While there have always been entrepreneurs working for social good, recent years have seen tremendous growth in programs and organizations to support them. From incubators and accelerators to business plan competitions and co-working spaces, a vast ecosystem has developed to support social enterprises.
As you navigate how to take advantage of this booming ecosystem, here’s the latest insights from an expert panel at the Mentor Capital Network’s 2016 Annual Gathering.
The ecosystem for entrepreneurs has seen such a boom that there’s been a trend in the past five years towards hyperlocal or focused programs. If you’re in a major city, chances are good that there’s not only an accelerator program near you, but even a specific program targeted for your work.
Conveners.org helps to accelerate accelerators, serving 125 programs in the Conveners.org network, and Kent reported growth in accelerators only serving food, clean energy, or other specific areas.
Ferragut recommends using the F6S platform to search for programs that meet your needs. “Keep applying to accelerator programs until you’re accepted. Have your template in a word doc and it will become easier. I keep a good paper trail and have everything ready to go,” she advises. And make sure you’re not applying solo—accelerators need to see you have a second-in-command.
It’s a sign of a maturing ecosystem that there are more hyperfocused programs, but many communities are left behind and lack access to even general opportunities. The high population density of certain cities leads to concentrations of ecosystems for entrepreneurs in places like New York, Silicon Valley, and DC. Smaller hubs of innovation such as Columbus, Ohio, don’t gain the same support. Entrepreneurs outside city areas are isolated from business communities.
Continuing to grow and build out this ecosystem for all is important to give entrepreneurs the network of support they need to survive the challenges of business. Powell runs a social enterprise accelerator program that serves entrepreneurs in Latin America where there isn’t a strong ecosystem, and brings them together for in-person bonding and deep dives with consultants. “This makes them feel like they’re not alone, like they have someone to walk with them. People need to feel like there’s light at end of the tunnel,” he said.
But when entrepreneurs lack in-person opportunities, virtual networks can bridge the gap to make connections.
Mentor Capital Network works with 600 individuals building businesses in 40 countries. MCN uses video conferencing and other online connections together with in-person networking whenever possible, bringing people together for a dinner to meet.
If you’re outside a major hub, look for online networks to build your connections, and take advantage of Skype and Google Hangouts to get more of a human touch. When you join organizations like Green America’s Green Business Network or the Social Enterprise Alliance, you can find like-minded peers across the country to connect to.
Tip: At Green America’s Green Business Network, we’ve launched a Facebook Group for members to connect to each other online. Request to join »
Virtual networks help the ecosystem grow towards greater inclusion for entrepreneurs outside big cities. There’s still much work to be done for authentic inclusion of people across many other areas of difference, such as socioeconomic background.
Hodge focuses on entrepreneurship for people with convictions and arrest records, and sees a long way to go to achieve true diversity in the entrepreneurial community. She sees a push for “inclusive entrepreneurship” as a buzzword, but emphasized how people are held back from launching businesses due to social disabilities, like lacking the privilege or access to money. “We have to be honest that it’s not a level playing field,” she said.
Kent added that “you can’t have a friends-and-family round of raising capital if your friends and family don’t have capital.”
Build Partnerships & Find Mentors
Strategic partnerships are also key to strengthening ecosystem connections and building social impact. For Powell, it’s what social innovation is all about—“figuring out where the whole is greater than the sum of its parts.”
One strategic partnership model that’s effective in the non-profit social impact world is connecting small and innovative organizations to larger organizations with greater capacity. Smaller organizations may lack the competency or capacity to apply for large grants, while larger but less innovative organizations may have the grantwriting expertise and capacity. “There are lots of under-resourced organizations. Incubating them in larger organizations and helping them stay on the cutting edge is part of what a robust ecosystem does,” Powell said.
Plucky new for-profit businesses follow a parallel model by partnering with larger, well-established businesses, providing fast-moving innovation while partners offer stability and standing in the marketplace.
“Stick to your commitments, make time for each other, and share clearly and honestly when things aren’t working,” Kent advised on building partnerships. “There’s an added burden in social impact because the risk if we fail is a lot higher, the systemic problem will continue to exist. What is your critical path to success, and what does your partner need?”
Mentorship also plays a huge role. Ferragut gained a critical mentor through her participation in Food-X, who has supported her on the journey to build Greenease, a mobile app that connects consumers to locally sourced and sustainable food. When Ferragut gets a call for help, she takes it. “Once somebody was there for me, so I want to keep being there for the community.”
