Our friends in the north (last week)

The strapline: “Impact investment isn’t a movement any more, but a real and fast growing asset class” was almost enough to send me off to read something else but I heartily reccomend having a read of Per Granvist’s report on SOCAP recent conference in Malmo (on CSRwire).

UK readers may not be aware of Social Capital Markets but they run an international events series “that connects leading global innovators – investors, foundations, institutions and social entrepreneurs” with the aim of helping to build the market “at the intersection of money and meaning.

Granvist’s report on their Malmo event fortunately doesn’t focus on the issue of whether impact investment is becoming an asset class – is someone going to issue a commemorative t-shirt with ‘I’m in an asset class of my own on the front’? – but on the more interesting question of what-on-earth the fast-growing global band of social investors are actually going to invest in. It’s good to see that people are just as confused about this in Malmo as they are in Manchester.

Part of the problem is that existing social entrepreneurs are finding the going tough: “After a few minutes of networking, I recognized a social entrepreneur who is now a year into realizing his dream of providing a crowdsourcing solution to fund projects to create better neighborhoods. It quickly becomes obvious through our conversation that the journey hasn’t been as easy as he expected. In fact, this fall he plans to enter the speaker circuit to supplement his salary. The irony isn’t lost on him – he expects to make more money talking on his idea than he should be making by actually working on it. ‘But as soon as times get better, I’ll be back full time on my project!’ he quickly added, clearly in response to my shocked expression.

I’m certainly not in a position to criticise somebody who finds themselves helping to finance their socially enterprising activity by pontficating about social enterprise – did I mention this training event we’re running? – but it’s a darkly, very familiar story. The number of social entrepreneurs with succesful business models to match their ideas and deliver their social purpose seems relatively small so far and I don’t see any evidence (yet) that the reality of growing funds for social investment will, in itself, lead to the creation of more commercially viable social ventures – or even a set of logical arguments as to how and why it might do so.

Later, Granvist talks to another delegate about, how to decide which social entrepreneurs to invest in: “The first step in screening potential entrepreneurs? Answering whether they are really hoping to solve a problem or merely address the symptoms of that problem. Even those in the first category will sometimes realize that the problem isn’t as pressing as they did when they came up with idea and then shift into reverse to create a livelihood by talking on their idea instead, a lot like the crowdfunding entrepreneur I had met on day one. The second step: Understand how the entrepreneur is going to cope with the challenges that scaling a business will bring. ‘Is their business model focused enough or are they trying to achieve a number of things at once?’ offered Seil. Without clear scope and having defined what you’re not doing, it’s impossible to scale.”

The first of these points demonstrates a clear disjuncture between social enterprise as most of us understand it in the UK, and social enteprise operating primarily on the US-model in the rest of the world. The majority of the relatively small number of UK social enterprises who are likely to be in a position to take on significant social investment in the near future are not problem-solving organisations in the sense Granvist is describing – they’re organisations looking to provide mostly publicly-funded services on an ongoing basis.

What unites social entrepreneurs across the world, though, is the sense that they face the same challenges as those faced by anyone else starting a business then trying to keep it going – plus the additional challenge of delivering a demonstrable positive social impact in the process.

For Granvist, in Malmo, the future looks bright: “I look around the room, filled with people bubbling on about how their innovations will change the world and forward-thinking investors with a desire to fund the next big idea. I look at my glass of wine and decide it is not half empty, but half full after all.

I share his optimism about the ability of people to change the world for the better but, when in comes to generating ongoing revenue rather than investment, I’m not sure we’ve got enough of the answers (so far) to the questions about where the money comes from.

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3 Comments

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3 responses to “Our friends in the north (last week)

  1. Yes, I’m aware of it and have been engaging online with money involved, like Kevin Jones.

    In the US the predominant perception of social enterprise or more accurately social entrepreneurship is of foundation funded approaches to use business methods to address social problems in much the same way that much of UK social enterprise is government supported. The approach is attributed to Ashoka’s Bill Drayton.

    In very recent times, I’ve come across journalist Anne Field whose interest is the self-sustaining “for profit” form of social enterprise of which the L3C is one of the more recent forms. Another, called a B-Corp surfaced in about 2007. Anne draws attention to the issue of taxation and Program Related Investment and in an exchange of conversation, I relate how this restriction was part of the reasoning for an alternative paradigm, back in 1996.

    http://www.forbes.com/sites/annefield/2012/05/04/irs-rules-could-help-the-fledgling-l3c/

    On the matter of solving problems rather than address symptoms, I discover only today that historian Simon Schama has advocated the deployment of another ‘Marshall Plan in Europe. As you will know was our aim to leverage such a plan 6 years ago, placing a blueprint for a microeconomic approach in the public domain.

    In the opening paragraph, the words of General George Marshall addressing Harvard in 1947, are quoted:

    “Our policy is directed not against any country or doctrine but against hunger, poverty, desperation and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist. Such assistance, I am convinced, must not be on a piecemeal basis as various crises develop. Any assistance that this Government may render in the future should provide a cure rather than a mere palliative. Any government that is willing to assist in the task of recovery will find full co-operation I am sure, on the part of the United States Government. Any government which maneuvers to block the recovery of other countries cannot expect help from us. Furthermore, governments, political parties, or groups which seek to perpetuate human misery in order to profit therefrom politically or otherwise will encounter the opposition of the United States.”
    .
    No interest however, from the European Union:

    http://www.european-citizens-consultations.eu/uk/proposal/2012

  2. I always read your articles with interest and find them thought provoking. This one on social enterprise in America and the challenge of choosing the right projects/people/organisations left me wondering why don’t we learn from trust funders? They face the same problem of many good ideas coming to them, far more than they can fund, so they have developed criteria with which to judge the soundness of the idea, the ability of the people to deliver what they say they will, and the robustness and sustainability of an organisation, all of which means they can have more confidence that they are making a good investment. This would save potential investors time, effort and worry, and it would mitigate against the entire movement becoming disillusioned through bad investments.

  3. jeffmowatt

    The other side of the coin, the social enterprise flag of convenience, grows ever murkier in Gloucestershire with two MPs being paid by a major Circle investor.

    I was mortified to see the reference to a company in the British Virgin Islands which is where East Europe’s gangsters conceal their investments.

    http://cheltenhamagainstcuts.wordpress.com/2012/05/04/two-gloucestershire-tory-mps-accepted-donations-from-controversial-super-rich-private-health-investor/

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