What is Social Entrepreneurship?
When you hear the term “ Social Entrepreneurship” what is the first thought that comes to mind? Social good? Non-profit? Change? Developing nations?
To me, the term Social Entrepreneur is best described as an Entrepreneur who is focused on social change or social good. An entrepreneur by itself has innovative ideas, drive, the need to succeed and is a creative problem solver. When you add the social element to this individual you have someone who takes all of their entrepreneurship talent and focuses on the most pressing social issues in the world. These social entrepreneurs are in business to create a sustainable company that can provide social change and social good to communities all over the world.
Social enterprises operate under the same structures as most businesses would. They can be sole proprietorships, partnerships, LLC’s, corporations or s-corps. From a legal standpoint they are just another businesses. What makes them special though is the “social” aspect of why they are in business. The social good that comes out of their business is one of the primary goals of the business. Does this mean it should take priority over revenue? No. To be a successful social entrepreneur there has to be a revenue stream in order to sustain the business. Unlike non-profits who often have sponsors, ties to larger foundations for funding, and receive huge tax breaks, social enterprises must turn a profit in order to stay in business. “Profits are to business as breathing is to life. Breathing is essential to life, but is not the purpose for living. Similarly, profits are essential for the existence of the corporation, but they are not the reason for its existence” – Dennise Bakke
The one problem social entrepreneurs come across is finding the needed capital to start their business. Traditional capital sources tend to cringe at the idea of a business whose primary goal is not to increase profits to their maximum, but instead, take part of that profit and turn it into social equity. Traditional financial institutions are in business to create a financial return on investment. When you offer them a return comprised of both social capital and financial gain they have a hard time measuring the social capital and are less likely to commit to something that obscure.
For those social entrepreneurs having problems securing funding to get their venture off the ground, the one common alternative is crowd funding, which is a good match for social entrepreneurs because it ties in a social aspect to raising capital. It allows the everyday citizen to invest personal capital (as low as $10) into a new business. These “micro financiers” are now doing social good with the possibility of getting a return on their investment. Their return can be a % of the company’s revenue or a product that they produce. It allows the everyday citizen to invest in these social minded businesses to better the world and get a little something in return as a thank you.
Social entrepreurship is gaining in popularity and is a large topic of discussion in Universities throughout the U.S. With the ability to create a sustainable business while at the same time creating good for the world, social enterprise may soon be a viable route for many graduates.
