Greetje den Holder — November 18, 2016 Follow @GdenHolderTwo months ago, I explained how you can start a social business. Social business is a strategy to solve a social problem with your company without depending on donations, which makes a social business fall in the middle on the for-profit and non-profit scale.
A social business requires a social entrepreneur. What is a social entrepreneur and do you have what it takes to be a social entrepreneur? This blog explains the concept of a social entrepreneur and lists some requirements. After reading this blog, you should be able to answer the question whether you have what it takes to be a social entrepreneur.
What is a social entrepreneur?
“Social entrepreneurs are people who look at society and see the big problems and see innovative solutions that are permanent and can change the fabric of society,” says Dr. Lyndon Haviland.
She feels that every business person can take on a social mission and that social entrepreneurs often start small but then build traction because they are unafraid to reach out to others to help them do their work.
The traditional entrepreneur is not always motivated by social justice. While social entrepreneurs want to do well by doing good, they are motivated by wanting to make a difference and leaving the world a better place.
Naomi Enevoldson agrees that while there is something distinctive about social entrepreneurs, there are also many similarities with traditional entrepreneurs.
Enevoldson starts by describing social entrepreneurs as ordinary people who find innovative solutions to society’s social problems. They use traditional entrepreneurial models to bring social or community benefits and they often have a personal experience of the need they are addressing and as such, they are uniquely positioned to address some of our most pressing social challenges.
Enevoldson claims that social entrepreneurs often go where Non-Profits and Government Organizations cannot go due to lack of funds, organization, and innovation. Social entrepreneurs leverage both the cash flow and technology-based solutions of their for-profit enterprises by linking them directly to existing not-for-profit organizations to create a new model for sustainable global change.
Using the same skills to different effect
Entrepreneurs in the business sector identify untapped commercial markets and gather the resources to break into those markets for profit. According to Enevoldson, social entrepreneurs use the same skills to different effect. For social entrepreneurs, untapped markets are people or communities in need, who have not been reached by other initiatives.
This is what social and business entrepreneurs have in common:
- they build something out of nothing
- they are ambitious to achieve
- they marshal resources – sometimes from the unlikeliest places – to meet their needs
- they are constantly creative
- they are not afraid to make mistakes
Academic definition of social entrepreneur
In Social Entrepreneurship: Definition and Boundaries, Samer Abu-Saifan claims that the field of social entrepreneurship continues to struggle to gain academic legitimacy. He proposes the following definition:
“The social entrepreneur is a mission-driven individual who uses a set of entrepreneurial behaviors to deliver a social value to the less privileged, all through an entrepreneurially oriented entity that is financially independent, self-sufficient, or sustainable.”
This definition combines four factors that make social entrepreneurship distinct from other forms of entrepreneurship. Social entrepreneurs:
- are mission-driven. They are dedicated to serving their mission of delivering a social value to the underserved.
- act entrepreneurially through a combination of characteristics that set them apart from other types of entrepreneurs.
- act within entrepreneurially oriented organizations that have a strong culture of innovation and openness.
- act within financially independent organizations that plan and execute earned-income strategies. The objective is to deliver the intended social value while remaining financially self-sufficient. This is achieved by blending social and profit-oriented activities to achieve self-sufficiency, reduce reliance on donations and government funding, and increase the potential of expanding the delivery of proposed social value.
Values-based leadership
Professor Harry Kraemer claims that being a social entrepreneur has very little to do with how much money you have or the number of people who report to you: “In social entrepreneurship, values-based leadership is essential. In particular, the two principles of self-reflection and genuine humility are especially important.” Kraemer defines three principles of value-based leadership:
1. The importance of self-reflection
Self-reflection allows you to look at your purpose and your motivation. Are you interested in becoming a social entrepreneur because you feel passionate about a certain issue? Do you believe that you are uniquely positioned to help identify or deliver a solution? Or is it about your desire to be recognized and admired, gain influence, etc.?
Continuous self-reflection keeps you aware of and aligned with your purpose and motivation. If you get off track, self-reflection can bring you back by reconnecting with purpose and the motivation to help others.
2. You are not watching the movie; you are in the movie
Through self-reflection, you continually remind yourself that a certain problem or solution is not the responsibility of others that you deem responsible for addressing problems and devising solutions. You recognize that you are one of them; consequently, you are going to do something about it.
3. Genuine humility creates partnership
Genuine humility plays a big role in keeping you in partnership with the people, organizations, and communities that you are trying to help. You may be blessed with intellect, a great education, and important experiences, but your genuine humility reminds you that you do not have all the answers.
How to raise capital as a social entrepreneur
In my country, The Netherlands, we apparently have a less friendly environment for social business than other countries do. According to PwC Netherlands, In the UK and in the US, the social enterprise sector emerged earlier and is more developed than in the Netherlands. These and other governments support the sector in various ways. Dutch social enterprises, on the other hand, experience difficulty accessing capital.
One of the instruments used by governments in order to facilitate or even boost the sector is specific tax and legal regulations or, more far-reaching, specific incentives such as tax breaks. This is not (yet) the case in The Netherlands.
Still, with or without government intervention, Dutch social entrepreneurs are keen to play their part in developing the Dutch social enterprise sector. In doing so, they experience challenges, one of which, as mentioned, is accessing the necessary capital to start or grow their organization.
Social enterprises struggle to find investors and convert their belief into an investor-ready business case. The lack of easy access to capital results in stagnating expansion for individual social enterprises and the social enterprise sector in general.
Although accessing capital is a challenge faced by many ‘regular’ businesses as well, there is an extra dimension for social enterprises as potential investors need to be willing to take the enterprise’s financial and social mission into account. Social enterprises also often propose innovative ways to solve a problem, thereby making it hard to point to earlier success stories of other organizations.
PwC Netherlands’s whitepaper is an interesting read, and it offers 4 guiding principles on what social investors want. I recommend that you read it! Here are the 4 guiding principles on what social investors want:
- Trade-offs do not exist! Alignment between financial and social objectives is key.
- Build and present a well-balanced management team. An investor will never believe that you make it on your own.
- Measure your impact! Your contribution becomes visible if measured.
- Avoid mission drift at all times!
Are you a social entrepreneur?
I hope that you have found the answers that you are looking for and that you now have a foundation for a good conversation with yourself and others about whether it is time to start that social business idea that you have and whether you are the right person for the job.
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