Finance II: Raj Melville

Social Entrepreneurship TiE Young Entrepreneurs Raj Melville January 10, 2009

Agenda
What is Social Entrepreneurship?
Social Challenges and Solutions
Examples of Social Entrepreneurs
Grameen
Aravind Eye Clinics
Agastya
Getting Started
Resources

Key Ingredients of a Social Entrepreneur = + Social Activist Business pioneer Social Entrepreneur

What Is Social Entrepreneurship ?
Business entrepreneurs change the face of business
Social entrepreneurs play the role of change agents in the social sector
Social entrepreneurs create sustainable solutions that change society for the better

Business and Social Entrepreneurs Share Common Traits
Strategic thinkers: Like business entrepreneurs, social entrepreneurs act upon what others miss
Mission driven: Work hard to generate value
Focused: Both entrepreneurs are intensely focused and hard-driving in their pursuit of a social vision
Resourceful: They are skilled at mobilizing and motivating resources
Results oriented: Driven to produce tangible results
Challenge Seekers: Tackle major issues, opportunities or challenges
Perseverance: Continue efforts despite obstacles

What sets Social Entrepreneurs Apart?
Social Entrepreneurs are innovative, resourceful, and results oriented addressing the root cause of a social issue
As leaders, social entrepreneurs draw upon the best thinking in the business, nonprofit, and public policy worlds to develop strategies that maximize their social and economic impact
"Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry." Bill Drayton, CEO, chair and founder of Ashoka Foundation

Social Entrepreneurship Governmental Organizations For Profit Businesses Non-Profits Social Entrepreneurs

The Non-profit Sector
Total US Non Profit Organizations (2006): 1,478,194
904,313 Public Charities
Organizations do not pay federal tax
Donations are tax deductible
109,852 Private Foundations
Created to distribute money to charities or individuals
About 29 % of Americans over the age of 16 volunteered in 2005
In 2004, public charities reported nearly $1.1 trillion in total revenues
(Source: National Center for Charitable Statistics)
Total charitable giving in the U.S (2007): $306.39 billion, consists of 2.2 % of GDP
(Source: Giving USA Foundation)

What Challenges do Social Entrepreneurs tackle?
Social entrepreneurs typically address areas of unmet social need or social opportunity creation that the public or private sectors have failed to address
Health
Water/Sanitation
Education
Sustainable Infrastructure: Housing, Communications
Renewable Energy
Environmental Sustainability
Food and Nutrition
Women’s Issues
Sustainable Agriculture & Technology
Also see the UN Millennium Development Goals http:// www.un.org/millenniumgoals /

SEs Bring New Approaches to Social Issues
New Design Solutions
Process Redesign – Aravind Eye Care ( www.aravind.org )
Product Redesign – Jaipur Foot
Distribution/Logistics – Saafwater www.saafwater.com
Infrastructure/Technology – Grameen Phone
New Business Models
Micro-Finance
Grameen
Cooperatives
SEWA http://www.sewa.org
Muthu Velayutham, Gram Mooligai Co Ltd http://www.new-ventures.org/arquivos/GramMooligai.pdf
Triple Bottom Line
New Funding Models
Venture Philanthropy
Socially responsible funds.
Calvert Funds
Acumen Fund
Creative Leverage models

Examples of Social Entrepreneurs
Grameen
Aravind and Aurolab
Agastya
Water Centric (presenting today)
Additional examples:
“ How to Change the World” by D. Bornstein
“ The Fortune at the Bottom of the Pyramid” by C. K. Prahalad
www.Ashoka.org

Grameen
Grameen Bank was started by Prof. Muhammad Yunus in Bangladesh in 1976 ( http://www.grameen-info.org/ )
Social goal was to
Extend banking facilities to poor men and women who otherwise would not get bank loans
Eliminate the exploitation of the poor by money lenders
Create opportunities for self-employment for the large number of unemployed people in rural Bangladesh
Currently Grameen has
7.61 million borrowers, 97 per cent of whom are women
2,535 branches in 83,343 villages
Loan recovery rate is 98.24 per cent.
2008 Projected loan disbursement of US $ 874 million
For profit concern generating dividends to borrowers who are shareholders

Grameen

Grameen
What did they do differently?
Went after untapped sector
Were willing to take a risk with uncollateralized loans to poor
Focused on women entrepreneurs
Introduced new business processes
No legal paperwork for loans
Created self help groups to ensure repayment thru social pressure
Simplified loan repayments with weekly meetings for incremental loan payments
Created competitive product
Set market rates of interest versus usurious money lender rates
Websites like www.kiva.org and www.microplace.org now allow individuals to help entrepreneurs in developing countries

