Think Bigger: Social Entrepreneurship's Critical Need for Accelerators Despite immense needs, impact investing can make a real difference across the globe.
By Benjamin Geyerhahn Edited by Dan Bova
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Prossy Sebunya has a passion for clean cook stoves -- a technology that's critical in third-world countries, where fuel is an expensive commodity, wood fires lead to deforestation and unhealthy conditions prevent sanitary food preparation.
But it's not just her passion. It's her business.
She's a social entrepreneur with the goal of spreading these stoves throughout Uganda. Through Boost, a training program for clean cook stove entrepreneurs that's run by the Global Social Benefit Institute Accelerator, she's fortified her business model.
Startup accelerators play a critical role in helping social entrepreneurs like Sebunya attract investors. Of course, accelerators are important in the for-profit world, but players in the expanding realm of "business with a mission" could use some help, too.
These idealistic but inexperienced entrepreneurs need more organizations willing to work with them until they're ready to accept multimillion-dollar investments to scale their impactful projects.
Related: 4 Ways Your Company Benefits From Giving Back
The maturation of later-stage social investing
There's been an influx of infrastructure to make it easier for large investment funds to move into social investing at later stages.
Traditional money managers such as Goldman Sachs can now create funds aggregating millions of dollars for investments in large social ventures. Using third-party rating systems that function similarly to generally accepted accounting principles, as well as new legal structures, they can hold these ventures legally accountable for the first time.
This has allowed these funds to be more accountable to their investors and make sure the companies they invest in are doing good while doing well.
The challenge
Despite all this progress, there's a lot of need for improvement in helping small startups scale up to the point that larger funds will consider them. Luckily, the startup world provides guidance.
Two traditional accelerators can show us what's possible. Y Combinator is probably the biggest and most famous, but AngelPad has a slightly more hands-on approach. These accelerators bring entrepreneurs in-house for months at a time to help them refine their business plans and demonstration projects -- often ending with a "demo day" in which participants present their businesses to investors.
Related: Adrian Grenier: To Succeed, Entrepreneurs Must Have a Social Mission
Those who survive maintain a close relationship with the accelerator, which takes an equity stake in the company.
Because the traditional accelerators have skin in the game, they put more into the companies and stick with them longer. Social-impact accelerators are experimenting with this model. For example, Significance Labs had a three-month in-house cohort of five fellows in 2014 to make mobile apps targeting low-income populations.
This is a great start, but the main problem is that most social accelerators don't support entrepreneurs long enough to get them to a stage where they can win significant capital. Too often, they offer mentoring and connections to networks but insufficient hands-on support.
This leaves us with social entrepreneurs who have good ideas and the passion to do good, but who lack the skills needed to launch and scale up a business. Instead of being seasoned businesspeople or top-flight MBAs, social entrepreneurs are often recent graduates or professionals in another field (e.g., health care or education).
Without the support of experienced professionals, learning on the job is particularly difficult in these high-impact organizations.
Revamp accelerators for social good
To combat this issue, investors must launch accelerators that extend beyond the current model of mentoring, providing tiny amounts of capital and offering access to networks. Rather, they need to physically bring social entrepreneurs in-house and support all aspects of their business, offering expertise in strategy, market research, product development, legal and accounting.
Social entrepreneurs must do their part by giving up some equity in exchange for help. Success would breed success, and this would become the model for social enterprises to get started, reach sustainability and scale up.
The needs are immense, but impact investing can make a real difference in the lives of people across the globe. However, to make any difference (and any profit), these social entrepreneurs need more than money.
They need guidance from accelerators interested in growing sustainable companies.
Related: Do Good or Make Money? Why It's Not Even a Question
This article was co-written by Andrew Greenblatt, founder of Pride Diamonds and a real estate company that buys properties and rents them to charities.
