Business Magazine

Social Entrepreneurs Don’t Need Profit For Success

Posted on the 23 April 2011 by Martin Zwilling @StartupPro

social-entrepreneurA term I’m hearing more and more these days is “social entrepreneur.” In the simplest of terms, these are people who seek to generate “social value”, rather than profits, and use traditional business principles to create and manage a venture to make social change.

On the surface, this sounds like entrepreneurs who want to build a non-profit organization. Yet the term seems to be more often associated with people whose work is targeted toward long-term socio-economic change. Think Margaret Sanger (birth control) or Mahatma Gandhi (non-violent), as opposed to the leaders of the Cancer Society or Goodwill Industries.

Whether the objective is to generate profits or social capital, the common element for all entrepreneurs is the recognition that there is a problem which needs solving, or there is an opportunity to improve the status quo.

The vision is always to be a change agent, to invent and popularize new approaches, and to persuade people to take a leap forward. In every case this requires a committed ultimate realist with the determination to persist in the face of daunting odds.

Another way to distinguish between the two types of entrepreneurship is by identifying what social entrepreneurship is not:

  • Not a fundraising strategy for nonprofits. A social enterprise may actually be profitable, or it may be non-profitable, but the generation of funds is deemed secondary to success on the environmental or social issues in the vision. Generating funds should not be the highest priority.
  • Not about profit before social impact. A social enterprise must be financially sustainable only as a means to the end, which is its social or environmental impact and rate of change. The business entrepreneur mission is profit always, social impact maybe.
  • Not a new definition for the nonprofit sector. The evident and real purpose of the social enterprise must be to make the world a better place, through the operation of the business. This certainly also has potential for enhancing the vitality of the nonprofit sector, but it doesn’t move it to a higher moral plane.
  • Not an investment opportunity for business investors. I still get inquiries about how to find angel investors and venture capitalist to kick-start a social enterprise. Funding such an enterprise is in the realm of philanthropists, government grants, or bootstrapping. Business investors are looking for a financial return, not a social capital return.
  • Not about entrepreneurship in the government sector. So far, the largest source of services and funding for social enterprises and social entrepreneurs has been federal, state, and local governments. Yet the enterprises are not government enterprises, and the process for success makes them good business enterprises.
  • Social entrepreneurship is not socialism. The socialist doctrine dictates compulsory taxpayer contributions to finance social initiatives, while the social entrepreneur uses the standard business model and innovative approaches to attract customers, fund activities, and accomplish social change.

The common element in both types of entrepreneurship is that an entrepreneur rather than an administrator is required. This is someone who is willing and able to create a new enterprise, based on an innovative idea, and is willing to assume total accountability for the inherent risks and outcome.


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