We begin 2012 with an overview of key developments in social entrepreneurship in 2011. As we scan the landscape we note four key findings of 2011 as the field continues to mature. The underlying trends continue to point to the idea that everyone can be responsible for advancing change and impact. This is manifested in the way we are seeing a continued democratization of the movement, a growing emergence of a new demographic of changemakers and discovery that collaboration and peer-to-peer networks continues to be on the rise.
1. An Uptick in Blended Funding Solutions for Social Entrepreneurs
Fact: Social enterprises (SEs) simply cannot be carried by a single source of funding. They need to look at different ways of blending capital to create the largest social impact. SEs are becoming more resourceful in the way they seek funding, and some of the most successful enterprises are using a range of capital sources: seed funding and impact investments, to government grants and CSR funds.
D.Light a former Development Marketplace (DM) grantee (through the Lighting for Africa Program), is a social venture working to replace kerosene lamps with affordable lighting for base of the pyramid consumers. D.Light received initial investments in 2008 from social capital organizations like Acumen Fund and Gray Matters as well as traditional VCs such as Draper Fisher Jurvetson. This year they received $5.5 million from Omidyar Network, and have recently won a prize.
Many hope to follow in the footsteps of D.Light. Hannah Seligson (a freelance journalist focusing on millennials and entrepreneurs), points out the candidate pool at Unreasonable Institute is rife with “participants who see the institute as just one stop on a kind of social entrepreneurship circuit; they’ve been awarded numerous fellowships, won different business plan competitions and are regular faces at industry conferences.”
With this in mind, the DM, in a continued effort to position SE’s as the third arm of development, is targeting ‘high social impact’ entrepreneurs who need growth finance to expand, scale or replicate their operations in a financially sustainable manner. The DM is working to provide a blended approach to their grantees, supplying them with funds and access to capacity building services, while also helping them access funds from third party investors to ultimately take their innovations to scale.
2. Continued Improvement of Reporting Standards
As more investors are dedicating a portion of their portfolios to mission-driven funds, they are demanding greater data about their social and environmental impacts beyond financial returns. Initiatives like the Global Impact Investing Network’s Impact Reporting and Investment Standards (IRIS) are gaining traction. IRIS began its initiative to develop commonly recognized indicators in 2009.
Others systems include Acumen Fund’s Pulse, a proprietary tool that the organization uses to track its investments. Other findings include the JP Morgan-GIIN report conducted from a survey of 52 impact investors. While the report claims that social investing is still in its infancy, the long-term potential of this new asset class is encouraging. According to the report, respondents plan to invest almost $4 billion over the next year. Most expect that 5-10 percent of overall portfolios will be allocated to impact investments in ten years, with the investor use of third party systems for impact investment increasing by 10 percent in 2010.
3. Diversified and Professionalized Set of Changemakers
Increasingly, social entrepreneurship is making its way into the academic space. More universities that have programs creating specific undergrad and grad programs that focus on social entrepreneurship. “It used to be that a business school’s social entrepreneurship program was just an office, but now it’s often a whole department,” claims Scott Shrum, co-author of “Your MBA Game Plan: Proven Strategies for Getting into the Top Business Schools” in an article for MSNBC.
In fact in 2009, 149 business schools in 24 countries offered courses incorporating social, environmental, or ethical issues - up from 111 schools in 18 countries in 2007. Entrepreneurship programs are working with youth as young as 11 years old, and funders like the Foundation for Youth Social Entrepreneurship are emerging in support of young social innovators internationally.
This is part of a growing trend that Blair Miller – Acumen Fund sees as the professionalization of an industry over the last 7-10 years. She notes that people are professionalizing a once dynamic career trajectory. “First consulting out of undergrad, then a one year stint at an NGO or social enterprise abroad, then B-school, then they land a ‘job’ at an organization in this field. It is so interesting that people are pursuing ‘jobs’ in this space, and it is also exciting to see as it is demonstrating that the industry is growing and becoming more institutionalized.”
With a broader definition of social entrepreneurship comes room for multiple roles from multiple disciplines. A social entrepreneur is no longer just the person with an innovative idea for addressing a social problem within a business context. She is now someone who also has expertise in law, engineering, biology without which actual social change could not be realized. Social change is also becoming a greater focus across the creative industries, the documentary filmmakers, the journalists and the front-line reporters or artistic performers.
Cheryl Heller, the pragmatic dreamer who designed the MFA in Social Innovation program set to launch in 2012 at the School of Visual Arts (SVA) in New York City, couldn’t agree more. The new MFA program will take students through two years of learning, in and out of the classroom, with a diverse group of practicing designers and experienced educators. Learning will take place through three principal methods: immersion in the world where a student wants to make a social impact; developing the concrete business and design skills necessary to implement innovation; and an understanding of how to integrate social transformation into a business model, through design.
4. The New Experts - Entrepreneurs
Now that the movement for social enterprise has taken hold, the next step will be to scale it effectively in order to achieve the greatest impact. Kevin Jones, co-Founder of SOCAP, in an interview with Dowser 2011 believes it will be crucial to work collaboratively – both to fund and implement new solutions, and to learn from other proven models for change. This year saw the continuation of collaboration on a number of different levels.
Hub Ventures, 12-week program a peer-reviewed process that leverages collective intelligence and a partnership of SOCAP Hub-Bay Area and First Light Ventures puts the entrepreneurs themselves at the heart of the funding decisions. During the program, 16 entrepreneurs participate in weekly peer review sessions, workshops, mentoring, weekly office hours, and pitch events – all of which are designed to improve their business models and raise future rounds of capital. The program culminates with the SOCAP Investor Day, during which all of the entrepreneurs pitch to the SOCAP network of Bay Area impact investors. At the end of the 12 weeks, three ventures each receive $75,000 in convertible debt seed funding. The Unreasonable Institute runs a similar program that churns out 26 peer-mentored SEs in six weeks of intense communal programs.
But for every SE fellowship program and organization that nurtures world class social entrepreneurs with methodologies, infrastructure and visibility, there are countless social entrepreneurs working outside esteemed incubators, claims Deron Triff, CEO and Co-founder of Changents in a recently article for HuffPost. “As a result of media technology/connectivity, open-source innovation, and unbridled access to information, many of the most extraordinary social entrepreneurs on the front lines today are self-sprung.” Many, Triff believes, are “self incubating.”
As we close 2011 and move rapidly into 2012, the Development Marketplace we will continue to provide blended approaches to capital and capacity to support the people who are successful at staying in this field. With this in mind, it will be interesting to see how our field will evolve.