The How-To: Scaling Social Enterprise Ventures
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The world needs social entrepreneurs, and social entrepreneurs need funds!
At the moment, the buzzword on everyone’s entrepreneurial radar is growth, scaling, and sustainability. Sure, as social entrepreneurs, we solve big problems at the macro-level - poverty, health, loneliness, education. We are talking billions of potential beneficiaries, yet the truth is social enterprise firms remain small- less than five people, in some cases.
Funding is a challenge even though there is lots of money available through donations, grants, developmental aid, banks, impact investors- so, what is going on? Clearly, you are more likely to get the big funds, if you have traction (prove your idea works, and the market/beneficiaries are willing to accept it), you can scale (grow disproportionate to the investments), and even better, you have a sustainable business model (covering your own costs), and make profits!
So, there are several stages you need to complete, and the more you accomplish (according to investor perceptions), the more money you get to fund your venture. Of course, if your impact is large and traceable with market value, you might be lucky to be supported through CSR funds. But these are exceptions. The thing to remember is that donations (charity, grants, CSR) are rarely long-term, and this creates challenges for future viability of social enterprise ventures.
So, let me make it simple: social entrepreneurship ≠ social + entrepreneurship.
Yes, they overlap, but there are fundamental differences both funders and entrepreneurs need to appreciate. Let me break it down for you. Scaling is about increasing impact (this does not necessarily mean more resources), while growth is about organizational size and reach (i.e. more resources). This is the big difference between conventional for-profit businesses and social enterprises where often growth is the only way to scale.
To avoid diluting purpose and stretching your resources too thin, ask yourself: where do you see yourself 10 years from now? Where do you see your beneficiaries, and what role will the organization have in its communities in ten years? A strong social entrepreneurial venture plans for its own obsolescence, with respect to the initial problem, as you have hopefully irradiated it.
There are two basic ways to scale social enterprises- either you go wide (horizontal scaling), or you go deep (vertical scaling). Of course, you might like to work on a hybrid version of both.
What does horizontal or vertical scaling mean? You can look at scaling (growth) as a strategy with various parameters like impact, replication, tools, product portfolio, reputation, governance, manpower, and funding. Choosing a strategy is a function of the goals of the social organization, its environmental constraints and its values. There is a real possibility that without strong governance and cultural orientation to purpose, the impact will get diluted.
Horizontal scaling involves approaching multiple geographic markets, and often different types of customers. You often try to standardize the product, and this makes impact measurement easier. So, if your focus is giving vaccines for improving child mortality at a global level, for example, at the very basic level the vaccines is standardized (with minor tweaks if necessary) and you can measure impact by how many children were inoculated. This is the simplest level of measurement.
Gavi, the Vaccine Alliance (Switzerland) uses its strategic partnerships around the world to provide vaccines to children around the world, and since 2000, it has prevented over nine million potential deaths by inoculating over half a billion children. Noor Dubai (UAE), which was launched in 2008, works to free the world from preventable forms of blindness, and has reached 25 million individuals from Africa and Asia by the beginning of 2017.
Horizontal scaling allows growth based on social franchising, market pull, organic growth, or through strategic partnerships. For instance, We Love Reading (Jordan) uses a social franchising model to create a network of neighborhood libraries around the world.
Vertical scaling, on the other hand involves focusing on one community, often localizing in one area, and going deep with a larger portfolio of products. There is no exact replication, but what happens is that through trust, co-creation, and community organizing, the social organization acts as a catalyst, and has a wider portfolio of products in the community.
The long-term purpose of such organizations is to eventually withdraw from the place/community, when it is able to solve its own problems. Very often, the products will morph and keep evolving as community needs evolve with systematic intervention. An example of such an organization is Ruwwad Al Tanmeya that works in Jordan, and though their focus has been youth, they are deeply involved with the communities they work in. Similarly, Karam Foundation (USA) is not confined to a geographic area, but works with one segment- Syrian refugees. The important thing to realize is that unlike most for-profit entrepreneurs, social entrepreneurs do not need to focus on volume to be impactful.
Reputation building for both types of strategies is critical, but again, differs in scope. For vertical scaling, gaining legitimacy with entrenched actors is necessary for survival, whereas for horizontal scaling, reputation builds market acceptance and helps gather funding. Horizontal scaling requires more effort on disseminating of information on cause and product availability, and works faster with partners to mobilize resources.
In the case of vertical scaling, it is really about trust. One method is education, of both beneficiaries and persons of impact. Education is often a slower process. Social entrepreneurs often look at their purpose as to “teach a person to fish,” rather than to “give a fish”. However, the key with both scaling processes, as mentioned by Auma Obama, founder of the Sauti Kuu Foundation (Kenya), is to begin the process by revisiting your assumption about fish: i.e. start by asking the question: “Do they eat fish?”