Acumen Blog

money-to-grow-on

Why Social Enterprises Need Money to Grow On

In The Search for Social Entrepreneurship, Paul Light writes, “If the idea is matters, so does management…to the extent that management is essential for scale-up and impact, socially entrepreneurial organizations need to embrace it.”

Light’s idea that high performing organizations should invest in management and organizational development systems makes sense, but in order for many social businesses to do so, the philanthropic landscape will need to change.

William Foster, partner at leading nonprofit consulting firm Bridgespan Group, recently wrote about the need for foundations to provide “growth capital” grants to later-stage organizations with sound business plans, strategic clarity and a sustainable financing model. In his Stanford Social Innovation Review article, “Money to Grow On,” he suggests that funding organizations should approach grantmaking in a similar way that venture capitalists approach making investments: high performing organizations with proven success should be awarded larger infusions of unrestricted cash to ramp-up and achieve long-term social change.

Foster writes, “Before venture capitalists invest in a company, they conduct a thorough review of the company’s management team, business model, and strategic plan, along with an analysis of the company’s competition and market. More often than not, they walk away from deals that are in many respects attractive. Few nonprofit donors undertake such rigorous due diligence. But they should. ”

For organizations working in the base of the pyramid space, this idea is already starting to take root. VisionSpring recently announced a prospectus, which is aimed at attracting $5 million in growth capital. The prospectus details how resources will be leveraged to create and measure increased social returns. Donors do not have to look far to reference past financial statements or catalogue other partners who are investing in their model — all these details are easy to find and effectively illustrated in the report.

VisionSpring Chairman and co-founder Jordan Kassalow explained the prospectus’ purpose in a recent interview with Rob Katz: “[it] is all about solving a pain point – that we didn’t have enough capital to execute our vision. So we want to get more dollars up front to build the team and systems to replicate and expand what we’re doing. ” Since its soft launch in June, the Prospectus has already helped raise over $1 million.

Agora Partnerships is another organization serving the BoP that recognizes entrepreneurs’ need for growth capital to create sustainable economic and social value. Agora identifies and advises socially responsible entrepreneurs who want to grow their businesses to create jobs and solve the problems of poverty. Those organizations with the most promising plans are providing with financial resources and additional business development support.

Like many organizations in this space, VisionSpring and Agora Partnerships are hybrid organizations – they combine non-profit tax status with an earned-income business model. Their non-traditional model may make securing traditional grants even harder, especially, perhaps, because their balance sheet shows a steady revenue stream. For these social enterprises, measuring and communicating successful results will be especially critical in securing unrestricted growth capital.

Social enterprises face an uphill battle in many regards – whether in terms of hiring, communications, impact measurement, etc. But when it comes to fundraising, the arguments put forth by William Foster are a useful guide. Like Agora Partnerships and VisionSpring, other social enterprises may choose to use a prospectus to raise the kind of scale-up capital they need to reach sustainability. Over time, we’ll be able to assess the utility of this new approach – but for now, it appears to be working. Just ask Jordan Kassalow.

Comments

Reflections on the India Fellows Seminar

Each year, the India Fellows Program brings together up to 20 emerging leaders from different regions, sectors, and socio-economic backgrounds in India. During the fellowship year, Fellows remain in their jobs and meet every 6-8 weeks throughout the year for 4 seminars and 2 collaborative projects, each about a week long. As the India Fellows Associate, Jacqui is responsible for supporting all aspects of the program recruitment, logistics, marketing and strategic planning. Below, Jacqui reflects on the first seminar, Foundations of Leadership. You can read more about the fellowship program here[Read More]

Adaptive Leadership in Action: Addressing Cultural Norms & Giving Women a Voice

In the fall of 2013, +Acumen launched the course Adaptive Leadership: Mobilizing for Change in partnership with the Cambridge Leadership Associates. This course is for anyone who wants to become more effective at leading their organization through change. Below, one of the course participants shared her story about how this course impacted her work and ability to affect change. [Read More]

Making Sense of Social Impact in Action: The Value of Educating Our Youth

At Acumen, one of the most common questions we get is how we measure social impact. Our newest +Acumen course – Making Sense of Social Impact: Acumen’s Building Blocks for Impact Analysis. – will provide an entry point for how to think about impact and we’ll share frameworks that help us define what to measure and why. Makoto Matsuura, founder of cobon a not-for-profit focused on youth education in Jakarta, Indonesia and Osaka, Japan, took a pilot version of this course and shared his reflections with us. [Read More]

Good news for philanthropists in the U.K. and Europe

We are excited to announce that Acumen now holds a CAF Charitable Trust in the United Kingdom. CAF, the Charities Aid Foundation, is a registered U.K. charity. By donating to Acumen through CAF, you can use Gift Aid if the amount of Income Tax and/or Capital Gains Tax you’ve paid for the tax year in which you make your donation is at least equal to the amount of basic rate tax  [the charity or Community Amateur Sports Clubs (CASCs) and any other charities or CASCs] you donate to will reclaim on your gift. CAF will reclaim 25% Gift Aid from HM Revenue & Customs and pass this through to Acumen.  The donor can claim higher rate tax relief (for more information, please refer to CAF’s online resource, What Is Gift Aid?). [Read More]

d.light Leaders Named 2014 Social Entrepreneurs of the Year

We are thrilled for our portfolio company d.light and Donn Tice, Chairman and CEO, along with cofounders Ned Tozun, President, and Sam Goldman, Chief Customer Officer, for being named Social Entrepreneurs of the year 2014 by the Schwab Foundation for Social Entrepreneurship. d.light is a for-profit social enterprise that manufactures and distributes solar lighting and power products with primary markets in the developing world, today announced that d.light, along with 37 other individuals and organizations in the 2014 class, will be fully integrated into the events and initiatives of the World Economic Forum. [Read More]