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Mon July 29, 2013
Doing Well By Doing Good: Social Enterprise
Social entrepreneurship is becoming a buzzword with more people looking to solve social problems through the private market. In the conclusion of a three-part series on corporate social responsibility, WNPR’s Sujata Srinivasan looks at how entrepreneurs and policymakers are growing this sector.
Like all social entrepreneurs, Christopher Brechlin stumbled upon a problem that needed a business solution, but from a socially mindful perspective. While working with nonprofits, he saw how they struggled to use data. Many didn’t have the resources to hire people who knew how to measure returns on grant and donor money, and to improve fundraising.
“I was meeting with different community partners and trying to have discussions about the data and the questions were always sort of answered anecdotally. ‘We’ve been doing this program for x number of years and we work with these children in providing daycare services,’ but it was really, really challenging to have a conversation about the actual impact that they’re having on those children’s lives.”
That led Brechlin to launch Blueprint for a Dream, a for-profit business in Willimantic that gathers data to solve social problems. The company creates databases that charities, government agencies and donors can use for free. Nonprofits pay a fee for additional services such as reporting, managing and communicating data. Brechlin says companies haven’t really invested in the social sector’s information infrastructure because it’s not as profitable as, say, Facebook. It doesn’t have the potential to scale to billions of users.
“I’ve isolated only about 150,000 human services or community development related nonprofits that would use my services. So there’s still money to be made through a subscription service and software, but it’s certainly not going to be highly, highly profitable in the tens, twenties, and hundreds of millions of dollars like most investors look for. There is money to be made, I just won’t become quite as rich as the founders of Google or something like that.”
That’s a trade-off social entrepreneurs often make. A new book from the Wharton School of Business called “The Social Entrepreneur’s Playbook” examines the challenges of a profit-making business and charity hybrid. Social entrepreneurs are drawn to highly intractable social problems that profit-maximizing companies have avoided because there isn’t much income to be earned. But that didn’t stop Lisa Bratt, who used to work in hedge funds, from launching Stephen’s Village in Stamford. In an expensive housing market, the for-profit business offers affordable housing to young people, many of them recent graduates with student loan debt.
“The median income for renter occupied units around our area is approximately $55,000. In our small microcosm of Stephen’s Village, many of them are making less than half of that. Our larger social goal is to prevent people from leaving the area because they can’t afford to live here – the people who are going to be the innovators and the future workforce generation.”
Bratt renovated 33 distressed houses. She leases them for a dollar a year from the owner who gets tax benefits in return. This, as well as $250,000 from private investors, enables Stephen’s Village to charge a rent that’s 25 percent below market value. Investors currently earn returns of eight percent, well below returns from private debt and hedge fund investments.
“Our social mandate is primary and foremost, so we’re never going to put investor interest above our social mandate. We’re aren’t setting out to squeeze out every dollar the market will bear, the whole point of social enterprise is obviously not to do that. But what our business records show is that you can combine the desire to promote social good and still produce healthy returns on investment.”
Bratt says she hopes the revenue model can grow.
“I think with economies of scale, we could actually achieve more and we’re looking into expansion now to do that. So, if we were to expand and to increase the amount of subsidies that we are able to take in, we would actually be doing better.”
More new graduates and retired employees are thinking of launching a social enterprise. Many gathered recently at the opening of a co-working space in Hartford for social entrepreneurs by reSET, a nonprofit. Founder Kate Emery says business has often been perceived as part of the problem. People felt in order to make a difference, they had to work in the nonprofit sector.
“Increasingly what people are seeing is business is a huge and powerful force today, and it can be a huge and powerful force for good.”
Though solutions are from the private market, government has a role. Earlier in February, Governor Dannel Malloy introduced a bill – drafted by reSET – to recognize social enterprises as a separate entity. The bill did not come up for vote in the senate due to time constraints. Catherine Smith, commissioner of the state Department of Economic and Community Development, expects it to sail through in the next session.
“The generation that’s just coming out of school now is really committed to social enterprise and it’s something that they want to invest their own futures in, their careers in. So being a state that’s a leader in social enterprise will help us attract and retain that young part of our population to really grow their careers here in the state.”
More entrepreneurs are finding out that as capitalism continues to evolve, doing well and doing good could be two sides of the same coin.
For WNPR, I’m Sujata Srinivasan.
With help from intern Ava Tankala.