The central importance of mentorship is the foundation of the Mentor Capital Network, which draws on a global web of experienced mentors and investors to provide support to early stage, visionary entrepreneurs who are using business to solve the world’s biggest social, economic, and environmental problems.
Find the Right Investors
Getting to scale is a challenge in the world of social good, but necessary for truly world-changing impact. Social impact businesses continue to struggle to access the financing needed to achieve greater scale. Companies like Amazon that are all about scale can go for ten years in the red, but social impact businesses and organizations face different standards.
Funders want to see the impact of their work throughout development, but it takes time to build something with depth that’s ready for scale. And when organizations and companies scale too quickly, the unintended consequences can undermine the intended impact.
Social impact businesses are also navigating a different exit strategy from conventional businesses seeking funding. “In impact investing, selling out to another company is not the primary objective. If you’re doing this to solve a problem in the world, how do you talk about exits and making sure investors get their money back? Social enterprises need different support to scale. They’re not allowed to lose million before they see revenues. Tech companies play a different game and it’s somewhat unfair we’re held up against them,” Kent said.
Search for investors that understand the world of social impact. Work your local networks for opportunities and explore online marketplaces like ImpactUs and Mission Markets.
After Food-X, Greenease raised a round of funding through a pitch competition. It was refreshing to her that the investors she connected to had a realistic understand of the slow growth in food, and didn’t expect a return for seven years. “They said, we’re not just investing in your business we’re investing in you,” she said.
But the investors asked Ferragut to focus on just the DC and NY areas, and she wanted to go nationwide. Ferragut ultimately stopped fundraising and focused on growing the business through her own funding.
Powell has seen much change in the field since starting one of the first impact investing funds, but feels the field continues to grapple with fundamental questions. “Impact investing was born with an identity crisis. Is this about changing and evolving capitalism for the 21th century, or how we modify existing [investing] products to satiate demand from investors for money to do more than just replicate itself?”
Hodge said there’s an awareness that “somebody needs to pay” for social impact, but governments, foundations, and the private sectors haven’t figured out who’s going to pay the bills.
Powell emphasized the importance of values-aligned investors recognizing the tradeoffs between return and impact. He painted an example where a company may have gotten thousands of children nourished and the investors aren’t going to make back thirty percent—but they’ll get their money back and can reinvest it and continue to make an impact. “We’re kidding ourselves if we say there’s no tradeoff,” he said.
And even when there is positive impact in the world, it can present more challenges. Hodge’s organization Mission: Launch is a not-for-profit social enterprise that creates opportunities for citizens facing barriers to employment due to an arrest or conviction record. They have to work quickly through strategic partnerships to move from sustainability to greater scale, driven by the heightened national interest in the past year around criminal justice issues.
As you navigate the challenges of investing, make sure you’re seeking investors who understand the unique challenges of growing social impact businesses and are willing to take the journey with you. “Do due diligence on your investors! Investors are going to do due diligence on us. But I failed to do my due diligence on them because I was so excited to have raised a round. Find out who they have invested in and talk to those folks,” said Ferragut.
But while conventional companies may have fewer investing challenges, you have communications and marketing opportunities based on your mission and impact that can help you stand out. “Realize how much communications and marketing matters to this space,” Hodge said. “If your product is more expensive, it’s an opportunity to explain why it’s better. Be a differentiator.”
Powell offered one last piece of advice from “the most successful social entrepreneur in the US,” Benjamin Franklin. “’Energy and persistence conquer all things.’ It’s about sticking with your vision, finding your allies, doing whatever it takes to succeed. Because we need to succeed.”
This article draws on insights shared at the Mentor Capital Network‘s 13th Annual Gathering in 2016 from a panel discussion on the Entrepreneurial Ecosystem. Since 2002, MCN has helped hundreds of entrepreneurs launch organizations that have gone on to create more than 20,000 jobs.
MCN’s entrepreneurs make the world a better place with their success, with focuses on clean energy, sustainable agriculture, educational innovation, sustainable construction, financial access, and dozens of other critical areas. Entrepreneurs can apply for MCN’s Sustainable Business Plan Collaboration Program. The Mentor Capital Network Annual Gathering is an opportunity to engage in the conversation around social entrepreneurship on a global scale, with two full days of intimate, challenging sessions that address big topics including public health, off-grid technologies and refugee camps, food security, and clean energy. The 2016 Annual Gathering was held Sept. 29 to Oct 1.