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Social Entrepreneurs: Stop Pitching and Start Executing

3p Contributor | Friday November 2nd, 2012 | 9 Comments

By Zoe Selzer

The Harvard Business Review recently published an article by Max Marmer addressing the issue of “celebretizing entrepreneurship” that echoed discussions my partner Garrett and I have been having around the office. In his article, Mr. Marmer states that this current trend “ends up severely circumscribing both the economic potential and societal impact of entrepreneurship by suffocating the early-stage startup ecosystem with increased noise, increased distractions, corrupted motivations and misapplied talent.” While I agree this is true in the traditional tech startup community, I am increasingly concerned that it is an even greater issue in our space of social entrepreneurship.

Although it has a long history, the for-profit social enterprise sector was still relatively unknown to the general public when the GoodCompany Ventures program began in 2009. Now there are an exponentially increasing number of entrepreneurs seeking to start businesses that change the world through their core operations. This trend has tremendous potential for positive impact but unlike other sectors where winners are rewarded through financial profitability, and the ineffective are culled by market forces, the social sector tends to receive heavy subsidy. These social enterprises are not held to the same standards as in conventional markets and there is little pressure to produce tangible results. Intentions and statements of purpose are often enough to merit rewards, both financial in the form of grants and awards, and social, from a variety of sources, and there is little pressure to produce tangible results. I have seen entrepreneurs collect nearly $1 million in prizes without ever impacting one life, and without being held accountable for their use of the money as they would in a traditional investment setting.

GoodCompany seeks to change this by bringing business rigor and standards to solving core social issues. We select our entrepreneurs for their innovation in tackling social and environmental challenges with new business approaches, and for their high impact potential. We take them seriously as entrepreneurs. Our programming is focused on the development of effective business models, rather than product development, which is unique in the incubator/accelerator community. Each week of our 12-week accelerator, the entrepreneurs are pushed to delve deep into one specific aspect of business development (e.g. Go to Market, Sales), then present their work to the peer group. Supported by MBA students and mentors, and encouraged by their cohort, we see the startups undergo remarkable transformations over the course of the summer. Since the formation of the GoodCompany Ventures program (now part of the larger GoodCompany Group), we have leveraged operating costs of less than $100,000 over four years to help our 40 graduates raise well over $30,000,000 in private capital. We draw companies from across the U.S. and around the world, and each year we have a few “celebrities” who choose not to fully engage in the hard work associated with our programming. Down the road, they are often disappointed to find that early positive signals of success do not equate to a lasting business success.

In his HBR article, Max Marmer closes by urging us to remember that entrepreneurship is not about “fame, glory or money” but rather about “building products that transform the world and drive the humanity forward.” This is especially true in the social sector, and to create the permanent changes we desire, we need to demand real-world results before offering rewards and celebrity.

Zoe Selzer is the Executive Director of GoodCompany Group.


▼▼▼      9 Comments     ▼▼▼

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  • http://www.facebook.com/profile.php?id=1100082 Jason Aramburu

    Zoe, thank you for the interesting article and perspective, and the great work you do at goodcompany. As a social entrepreneur who has been through an incubator, received grant funding, and raised investment, I would push back on some of your assumptions. It takes a lot of money to build an industry. The global tech industry began in the 90s and experienced a cataclysmic failure in 2000. Billions of dollars of grants and early-stage investments were seemingly wasted. The ‘celebrities’ of web 1.0 became pariahs. Now, 12 years later the consumer web industry is stronger than ever, has created billions of dollars of wealth and jobs, and is even more of a celebrity cult than before. Today’s tech industry would not exist without the failures (and expenditures) of the past. The most successful investors in tech today realize this– they understand that for every 1 successful investment, 9 will fail. They also understand that by rapidly deploying smaller amounts of capital to more ventures, streamlining due diligence and allowing creative entrepreneurs the freedom to work the industry grows as a whole.

    Social enterprise is a new industry with huge amounts of potential. Like any other new industry, there will be numerous failures. Many social entrepreneurs are creating new markets in places with huge market inefficiencies. If anything, I think the industry needs more grants, business plan competitions, fellowships and free money. A study by Village Capital found that fellowships/incubators (even if they don’t provide funding) do significantly increase the likelihood that a social enterprise will raise venture capital and achieve profitability. If funders want to develop and grow creative solutions to entrenched problems, they have to understand the risks and rewards.

    best,

    Jason Aramburu
    CEO
    re:char

    • http://twitter.com/LorraineSiew Lorraine Siew

      Hi Jason,

      I was just reading your comment and thought that your name sounded familiar, then I remembered that you were one of the mentors flying in to Kuala Lumpur for the Youth Social Business Summit.

      We’ll be having an event for social entrepreneurs in Asia on December 5-6, right before YSBS. If there’s any chance that you’ll be in town then, do give me a holla at lorrainesiew at gmail dot com.

      Hope this comment doesn’t seem sound too spammy ;) Take care.

