A guide to social entrepreneurship

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A social entrepreneur creates innovation and transformation to provide solutions to social, cultural or environmental issues in various fields including education, health, agriculture, human rights and climate change. Leading entrepreneurs build sustainable organizations that try to achieve large scale change through a new invention, a different approach or a more rigorous application of known technologies. Social entrepreneurs are also called social capitalists, innovators or venture philanthropists and their organizations can either be non-profit or for-profit entities.

Characteristics

Around 45 percent of social entrepreneurs are in their 20s or 30s. While the split is 50/50 between male and females, 31 percent have been entrepreneurs for less than a year and only 12 percent have been on the job for five or more years. Social entrepreneurs work for the benefit of others while traditional businesses focus on financial objectives. Entrepreneurs use a business approach to find solutions to social problems often building their organizations on integrity and other core values. Social entrepreneurs are usually empathetic and use emotional needs to engage and inspire those around them.

Social Enterprise

The businesses set up by social entrepreneurs to benefit society are called social enterprises. Most of these enterprises in the United States are small with about 40 percent having fewer than five employees and making less than $250,000 in revenue a year. U.S. social enterprises are fairly new with 60 percent being created after 2006. Approximately 90 percent of these enterprises focus on solving problems in the U.S. rather than overseas. Many of the areas where social enterprise takes place are major U.S. cities next to the coast including Los Angeles, Boston, Washington D.C. and Miami. The top impact areas of U.S. social enterprises are economic and workforce development, education, energy and the environment.

Leveraged Non-Profit

The entrepreneur creates a non-profit organization with the aim to promote the adoption of an innovation that addresses a market or government failure. The entrepreneur engages in a cross section of society including private and public organizations creating a multiplier effect. Leveraged non-profit ventures rely on outside philanthropic funding and the partners’ vested interest in the continuation of the project.

Child’s Play is a perfect example of a 501(c)(3) non-profit organization. Child’s Play is a game industry charity dedicated to improving the lives of children with toys and games through more than 100 hospitals worldwide. With the help of hospital staff, children create wish lists full of video games, toys and books. People can view a wish list and send the appropriate gift or donate money to Child’s Play for them to purchase new consoles and games for hospitals.

Hybrid Non-Profit

The entrepreneur sets up a non-profit organization but there is some cost recovery through the sale of goods and services to private or public institutions and target population groups. For an optimal structure, the entrepreneur often sets up several legal entities to accommodate the earning of an income and charitable expenditures. The entrepreneur also receives other sources of funding such as grants or loans to be able to sustain the transformation activities as well as address the needs of the clients who are often poor or marginalized from society.

An example of a hybrid model where a non-profit and for-profit are linked is Story Pirates. This non-profit was founded in 2003 and is based in New York City and Los Angeles. Story Pirates provides after-school writing and drama programs to underserved schools and produces stage shows for the public.  Story Pirates created a for-profit business of the same name to accommodate the growing number of ticket sales. These organizations are linked through licensing agreements that allow them to share their name and content.

For-Profit

The entrepreneur establishes a business that provides a social or ecological product or service. Although profits are generated, the main goal is not to maximize financial returns but to grow the venture and reach more people in need. The profits are usually reinvested in the enterprise to fund expansion. The entrepreneur looks for investors that are interested in combining financial and social returns on their investments.

An example of a for-profit social company is TOMS which was founded in 2006 with the promise that every pair of shoes sold would provide a free pair to children in need. In the past 10 years, the company has given more than 60 million pairs of shoes away in Argentina, Ethiopia, Guatemala, Haiti, Mexico, Rwanda, and the U.S. TOMS profits have allowed it to expand its product line to eyewear, coffee, bags and backpacks which helps new programs like giving away free eye exams, improving global child health and wellness, safe drinking water, bullying prevention programs and training for safe birth conditions to those in need.

Social entrepreneurs are visionaries trying to implement sustainable and systemic social change through innovation. These entrepreneurs believe all people can provide meaningfully contributions to social and economic development. The impact of their work is measured and analyzed to maintain the highest standards and continuously improve their efforts. Social entrepreneurs are striving to create a better environment for future generations.

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