Social Entrepreneurship: Growing Business With A Purpose

Social entrepreneurs contribute immensely towards change and innovation in a wide variety of fields, including health, enterprise development, education and the environment. These individuals devote their time to pursuing key social issues, such as poverty alleviation. They approach every project with courage and inspiration. As a result, they overcome traditional practices and obstacles to bring new ideas.

In many cases, the professionals employ business methods and demonstrate entrepreneurial zeal to ensure effectiveness. Doing so makes it easier to build sustainable organizations, which operate as companies or nonprofits.

To learn more, check out the infographic below created by Villanova University’s Online Master of Business Administration degree program.

Social Entrepreneurship environment

Social entrepreneurs can be defined as visionaries who refine and adapt strategies based on feedback to implement sustainable and systemic social changes on a large scale. The professionals often achieve these objectives through rigorous application of known technologies or approaches. They are also known as venture philanthropists, social innovators and social capitalists.

Emphasis is placed on social or ecological value creation while attempting to boost the company’s financial value. The entrepreneurs also believe that all people can contribute meaningfully to both social and economic development. The impact of these activities is measured and analyzed to evaluate strategies and maintain the highest standards. Qualitative and quantitative data is used to guide continuous improvement.

Organizational models

Social entrepreneurs use different types of organizational models to achieve their goals.

Leveraged Nonprofit Ventures

The social innovators may opt to establish a nonprofit entity with the aim to promote the adoption of innovative methods that address failures in various sectors. They pursue the initiatives by engaging a cross-section of society, including private and public entities. The multiplier effect is usually leveraged as part of the process. These organizational models are dependent on philanthropic funding.

Social Business Ventures

Social entrepreneurs can establish for-profit ventures with the aim to provide an ecological or social product or service. The main objective of these types of entities is to provide key social services and reach more people in need. Profit is a secondary objective, which means wealth accumulation is not a priority for the entrepreneur and the funders.

Hybrid Nonprofit Ventures

This model entails the establishment of a nonprofit organization. However, the entity incorporates cost-recovery mechanisms to boost viability and cashflow. Common cost-recovery methods employed by hybrid ventures include the sale of products and services. The organization assumes several legal statuses to accommodate the income generation and the charitable expenditures in an appropriate structure.

Classic Example Of The Hybrid Model

The nonprofit Mozilla Foundation established a for-profit entity called Mozilla Corporation. The business is aimed at handling the growth of the Firefox web browser. The corporation is reportedly making more than $100 million in profits annually. The money is derived from revenue-sharing agreements with business partners, such as Yahoo and Google.

As the sole shareholder, the Mozilla Foundation is responsible for the development of the browser’s open source software. It rakes in roughly $200,000 in philanthropic funding per year.

The Social Enterprise In The United States

The majority of social enterprises in America are relatively small, both in terms of revenue and number of employees. Up to 90 percent of the ventures focus on local social issues rather than abroad. This information was uncovered by the Great Social Enterprise Census. However, some experts are convinced the data is far from representative.

The argument is based on the belief that thousands of organizations can and should be legally identified as social enterprises, because they provide products and services that solve a social problem. Therefore, all businesses that focus on providing solutions for ecological or social missions, including community finance institutions, are social enterprises.

Overall, the census data shows that 45 percent of active social enterprises in America earn less that $250,000 in revenue and have fewer than five employees.

How Social Enterprises Are Transforming Innovation In America

Social innovators, their funders and policymakers are consistently working towards the development of a symbiotic ecosystem for innovation. The framework for the social enterprise ecosystem is characterized by four pillars; regulation and receptivity, quality of life, funding, and human capital.

Funding incorporates venture capital, grants and seed funding. Quality of life refers to the factors that determine an entrepreneur’s experience, including cost of living. On the other hand, market receptivity, attitudes towards social enterprises and regulatory frameworks can contribute to the success or failure of these ventures.

Human capital entails the ability to attract the right personnel, including employees and advisers. These people become the engine of social enterprises.

Based on the four pillars, some of the top cities for social enterprise in America include Washington, DC; San Francisco; Austin; Boston and Seattle. Funding presents the greatest challenge for venture philanthropists. This applies to both for-profit and nonprofit organizations. For this reason, entrepreneurs deal with issues involving articulating their ventures to potential funders.

Studies have shown that social entrepreneurs enjoying a higher quality of life are more likely to recommend their city to other innovators. In doing so, they contribute to better ecosystems and richer communities. The cities reap the rewards as they reach a critical mass of venture philanthropists and resources.

Local authorities can help improve residents’ quality of life by supporting arts and cultural activities. Additionally, they should encourage the provision of affordable housing.

Role Of Mentors And Employees

Mentors play a vital role in supporting the activities of social innovators. As such, they are a key part of the ecosystem. A recent study revealed that 65 percent of female social entrepreneurs agreed that mentors were available. In contrast, up to 75 percent of men agreed when asked to comment on the accessibility of mentors in the ecosystem.

The search for human capital goes beyond just looking for effective personnel. The wide selection of investors, thought leaders and mentors contributes to a fertile ground of talent that provides much-needed expertise. Institutions of learning, such as universities and other hubs of thought leadership, also play an integral role in the human capital landscape.