All Ideas
Knowledge on Entrepreneurship
April 10, 2019 | Ben Beers, Cara Lee, Liza Mueller, and Janna Oberdorf

State of Social Entrepreneurship 2019

Introduction

In the 2019 application cycle, Echoing Green received 2,574 applications—a 6.4 percent increase from last year—representing 3,006 individuals operating in 161 countries across the world. Analyzing this data set, which we believe is one of the largest collections of data on social enterprise applicants, allows us to observe trends in the field, understand our applicants’ needs, and share learnings with others working in social impact.  

The Data: Barriers to Entry and Funding Disparities

One indisputable learning from supporting social entrepreneurs is that the playing field is not level for all individuals who seek funding. Barriers to funding exist at both the market and individual or organizational level, and range from fragmentation in the funding space to biases in decision-making, which disadvantage people of color, women, indigenous leaders, and other individuals across the world. Barriers also stem from organizations’ proximity and access to funding based on global concentrations of wealth. Rather than avoiding these realities, it is important to acknowledge them and work together to alleviate them.

“Minorities, women, and black women, specifically, are the driving force of entrepreneurship. It is OK to not understand or relate to our ventures, but it is not OK to look over us because of that. We want equal financial contributions for solving our own problems.”

Brittany Young ’18, founder of B-360

Funding Disparities: Competitiveness and Lack of Resources

Prior to applying to Echoing Green, the 2019 applicants collectively raised and earned $238 million dollars for their work—a significant accomplishment. However, it is an unfortunate truth that this value is relatively small considering the total funds available in both the philanthropic and impact investing sectors, particularly to early-stage organizations. This results in social entrepreneurs often competing against one another for the money to carry out their work.

Echoing Green applicant organizations span different levels of early-stage development, which can impact their ability to raise funds. We consistently see funding heavily concentrated in a small percentage of organizations, while a majority of organizations have not raised any funds for their work. 51 percent of organizations reported $0 of funds received, while the top 10 percent of organizations by fundraising dollars have received $193 million of the total $238 million funds received.

Funding Disparities: Gender, Ethnicity, and Geography

In addition to the challenge of raising funds from a limited pool of resources, our analysis shows intersectional inequalities in funding decisions along gender, race and ethnicity, and geography. This provides evidence of biases against funding women, people of color, and those operating in countries that score lower on indexes of potential for human development (such as the Human Development Index or HDI).

With more than half of applicants reporting no funds raised, we have an opportunity to examine who receives funds at all: Men are more likely to have raised funds than women; Caucasian, European, and white applicants more likely to have raised funds than African, African-American, and black applicants.

The median funds raised by black applicants is $0, compared to $12,245 of their white counterparts. When funds have been raised, organizations led by African, African-American, or black applicants report median funding $25,000 lower than their Caucasian, European, or white counterparts.

Along gender lines, Caucasian, European, and white female applicants have a median funds raised $25,000 less than their male counterparts—though the effects of race and ethnicity on funding are evident, as well, with African, African-American, and black women applicants raising a median $47,400 less than Caucasian, European, and white men.

When examining funding by citizenship and geography, using the Human Development Index (HDI), we observe discrepancies in fundraising opportunities between citizens of the top 2/3rd (which includes the United States, Vietnam, and Chile), and bottom 1/3rd (which includes Haiti, South Sudan, and Myanmar) of the HDI.

Social entrepreneurs who are citizens of lower 1/3 HDI nations report receiving significantly less funding to work in their own countries than social entrepreneurs from top 2/3 HDI nations who propose work in those same countries.

“We need to encourage community leaders to rise up, take charge, and create solutions for their community. You don’t have to leave the continent—you can attract resources from everywhere. But we need funders to better explain the ‘why’ of what they’re looking for, find creative ways of assessing candidates, and be willing to take more risk.”

Alloysius Attah ’14, co-founder of Farmerline

Investing in Women & Girls

Applicants to our Fellowship are asked to indicate their primary beneficiaries from 11 options ranging from General Population to specific populations such as Immigrants & Refugees or Senior Citizens. This year, we observed our highest-ever proportion of organizations focused on the needs of Women & Girls: 290 applications (11.27 percent) reported this focus, up from 233 applications (9.63 percent) in 2018.

These organizations have already raised $17.7 million—the highest for this population focus we’ve observed. Likely linked with their fundraising successes, 8 percent more of the organizations are reporting over two years of operation, and 6 percent more are applying with proof of concept achieved.

A significant proportion of the growth in Women & Girls-focused organizations is driven by U.S.-based applicants, with 33.1 percent of applications coming from the United States—an increase from 29.4 percent in 2016. From both our data and anecdotal learnings from evaluating applications, we observe frequent alignment of our applicants with broader political and cultural movements: from the drive toward gender parity within U.S. government leadership to the efforts of activists like those organizing the Women’s March and leading the #MeToo movement.

Gender Disparities in Applicant Leadership

Echoing Green has observed a consistent trend toward gender equity in our applicant pool over the past several years. While we received 1.2 percent fewer applications from female applicants in 2019, this is the first decrease we have seen since 2014. There was an increase of individuals identifying as non-binary, genderqueer, and transgender male or female—up to 1.1 percent, our highest proportion to date.

Debunking the Myths of Young Entrepreneurs

The prevailing narrative in the field on age is the myth that social entrepreneurs are exclusively, or even predominantly, under the age of 30. While a lot of emphasis is given to those under 30, Echoing Green has observed a gradual shift of leadership in the social entrepreneurship space toward those over 30.

