes of prosperous entrepreneurs play a crucial role as well.

35 million people comprise the wealthiest 10% of the United States and Canada, combined. “This means that 1 in 10 people have money here”, said Mr. Solomon. The rise in private money for business ventures with social impact, corresponds with a decline in public investment due to the decreasing reach of government. For those setting out to run socially sound businesses, its helpful to know that not only are there plenty of funds, but also, this is a rapidly developing trend.

Social Entrepreneurship is a powerful new movement (as I see it); one that allows people everywhere to take charge instead of relying on bloated bureaucracies and corruptible governing bodies. There will be several successful models of engagement over time. The best models will generate victorious public-private partnerships.

Much yet remains to be seen, learned and studied about this industry. But what we have set out to do is good. We will stay the course, build expertise and develop credibility. Hopefully, we will succeed and change many lives for the better. In any case, a few years from now, we will look back and remember our first supporters and advisers.

-Shivani

First Social Enterprise on Fundable!

Social Enterprise on Fundable

We’re proud to announce that PATHFINDER is the First Social Enterprise on the equity crowdfunding platform, Fundable. Check out our campaign and do share our story with your friends and networks!

More Press! Thanks “My Social Good News”!

Check out the article “Chemists and Do-Gooders: The Drunken Chemist Is Partnering with Social Enterprise PATHFINDER to Create Jobs For Women in India” highlighting our pilot project and partnership with The Drunken Chemist (TDC).

We are eager and excited to get to work on their expansion and creation of jobs for rural women in India!

-Jess

Check out this successful example of a market-based solution to poverty

The One Acre Fund is a successful example of a market-based solution to poverty. Like us at PATHFINDER, they believe in enabling people so that these people may bring themselves out of poverty, and eventually thrive. Check out what they’re doing  here.

Enabling not aiding: a solution to the non-profit brain drain

By Jessica van Thiel

We are different from most consultancies in the way that our model operates. Our intention is to enable social entrepreneurs by providing them with the resources and funding they need to be able to focus entirely on their organizations and causes; because the current model that most non-profit organizations use is just not sustainable.

Too often professionals with a great deal of expertise and education are expected to work for very little or on a voluntary bases (in many cases). This of course is not sustainable and the result is a high turnover of staff, the abandonment of projects and in many cases the closure of the organization.

We aim to prove that our innovative model of operations will address these greatest known industry shortcomings and will tackle them head on by enabling (not aiding) promising local social entrepreneurs and by engaging only sustainable and scalable operations.

By the end of 2016, our objective is to make great strides. The direct impact will be seen at the ‘grass roots’ level through our pilot projects. Supporting the education of school children in Nepal, and the creation of jobs for rural women in India will be the tangible results seen right from the start.

However, raising funds is tough and raising funds where it is unlikely to make a massive return on investment right away, or where there isn’t a cool new gadget to grab, is even tougher. We are a social enterprise and “social entrepreneurship” is a relatively new, developing trend.

Much work is yet to be done to discover the amazing benefits of running socially responsible and economically sustainable organizations. But at PATHFINDER we are confident that over time, our model will prove to be successful and demonstrating of enormous potential!

-Jess

Momentum

We’re partnering with a fantastic organization that that works to bring quality education to children who cannot afford or access one. Our first project signed is in Nepal with World Pathfinder Children’s Fund.

Our names being similar is pure coincidence, by the way. Or its a really good sign, perhaps?

Next up, generating interest and investment (yikes)!

Starting Out

We’ve been researching and meeting with advisors, experts and potential partners for a while, and we’ll continue to do so through PATHFINDER’s life. We’re also currently working on setting up our opening engagement (and we’re very excited)! We’ll have more to share within a couple of months so please keep an eye out for the details coming soon.

~Shivani