Last week 1,600 participants from around the world – including entrepreneurs, investors, institutions, non-profits and foundations – gathered at SOCAP12 to discuss “the intersection of money and meaning.” Understandably, impact investing is a common thread throughout the conference. The first day of the conference began with keynote speaker Katherine Fulton discussing the Monitor Institute’s new report Blueprint to Scale, describing philanthropy’s role in impact and investing. Day one also included sessions on “Taking Sustainable and Impact Investing Mainstream” and “Impact Investment Funds Leading the Way in Growing the Impact Investment Space.”
When discussing impact investing there is a general sense that we are at the next phase of market definition and growth. To accelerate and guide that growth, a critical component will be to understand the demand, i.e. the social enterprise need for impact investing. Understanding that demand depends on how we define and identify successful social enterprise.
So how do we define and identify successful social enterprise? Potential answers to this question are nuanced and complicated; however, by starting with the fundamentals, such as the building block of legal structures, we can glean a surprising amount of insight and a solid base for growing our understanding. For example, when beginning a social enterprise an entrepreneur is concerned with the investors she will attract, the relationships she can build and the activities she will be able to conduct. All of these components are guided by legal structure.
Last month I participated in an event where the various legal cards a social enterprise could play were (literally) put on the table. The Criterion Institute’s Structure Lab helps to understand the “27 dimensional chess game” that is finding a legal structure for a social enterprise. Utilizing their customized card decks, the conversation was grounded in defining the values, relationships and assets of a specific social enterprise. From there the myriad of legal options begins to fall in place. However, once an entrepreneur has landed on an initial structure, as the business evolves they may need to adapt using other legal, market and financial tools.
From the theoretical exercise of the Structure Lab to some on-the-ground action, the first day of SOCAP12 has already provided me with several examples of how social entrepreneurs are dealing with these issues:
- Zeega, an online platform for inventing new forms of interactive storytelling, described their decision to switch from a 501(c)3 to a C-corporation in order to include investors interested in their evolving business model.
- The Working World explained their strategy for supporting worker cooperatives by providing technical assistance and financing. Cooperatives (while one of the oldest legal structures for social enterprise) provide exciting new opportunities to empower communities and democratically build sustained, local wealth.
Like in the Structure Lab it is clear at SOCAP12 that there is not one magic solution but a set of legal and financial tools that, if used correctly, can create powerful social change and provide a return. In recognizing this diversity of social enterprise models, Pacific Community Ventures has launched the Great Social Enterprise Census. Our hope is to better understand exactly what successful social enterprise looks like in the US, providing a robust data set that will help support the growth of new social enterprise and provide more opportunity for impact investors.