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  • Social Startups Are For Technology; Not Transformation

    Most social enterprises generate little or no monetary profit. Often seen as one level above microfinance, their returns are, “social transformation.”

    Upstart: Startup/Entrepreneur

    “Money runs into social start-ups,” read a Wall Street Journal headline this week. It was the “social start-ups” that caught my attention. For much of the past decade my focus has been on social entrepreneurship. The article, however, had no mention of the many idealists working to solve problems in health, education, climate change and poverty that plague much of the globe.

    Instead, the piece was focused on social networking technologies such as Facebook, Twitter, and the featured Color Labs, which opened its doors last week – after raising $41 million in venture capital. Forty-one million is a sum unimaginable in the social enterprise world, where funding as well as revenue is a constant struggle.  It is this factor that makes me worry that this field will continue to be a philanthropic option.

    Most social enterprises generate little or no monetary profit. Often seen as one level above microfinance, their returns are, as the godfather of social entrepreneurship Bill Drayton says, “social transformation.” That is what he seeks when awarding seed money for such endeavors through his organization, Ashoka.

    It is also what Jacqueline Novogratz, founder of Acumen Fund, seeks as well. Unlike Ashoka, however, Acumen does seek return, which it calls “patient capital.” “Patient capital,” she writes on her organization’s blog, “is money invested not for undue profit but to support opportunities for disadvantaged communities. Money earned is used to invest in others an not for personal gain; and investors provide management support for the sake of the others’ success.”

    But little money is earned by these “social start-ups.” Rare is the enterprise that generates revenue numbers that would be attractive to venture capital (VC) investors. In fact there are only a couple of VCs, such as Greylock and Draper, Fisher and Jurvetson that have social entrepreneurship on their radar. The majority of social entrepreneurs rely on government grants, philanthropic donors, awards, such as the one that will be given by the Skoll Foundation this week at its annual gathering in Oxford, England, and “social impact” funds, such as Root Capital and Ignia, raised specifically for this increasingly expanding market segment.

    Read More:


    Upstart: Business and Management for 20-40 Year Old Professionals

    Filed Under: Startup/Entrepreneur


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