    • http://twitter.com/obamauni macrae

      how about converging everything -competitions, incubators, accelerators, university resources, mayors resources, expert resourecs- relevant to investing in youth entrepreneurs most exciting social service franchises. On 28 september muhammad yunus spent most of the day at university of district of columbia, and challenged washington dc as to whether it was up for liberating youth economics in such a way during academic year 012-013- He has already helped 4 states : oregon, north carolina, georgia, alabama – make huge progress in this regard

      if you think it is DC’s time or come form another capitawhere youth want this , lets just do it http://dcyouth10000.blogspot.com

    • Helen Cummings

      Excellent post! I, too, think that grants, business plan competitions, fellowships, and free money are crucial to the continued growth of social enterprise. NESsT is one example of an organization that supports social enterprise. We, at NESsT have an unique approach that combines financial capital, training and mentoring, and access to markets and networks, to enable our portfolio to plan for, start up, or expand social enterprises.

      I believe organizations like NESsT are so important because impact investing, while bringing new sources into the social enterprise space (which were previously funded by grants), does not fully address the early, embryonic stage in the development of a social enterprise. That is, the period ranging from 2-3 months to 2-5 years (depending on what kind of business it is) spent identifying the social entrepreneur and getting them ready to implement their business model. The time where you really can identify the companies. This is, because, usually impact investors are actual investors that want to make some money on their investment- maybe just a market return. Social enterprise, however, needs funders that are prepared to experiment with their money. Without them you can invest in the pipeline of social entrepreneurs.

      So, what are ways to change this reality? Well, investing in the early stage has always been a strong point for endowments and foundations, entities that aren’t necessarily expecting a prompt financial return. Also education plays a huge role. NESsT, in addition to other organizations, really strive to get the idea of social enterprise planted at the university level.

      Check us out! http://www.nesst.org
      Follow us on Twitter @nesstorg

      Best,
      Helen Cummings
      Social Media Consultant for NESsT

    • Zoe Selzer

      Hi Jason -

      Thank you for your response. I understand your points and don’t disagree about the importance of access to capital in multiple forms. My issues isn’t with the fact that such prizes exist, but that they are given for ideas rather than impact. Awards, prizes and investments should follow action, not precede it. We need accountability and results if we want to truly tackle the world’s most pressing problems.

      Best of luck with your business.

      Zoe Selzer

  • Rachel – Backpack Farm Kenya

    So is this commentary about the supposed success of another
    incubation program because i don’t see any statistics of whose lives
    have been impacted, only the supposed finance that has been raised and
    other non-specific generalizations! This is a hear say commentary. And
    no, I don’t believe the investment figures quoted are accurate either.

    One
    of the challenges of being a real, field based social entrepreneur is
    to balance the operational requirements of a building a business vs the
    required road shows where you network and hunt for investors. G-d
    forbid no one has heard of you or your venture because then it doesn’t
    matter what impact you can demonstrate! Then you meet investors who have
    NO idea what it means to accomplish system change while demanding 10x
    returns or simply can’t offer them a sexy enough story. So if a social
    entrepreneur needs to leverage the buzz around its brand to attract the
    money, then so be it!

    So
    Zoe… thank you for your thoughtful if not limited insights on the
    practical challenges of implementing a social enterprise aka a company
    that needs to not only design product but then delver results, financial
    returns, accounting standards and fiduciary responsibilities (corporate
    governance ad transparency). I am horrified by the disconnect between
    the SOCENT community – “I am changing the world, invest in me!” –
    and the lack of the investment community to engage. But most
    certainly this challenge does not or should NOT land squarely on the
    shoulders of the entrepreneur!

    • http://www.facebook.com/profile.php?id=1100082 Jason Aramburu

      Rachel, couldn’t agree more. It’s really hard to get noticed by investors in silicon valley. It’s damn near impossible to do so in rural Africa. Successful companies need good fundraisers to succeed, and good fundraisers are the ones who get noticed by fundraisers.

      • Rachel – Backpack Farm Kenya

        Jason .. i wasn’t specifically referring only to silicon valley but the world. Perhaps, the social enterprise space is even more incestuous than the tech space and much less forgiving!

  • http://www.intrinsicstyles.com/ Intrinsic

    Great article. I do notice a definite trend in new social entrepreneurships, which is great, but I do agree that there is little accountability. The thought that they could be doing something good is not reason to cut them more slack. They’re a business, and so need be held to the same standards as a business in terms of profit. In general, most would say their goal is to prove that doing good can be profitable. So they need to be profitable… without any charity. Otherwise, just be a nonprofit, which is still great.

    We’re a social good company called Intrinsic that sells handmade laptop sleeves from Africa. We empower people to rise above poverty through sustainable business. We started off with a few thousand dollars of investment, just enough to get off the ground. being profitable is still a challenge and we’re getting there, but we can say this – we’ve already changed lives. Bottom line, like this articles says, don’t just dream – do something.

    Check us out at http://intrinsicstyles.com