Echoing Green shares insights into the types of investment readiness support and financing needed from early stage social entrepreneurs.
Tensions of Starting a Social Enterprise
Two years ago today, on January 5th, I quit my job at a nonprofit consulting firm in DC to move to Hyderabad, India to work with an Echoing Green Fellow organization, GreenMango. For years, I had unfulfilled desires that converged in this unique opportunity: live in India, pursue social enterprise and experience the challenges and impact of a start-up. The choice was one that some considered brave and ambitious and others considered irresponsible and foolish. When I moved to India, I discovered that this fine-line was the first of many.
There’s a belief that any word used to describe India is accurate—desperate, thriving, beautiful, sad, energized, etc. Like my decision to go and the country itself, start-up social enterprises straddle fine lines, tension pulling in both directions. All new businesses, social enterprises included, must make difficult decisions about how to spend limited time and money. However, social enterprises face nuanced challenges because of their dual mission to make dollars and make change.
I spent four months working for GreenMango interviewing tailors and others who worked out of their one-room homes. I wrote articles to help customers and service providers do business together, created strategies to drive traffic to the website and developed a customer relationship management plan. During this time, I experienced firsthand four sources of tension facing start-up social enterprises.
1. Sell the social mission or sell the product/service? In India, neither start-ups nor social enterprise carry the cache that they do in the U.S. Because of this, recruitment is one of the most difficult challenges—both in terms of talent and customers. While Western markets are increasingly open to buying social products (ala TOMS shoes), the extreme price sensitivity of the Indian market combined with the fact that philanthropic giving is about a quarter of what it is in the U.S., result in persistent marketing questions. How can a company sell the product based on low price and high quality while simultaneously marketing the social mission to (often Western) investors and the media? Purists argue the product should stand on its own with the social benefit a by-product, but the reality in social enterprise is that the social mission is part of what the customer is paying for.
2. Continue to engage supporters or turn attention to customers? Because Echoing Green is often one of the earliest investors in their grantees’ work, the media attention and “friendly” support can be quite high from the start. Companies like GreenMango, who are faced with converting this good will into revenue-generating business, are forced to evaluate how to allocate time and attention. While supporters can be great cheerleaders, unless they are part of the customer base as well (which they rarely are), a start-up social enterprise can’t necessarily grow the business by strengthening those relationships. Can a social enterprise leverage vocal non-customer supporters to grow income generation? CEOs need to decide how much of energy investment should be redirected to customer recruitment and cultivation while at the same time keeping their cheerleaders and media enthusiastic.
3. Build for how things are or how things ought to be? All Echoing Green Fellows and social change organizations are trying to push people to do something differently for the benefit of the whole. While one could argue that all companies face this challenge, social enterprise is explicitly trying to find the intersection where individual benefit meets societal benefit. These companies want to meet people where they are, but they are also encouraging them to reach beyond their comfort zone, change their behavior and question their assumptions. What is the best way to design and sell a product or service that solves a social problem that consumers don’t recognize exists? Innovative start-up social enterprises build products and services that have to take people from where they are to quickly create the society that ought to be, a leap that requires a complex marketing message.
4. Scale or survival…and on what timeline? Every young successful business faces the question of how to grow: Is it better to create a larger impact across a wider audience in a limited way or a smaller but potentially more meaningful impact? Start up social enterprises face pressure to show impact on both fronts—large and meaningful impact—with “scale” being the ultimate that many are striving for. CEOs want to show to growth while maintaining a high standard for social change, which often means deep one-on-one personal investment that limits scale. The challenge to show progress on two fronts at the same time means using sometimes competing impact measures: revenue and substantive change. Prioritizing one over the other may mean the difference between scale and survival.
Unfortunately, GreenMango is no longer in operation. While I was undoubtedly disappointed to see such a great organization shut down, it was an incredible experience to have witnessed and been a part of the reality a social enterprise faces every day, and an experience that has me consciously planning how I want to lead change in my own life and, how I can help social enterprises successfully navigate these tensions.
Bringing about dramatic and lasting social change requires lifelong leadership and learning lessons along the way.
Six guiding leadership principles can help private sector leaders build long-term relationships with nonprofit leaders.