The Verticalization and Mainstreaming of Social Entrepreneurship

The financial crisis has not, thus far, cast a clear death blow to Milton Friedman's idea that the only responsibility businesses have to society is to maximize profits. That said, the last couple years have seen a steady mainstreaming of "social entrepreneurship," particularly within vertical industry categories such as Fair Trade. I believe both the verticalization and mainstreaming of the field will continue, creating a higher need than ever before to understand just what the broader designation of "social entrepreneurship" has to offer.

Social entrepreneurship tends to refer to the space in which companies and nonprofits use market and business objectives to achieve social aims. While there is some debate about whether the term refers exclusively to one legal business model over another, the core point for most of the people I tend to agree with is that "social ventures" as opposed to regular for-profit entities have an explicit focus on solving some social or environmental problem and maximizing social or environmental good alongside (or sometimes even at the expense of) pure, short-term profit maximization.

In this way, it is different from corporate social responsibility, which at its best is about giving back, improving employee culture and conditions, and reducing environmental impact. The difference is the fact that social entrepreneurship suggests that there is a core social or environmental value created every day by the products or services at the center of the very business. This does not mean that social ventures are "better" than non-social ventures -- there are lots of great companies that simply happen not to focus on solving social problems and which are still wonderful employees, community members, and philanthropists -- but it does mean they are different.

Social entrepreneurship is, however, a slightly weird field, in the sense that it is not an industry, but a term which applies to a number of (sometimes unrelated) industries, and a similar approach to business that places a social or environmental value at the center of the mission. Most people come into contact with the broader field of social entrepreneurship through one of the industries that it touches.

I think there are a few clear examples of these "vertical" fields that connect with the larger banner of social entrepreneurship that have gotten increasingly mainstream over the last few years. Cleantech is perhaps the most obvious, becoming one of the most invested in areas of venture capital ($1.9 billion was invested in Cleantech companies in the first quarter of 2010 alone). Microfinance is another clear example. The awarding of the Nobel Peace Prize to Grameen Bank founder Muhammed Yunus and the explosive popularity of Kiva are two of the more important historical moments for the prominence of social entrepreneurship, and the recent IPO of SKS could be another. Fair Trade, Organic and Local Food movements are all racing to the mainstream, as well.

Being based in Silicon Valley, I'm particularly interested in industry verticals that can attract tech talent to start new companies. I think we're going to see big booms in education startups (see: Udemy, Enzi, Grockit, DonorsChoose, Supercool School) and I hope that many will learn to work within instead of solely outside the current education system. Healthcare seems like an obvious area that mixes social good with the potential for immense profit, but there are still too few web tech companies working on the issue, a problem that programs like Hacking 4 Health are trying to redress. And although they are a little bit different in terms of their potential for financial gain, there also seems to be a mini wave of "government 2.0" startups (see: Code for America, CitySourced, Gov2.0 Summit) that are trying to change the way municipal services are deployed and how governments interact with citizens.

It makes sense that social entrepreneurship would mature into verticals like this: startups need accumulated bodies of knowledge and connections to be successful, and ultimately, what works in Fair Trade may not work in Education. At the same time, I think the common element of trying to maximize a social or environmental good takes as much managerial discipline as deploying a successful revenue model, and for that, the broader field of social entrepreneurship has much to offer.



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