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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