Social Entrepreneurship

After SoCap09: The Five Issues Holding Social Entrepreneurship Back

by Nathaniel Whittemore

category: Trends

Published September 04, 2009 @ 04:00PM PT

In the lead up to this year's Social Capital Markets conference, Matthew Bishop wrote that while the 2008 inaugural event was "long on optimism," it was also "rather short on coherence." My feeling after SoCap09 is that he was dead-on, and that the particular conversations sparked by the global financial downturn have highlighted how much the social enterprise field has matured over the last year. At the same time, there are some major outstanding issues that prevent the space from fully coming into it's own.

1. Metrics. The flip side of maturity is metrics. Something that's clear from this year's conversation is that for this sector to make the jump from a set of related, conversant, but ultimately disconnected organizations to a real functioning market, there need to be recognized (and utilized) tools that connect social performance benchmarks with financial performance. The Global Impact Investing Rating System (GIIRS) is one new platform and it will be interesting to see if and how it's adopted over the next year. Overall, metrics definitely made the mainstream at this year's event.

2. The Bottleneck of High-Risk Seed Capital. Another prominent feature of the event was the bottleneck of a particular type of investment - high financial risk for seed stage ventures, particularly for-profit ventures. While entrepreneurs are constantly complaining about a lack of capital, I think that this is one case where they're right on. For this field to grow, it needs recognized and regular sources of capital for extremely high risk early stage for-profit social ventures. It's far easier for innovators to build nonprofit groups where they can leverage their friends and family for donations, and because of this, there is a dramatic under maximization of the opportunities of the for-profit social venture approach.

3. The Bottleneck of Truly Disruptive Social Ventures. There are many great non- and for-profit actors doing vitally important work. There are far fewer organizations that are truly disrupting existing models and structures in a way that compels traditional actors to join the field. FrontlineSMS: Medic is disruptive - particularly their forthcoming field diagnostics tools which could fundamentally shift the medical diagnostics industry. BetterWorldBooks is shifting the way nonprofits and for-profits working towards similar goals work together, and provides a user experience compelling and coherent enough that it could eventually be a major player in the e-commerce space. Virgance is still young, but their swinging for the stands to build these sort of companies. By and large however, we need more truly disruptive models if we're going to cause a sea change. There is a generally held sentiment in the tech world that for a company to shift behavior, it needs to be not 20% but a full 2x better than competitors. That's even more true in the social sector.

4. Continued Incentives for Sort-Termism. I wrote earlier this week about how much of the crisis of modern capitalism is driven by the incentives to make money from short-term exploitation instead of long-term sustainability. This is an admittedly hairy issue and how we can shift these incentives remains an open and challenging questions. But while our economy remains structured to reward short-term exploitation and our values and societal conversation do not provide enough of a countervailing force against it, I think that we can only get so far.

5. Political Power. One of the interesting questions that came up at SoCap09 was whether the field of social enterprise had missed an opportunity to push it's agenda further at the time of crisis. In Alliance Magazine this month, Economist bureau chief and Philanthrocapitalism author Matthew Bishop wrote about how had been at surprised at the timidity of nonprofits pushing their agenda after the economic meltdown. Part of the reason is that if we're honest with ourselves, we have few (if any) champions with true, sustained political influence. Our economic institutions are not yet big enough to acquire political influence by proxy.

There are many wonderful brilliant advocates of our movement. And for the first time their is a White House office dedicated to our cause. These folks are doing the best they can, and we should all be behind their efforts. But by and large we don't have leaders with political capital to actually influence the larger conversation about rebuilding and restructuring our economy for the 21st century. I'm not sure who the best candidates for this might be, but I know we need these people. Al Gore, God bless him, is not enough.

(Photo: Bono and Al Gore at the World Economic Forum)