Capital to Create Change: Funding Organizations for Social Entrepreneurs

No doubt, the need for social entrepreneurs to become catalysts for systemic change abounds. And there is certainly an abundance of innovative thinking. Truly effective programs, with sound planning, keen implementation and qualified leadership remain as scarce as the investment capital necessary to launch such visionary enterprises.

As with all investments, organizations that fund social entrepreneurs and social enterprise are willingly assuming risk, carefully calculated and hedged with thorough analysis, but risk all the same. Within the emerging social enterprise sector, however, business models, standards and new methodologies of assessing that risk are also being developed to minimize those risks as well as ensuring maximum returns on these investments, tangible and intangible. There remain common denominators Echoing Green, Ashoka, Draper Richards Foundation and other venture capitalists seek out prior to committing funds to a particular enterprise: meeting an unmet need, viability, and sustainability.

New evaluation standards for defining, then assessing, success of social enterprises are also changing within the sector. The paradigm shift from traditional business measures - profitability, market shares, and return on investment - to leadership, trajectory and social impact has not been a simple transition. Of the three social enterprise investors reviewed in this series, only Ashoka evaluates its own overall social impact, citing leadership within the field, changes in public policy and industry norms, impact on market dynamics and value chains as indicators of positive social change.

Moreover how can a life saved or even a life enhanced be measured, let alone evaluated via standardized methodologies? A son born healthy through an Ashoka-funded maternity program may ultimately become a renowned statesman or his progeny an inventor or scientist who solves even greater challenges in future. Likewise for a young life transformed through a tutoring program designed exclusively to help at-risk students in blighted communities, how can the total social and economic impact that young woman or man subsequently makes to the world be calculated? How do you determine the long-term impact of a public sector, business sector collaboration with academia orchestrated by one of Draper Richards fellowships?

Among Echoing Green's 2010 fellowship recipients are the typical not-for-profit organizations as well as several for-profit entities with income-generating activities as a key component of their business models. The emerging market-based approach to social enterprise features an earned income stream as an integral part of its viability and sustainability, enticing other organizations to adopt a "do good by doing well" philosophy.

Ultimately, championing and funding changemakers to meet current and future challenges will shape that very future, our future, but the excitement in the still evolving social enterprise arena needs continued social support demanding innovative solutions in new modalities. That's where this feature ends, and you step in.

Photo credit: thestartup