[From Echoing Green blog, 5 April 2012, with David
attention around social enterprises is powered by a number of mutually
reinforcing global socioeconomic trends. Something big and coherent may be
brewing, but equally this energy could end up dissipating into myriad
unconnected efforts. This begs two questions: What are the gaps that the social enterprise movement will need to
bridge? What are the catalysts that can channel the energy in a most
constructive, consistent and impactful way?
Here we share our
thoughts on four key gaps we have identified, focusing on social
entrepreneurship in developing countries. They relate to awareness,
skills, credibility and money.
Geographic and Cultural Gap. Social entrepreneurship, like all
early stage investment activity, has to be fundamentally home-grown. There is a
risk that the social entrepreneurship label—and hence the funding that comes
from a new investment class associated with the label—comes to be dominated by
an over-achieving, highly educated, globally mobile jet set that have the
capability to network between them and command the new social media tools. They
can play a critical role in catalyzing interest and demonstrating attitudes and
skills, but the opportunity is much larger.
Many enterprises that are locally owned and managed would be considered social
if only they were aware of the label. Equally, many successful businessmen in
developing countries are ready to contribute smart money to the socioeconomic
development of their countries, if only they find good ways of investing
responsibly in their own countries. Social entrepreneurship needs to be a
platform for indigenous action, grafted with ideas, skills and practices
brought from outside—not the other way around. So gap #1 is about pipeline: How
can social investors find the hundreds of local enterprises that already look
and feel like a social enterprise?
Age and Experience Gap. Social enterprises seem to be populated
with young people, for whom innovation and disruption seems more natural. It’s
also the demographic with the biggest reserves of idealism, fearlessness and
energy—a combination which, if channeled property, produces passion. But youth
lack experience: their passion can lead them to misread market needs,
underestimate the challenge of taking good products to market, and expect and
drive change in too many ways. Running social enterprises has all the
challenges of running purely commercial enterprises, plus the added complexity
of operating a second bottom line—especially when that second bottom line is
not articulated around a set of observable metrics.
So where’s the grey hair? Where are the older, experienced people who can
temper younger entrepreneurs’ plans without sapping their passion? The new
generation is not being supported by the old. So gap #2 is generational: how
can social enterprises tap a bigger pool of experienced managers and
businesspeople who, in their middle age comfort, may be interested in
contributing their time and expertise rather than necessarily their money?
Expectations and Communications Gap. Movements require a narrative
that speaks to a higher purpose, and that is often built out of over-simplified
stories. That helps the cause, but there is the risk that the narrative becomes
dissociated with reality on the ground. The current batch of social
entrepreneur "early adopters" tend to be an optimistic,
self-confident and driven lot, and they can easily create over-hype. We’ve seen
that happen with microcredit. Now we can marvel at how so many people used to
think that putting poor people through continuous debt cycles was a
well-trodden path out of poverty. For social entrepreneurship the risk of
over-promising is also there: it’s hard to keep the rhetoric in check when
there is such strong feel-good air about it, there are no clear definitions or
boundaries around the notion of the social enterprise, there are no consistent
metrics for impact.
Advocacy and branding are now recognized as key tools for change and
development impact. But they need to support action and results rather than
developing its own story. So gap #3 relates to communications: how to keep the
conversation honest, not confusing the goodness of people and ideas with actual
Funding and Risk Gap. Social capital is most critical to help prove
not so much that an idea is socially worthwhile, but that it is sustainable
and/or scalable. Developing an idea is fairly cheap, and one is generally able
to tap the goodwill of family, friends and socially-minded angels to build some
kind of working prototype and do very early market testing of the idea. And
once the operational model is proven, normal commercial funding sources become
But what about the middle stage, when you can readily convince anyone that you
have a good idea but can’t quite prove that you can take it to market
efficiently? That’s where social capital is most needed: to propel socially
relevant ideas into socially impactful ones. But despite the good intentions,
the questions on risk and the expectations of returns posed by social investors
seem to be quite similar to those expressed by purely commercial funds.
Persistent lack of funding can frustrate the great expectations of social
entrepreneurs, and the sector can move from over-hype to over-disillusionment.
So gap #4 is about risk-taking: in what ways do social investors propose to
absorb enterprise risk in the post-seed but pre-commercial stage of social
The social enterprise sector has set a tall agenda for itself. We need social
enterprises to help create livelihood opportunities for disadvantaged
communities, address health or environmental challenges faced by vulnerable
communities, foster universal access to quality education and information-based
services, build business connections between the informal and formal sectors,
or provide tools and platforms to help microenterprises to flourish.