Category Archives: Social Entrepreneurship

Our Destructive Obsession with New/Cool Social Enterprises

Recently ClearlySo was asked to raise capital for a business we know well.  It has been going for over a decade, is well-established in its marketplace, and sells products people like at affordable prices which generate a satisfactory gross margin.  The firm has over £1 million in sales, operates at breakeven and achieves considerable social impact; but the road to get there has been long and difficult.  The lessons have come painfully, yet the CEO has matured greatly, he has built a strong Board with an effective Chairman, and with a bit more capital they could thrive.  Sadly, investor’s initial reactions are somewhat unenthusiastic—I won’t say too due to client confidentiality.

At the same time other newer companies we help easily grab investors’ attention—though they lack many of the key ingredients to success.  A charismatic founder might be in place, but there is no battle-tested team or Board.  A breath-taking PowerPoint presentation has been assembled, but the route to market is unclear, and the business plan, though replete with colourful graphics is bereft of anything which resembles hard evidence.  There is sometimes no product or even a prototype—just the best of intentions and glorious aspirations.

The social enterprise sector must allow for innovation—for where else can the experimentation take place in solving social problems, but things are way out of balance.  In my judgement investors and governments are obsessively fascinated with cool early stage ideas.  We can dream together with the entrepreneur about what might be but forget that things almost never work out as well as planned.

This is all charming in a way, like the romantic notions of a new love, but it has damaging consequences.  Entrepreneurs and their teams have slaved away, experience is gained, customers won, networks established—but as targets are inevitably missed, and reality bumps romantic illusions aside, investor fatigue sets in, funding is challenging to secure and the enterprise collapses.  From a social impact standpoint it is a disaster.  A ten year old business has done the hardest thing—survived—but it never achieves scale, as the dollars move on to the next new thing.  From the financial perspective the unsuccessful investment sours investors on this and potentially other deals.

I think we need to focus more on teams and enterprises that have withstood the test of time and remember that most new businesses fail.  The best indicator of future longevity is years of survival—especially crisis filled years like these.  Maybe we also need:

  • A fund which only invests in firms after year 3 or 5?
  • Mentoring programmes which have a similar focus?
  • A ban on start-up investment in the social enterprise sector (that is not a serious proposal, just checking if you are still reading)
  • Government to shift investment to social enterprises which surpass a certain size or longevity threshold?

I also think we have to stop being so impressed with what sounds cool.  It’s great for cocktail parties but will not help us get the sector to scale.

First published in The Social Edge in May 2012

Skoll World Forum Impressions—The Pluses and Minuses of Celebrity

I attended my six consecutive Skoll World Forum (SWF) last week. As ever, the featured speakers and the audience were extremely impressive and captivating. Every year I feel utterly exhausted by the end, but every year I return again knowing that this remains the key Forum for social entrepreneurship and investment in the world, despite the continued overrepresentation of practitioners from the USA.

Past SWFs have generally been a bit light on social entrepreneur, and heavier on investors—but this has been rectified over the last few years.  Also on the plus side the sessions seemed to flow better the fringe “Oxford Jam” meeting across the street is now a well-established and valued counterpoint to the forum itself.

The most significant impression I have is of inspiring people who grace this conference in considerable number. This year the highlight was Archbishop Desmond Tutu, who gave a series of impassioned discussions. Who also could fail to be inspired by the performance artist Peter Gabriel, who sang his hit song about Stephen Biko?. The SWF also introduced the Elders, a gathering of the global “great and good” including Tutu (who chairs the Elders) and Nelson Mandela as well as Jimmy Carter and a host of others.  Such super celebrities undoubtedly have the power to do a great deal of good in the world and their activities were explained.

On the other hand, the misfortunes of another global celebrity hung over the conference. Mohammed Yunus, the social entrepreneur behind the Grameen Bank and the person widely considered to be the father of micro-finance, has been very much in the press these days. He is being investigated in his native country of Bangladesh. I will not go into the details, which are not familiar to me and there are widespread allegations that the case is politically motivated. In fact, there was an appeal at the SWF to speak out and campaign on his behalf. Surely, anything that is motivated by political purposes to denigrate such an important and successful individual is anathema to the spirit of social entrepreneurship and the Forum.

