Entrepreneur Prep – Keys to a Successful Social Enterprise (or Any Enterprise, Really)
by Clara Chow, President & CEO, Generation Enterprise
Three years ago, I dove headlong into the world of social enterprise with the launch of a microbusiness incubator in the slums of Lagos, one of the world’s fastest-growing megacities.
Up until then, my teammate and I had lived pretty routine lives. But we’d caught the social entrepreneurship bug. We showed all the symptoms:
- We were concerned about—even obsessed with—a societal problem (in our case, the “lost generation” of unemployed and underemployed young people—our global peers—trapped in the informal sector and unable to integrate into the global economy).
- We had an idea for a business solution to this social problem (a startup incubator that would employ youth to rapidly prototype and test Base of the Pyramid business ideas, then match and invest in the most promising of these pre-tested ideas and youth).
- We actually got out into the world to test, learn, and pivot (we connected, fundraised, and moved to the slums to “do the doable, then push it”).
Today, Generation Enterprise has 14 businesses in its portfolio, partnerships with two state governments, and a global team focused on scaling its operations, deepening its impact, and reinventing SME investing. Here are three key questions to keep in mind when building a venture, social or otherwise:
Why does your organization exist?
“To make money” is not necessarily the right answer for social sector organizations addressing market failures, where the need is real but payment not efficient or even possible. Even for-profit organizations need something bigger, hairier, more audacious, and visionary to last and grow. A focused, memorable mission informs strategy, motivates stakeholders, and guides tradeoffs (inevitable because resources are scarce).
How will you keep the lights on and fuel your machine of social change?
Increasingly, social entrepreneurs are embracing the discipline of the market and seeing earned income as an important path to sustainability. Nonprofits are developing earned income strategies alongside traditional fundraising/grant activities (universities, hospitals, and art organizations, have long relied on earned income). A whole new group of social enterprises are eschewing 501c3 status altogether, opting instead for L3C and B Corp structures and following Muhammed Yunus’ ideas about social businesses. Others are straddling the two worlds as hybrid organizations, with their own set of challenges.
Did you know that good intentions are not enough (anymore)?
Accountability is in, and there are even “pay for performance” experiments based on the concept of social returns (and the ability to quantify and monitor them). The Global Impact Investing Network is betting that measurement and standardization is one of the keys to creating a real impact investment asset class. While the debate rages about which metrics are the right ones and how they should be measured or reported, you still need to put some justifiable system in place.
Of course, all three building blocks are related. No mission, no money—you’re not going to get funds (as a donation, investment, or earned income) if you can’t articulate what you’re doing with it. But also, no money, no mission—you can’t have the impact you aspire to if you can’t even keep the lights on. And, you can’t tell whether you’re on track to fulfilling your mission or make the case for why you deserve (more) money if you don’t have actual data to back you up. Together, these building blocks should form a strong foundation—for whatever you hope to build.
Are you a woman-led for-profit social venture looking for funding? Apply to present at an upcoming Pipeline Fellowship Pitch Summit: http://pfpitch.bizodo.com/f/8iJJML
Clara Chow is the President and CEO of Generation Enterprise, a small business incubator for youth in the urban developing world. Generation Enterprise equips at-risk youth to start socially responsible businesses in slum communities. She has served as a management consultant, city government economic development manager, and startup manager and advisor in the New York tech and media space. She is currently a student at the Stanford Graduate School of Business. Find her and the Generation Enterprise team on Twitter (@genterpriser).