What is Social Entrepreneurship? Do Angels fund it?

26 Dec, 2018 / mvsblog

The field of social entrepreneurship is gaining a rapid growth and getting a lot of interest from all sectors. There is a lot of money and talent that is being invested here.

So what exactly is Social Entrepreneurship?

It’s the use of the latest approaches to solve ancient social problems. It is entrepreneurship that involves the developing, funding and implementing of solutions to social, cultural, or environmental issues. So you identify the social problems and attain a social change by implementing the entrepreneurial principles, processes and operations to find a solution. The organisation that undertakes these ideas may be big or small.

Social entrepreneurship tests and unsettles institutions by offering ground breaking solutions that really make a difference. Their activities range from CSR (corporate social responsibility) to activism and even a social enterprise or business. It is an extensive field and its role in changing the present economic patterns is crucial to the development of the nation.

Start-ups are beginning to show considerable interest in social entrepreneurship.

When it comes to the business models that they look at, there are many options that include a non-profit, for-profit, even hybrid, and a non-profit with income.

The means of financing for social entrepreneurships include soft loans, grants and scholarships, loans, donations, venture capitals, and also angel capital that include social angel capital as well.

So do angels fund social entrepreneurship?

Angels are generally known to be investors who provide high risk capital expecting rather high rates of return. Normally they tend to invest in early stages. Most angels might be entrepreneurs themselves and they help grow and develop the business with their time and expertise as well. They are motivated when they see the businesses that they invest in thrive. These typically high-net-worth individuals with business know-how and experience, play a key role in funding start-ups.

Any new business funding includes risk and banking systems more often than not shun them, social entrepreneurship included. This makes the role of angels in social entrepreneurship even more crucial.

If one is looking at Angel investment, do remember that the structure of the company ought to be Private Limited as a trust, NGO, etc. cannot be considered for Angel investment.

So where would Angels prefer to fund? What are the types of businesses that they might show interest in when it comes to social entrepreneurship?

  • Businesses with a Large Impact on Society

Angels prefer investments that have a large impact on the society. So one needs to be able to measure their impact or at least quantify their outcome as that would make it a stronger case. It ought to basically have an impact on a larger set of people. This is where Angels would see value.  It could also be preserving an art, for example – Go Coop. GoCoop.com is a global marketplace of India that enables artisans in connecting directly with the buyers. This significantly reduces the cost of marketing and there is more transparency in the craft supply chain. There is also a venture like Happy Hens that impacts the society in being more humane to animals.

When a social entrepreneurship venture creates a large impact, the “impact fund” can be approached.  This investment is done with the purpose of producing a measurable, favourable social or environmental impact along with a financial return.

  • Businesses that empower a large number

Angels also prefer investing in businesses that empower a larger number. For example, in a country like India, a business could be empowering women, or the disabled or even abused population. For example Pee buddy is India’s first portable, disposable female urination device with which women can stand and urinate in all public toilets. The hygiene part is taken care of with this. These type of businesses that make a tangible difference to empowering lives, in a large number of course, is what might attract more angels to invest.

Many companies including Airtel, with its multiple social cause initiatives like the recent marathons, have created a social impact. As an investor, I believe that when a social entrepreneurship business impacts people as well as the society, the growth will be more stable. The risk for the investor would be less and though the returns may not be exorbitant, they will be average, yet worth it due to the impact that it creates.

The Original article appeared on Bizztor.

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