On the other hand, his misfortunes appear to be having a negative impact on the micro-finance sector at large, which is also suffering from a range of different issues, and underscore the risks in celebrity. There is no doubt that Yunus has made an enormous contribution to social enterprise and micro-finance, however the unfortunate consequences of this publicity and his strong identification with the sector are now having adverse consequences.  For the social enterprise and investment sector to thrive on a long-term basis it needs a healthy and robust diversity of voices.

What do you think?

First published in The Social Edge in April 2011

Size—the ally or enemy of Social Enterprise?

In our last Social Edge post we looked at the merger activity in social enterprise and suggested that it was sub-optimal, perhaps because of egos, or because the absence of a profit motive which, in theory, compels Boards and CEOs of “for-profit” companies, and is absent with SEs.  Implicit in this, is the presumption that bigger is better.

Many of the conferences I attend host a myriad of sessions on “getting to scale”, a particularly American phrase, but such thinking permeates Europe as well.  With size, organisations can achieve economies of scale.  Also, for SEs with models that operate effectively in alleviating hunger, teaching poor children, reducing CO2 emissions reductions, etc. there must surely be a strong moral case to expand rapidly.

From a funder’s perspective scale seems all-important.  Nearly all I know seek to engage in activities which are “high-potential”.  I have never been approached by an investor looking for something small which seeks just to continue serving a narrowly defined community well.  Foundations and social investors seek result they can measure—and results seem to mean growth.  The need for capital and the orientation of most investors creates a bias towards big, or at least bigger.  How should the non-scale oriented gain funding?

But some contend that as SEs grow their missions are diluted.  The purity of what drove the original team is sacrificed in the pursuit of growth.  How easy is it to stay social or ethical as the line between the CEO and the line staff becomes more attenuated?

Vertically “tall” organisations can suffer a “corruption” of sorts in their missions.  The CEO is focused on one set of objectives, whereas line staff is concentrated on another.  This can be especially true when the business becomes very large and the CEO becomes an important figure—I have seen several then lose sight of their original mission.  And how many really large social enterprises are there anyway?  Mondragon in Spain, John Lewis, The Coop and Welsh Water in the UK (and many of these would not fit many commentator’s definitions of social enterprise)—but the list gets very short, very fast.  Perhaps as SEs get big they become more valuable and greed or delusions of grandeur kick in.

  • Maybe it would be better if they just sold out, cashed in their chips and reinvested some of the proceeds in new social enterprises? Gordon and the late Anita Roddick did this to wonderful effect with the Body Shop.
  • Perhaps there is just a “life cycle” to SEs and we need to just accept that?
  • Will this fascination with size ever cease?

First published in The Social Edge in October 2010

Should Tax Incentives for Social Enterprise Stop?

I recently attended the launch of a report by the Centre for the Study of Financial Innovation entitled “Investing in Social Enterprise; The Role of Tax Incentives”.  What followed was one of the most vigorous and lively debates in which I have ever participated in this sector.

The report catalogued the considerable number of tax incentives available for investors in social enterprise in the UK—many of which have been available for some time.  Government officials in many countries are studying case studies like the UK and toying with alternatives.  At the CSFI debate, numerous practitioners argued for a series of sensible refinements.  Others noted that the field of play should at least be level with the private sector.  There is, however, a compelling case for an end to all incentives.

First, there is little evidence they succeed.  In the UK it seems the progress of the sector has happened despite and not because of the incentives.  Areas of particular benefit seem to have enjoyed less rather than more growth.

Second, the vast array of incentives is a highly complex and difficult and expensive to negotiate.  Small wonder the cover of the report was an image of a maze.

Third, they are highly distortive.  There is considerable evidence they also displace important private sector efforts in the social enterprise area.  When these incentives are augmented by the creation of Government funded or backed vehicles, as in the UK or Ontario, Canada, for example, (thus far the US has been relatively light on such distortions) this can seriously impede private sector involvement.

