the state of social enterprise

The State of Social EnterpriseThe State of Social Enterprise

Dr Alex Nicholls MBA

SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP1

University Lecturer in Social EntrepreneurshipSaid Business School, University of Oxford

Fellow in ManagementHarris Manchester College, Oxford

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Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

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• Definitions• Context• Social enterprise typology• Social enterprise investment

OverviewOverview


DefinitionsDefinitions


A business with primarily social objectives whose surpluses are principally reinvested for

that purpose in the business or the community, rather than being driven by the

Social EnterpriseSocial Enterprise


community, rather than being driven by the need to maximise profit for shareholders and

owners

DTI (2002)DTI (2002)

Spectrum Of ActionSpectrum Of Action


CAF/Venturesome (2009)

• Purpose is social/environmental• Vehicle is business• Generate earned income• Not necessarily profitable

• Create blended value

Key CharacteristicsKey Characteristics


• Create blended value• Social + financial (accounting)

• Agnostic about legal form• Method not the means

• Strong market orientation• Performance measurement

Conceptualizing SEConceptualizing SE


Social Enterprise ModelsSocial Enterprise Models

• More efficient• Driven by competition

• More self reliant/independent• ‘Sustainable’?

• More scalable


• More scalable • Better access to capital

• More innovative• Hybrid synergies

• Investable

Social Enterprise ModelsSocial Enterprise Models

• Leverage public and private resources• Free up philanthropic funds/grants

• Respond to demand more quickly• Organisational mindset• Resource availability


• Resource availability

• Wider access to skilled personnel• Greater financial rigour• Reinvest revenues to capacity build

ContextContext


Social Sector EffectivenessSocial Sector Effectiveness

• Move towards more ‘efficient’ business models in social sector• For-profit subsidiary ventures• Cross sector partnerships/hybrids• Drive towards ‘sustainability’


• Drive towards ‘sustainability’• Better responsiveness

Sustainable BusinessSustainable Business

• Enhanced CSR• Triple Bottom Line strategies• Pressure to act as corporate ‘citizen’• Role in solving social problems• Role in social institution building


• Role in social institution building

• BoP opportunities

Reinventing GovernmentReinventing Government

• Increased privatisation of government and public services• Search for better quality/efficiency/legitimacy• Reduction in taxation• Formats:


• Formats:• Outsourcing contracts• Voucher schemes• PFIs/PPPs

New Resource StrategiesNew Resource Strategies

Strategy Variations Examples

Sale of products and services

Mission relatedNot linked to mission

Project Impact

Fees/cost recovery Membership feesLicensing fees

Fair Trade


Licensing fees

In-kind resources Pro bono goods and servicesVolunteers

CityYear

Partnerships With businessWith governmentWith local community

Eco-Clubes

Raising funds Special eventsAdditions to bills

Habitat for Humanity

• IFF survey (2006)• 55,000 social enterprises in UK• 2009 >60,000

• 5% of all businesses with employees• Combined turnover of £27bn

UK Social EnterpriseUK Social Enterprise


• Combined turnover of £27bn • Contribute £8.4bn p.a. to economy• 2010 >4000 Community Interest Companies (CICs)

• GEM SE survey (2006)• UK sample, 27,000 18-64 year olds• 3.2% of working population engage with SE (1.2 million)

• Mostly in start-ups (2.8%)



• Mostly in start-ups (2.8%)• Bias towards women (3.6%) v men (2.8%)• Strong ethnic minority bias

• Afro-Caribbeans 3 x more likely to be SEs than caucasians

• Some regional variation• London 4.7% of working population engage with SE


• SEC Report (2009)• Average annual turnover of £2.1m• Maximum of c £100m• 39% derive >50% of income from public sector contracts


contracts• Recession busting: 56% increased turnover during 2009

• 60% of new investment for growth• 26% lead by women (v 14% in all SMEs)

UK Government PolicyUK Government Policy

19 SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP

Big SocietyBig Society

Government needs to open up public services to new providers like charities, social enterprises and private companies so we get more innovation, diversity and

Cameron (2010)Cameron (2010)

so we get more innovation, diversity and responsiveness to public need

21 SKOLL CENTRE FOR SOCIAL ENTREPRENEURSHIP

Social Enterprise TypologySocial Enterprise Typology


SocialPrograms

+Enterprise

SocialPrograms

EnterpriseActivities

SocialPrograms


$

Social Enterprise Models



Embedded

Programs Activities

Integrated

Programs Activities

External

Alter (2006)

Employment Model


Embedded

Entrepreneur Support Model


EmbeddedIPO 2010 c$350m IPO 2007 c$450m

Market Intermediary Model


Embedded

Fee-For-Service Model


Embedded

Cooperative ModelCooperative Model


Embedded

Service Subsidization Model


Integrated

Organizational Support Model


External

Key Investment QuestionsKey Investment Questions

• Who is the customer?• Market characteristics• Economic model for social/environmental value creation• ‘Green Ocean’ opportunity?

• Business model• Business model• How are surpluses generated?• How are surpluses distributed?

• Legal form• Financial structure

• Risk and return• Timescale for growth/expansion/profitability

31

Social Enterprise InvestmentSocial Enterprise Investment


Impact Investing FieldsImpact Investing Fields

• Clean technology• Microfinance• Global health• Water• Housing


• Housing• BoP investments• > $1tr investment opportunity

The Investor UniverseThe Investor Universe


- 100% + 8%0%

Capital-protected Market-rate returnGrant-makers

- 15%

?

Social Social Investor MarketsInvestor Markets


Nicholls (2009)

Structured DealsStructured Deals


Monitor(2009)

Vodafone’s MVodafone’s M--PESA ProjectPESA Project

• M-PESA: mobile banking for Kenya’s poor• Vodafone subsidiary Safaricom signed almost 2m customers in the first year of operation

• DFID matched Vodafone’s investment of £1 million to pilot M-PESA in Kenya (as a grant)


to pilot M-PESA in Kenya (as a grant)• Without DFID support Vodafone could not have invested in the venture

• $38 million of mobile phone banking transactions (2009)

• 2,500 people signing up every day

Social Impact Bond ModelSocial Impact Bond Model

InvestorsInvestorsPublic Public SectorSector

Delivery Delivery AgencyAgency

Makes Payment Based Makes Payment Based On Defined OutcomesOn Defined Outcomes

Financial Returns Financial Returns Dependent On OutcomesDependent On Outcomes


Target Target PopulationPopulation

Service Service ProvidersProviders

Improved Social OutcomesImproved Social Outcomes

Reduced Public Sector CostsReduced Public Sector Costs

Wider Benefits To SocietyWider Benefits To Society

• 18th March 2010: launch of the first Social Impact Bond with the Ministry of Justice

• Pilot offers intensive support to 3,000 short-term prisoners in Peterborough Prison• Six year period, both inside prison and after release, to help them resettle into the community

Social Impact Bond PilotSocial Impact Bond Pilot


•to help them resettle into the community

• Working with SEs such as St Giles Trust• 5 million pound bond

• If SIB reduces re-offending by 7.5%+, investors will receive a share of the long term savings up to a maximum 13% return

QuestionsQuestions


QuestionsQuestions

the state of social enterprise

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