What Makes a Social Entrepreneur?

Social entrepreneurs are:

• Social Catalysts – They are visionaries who create fundamental social changes by reforming social systems and creating sustainable improvements. According to J.Gregory Dees, “though they may act locally, their actions have the potential to stimulate global improvements in their chosen arenas, whether that is education, health care, economic development, the environment, the arts, or any other social field.”

• Socially aware – Social improvement, as opposed to the creation of profit, should be the ultimate goal of the social entrepreneurs. The success of their endeavors is measured by their social impact, not by the amount of profits generated.  

• Opportunity-seeking – They pursue their goals relentlessly, seeing every obstacle as an opportunity to develop and fine-tune their business models. 

• Innovative – They are creative, willing to think outside the box and ready to apply ideas to new situations. They understand that not every innovation will be a success, and they see failures as learning opportunities even as they strive for success.

• Resourceful – Their visions are not limited by the resources that they have. Besides optimizing the use of existing resources, they actively expand their resource pool through collaboration with others.

• Accountable – Social entrepreneurs are accountable to their beneficiaries, and they often ask themselves, “Am I creating value for the people I am serving? Do I understand their needs?” This is because social entrepreneurs want to know that they are actually making an impact. They are also accountable to investors who want to know that their contributions are indeed stimulating social improvements as promised by the social entrepreneurs.

More 'Patient Capital' for Social Ventures

An increasing number of venture investors are hunting for small companies that could yield social benefits as well as high profits

Gaia Herbs sounds like an unlikely candidate for venture capital. Ric Scalzo, a medical herbalist, founded Gaia in 1986 to produce, distribute, and sell organic supplements. The $16 million, 125-employee firm prides itself on its commitments to improving society, including funding education in the South Pacific islands and Sumatra, where the company sources some of its herbs. The alignment might sour most VCs, who train a strict eye on bottom-line benchmarks. Nonetheless, Gaia, in Brevard, N.C., received a $3 million venture investment in July to develop new products and expand its reach in the fast-growing natural products market—and for Gaia's new investors, Scalzo's social mission was a selling point.

"They have such an aligned vision with the growth and development of Gaia," Scalzo says of his new partners at TBL Capital, a venture firm in Sausalio, Calif., dedicated to funding companies with social missions. Venture capital fueled the companies that revolutionized such industries as semiconductors, biotechnology, and the Internet. Now venture capitalists want to use the same combination of financial might and business savvy to stem global warming, create jobs, and alleviate poverty. The idea of putting VC-style investing to work on social problems has been around for the better part of 20 years. What's changing, VCs say, is how much interest in social enterprises has grown—among both investors and consumers.

Indeed, a growing number of venture investors want to back companies that, in addition to financial returns, will also yield environmental or social benefits—a model called the double- or triple-bottom line. "The market has moved in our direction," says David Kirkpatrick, co-founder and managing director of SJF Ventures in Durham, N.C. He says the 10-year-old firm, with $45 million under management in two funds, has been investing in growth-stage companies that create jobs in low-income areas as well as such industries as clean technology "before it was cool."

Potential Social Impact

No one can say exactly how much social venture capital has been invested, partly because exactly what constitutes a social venture is hard to define. Many VCs who are agnostic about portfolio companies' social missions have nonetheless poured millions into ventures with other benefits—clean-energy companies, for example—because they see market opportunity.

On the other end of the spectrum, nonprofit funds such as the Acumen Fund make loans and investments based more on their social impact than on financial return. For example, Acumen has backed A to Z Textile Mills, a Tanzanian manufacturer of antimalarial mosquito nets, which now produces more than 16 million of the lifesaving nets each year at a final cost of about $5 per net. But even the line between Acumen-style enterprises and for-profit ventures is blurring, as entrepreneurs seek new markets in what University of Michigan professor C.K. Prahalad famously called "the fortune at the bottom of the pyramid." Investors have formed entire VC funds, such as the Monterrey, Mexico-based IGNIA, to back for-profit companies serving these markets.

Joshua Humphreys, director of the Boston's Center for Social Philanthropy, has tracked at least $7.3 billion invested in 100 socially responsible alternative asset funds, which include venture capital, other types of private equity, and hedge funds. Of that, he estimates that $5 billion 10 $6 billion is venture capital. That's still a small chunk of the VC world, which invested more than $28 billion in 2008 alone. But it includes funds from such marquee VC firms as Kleiner Perkins Caufield & Byers, a firm that backed Google (GOOG), Amazon (AMZN), and Intuit (INTU), and now counts Al Gore as a partner. "The brand-name, top quartile funds are investing in the very space we're investing in," says SJF Ventures' Kirkpatrick.