Fourth, Government incentives can be highly volatile and vulnerable to a shift in the political winds.  Thus, well-intended initiatives can be undone at the stroke of a pen, which is disruptive and damaging to the operations impacted.

Fifth and most importantly, at such times, it is difficult to argue that our sector is as deserving as so many whose lives have been destroyed by such man-made calamities as the credit crisis and the resultant fiscal retrenchment, or the recent oil spill in the Gulf of Mexico.  Our genuine concern for the social impact of our sector needs to take into account the human suffering around us.  Moreover, with private capital making its way into the social or impact investment space, are we really in a position to justify our pleas?

Nevertheless, questions remain:

  • Are there specific areas where there is simply no choice but to require governmental capital or fiscal incentives to correct a genuine market failure (rather than frustration over speed)?
  • Which sorts of governmental activity can have the biggest impact? In which circumstances?
  • Are any particular countries especially effective in social enterprise development as a result of governmental action? Many of my examples reflect my own Anglo-Saxon orientation.  Are there other models which are working?  Do recent fiscal programmes in France offer a new path to follow?

First published in The Social Edge in July 2010.

Can Social Enterprises be Commercial?

“Oh that’d be a bit corporate, don’t you think?”  This I was recently told by a social entrepreneur, following a suggestion I thought would improve their performance.  It was not just the reply I found troubling, it was the face the respondent made.  He sort of scrunched up his face the way you might at the smell of rotten eggs.  I also felt that feeling I feel many times working in the social enterprise sector—“whose side are you on, mate?” they seem to ask.  “I thought you were one of us but when you talk like that it makes me think you never left the City/Wall Street”.

In so many ways I find a real distaste for what I would consider good corporate practice.  Another social entrepreneur is always late.  Meeting always begin 20 minutes after they were meant to.  I feel emotionally unable to just start arriving 20 minutes after the official start time, although others do—so my time is wasted and I quietly (generally) fume.  It is not that mainstream entrepreneurs are by nature any more punctual—of course not.  But when they arrive late, they apologise, and there is some recognition of the fact that this is unacceptable behaviour which needs correcting.

Another example is the mess in which I find some of the offices.  Don’t these companies have customers, I think.  What are they to make of the state of this room/office?

This is not to suggest that social entrepreneurs go to the expense of creating lavish offices which seek to impress—surely a waste of scarce resources.  But tidiness and order are not evidence of moral turpitude or corporate sell-out, just of an organisation in good operating condition.  Again, it is the attitude rather than the reality which grates; the sort of nonchalant acceptance that a mess is one quaint aspect of running a social enterprise, especially an early stage one.

Nowhere is this more harmful than when it comes to fundraising.  Where traditional entrepreneurs strive hard to hone their pitch, the social entrepreneur acts as if he/she is somewhat “put upon” but the unnecessary and tedious demands of the potential investor to get an earth-shatteringly important story into a mere few minutes.  We find this sometimes at our Social Investor Speed Dating events from social entrepreneurs.

Not all are this way, and I exaggerate (as ever) to make the point, but I contend that there is nothing harmful in operating to the best standards of commercial behaviour.  It does not undermine but rather enhances the social mission.  It does raise questions:

  • How far can a social business or enterprise go in becoming commercial before it ceases to be social?
  • Which corporate traits are best avoided?
  • When we at ClearlySo host our annual Social Business Conference, and focus on just the financial and performance issues, are we undermining the social ethos? Should we not be including sessions on furthering the social mission?
  • Is the nonchalance I mentioned above just an essential characteristic of the visionary social entrepreneur which we need to accept and celebrate?

First published in The Social Edge in June 2010

Will The Social Economy be Far More Feminine?

Last week I participated in a podcast by the Guardian in the UK.  One issue we debated was the idea of a women-run investment bank.  I was highly supportive and put my name forward to sit on its (mixed!) Board.  My thinking—an excess of testosterone and an absence of diversity has nearly destroyed the western economic system—our investment banks need more balance.

These are tricky issues to address in print; one feels on a cliff edge in doing so, but this issue seems important.  There is much research which suggests that women are better equipped at exhibiting balance—at being aware of and acting in accordance with a wide-range of conflicting objectives.  In a financial meltdown caused by a lack of balance, are these not sound arguments for a more feminine approach to the economy—or simply more women in more senior places.

