'Innovation Is the Easy Part': Providing Fuel for the Social Impact Sector
Social entrepreneurs are notoriously creative—you have to be to concoct a venture that makes doing good profitable. But when they launch their businesses, many entrepreneurs discover that innovation was the easy part.
The learning curve is sharp when you’re building a company in an emerging sector. You’ve got to find investors willing to measure returns in social impact and dollars. Plus, to really make that impact, enticing new customers becomes key. Finding a fertile ecosystem of support—and methods for facing these challenges—leads many early-stage social entrepreneurs to universities and accelerators dedicated to growing impactful business.
From B School to B Corp
Social entrepreneurship’s prominence in the business world over past decades owes partial thanks to universities. When Greg Dees developed the first social enterprise course at Harvard Business School in the mid-'90s, competitors like Stanford and Duke were quick to follow. As the sector expanded and student demand increased, the subject matter proliferated throughout higher education.
The Center for Social Entrepreneurship at Ohio’s Miami University was among the first undergraduate initiatives of its kind at an American public university. Since its founding in 2007, interest has skyrocketed, according to Brett Smith, the center’s director. The first classes offered were often filled with students unsure what “social enterprise” even meant. Now, Smith says, when he asks on day one if his students have heard of microfinancier Grameen Bank or its founder Muhammad Yunus, “every hand is up.”
Marina Kim, executive director of Ashoka U, says the growth in social enterprise programs signals the maturity of the sector. “It started in business schools… and now we’re seeing that it’s not only campus-wide—across all schools in grad and undergrad—but the types of schools that are getting involved are not just elite,” she says.
Through Ashoka U, an offshoot of Ashoka’s fellows program, 15 universities dubbed “changemaker campuses” are developing interdisciplinary social entrepreneurship programs to make social innovation a campus-wide strategic goal. Among them is Tulane University, where a robust social innovation program includes School of Architecture faculty and students designing and building environmentally sustainable, affordable housing in the Ninth Ward. Tulane’s Urban Innovation Fellows program, through a partnership with the Rockefeller Foundation, provides a $45,000 stipend and mentorship to four fellows who spend a year crafting systemic change in the areas of urban revitalization, public education, health and economic redevelopment.
At the University of Chicago’s Booth School of Business, tides are changing despite the once heavy influence of “Chicago School” free-market libertarianism. According to professor Linda Darragh, entrepreneurship is the second largest concentration at Booth, and increasingly, students enter the program declaring that they want to work in educational and agricultural businesses. “They don’t want to be investment bankers and consultants,” Darragh says. “They really want to do something more.”
Last year, Booth’s annual New Venture Challenge—a business plan competition that promises financial support for the best entrants—spun off a separate Social New Venture Challenge for 20 teams of students to develop their enterprises. This fall, Booth, Northwestern and Northern Illinois University professors are launching Impact Engine, an accelerator that will offer eight to 12 companies $20,000 upfront seed capital and a 12-week program culminating in a pitch opportunity, Investor Day.
Accelerators: matching mentorship, seed capital, and great ideas
The inspiration for Impact Engine comes from two accelerators—Hub Ventures and Excelerate Labs—that are doing for social enterprise what Y Combinator has famously done in Silicon Valley, offering short-term, intensive programs to test young startups and provide the access to mentorship and investment to help them grow. “We decided to take what’s working in the tech space with the accelerator model and apply that to the social venture space,” says Hub Ventures director Wes Selke
San Francisco-based Hub Ventures matches 10 social impact startups with mentors and investors in 12-week cohorts, providing workshops and collaborative workspace at Hub Bay Area, and up to $20,000 seed funding—all in exchange for up to 7 percent equity stake in each company.
Chicago-based Excelerate Labs, soon entering its third cycle, matches 10 companies with mentors and investors in a 13-week summer program. Excelerate, though not focused solely on social enterprise, has worked with a number of social ventures. “We’re looking for the best companies we can find… the companies we think will grow, have the most impact, have the highest likelihood of success,” says co-founder Troy Henikoff. It just so happens that thus far, many businesses that meet those qualifications are trying to do so with a double-bottom line.
Mentorship and investment works. Power2Switch, an online service that helps people switch to renewable energy, reducing usage and costs, came out of Booth’s New Venture Challenge and later was accepted to Excelerate Labs. Co-founder Phil Nevels says going through each process helped the company refine its pitch and business model. Exposure to people they “needed to know”—investors, customers, future partners—translated into an ability to raise funds quickly. According to co-founder Seyi Fabode, Excelerate and Booth helped Power2Switch grow from a few hundred to a few thousand customers.
Ethan Austin, co-founder of the personal medical expense fundraising site GiveForward, says his company is on a completely different trajectory since Excelerate. In one day in January, GiveForward processed more transactions than it did in its entire first year of business before the program. Austin explains that now he’s able to pick up the phone and call mentors like Jeff Hoffman, founder of Priceline or Tim Krauskopf, “the guy who practically invented the internet… It's incredible how much faster your business can grow when you have really smart mentors who can guide you down the right path.”
For entrepreneurs looking for an even more intense experience, there is the Unreasonable Institute in Boulder, Colo. A rigorous application process and crowdfunding competition results in 25 companies embarking on a six-week stay in a borrowed sorority house where entrepreneurs actually live with the mentors and investors who have committed to accelerating their companies. (And yes, the process is filmed. Real TV, co-founder Daniel Epstein calls it "not reality TV.")
In many ways, universities offer the best long-term nurturing for early planning. For social entrepreneurs who’ve already flipped their tassels, competitive accelerators tend to offer the best resources because more traditional “incubators” (long-term business-growing homes for startups) have been slow to develop for social entrepreneurs. These accelerators provide crash courses and connections, but also a way to tap into the elusive impact investment world. Impact and angel investors are more willing to invest in companies that have been vetted by a solid accelerator or a competitive university program.
Still, the equity upside for social enterprise is still very much unknown. “We don’t really have our Google or our Apple or our Facebook—household names that have excited and made investors a lot of money,” Selke says. “Until that happens, it will continue to be challenging.”
Each Thursday, Sarah Stankorb examines the way social enterprise is changing business and creating positive impact.
Photo courtesy of Unreasonable Institute