Social Entrepreneurship as a distinct field on its own has been steadily gaining widespread interest and traction in the last 2 decades. When I say distinct field, it is important to define specifically for the purpose of this article what it means and how it is different from other related fields like social service and impact investing.
Social entrepreneurship is essentially the process of driving social change at scale through not-for-profit entrepreneurial endeavors. To make it clearer, let’s contrast it with the other two fields mentioned. The way social entrepreneurship differs from social service is primarily in the business model and how it can be scaled. According to the Stanford paper, “Social Entrepreneurship: The Case for Definition” by Roger Martin and Sally Osberg, “The difference between the two types of ventures – one social entrepreneurship and the other social service – isn’t in the initial entrepreneurial contexts or in many of the personal characteristics of the founders, but rather in the outcomes. Imagine that Andrew Carnegie had built only one library rather than conceiving the public library system that today serves untold millions of American citizens. Carnegie’s single library would have clearly benefited the community it served. But it was his vision of an entire system of libraries creating a permanent new equilibrium – one ensuring access to information and knowledge for all the nation’s citizens – that anchors his reputation as a social entrepreneur.”
While impact investing can be considered a subset of social entrepreneurship, for the purposes of this article, I will differentiate it because the field of impact investing specifically has received widespread attention from mainstream investors leading to it being defined very broadly. Impact investing is typically geared towards for-profit projects which have a social angle but financial returns are expected. While this has proven to work well for some models (affordable housing, clean energy, microfinance etc. among others), the time frame and the expectation of returns makes this a challenging model for problems that require deep structural change over decades (school education, community development, governance among others).
Now that we have a better understanding of the definition of social entrepreneurship, let’s look at a few capacity building measures that can be implemented for social entrepreneurs. Specifically, what venture philanthropy firms or other ecosystem players can do to help social entrepreneurs grow faster and scale more efficiently.
The first is a network of investors for fundraising. This is well established for traditional entrepreneurship. One can do a cursory Google search and figure out what stage, geography and domain a VC firm looks at and details on their past and current portfolio. An entrepreneur can quickly figure out who the most relevant investors in their space are and how to approach them. This is much harder to do for social entrepreneurship. The landscape of investors is more fragmented and much less organized – it consists of foundations, individuals, CSR arms of companies, venture philanthropy organizations and family offices.
The 2016 Companies Act law in India which mandated companies to donate 2% of their average net profits to CSR has catalyzed investment in social ventures but to truly achieve benefits of scale, it needs to be done in much more coordinated manner. A big service that a venture philanthropy firm or an ecosystem player can provide social entrepreneurs is organizing the world of investors – by the size of the cheque they write, by the areas they focus on, their specific preferences and then most importantly by facilitating introductions to them. This allows the entrepreneurs to focus on what they do best which is to create an organization that can impact society in an impactful and meaningful way.
The second is hiring. An organization that has to scale effectively needs to have a deep bench of talent at all levels. Millions of dollars of VC money have gone into startups that aim to make the hiring and recruitment industry more efficient and streamlined. There are startups solving for hiring by industry, geography, function, seniority, diversity – pretty much anything you can think of. The same cannot be said of social entrepreneurship and this is where capacity building players can come in. They can aim to be a central hub of connecting social ventures and those looking to join them. Due to the sectors relative infancy, the approach will need to be high touch at first (such as personally facilitating introductions) especially for senior positions until the sector matures and this becomes institutionalized. Teach for India has done this very effectively in the education sector owing to their large alumni base. The same can be done across sectors by other organizations.
The last area is impact measurement – an extremely complex challenge to overcome. In companies, at a basic level, the overarching goal is simple – make more money than you spend. For startups where this takes time, there are established metrics for every stage to measure progress: ARR/churn for enterprise software companies, DAU’s/MAU’s for consumer internet platforms, CAC/LTV to measure efficacy of marketing dollars etc. This is where it gets tricky for social entrepreneurship. How do you decide which metrics to focus on? All investors want to see outcomes but how do you measure them when cycle times of your intervention are much longer. It can be objectively measured how many mid-day meals are provided to children in their school but it’s harder to determine the efficacy of a sports program instituted to build confidence amongst students. This is again where the ecosystem builders can add value. They have a vantage point from where they observe social ventures; across stages, sectors and often times across geographies. Institutionalizing their learnings through pattern recognition and sharing them across the ecosystem can be extremely valuable.
The power of social entrepreneurship lies in its ability to tackle many of societies largest challenges at scale. In order to do that however, multiple stakeholders in the ecosystem have to come together, share learnings and best practices, and help effectively build capacity of these entrepreneurs.
Views expressed above are the author’s own.
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