Rwanda, in the aftermath of its 1994 genocide, has since seen women attain many senior positions and the majority in Parliament.  More recently, Iceland was bankrupted by a set of reckless “cowboys”—now women have been given the political and economic reins.  In both cases this was not a planned or decreed handover; the people merely turned to women to sort out their mess (see a ClearlySo blog post on this subject).  Do we need to do the same elsewhere?

In the social economy this has already begun.  Think of some of the prominent figures in social business, enterprise and investment.  Anita Roddick was co-founder, driving spirit and the face of The Body Shop, one of the sector’s first mega-success stories and a business which changed how we think about consumer products.  The co-heads of Justgiving, the leading charitable giving website, are both women (Zarine Kharas and Anne-Marie Huby), and the two leading UK fairtrade brands, Cafe Direct and Divine (chocolate) are run by Anne MacCaig and Sophi Tranchell.  There are some great men as well, but compared to the traditional business sector the extent of this female presence is unique.

Do we need to encourage this further?  If so, how?

Could we be going too far in this direction?  If so, what are the risks?

Although it is a bit weird feeling that history is making my gender somewhat useless—our position is much of our own making.  I look forward with enthusiasm to seeing a more feminine economy, in the social enterprise sector and elsewhere.  We have had our chance!

First published in The Social Edge in October 2009

Do we really need more money?

Ask any entrepreneur, social or otherwise, and the answer is always an emphatic “yes”.

As CEO of ClearlySo, an early stage social business, I am among those lining up with my hand eternally outstretched—in search of funding.  We are all keen to get our hands on more capital, convinced this will solve all our problems.

We seek it everywhere and demand governments “do more” for the sector.  When Barack Obama recently requested $50 million for a Social Innovation Fund, I queried the amount, suggesting it was trivial.  After all, in Britain the government has invested hundreds of millions of pounds into social enterprise and is currently considering at least another £300 million to support a Social Investment Wholesale Bank.

But the question arises—is all this government money a good thing? In a recent blog post, I challenged that notion and pointed out that the social business sector, especially in the UK, was in danger of being flooded by too much government funding.  Does this not crowd out private investment?  Are the criteria for decision-making apolitical, or are they heavily influenced by partisan calculations or “cronyism”?  In such times of burgeoning fiscal debt and individual hardship is such government largesse appropriate?

There is a more fundamental question.  Are we focusing too much attention on the supply of investment to the sector?  Funds for investment can be organised quickly—overnight if you’re Bill Gates.  But to build a successful business can take at least 5 to 10 years.  By focusing excessively on the investment side are we not missing an opportunity to invest more into building great businesses?  Won’t this imbalance harm the earliest investors, who will realise poor financial returns as too much capital will be chasing too few good deals?  Won’t the longer term future of Impact Investment suffer as a consequence?

I understand the importance of bringing more capital into the sector.  But we must ask ourselves what is the best use of incremental funding at this time—more investment or building more great businesses?  The companies need professional non-executives, sound financial control, well-conceived marketing and sales strategies, etc.  Demands for more funding have become an act of faith for practitioners in the sector.  Is this serving our long-term interests?

First published in The Social Edge in August 2009.

The Charismatic Entrepreneur—A Blessing or a Curse?

In the early stages of any entrepreneurial venture, social or otherwise, it is the energy and drive of the single entrepreneur (or sometimes a duo, a la Google) which keeps the “show on the road”.  Her (or his) passion, drive, connections, persuasive powers etc. are what enable the venture to get through the impossibly difficult early days.

In social entrepreneurship this is even more the case.  As there is often no equity upside, the financial incentive is essentially non-existent.  Moreover, the social nature of the organisation gives the enterprise the element of a “crusade”.  In this regard the CEO/Founder’s vision is the lifeblood of the enterprise—the source of strength on which others often draw.

