An Introduction to Social Entrepreneurship Dream Believe Pursue
An Introduction to Social Entrepreneurship Dream > Believe > Pursue
An Entrepreneurial Revolution • 1 million new ventures a year in U. S. • 85% of the new jobs in small and start-up firms • Product/service introduction rate higher than ever before • Rate of wealth creation exploding • And it’s a global revolution 2 Dream > Believe > Pursue
What Is Entrepreneurship? Process of creating value by bringing together a unique package of resources to exploit an opportunity Dream > Believe > Pursue
The New Buzzword: Social Entrepreneurship So, is entrepreneurship basically entrepreneurship regardless of the context? Or is “social entrepreneurship” something truly different? 4 Dream > Believe > Pursue
What Is Social Entrepreneurship? Nonprofits making money Dream > Believe > Pursue
What Is Social Entrepreneurship? Nonprofits making money For-profits doing things to show they are not evil Dream > Believe > Pursue
What Is Social Entrepreneurship? Nonprofits making money For-profits doing things to show they are not evil Process of creating value by bringing together a unique package of resources to exploit an opportunity, in pursuit of high social returns Dream > Believe > Pursue
The only big difference between commercial and social entrepreneurship: Denomination of the returns Social and commercial entrepreneurship have most of the same characteristics 8 Dream > Believe > Pursue
The Process of Social Entrepreneurship 1. 2. 3. 4. 5. 6. 9 Find an opportunity Develop a business concept Figure out what success means and how to measure it Acquire the right resources Launch and grow Attain goals Dream > Believe > Pursue
The Main Difficulty: Measurement • What is profit? • How do we count it? • What is “social return o n investment” for venture philanthropists? • Can we compare investments? 10 Dream > Believe > Pursue
Three characteristics • Social entrepreneurship meets needs unmet by commercial markets and (usually) the government • Social entrepreneurship is motivated by social benefit • Successful social entrepreneurship usually works with, not against, markets 11 Dream > Believe > Pursue
Case 1: Housing Opportunities Made Equal (H. O. M. E. ) • Services – Core services in housing disputes and fair housing advocacy in Virginia – Special projects and lawsuits • Opportunity: Educate people on fair housing before-the-fact, instead of fixing situations after-the-fact • Enterprise: Start fair housing training Institute • Returns: More housing for the disadvantaged, fewer complaints 12 Dream > Believe > Pursue
Case 2: Boaz & Ruth • Opportunity: Underused human capital • Endeavor: New businesses using former inmates in an aggressively faith-based setting • Social returns: Young people not returning to jail, peaceful neighborhood 13 Dream > Believe > Pursue
Forces on Social Entrepreneurship 14 Dream > Believe > Pursue
Social Entrepreneurs “Look” Like Any Other Kind of Entrepreneur 15 Dream > Believe > Pursue
Risk + Innovation 16 High risk aversion Low risk aversion Highlyinnovative Dreamer Entrepreneur Not innovative Stuck Gambler Dream > Believe > Pursue
Opportunities vs. Threats Opportunities for social entrepreneurs look like threats and tragedies to others Dream > Believe > Pursue
Myths about Social Entrepreneurship • Social entrepreneurs are anti-business • The difference between commercial and social entrepreneurship is greed • Social entrepreneurs are nonprofit managers • Social entrepreneurs are born, not made • Social entrepreneurs are misfits • Social enterprises usually fail • Social entrepreneurs love risk 18 Dream > Believe > Pursue
Why does social entrepreneurship matter? 19 Dream > Believe > Pursue
A Nation of Social Entrepreneurs Immigrant stock with a high entrepreneurial orientation + Faith in own abilities + Vast ungovernable frontier = Citizens willing to meet their own social needs, without an excessive reliance on the state 20 Dream > Believe > Pursue
The Result: Nonprofit Nation • 1. 5 m registered nonprofits • Something like 9 m grassroots organizations • 30 nonprofit links per citizen 21 Dream > Believe > Pursue
A primer on nonprofit organizations 22 Dream > Believe > Pursue
What Is a Nonprofit? • Tax & regulatory definition: an organization that – Enjoys special tax status – Faces a nondistribution constraint (profit=0) • Functional definition: an organization that forms to – perform “public tasks” • environmental protection, social service provision – perform tasks for which there is demand but no supply from for-profits or governments • religious activity, art museum – influence the direction of public policy • political party, issue organization 23 Dream > Believe > Pursue 23
International Facts • U. S. is very large – represents more than ½ of all nonprofit activity worldwide ($600 b) – has 45% of all world’s nonprofit employees • Rich nations tend to have more developed nonprofit sectors than poor nations – Government social spending is positively correlated with nonprofit sector size 24 Dream > Believe > Pursue
International Comparisons 25 Dream > Believe > Pursue Source: Salamon, et al. 1999
0 26 Dream > Believe > Pursue Mexico 0. 9 Romania 1. 3 Slovakia 1. 7 Hungary 2. 4 2. 2 Czech Republic Brazil 2 Colombia 3 Peru 3. 7 3. 5 Finland Japan 4 Argentina Austria 4. 9 Spain Germany France 6 UK 7. 8 Australia 8 USA 10 Israel Belgium 12 Ireland Holland Percent of employees Size of the Nonprofit Workforce 14 12. 6 11. 5 10. 5 9. 2 7. 2 6. 2 4. 5 0. 6 0. 4
NPO Types in the U. S. • 34 types: 501(c)(1)-(27), 501(d)-(f), (k), (n), 521(a), 527 • 501(c)(3): public benefit organizations – Religious, charitable, educational, scientific, literary, amateur sports promotion, prevention of cruelty to animals or children – Private schools, houses of worship, social welfare charities, hospitals, libraries, etc. • 501(c)(4): mutual benefit organizations – Local civic leagues, social welfare organizations, employee associations – Volunteer fire departments, homeowners’ associations, social clubs, festivals, etc. • 501(c)(6): Trade organizations – Business leagues, chambers of commerce 27 Dream > Believe > Pursue Ref. : Section 501, IR Code
Nonprofits Are Proliferating in the U. S. 28 Dream > Believe > Pursue
The Nonprofit Sector Is Larger than Government 29 Dream > Believe > Pursue
Health Organizations Dominate the Sector 30 Dream > Believe > Pursue Source: IRS 990 data, 2003
Revenue Sources Vary a Lot by Subsector 31 Dream > Believe > Pursue
Health Organizations Tend to Be Huge 32 Dream > Believe > Pursue Source: IRS 990 data, 2003
All Subsectors Are Growing (but Health is exploding) Dream > Believe > Pursue 33 Source: Independent Sector 2002
Main Challenges at Present • Money • Competition • Demonstrating effectiveness • Technology • Trust • Human resources • Public-sector relations 34 Dream > Believe > Pursue Ref. Salamon 2002
Main Opportunities at Present • Demographic shifts • New philanthropy • Heightened awareness of sector • Increased social welfare spending through sector – Entitlement expansion – Welfare reform 35 Dream > Believe > Pursue Ref. Salamon 2002
Main Trends at Present • Explosive growth • Attention to marketing and management movements • Commercial ventures • Development of umbrella organizations and formal education • Effectiveness in competing economically and politically 36 Dream > Believe > Pursue Ref. Salamon 2002
Main Risks at Present • Identity loss, “mission creep” • Industry concentration • Pressure on managers for results • Loss of public trust 37 Dream > Believe > Pursue Ref. Salamon 2002
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