No Need for a Tradeoff

While some social VCs concede that they will accept lower financial returns for social benefits—particularly those who back nonprofit ventures as well as for-profits—others don't see the need for a tradeoff. Kirkpatrick says SJF Ventures has the same investment expectations as traditional VC firms, because his firm backs companies that have social and environmental benefits "fully baked into a sustainable business model," rather than as an add-on that they have to balance against making money. "SJF's focus is no compromise, financial or mission," he says.

The key difference between social VCs and those purely seeking profits is that mission-driven investors provide "patient" capital, says Mark Finser, general partner at TBL Capital, who raised the $50 million fund in 2007. "The highest tolerance is in their time horizon," Finser says. His fund, mostly raised from high-net worth individuals, invests in "companies that will be game-changers in that particular industry," he says.

Investors and entrepreneurs are still trying to resolve big questions about how to apply the venture capital model to social enterprise. For one, there is no clear way to quantify social and environmental impact so investors can measure their nonfinancial returns, though such tools as the Acumen Fund's Portfolio Data Management System and consulting firms such as Social Venture Technology Group attempt to do so. Another question for social VCs is what constitutes a socially responsible exit—that is, how can a portfolio company retain its social mission through an acquisition or public stock offering? "This is an experimental phase right now," says Meredith Walters, senior associate at social venture firm Good Capital in San Francisco. "People are trying different things. There's no accepted way to do it."

But it's clear that venture investors are becoming more interested in social entrepreneurs—not just in their products but also in their missions. Some industries in particular, where investors see potential for big profits and big impact, have received more attention than others: clean energy and green, organic, or natural foods and consumer products are especially in vogue. "There's more attention in this space, and with attention, more investors want to participate," says Deb Parsons, business development director at Investors' Circle, a network of angel investors, VCs, and foundations involved in socially responsible investing. "It becomes less a fringe and more acceptable. In a few years it'll be closer to mainstream."

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Advances in technologies are propelling societies into the future but not every country is progressing equally. The most developed countries have a distinct technological advantage and poorer nations are being left to fend for themselves on the wrong side of the digital divide. This latest blog is designed to examines the reasons behind this chasm of digital inequality and what can be done to close the gap.

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Latest Posts:

Skimming Scams

 Today’s fast-paced and consumer-oriented world has become dependent on plastic money to an impressive degree. The days of standing in a long queue at the bank or carrying wallets bulging with cash, though completely over, have-to a large extent-been reduced due to the credit/debit card culture that now prevails among this generation of consumers.For Detail Click Here

How Search Engine Works ?

Though the working of different search engines vary from each other, they all perform some basic functions, Essentially, all search engines work in an orderly fashion, performing three main operations-Web crawling, indexing and searching. For Detail Click Here

 King Of Search Engine:

 Google: Google is the reigning king of search engines-nothing groundbreaking there. Not only is its current market share approximately 65 percent, but it is currently the only search engine whose name has been recognized as an actual verb in English language. Spider tested the search engine and its features to see what makes it number one.For More Detail Click Here

Engine of Choice:

 Spider conducted extensive tests to analyze how two of the major search providers performed under certain controlled conditions-the browser used was Google chrome in incognito mode, and the internet speed of a steady 1500kbps of dedicated bandwidth.For More Detail Click Here

 

Entrepreneurs are... lazy?

I’ve seen it argued that “laziness” is one of the most essential traits of some successful entrepreneurs because it leads them to innovate.  They don’t complacently accept “the way it’s done,” if they can figure out an easier, faster way to get the same result.  Shawn Fanning revolutionized music by creating Napster because it was easier – period.   Every song you want, with the click of a mouse?  Sure beats dragging your butt out of bed, leaving your dorm room, catching a ride down to the local record store or mass retailerand actually paying for the CD.  That, folks, is an innovation that can lead to efficiency, expediency and – you guessed it – success.

But it begs the question:

Whether it’s laziness, impatience or simply a refusal to accept the status quo - do these entrepreneurs become successful DESPITE their flaws, or BECAUSE of them?

As the recession teeters between decline and recovery, many new would-be entrepreneurs are created with every massive round of corporate layoffs and every graduating class of students that can’t find a job.  Instead of encouraging them to discover what they love to do and follow it, perhaps we should be encouraging them to discover what they HATE to do – and find a better way to do it.

