Social Entrepreneurs Seek New Investments to Reach a 'Tipping Point'

By Nicole Wallace

On Oxford University's 900-year-old campus, the new field of social entrepreneurship — which blends business techniques and social goals — this week grappled with its need for more money to finance growth.

Nonprofit leaders, scholars, business people, and policy makers from 40 countries gathered at the Skoll World Forum on Social Entrepreneurship at the Said Business School here.

"There's still a shortage of funds, and the funds that are there are still very hard for social entrepreneurs to get," said Martin Fisher, chief executive officer of KickStart, a nonprofit organization in Nairobi that sells water pumps to poor farmers in Africa. "Every social entrepreneur I've met is spending far too much of their time working to raise money."

Instead, he argued, they should be working to develop "the next big thing, the next equivalent to microfinance."

Through the work of social entrepreneurs around the world, he said, microfinance has reached a point where millions of dollars — both philanthropic and for-profit — are pouring into lending projects, enabling loans to more than 110 million of the world's poorest people.

But, "we have to remember very clearly that it's taken microfinance 30 years and hundreds of millions of dollars of consistent investment to reach the place where it is today," said Mr. Fisher. "So to get to a tipping point, any of the new innovations are going to take a large amount of time and a large amount of money."

The daunting size of the problems social entrepreneurs are tackling makes rapid growth imperative, said Roshaneh Zafar, president of the Kashf Foundation, a nonprofit organization in Lahore, Pakistan, that makes small loans and other financial products available to poor women.

"It's about transforming systems and policies, and that's why scale becomes important," said Ms. Zafar. "But how big is big enough? When I think of my own institution and of our plan to grow to 1 million clients by 2010, that's only 8 percent of the poor people in Pakistan."

'Necessary Resources'

The difficulty that organizations face finding the money they need to grow — particularly as more foundation money goes to start-ups — could pose a long-term threat to the nascent field, said John Elkington, founder of SustainAbility, a company in London that provides consulting and research on corporate responsibility.

"I wonder whether we are possibly in danger of creating a thousand flowers blooming without necessarily having the resources to take them to the necessary next step," he said.

He pointed out that that's how capitalism works. Periods of enormous investment in new companies — like the dot-com boom or the current growth in environment-conscious, clean-technology firms — are followed by drastic retrenchment.

"So the question is, Are we going to see a shakeout in this area?" said Mr. Elkington.

To analyze the current state of the social entrepreneurship, SustainAbility conducted a survey of more than 100 people — mostly leaders of nonprofit organizations, but also some executives of businesses that are set up both to make moneyfurther a social goal — and conducted in-depth interviews with 20 more.

Nearly three-quarters of the study's participants reported that raising money was one of their two biggest challenges.

The survey also examined how social entrepreneurs were working with companies, and whether they were open to such partnerships.

"Across the board the social and environmental entrepreneurs were keen to work with business," said Mr. Elkington. Some of the organizations were already collaborating with companies, but he said there were concerns.

"One of them was, 'We don't know how to pick the right sort of corporate partner,'" said Mr. Elkington. "' We simply don't know how to do that. Even if we get into negotiations with a particular potential partner, we don't know how to negotiate the best sort of deal for our organization.'"

The study, "Growing Opportunity: Entrepreneurial Solutions to Insoluble Problems" (http://www.sustainability.com/growing-opportunity), is the first part of a three-year project to increase partnerships between social entrepreneurs and corporations. The Skoll Foundation, in Palo Alto, Calif., is supporting the project with a $1-million grant.

Collaborating With Business

The potential that partnerships with corporations hold for helping social entrepreneurs expand the reach of their programs was very much on the mind of conference participants.

For example, vaccines need to be kept within a certain temperature range to be effective, and when delivering vaccines to remote areas in developing countries, the "cold chain" can easily break down at many points along the way. So in the early 1990's, PATH, an international-health charity in Seattle, tried to develop a temperature-sensitive marker that could be placed on a vaccine vial and would show if it was exposed to temperatures outside the acceptable range.

The product PATH was working on had problems — including the fact the dye used on the labels gave people a rash. But the charity found a company in New Jersey that had superior technology. It was producing markers for poultry products, and had no idea that its technology could have public-health applications.

According to Christopher J. Elias, president of PATH, the charity was able to introduce the company to the complex world of international health and development, and persuade major players like the United Nations and the World Health Organization to require the new technology on the vaccines they purchased.

Initially the company was skeptical about the partnership, but today, he said, vaccine markers are its major source of revenue.

"The company could never have gotten the commercial success without us playing essentially a brokering role," said Mr. Elias.

Today PATH has partnerships with more than 60 pharmaceutical and biotechnology companies. The key to building and maintaining those relationships, said Mr. Elias, is understanding the business perspective. To that end, the organization has on its staff 10 employees who have both an MBA and industry experience.

While PATH has been successful working with companies, Mr. Elias estimates that about three-quarters of large pharmaceutical and biotech companies are sitting on the sidelines when it comes to research and development that could improve health in the developing world. He hopes that the companies that have been taking a role in global health issues will talk to their colleagues about the benefits of working with charities.

Said Mr. Elias: "They're not going to believe us, because we're looking to do a partnership, but they will believe their peers."

Video broadcasts of selected sessions of the Skoll World Forum are available on the Skoll Foundation's Web site at http://www.skollfoundation.org.