In 2019, the proportion of applications from those over 30 was 66 percent—an increase from 62 percent in 2018. This aligns with an ongoing trend—this year, 32.5 percent of applicants reported between the ages of 36 and 50—the highest proportion we have observed for this age group. We believe this could reinforce an emerging understanding about both the financial barriers to entrepreneurship for youth, as well as the increased professionalization of the entrepreneurship sector.

While much is written about the lack of access to funds for young entrepreneurs, our data shows another less talked about side of the story: a sharp drop-off of funds among leaders over 50.

The most significant investment is in individuals over the age of 25, peaking at those between 36 and 50 who raised, on average, $55,000 more than their 18- to 25-year-old counterparts. However, those over 50 report the highest proportion of unfunded organizations and a significant decrease in average funds raised.

 

“I love working with younger folks, but ageism runs the gamut when it comes to funding. I was even told by a big impact investor that we needed to hire a young person. It can be discouraging, especially in the impact investing world where you expect your good work to take precedence—but the bias is definitely real in that space.”

Sara Day Evans ’18, founder of Accelerating Appalachia

Trends in Emerging Innovations

In addition to delving into our applicant data, Echoing Green learns a great deal about trends in the social entrepreneurship field during our selection and diligence processes, during which applicants elaborate on how and why they do their work.

Human Rights in Immigrant and Racial & Ethnic Minority Communities

A critical component of upholding human rights and meeting basic human needs is strengthening the connections of vulnerable communities to instruments of power and increasing their ability to make use of basic services, which might otherwise be absent or denied.

From solutions such as using technology to expand access to financial services for displaced individuals, to legal interventions to protect immigrants against unjust deportations, Echoing Green applicants are working to empower immigrant communities across the world. In the United States, applicants continue persistent efforts to dismantle structural racism—from community advocacy projects pushing for police reform, mental health programs seeking to address trauma, or technology innovations to spread issue awareness and support the financial wellness of the black community.

Our funds raised data aligns with this focus in the United States, while also illustrating a challenge: funding for organizations working with Racial & Ethnic Minorities is at its highest with $23.3 million raised, up from a previous high of $11.7 million; however, Caucasian, European, and white applicants continue to receive higher average and median funds than African, African-American, and black applicants to do this work.

Leveraging Climate Policy to Build Equitable and Sustainable Economies

Applicants to Echoing Green’s Climate Fellowship often find themselves pushing up against entrenched powers, from governments that refuse to acknowledge the severity of the climate crisis to high-polluting industries resistant to climate-saving reforms.

This year, our climate applicants are seeking ways to influence governments with policy advocacy, often aligning with the bold vision of the U.S. Green New Deal policy proposal, or continuing to push boundaries in clean technology. Of our 2019 applicants, a majority—57 percent—are proposing innovative new products to combat climate change. There was also a growing interest in identifying opportunities to build circular economies that seek to solve multiple climate challenges at once.

Using New Technology for Good, But at What Cost?

As new technologies emerge, our applicants are seeking ways to apply those innovations for social good: artificial intelligence in climate mapping technology, virtual reality as an education supplement, and Blockchain or similar concepts applied across multiple sectors.

As technology continues to have a growing influence on how our lives are lived and decisions are made, we at Echoing Green are increasingly cognizant of the need to not only identify these opportunities to reshape our future, but how they could also be used to do the opposite: threaten individual privacy or disrupt livelihoods if implemented without concern for the wellbeing of the humans impacted. We, and the social sector at large, must foster conversations and do what we can to ensure that technology innovations will serve the needs, and cannot be used against, the communities we seek to support.

Conclusions and Next Steps

If social entrepreneurship is to be an impactful model of social change, it cannot carry forward the challenges of its past or make decisions about its future without the input and leadership of those they seek to serve. To do this work, it is fundamental for us to understand not only the needs of our Fellows, but also those of our applicants: who they are, what they need, what barriers prevent them from receiving the resources necessary to grow their organizations, and the ecosystems of support—or lack thereof—that surround them.

Echoing Green is at the forefront of the growing inclusive entrepreneurship movement. We remain focused on and committed to unleashing a more diverse set of innovators and founders to drive high-impact social enterprises through activities like talent identification; building onramps to the field; access to funding; networking opportunities; mentoring; and media coverage to drive positive narrative change. As this data shows, however, this movement is not making progress quickly enough.

It is important for funders of all kinds to both lessen their restrictions on funding and seek to give more money earlier in the spectrum of organizational development.  Without this critical investment, made in a way that fully acknowledges how barriers operate to reduce our applicants’ opportunities to create positive social change, our industry could fail to meet its potential.

We will continue to advocate, research, and foster conversation between all participants in this conversation to ensure that our sector is consistently pushing to better itself, increase access to critical resources, and elevate the voices of leaders who are on the ground, solving our world’s most difficult challenges.

Acknowledgements 

The report was authored with contributions from Ben Beers, Liza Mueller, Cara Lee, and Janna Oberdorf. Access our past State of Social Entrepreneurship reports here.

Special thanks to the Citi Foundation for supporting this report through the Inclusive Leadership Initiative. With support from the Citi Foundation, Echoing Green has expanded its work with leaders who represent and work with communities of color. Together, Echoing Green and the Citi Foundation are supporting the next generation of leaders who are helping create economic and social opportunities for young women and men of color across the United States.