I’ll be interested to see what aspects of the mundane – tasks we accept as they are because “that’s the way it’s always been done” – are pushed further up the evolutionary ladder by some bright, innovative, creative – and yes,maybe lazy – new entrepreneurs.

What do you think – is “laziness as motivator for entrepreneurial spark” a valid theory?  Disagree with me?

Let me know what you think in the comments.

Entrepreneurial Justice

Judicial activism, Roe Vs. Wade, civil rights, constitutional interpretation – these are all topics that Judge Sonia Sotomayor has been grilled on in determining her fitness to sit on our nation’s highest court. Pretty much since the nomination of Judge Robert Bork, the confirmation process has morphed into a dance of disingenuous rapport and obfuscation that is more about surviving the process than full disclosure.

Senator Lindsey Graham summarized best what the process has devolved into when he stated: “Unless you [Sotomayor] have a complete meltdown, you are going to be confirmed.” How comforting it is that such matters of national interest are a fait accompli.

If however we found a way to return to a civil and intellectually honest process of discovery, I would add to the lens of appraisal topics that you hear of rarely, if ever, yet are arguably of equal social importance as the list above. I am referring to policy matters that are routinely being born or bastardized in response to knee-jerk reactions within the courts of public opinion. Recent examples would include such over reactions as Sarbanes-Oxley or the unfortunate absence but much needed legal reform of our patent laws as well as convoluted responses around immigration.

All of these topics are impacting the engine of entrepreneurship that drives our economy, with significant socioeconomic consequences themselves. Yet, you won’t hear any of our elder statesmen ask a Supreme Court nominee, “What have you observed as the unintended consequences of the Sarbanes-Oxley Act of 2002, and what, if any, remedy would you propose?”  Sadly these matters languish in obscurity because they lack loud, influential financially-organized, advocates to bend the political will of those who stand in judgment. Instead of knocking down the barriers that impede the birth and growth of high-impact entrepreneurial ventures, we perpetuate the status quo because that has become the politically expedient thing to do.

Alas, we can dream of a day in the future when we can have an informed public dialogue around the contribution of immigrant entrepreneurs and its influence on the growth of our economy. We can debate on how the patent laws have not kept up with the pace of innovation and are now actually stifling the commercialization of invaluable intellectual property. And we can have the courage, even in the midst of the worst economic crisis since the Great Depression, to state that oversight and regulation (such as Sarbanes-Oxley) born in haste to placate the uniformed masses is having a chilling and destructive impact to the entrepreneurship that this country was built upon.

Thankfully, Kauffman, the Foundation of Entrepreneurship, is not sitting idly by wringing our hands. We have commissioned the single largest collection of economic research on entrepreneurship that provides the justification for new bold thinking. For policy makers and influencers that are courageous enough to read it and act upon it, we are ready to stand with you to answer those that may challenge with jaundice interpretations. That may however require the rare characteristic of thinking beyond self-interest while understanding that supporting entrepreneurship benefits all of society.

For those hungry for more, stay tuned. This fall we will be launching a movement that will give a voice to this cause. We will rescue entrepreneurship from the status of being the white noise of our economy. We will force upon the public conscious that entrepreneurs birth the new, create the jobs, and generate the wealth that will be required to pay for the sins of our past. Entrepreneurs are leading the recovery and soon everyone can join in this noble effort.

Innovation = Job Creation, it's a simple equation.

We are currently narrowing a field of 30 applicants for 12 availabl Postdoctoral Researcher/Entrepreneurship Fellowships. The basic premise is that we are selecting a dozen incredibly bright folks from science, technology, engineering and medical fields, and we are going to help them accelerate their particular technology of interest into commercial application – technology commercialization as it is known. On a side but related note, we have also partnered with the National Postdoctoral Association to sponsor the Kauffman Foundation Outstanding Postdoctoral Entrepreneur Award and the Emerging Postdoctoral Entrepreneur Award. 

As I had the pleasure of being among those interviewing these incredibly bright individuals, a few things became quite obvious. First, and probably most significantly of any other general characteristic I gleaned, was the high percentage of immigrants. And they came from all over the world – India, Iran, Italy, Finland, Germany, and Scotland just to name a few from my group of interviewees. As it turns out, around 75% of the total field were immigrants. Keeping in mind that applications were from US-based schools, I found this to be astonishing. 

Obviously that speaks well of our schools that there is such demand, but it also speaks to the entrepreneurial ecosystem in this country as most of these individuals see their best path to commercializing their technology is in the U.S. That is not to say, however, that there isn’t much more that we could and should be doing to encourage even more activity, but that is a subject for another post. 