Yet frequently this strength becomes a source of weakness, especially as the organisation matures.  So impassioned is the leader by the mission, so violently consumed by this personal passion, they stifle innovation, debate, staff development and, inevitably, the enterprise’s future.  Such dysfunctionality is often the rule, in the dozens of social enterprises I have observed over the past decade.  For example:

  • The success of one consumer-oriented social enterprise is deeply threatened by a CEO who seems unable to yield control; threatening the company’s development and its access to capital.
  • A technology oriented social business failed partly due to the CEO’s need for control and his/her refusal listen to staff, advisors and shareholders.
  • An environmental firm loses key staff on a regular basis because the CEO is unwilling to be challenged.

…sadly, I could go on and on.

It is not always thus.  I sit on the Board of a company, where the CEO/Founder, an unusually secure individual, regularly raises the issue of succession and team development in order to secure sustainability.

  • How can social enterprises benefit from the drive of the entrepreneur without sacrificing their futures?
  • What role can the Board play in these situations?
  • How can good governance be achieved when there are no external shareholders with power?  This is a serious problem where the CEO retains control in order to “protect the ‘mission’ of the organisation”.  Frequently this power is used to protect his/her position.
  • Can external stakeholders have a role in helping to address and resolve these problematic circumstances?
  • How can credit be shared in a world where success is often personalised by the media?

First published in The Social Edge in July 2009.

Are the only innovations in social entrepreneurship Anglo-Saxon?

Are the only innovations in social entrepreneurship Anglo-Saxon?  Well, you might think so.

At the annual Skoll World Forum, (the “Davos of social entrepreneurship”) the overwhelming majority of speakers, experts and practitioners came from Anglo-Saxon countries, particularly the US and UK.  I recently attended a lecture by a well-regarded professor on social enterprise and finance.  He stated that “without a doubt the UK and the US lead the world in terms of thinking in this area”.

I found myself wondering, “Is this really true?”  Is this, perhaps, just an example of Anglo-Saxon “imperialism”, which ought to be contrary to the spirit of the world of social enterprise and finance?  Or do many of us think it is true because so much of the literature is written in English –the current “lingua franca” of the social enterprise world and the only language many of my colleagues and I can understand!  Perhaps there is indeed a large Anglo-Saxon contingent to the global “voice” on this subject, but have we got the proportions right at our global gatherings?

This is important to me because I am passionately interested in progress in the sector and believe that its pace is quickened when inputs are diverse.  If, by contrast, so many voices are Anglo-Saxon (like mine, I should confess), does this not hamper growth?  Are we not limiting our access to innovative ideas to only those which might spring forth from an “Anglo-Saxon” mindset?  Also, are there not ways to deploy social networking technologies to harness a broader range of views?   Even if we persist in writing in English can we not at least tap into a broader range of voices by nationality?

There is openness to models from the developing world.  But in many cases these models are deployed by Anglo-Saxons who move to these poorer countries.  Does this represent then a diversity of thinking or not?

Continental Europe and Japan represent an enormous proportion of global economic activity—yet their voice regarding social entrepreneurship is far more limited.  Is this because there is not much going on or because we just do not know where to look, or have limited access because of linguistic barriers?

First published in The Social Edge in May 2009.

On tough economic times

Would anyone invest in social enterprises nowadays?  Well yes, actually.  The crisis has demonstrated that the “profits at all costs” economic model is probably finished.  Social businesses and enterprises address this directly, offering a balance between financial reward and societal benefit.

It is still capitalism, as the market and investment models still apply, but a bit less “raw in tooth and claw”.  For example, we have just secured funding for our new social business,, and other early stage businesses I know have also.  Socially Responsible Investment funds are holding up relatively well.

Secondly, the credit crunch has thoroughly debunked the notion of a “guaranteed financial return”.  We have learned there is no such thing.  Even bank and governmental guarantees are only as good as the entities behind them–and these now seem somewhat less secure.  Moreover, the failures of some guarantees were outside the control of the guarantor.  I think the “social returns” social enterprises and ethical fund managers aim to achieve can be more reliably delivered–and their ability to guarantee them is more within their sphere of control.

So with all that, why would anyone ever invest in anything but social businesses and enterprises, especially in the current environment?  You get some financial return, a guaranteed social return and who knows–entry into heaven?”

First published in The Guardian in February 2009.