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What we learned about models for social entrepreneurship at this Wharton Social Impact Conference panel

November 3, 2015 Category: Funding

Understanding the needs of the community you’re working with is the number one priority for every social entrepreneur seeking to create good. Whether that solution is best delivered through a traditional nonprofit model or via a mission-driven for-profit model hinges on the case-by-case particulars that accompany every specific problem at hand.

That was the overall takeaway from the panel on models for social entrepreneurship at this year’s Wharton Social Impact Conference, moderated by SustainVC principal Chris Bentley and featuring social entrepreneurs and agents of change across public and philanthropic sectors:

  • Bill Cromie, Director of Emergent Technology at Brooklyn-based social impact incubator Blue Ridge Labs at the Robin Hood Foundation
  • Corinne O’Connell, Associate Executive Director at nonprofit Habitat for Humanity Philadelphia
  • Tobias Peggs, President (Impact) at The Kitchen, which oversees a number of community restaurants as well as a nonprofit organization that implements educational gardens in schools across the country

The consensus among the three panelists was that the key asset to any socially-minded business or impact organization is always the community being served. For Cromie, who helps manage a portfolio of social enterprises focused on curbing poverty in New York City, that means getting out and piloting new products.

“We’ve seen time and time again designers and product engineers who immerse themselves in communities and find their models are incorrect,” Cromie said. ‘The process of continually going back to the community and testing and validating your assumptions is really the secret sauce to coming up with business models where it’s a win-win for all participants.” 

For O’Connell and Peggs, that product is always very tangible – homes and food, respectively. The challenge lies in finding the funds to deliver those products to target communities. Peggs said that’s why The Kitchen searches for local mission-aligned investors before searching for communities in need.

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“We’ll work with that community of investors to secure the financing, then we’ll find the communities of underserved kids,” Peggs said. Why? Because the last thing you want to do as a social entrepreneur – or any type of entrepreneur, for that matter – is take the wrong kind of money, immediately putting you at odds with running your business or organization the way it should be run. 

“It’s in the world of impact entrepreneurship. You have to make sure you take the right type of money from your investors,” he said. “We’d much prefer to align with the type of capital that shares the same objective.”

The right avenue for funding all depends on whether the model is philanthropic or enterprising, Cromie said. He said he advises teams to think in two spectrums:

  • Large scale, small impact = venture funding
  • Small scale, large impact = philanthropic funding

 

O’Connell said Habitat Philadelphia has recently discovered a for-profit revenue generator of their own: Habitat Philadelphia’s ReStore, which sells home goods to the general public.

“To open the ReStore, we pursued the traditional philanthropic avenue,” O’Connell said, adding that it took $300,000 in startup capital to get the store launched.

“It’s proven that the model works, so it’s easier to sit down and talk to investors with some data in front of you,” she said. As Cromie pointed out, finding funding is really all about the metrics you can provide as an organization – not just social impact metrics, but basic business financials and milestones.

For Habitat Philadelphia, that includes the numbers of homes built and number of homes repaired, as well as impact metrics relating to how that home ownership plays into voting and education. For The Kitchen, those metrics include the number of jobs created, dollars raised for fellow nonprofits trying to change local food systems and dollars spent in the local farming economy.

Overall, the panel agreed: Every decision always comes down the community being served and what model will serve them best.

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