Another interesting observation was how many of these immigrant scholar entrepreneurs are already well along their way to building companies – several of which already employing others. And rest assured that with the innovations they were promoting in the fields of therapeutics, medical devices, environmental controls, etc., we aren’t talking minimum wage, dead-end jobs. 

I know that immigration is touchy subject, and we have certainly published our share of research on this space; but the undeniable fact is that commercializing innovation leads to job creation, which restores the health of our economy. Those that would push out or prevent this source of growth to our economy would be cutting off their xenophobic nose to spite their face. If I had my way, we would staple a green card to each and every diploma from anyone graduating in any of these promising fields. 

After all, they may very well bring the innovation to the market that saves your life some day. And if that day should come, I doubt that you will be overly concerned if it were invented with an Asian, European, or Middle Eastern accent. 

As always, I am happy to hear supporting and opposing views – that’s what the comment button below is for.

The Lost Word on the Economy

While pundits, columnists, economists, and policy makers climb over mountains of financial data, looking for signs of recovery and politically convenient scapegoats upon which we can turn a distracting public focus of populist rage and class warfare, there is a quiet but steady vibration of activity that has the comforting quality of white noise – as well as the anonymity of it too.

This activity however holds many of the keys to our economic recovery yet it struggles to be heard, not unlike the piccolo section of an orchestra. Everyone seems all too eager to focus on the loud drums and trumpets because they are loud. Yet it is the fairer woodwind instruments that take on the more challenging task of adding depth and complexity to a movement. Likewise, entrepreneurs have added depth and vibrancy to our nation’s economy since its founding; yet they are all but non-existent in today’s discourse on policy and stimulus priorities. For example, with over 177,000 words and a price tag of $850B, the stimulus plan makes only one generic use of the word entrepreneur as part of broadband spending.

Quietly and largely underrepresented, entrepreneurs have become the white noise of our economy – nondescript yet comforting and generally assumed to be omnipresent; until such time they are not. They do not stand in line with hat in hand asking for a bail out. They do not take the work and value of others, packaged in incomprehensible get-rich-quick schemes to dump on unsuspecting investors, while lining their own pockets through incredulous compensation plans approved through gross incompetence in the best case, willful misconduct in the worst cases.

They also do not have, with few exceptions, strong and organized lobbies or advocacy groups. Too often, policy makers and others lacking the attention span or intellect to understand the distinction, lump entrepreneurship and small business into one ubiquitous ball of taffy – conveniently stretched when necessary yet easily wrapped and shelved for another day. The previous administration couldn’t pronounce the word entrepreneur; but the Obama Administration appears to be, for the moment at least, missing a golden opportunity. They are looking for a “two-for” by increasing loan guarantees via the SBA. That type of funding is but one small way to support a smaller fraction of the types of high-growth entrepreneurs that will build the companies that will ultimately grow our way out of crisis.

From early entrepreneurial pioneers like Carnegie, Edison, and Ford, our nation’s economic vibrancy and competitive advantage was born by individuals that saw opportunity where others did not, and built companies that employed thousands of individuals providing for the needs of others. And these efforts led a nascent nation from ‘up and comer’ status to the single largest economic power in the world. How distant of a memory that now seems with our own economic destiny abdicated to an international community all too eager to fund our deficits while we complacently turn a blind eye from compromising our own power of self determination.

For those who stand in opposition of wealth creation out of some misguided sense of social justice, please recognize that you can not build a manufacturing empire without employing throngs of people. And while the motive to become wealthy drives many of these people, it is their creation of wealth, the earnings of their companies, and the people and corporate earnings of everyone up and downstream of the supply chain, that pay the taxes that fund all of our ambitions; for better or worse. This wealth creation has also led to another uniquely American endeavor of forming private foundations that have provided immeasurable and invaluable benefit to humanity.

If you are still not convinced, consider that it has been about 1,000 high growth firms, many of which being started in prior recessions, that have led the job growth needed to grow our way out of past recessions. There is more than ample data to justify a significant and long-term prioritization of supporting entrepreneurship. We simply need to have the attention span and discipline to recognize the contribution of entrepreneurs.

Our policy makers need to look past their immediate self interest and awaken to the fact that helping entrepreneurs succeed is the smart thing to do, even if they can’t take credit for it. After all, a vibrant entrepreneurial ecosystem has a multiplier effect (entrepreneurial spawning) that really will put us back on the path of self reliance.

So let’s pull this word, entrepreneurship, out of white noise obscurity. Let’s remember that starting and building great companies that employ people and advance new innovation and productivity, is the surest way for us to pay for a future worth living.