Posted by: Charlie | February 3, 2010

Social Enterprise, The Hybrid Nerd

Social enterprises are like the smart geeky high school student who is also a an all-american football star. Well, with one exception – social enterprises are handicapped. They sit in the shaky middle between bottom-line, for-profit companies and socially & environmnetaly focused non-profit organizations. They are hybrids.

Despite recent buzz about the field, there has been a general lack of institutionalized support for the sector. Foundations are weary to fund for-profit entities even with a social mission, and businesses rarely offer tiered pricing for hybrid businesses. Where as non-profits often receive reduced rates for services like legal and tech (Google Apps is free for non-profits), social enterprises pay full price. And boy do they pay for it.

In full disclosure, in my other life I run a social enterprise called Runa. We not only have to maintain strategic relationships with small farmers, indigenous communities, and other organizational stakeholders, but we also have to run a highly profitable tea business. We want to do both, and our investors feel the same. While we have received a good deal of good will press and local support in our home town, both business and non-profit communities do not really know how to handle us. So we front the bill.

Usually the nerdy football star matriculates to college with help of a financial aid package, and thats where the metaphor ends. Luckily, there is a growing community of social enterprises fighting to do good… and do well. How will we treat these Hybrids as they grow out of the awkward high school stage?

photo credit: crimfants

About these ads

Responses

  1. Charlie – you know about L3C? Seems relevant.

    http://en.wikipedia.org/wiki/L3C

    -From Mark, a fellow Ecua-phile.

    • Mark,

      Thank you for your comment. The L3C is a curious idea for a whole new sector of business. Earlier, I did some research over at Triple Pundit and came to some realized that there are two major funding gaps in the non-profit sphere that the L3C could fill.

      First, at the start-up stage, non-profits are ineligible for most foundation money who rely on 3 or more years of proven success in addition to audited financial statements. These organizations rely on the generosity of friends and family, but are more likely to spring up on college campuses where cash flows plentifully rather than in communities where families struggle to pay mortgages. A low-profit entity could incentivize early stage investors to build quickly in order to effectively address pressing social issues, all with the assurance of a small financial return.

      Second, traditional non-profits, after the very tight boot strapping stage, struggle to secure growth capital in a field of limited charity. Individuals max out their spending limit. Foundations with mature portfolios may be weary of picking up new programs especially in harder economic times. However, L3Cs could attract other financial institutions looking for new forms of CSR and charity with strategic small returns.

      Its an interesting sector and the SEC has yet to rule on the legitimacy of the standing.

      Do you know any L3Cs? I’ve never met anyone who runs an L3C organization.

      Charlie

  2. Can’t say that I do. But I bet Nathaniel Whittemore over at change.org does.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: