Intro to social entrepreneurship - An Introduction to...

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Unformatted text preview: An Introduction to Social Entrepreneurship Dream > Believe > Pursue An Entrepreneurial Revolution • 1 million new ventures a year in U.S. • 85% of the new jobs in small and start-up firms • Product/service introduction rate higher than ever before • Rate of wealth creation exploding • And it’s a global revolution 2 Dream > Believe > Pursue What Is Entrepreneurship? Process of creating value by bringing together a unique package of resources to exploit an opportunity Dream > Believe > Pursue The New Buzzword: Social Entrepreneurship So, is entrepreneurship basically entrepreneurship regardless of the context? Or is “social entrepreneurship” something truly different? 4 Dream > Believe > Pursue What Is Social Entrepreneurship? Nonprofits making money Dream > Believe > Pursue What Is Social Entrepreneurship? Nonprofits making money For-profits doing things to show they are not evil Dream > Believe > Pursue What Is Social Entrepreneurship? Nonprofits making money For-profits doing things to show they are not evil Process of creating value by bringing together a unique package of resources to exploit an opportunity, in pursuit of high social returns Dream > Believe > Pursue The only big difference between commercial and social entrepreneurship: Denomination of the returns Social and commercial entrepreneurship have most of the same characteristics 8 Dream > Believe > Pursue The Process of Social Entrepreneurship 1. 2. 3. 4. 5. 6. 9 Find an opportunity Develop a business concept Figure out what success means and how to measure it Acquire the right resources Launch and grow Attain goals Dream > Believe > Pursue The Main Difficulty: Measurement • What is profit? • How do we count it? • What is “social return o n investment” for venture philanthropists? • Can we compare investments? 10 Dream > Believe > Pursue Three characteristics • Social entrepreneurship meets needs unmet by commercial markets and (usually) the government • Social entrepreneurship is motivated by social benefit • Successful social entrepreneurship usually works with, not against, markets 11 Dream > Believe > Pursue Case 1: Housing Opportunities Made Equal (H.O.M.E.) • Services – Core services in housing disputes and fair housing advocacy in Virginia – Special projects and lawsuits • Opportunity: Educate people on fair housing before-the-fact, instead of fixing situations after-the-fact • Enterprise: Start fair housing training Institute • Returns: More housing for the disadvantaged, fewer complaints 12 Dream > Believe > Pursue Case 2: Boaz & Ruth • Opportunity: Underused human capital • Endeavor: New businesses using former inmates in an aggressively faith-based setting • Social returns: Young people not returning to jail, peaceful neighborhood 13 Dream > Believe > Pursue Forces on Social Entrepreneurship 14 Dream > Believe > Pursue Social Entrepreneurs “Look” Like Any Other Kind of Entrepreneur 15 Dream > Believe > Pursue Risk + Innovation High risk aversion Highlyinnovative Dreamer Entrepreneur Not innovative 16 Low risk aversion Stuck Gambler Dream > Believe > Pursue Opportunities vs. Threats Opportunities for social entrepreneurs look like threats and tragedies to others Dream > Believe > Pursue Myths about Social Entrepreneurship • Social entrepreneurs are anti-business • The difference between commercial and social entrepreneurship is greed • Social entrepreneurs are nonprofit managers • Social entrepreneurs are born, not made • Social entrepreneurs are misfits • Social enterprises usually fail • Social entrepreneurs love risk 18 Dream > Believe > Pursue Why does social entrepreneurship matter? 19 Dream > Believe > Pursue A Nation of Social Entrepreneurs Immigrant stock with a high entrepreneurial orientation + Faith in own abilities + Vast ungovernable frontier = Citizens willing to meet their own social needs, without an excessive reliance on the state 20 Dream > Believe > Pursue The Result: Nonprofit Nation • 1.5m registered nonprofits • Something like 9m grassroots organizations • 30 nonprofit links per citizen 21 Dream > Believe > Pursue A primer on nonprofit organizations 22 Dream > Believe > Pursue What Is a Nonprofit? • Tax & regulatory definition: an organization that – Enjoys special tax status – Faces a nondistribution constraint (profit=0) • Functional definition: an organization that forms to – perform “public tasks” • environmental protection, social service provision – perform tasks for which there is demand but no supply from for-profits or governments • religious activity, art museum – influence the direction of public policy • political party, issue organization 23 Dream > Believe > Pursue 23 International Facts • U.S. is very large – represents more than ½ of all nonprofit activity worldwide ($600b) – has 45% of all world’s nonprofit employees • Rich nations tend to have more developed nonprofit sectors than poor nations – Government social spending is positively correlated with nonprofit sector size 24 Dream > Believe > Pursue International Comparisons Country Argentina Australia Austria Belgium Brazil Colombia Czech Republic Finland France Germany Hungary Ireland Israel Japan Mexico Netherlands Peru Romania Slovakia Spain U.K. U.S. 25 Revenues from government 20% 31% 50% 77% 16% 15% 39% 36% 58% 64% 28% 77% 64% 45% 9% 59% 19% 45% 22% 32% 47% 31% Revenues from philanthropy 8% 6% 6% 5% 11% 15% 14% 6% 8% 3% 18% 7% 10% 3% 6% 3% 13% 27% 23% 19% 9% 13% Dream > Believe > Pursue Earned revenues 73% 63% 44% 19% 74% 70% 47% 58% 35% 32% 55% 16% 26% 52% 85% 38% 68% 29% 55% 49% 45% 57% Source: Salamon, et al. 1999 0 26 Dream > Believe > Pursue Mexico 0.9 Romania 1.3 Slovakia 1.7 Hungary 2.4 2.4 2.2 Czech Republic Brazil 2 Colombia 3 Peru 3.7 3.5 Finland Japan 4 Argentina Austria 4.9 4.9 Spain Germany France 6 UK 7.8 Australia 8 USA 10 Israel Belgium 12 Ireland Holland Percent of employees Size of the Nonprofit Workforce 14 12.6 11.5 10.5 9.2 7.2 6.2 4.54.5 0.6 0.4 NPO Types in the U.S. • 34 types: 501(c)(1)-(27), 501(d)-(f),(k),(n), 521(a), 527 • 501(c)(3): public benefit organizations – Religious, charitable, educational, scientific, literary, amateur sports promotion, prevention of cruelty to animals or children – Private schools, houses of worship, social welfare charities, hospitals, libraries, etc. • 501(c)(4): mutual benefit organizations – Local civic leagues, social welfare organizations, employee associations – Volunteer fire departments, homeowners’ associations, social clubs, festivals, etc. • 501(c)(6): Trade organizations – Business leagues, chambers of commerce 27 Dream > Believe > PursueRef.: Section 501, IR Code Nonprofits Are Proliferating in the U.S. 28 Dream > Believe > Pursue The Nonprofit Sector Is Larger than Government 29 Dream > Believe > Pursue Health Organizations Dominate the Sector Unknow n, 29.10% Health, 35.91% Other, 7.13% Member Benefit, 1.67% Arts, 2.15% Education, 14.03% Grantmaking, 4.90% Human Services, 4.96% 30 Dream > Believe > Pursue Source: IRS 990 data, 2003 Revenue Sources Vary a Lot by Subsector Subsector Portion of Total 1 nonprofit sector revenues1 Education 18% $119.7b Social welfare 12% $79.8b Health 49% $325.9b Arts 2% $13.3b 3 Religion 12% $79.8b Total 100% $664.8b 1. Source: Independent Sector (2002) 2. Source: Salamon (2002) 3. This category only counts sacramental activity 31 Government funding2 19% 52% 42% 10% 0% 33% Dream > Believe > Pursue Private donations2 16% 20% 6% 44% 84% 20% Earned income2 65% 28% 52% 46% 16% 47% 32 Dream > Believe > Pursue Source: IRS 990 data, 2003 Religion Public Safety Sports Civil Rights Animals Youth Community Housing Arts Environment Crime Food Human Services Employment Public Benefit Grantmaking Social Science International Education Science Member Benefit Health Health Organizations Tend to Be Huge $15,000,000 $10,000,000 $5,000,000 $0 All Subsectors Are Growing (but Health is exploding) Dream > Believe > Pursue 33 Source: Independent Sector 2002 Main Challenges at Present • Money • Competition • Demonstrating effectiveness • Technology • Trust • Human resources • Public-sector relations 34 Dream > Believe > Pursue Ref. Salamon 2002 Main Opportunities at Present • Demographic shifts • New philanthropy • Heightened awareness of sector • Increased social welfare spending through sector – Entitlement expansion – Welfare reform 35 Dream > Believe > Pursue Ref. Salamon 2002 Main Trends at Present • Explosive growth • Attention to marketing and management movements • Commercial ventures • Development of umbrella organizations and formal education • Effectiveness in competing economically and politically 36 Dream > Believe > Pursue Ref. Salamon 2002 Main Risks at Present • Identity loss, “mission creep” • Industry concentration • Pressure on managers for results • Loss of public trust 37 Dream > Believe > Pursue Ref. Salamon 2002 ...
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