Aravind Eye Hospital
Founded in 1976 by Dr. G. Venkataswamy, in Madurai, India ( http://www.aravind.org/ )
A social organization committed to the goal of elimination of needless blindness through comprehensive eye care services.
Every year the Aravind Eye Care System
Sees over 2.4 million patients
Does over 200,000 cataract operations, nearly half of them free
Average cost at one hundredth of that in the US.
Doctors conduct over 2000 operations a year, over 6 times the national average
Aurolab, a manufacturing spinoff, makes interocular lenses to world class standards at tenth of international cost ($4-5 versus $100 -$150)

Aravind Eye Hospital
Focused on the social objective
"But Aurolab sells the lenses for less, not only because their costs are lower but because they chose to price them lower – because our goal is maximizing service rather than maximizing profit."
Streamlined the entire operation process
Setup as a production line
Increased the utilization of doctors and equipment
Built new multi-tiered pricing models
Cross subsidized free patients with higher charges for those who could pay

Agastya
Founded in 1999 by Ramji Raghavan in Bangalore, India ( http://www.agastya.org/ )
Non-profit focused on transforming education in India through a scalable and interactive education model
India, one of the most populous countries, has over 35% illiteracy rate
Rural schools are poorly staffed with teachers with inadequate training
Created a science training center with distributed centers in each rural district
Developed a new style of interactive teaching
Agastya Mobile Labs take science education out remote schools
Mobile Labs reach over 800 rural teachers and 40,000 students a year
Over 30 Agastya Mobile Labs make it largest science outreach program in the world
Results show passing rates at Agastya schools up from 40% to 96%.
Having touched over 80,000 teachers and 2.5 million children,
Prime Minister’s National Knowledge Commission has recommended the ‘Agastya model’ for nationwide dissemination

Agastya

Agastya
Disruptive business model
Developed a unique teaching model
Break the typical mold of teacher/student interaction
Redesigned the supply chain
Took classes out to the student
Matched resources to talent available
High school students as capable instructors
Scales reasonably well
Engage the ‘customer’ i.e. student
Created a product that satisfied both student and teacher’s needs

Getting Started
Social entrepreneurs play the role of change agents in the social sector, by:
Adopting a mission to create and sustain social value (not just private value)
Recognizing and relentlessly pursuing new opportunities to serve that mission
Engaging in a process of continuous innovation, adaptation, and learning
Acting boldly without being limited by resources currently in hand
Exhibiting heightened accountability to the constituencies served and for the outcomes created
(Source: The Meaning of Social Entrepreneurship, J. Gregory Dees)
Define a clear vision around a social issue or challenge
Identify market opportunity and define innovative or disruptive solutions
Build a sustainable business model
Clearly define social impact metrics
Recruit and attract resources and volunteers

Funding
Sources of funds
Family and Friends
Competitions
Fundraising events
Foundations and Grants
Social Investors

Resources
Funding Sources
Saffron Circle: http:// www.saffroncircle.org /
Echoing Green: http:// www.echoinggreen.org /
Ashoka: http://www.ashoka.org/
Acumen Fund: http:// www.acumenfund.org /
Agora Partnerships: http:// www.agorapartnerships.org /
New Profit: http:// www.newprofit.org /
Draper Richards Foundation: http:// www.draperrichards.org /
Social Innovation Forum: http:// socialinnovationforum.org /
MIT IDEAS Competition: http://web.mit.edu/ideas
Changemakers: http://www.changemakers.net/
Ashoka’s Youth Venture: http://www.genv.net/
University Network: http:// www.universitynetwork.org

Resources
Sites about Social Entrepreneurship and Social Innovation
Ashoka’s Website for Social Innovation: http:// www.changemakers.net /
PBS Series on Social Entrepreneurs: http:// www.pbs.org/opb/thenewheroes /
The Skoll Foundation: http:// www.skollfoundation.org /
The Schwab Foundation: http:// www.schwabfound.org/sf/index.htm
Draper Richards Foundation: http:// www.draperrichards.org /
Duke University: http:// www.caseatduke.org /
Columbia University: http://www4.gsb.columbia.edu/socialenterprise/
Harvard University: http:// www.hbs.edu/socialenterprise /
Stanford University: http:// www.gsb.stanford.edu/csi /
Bill & Melinda Gates Foundation: http:// www.gatesfoundation.org/default.htm
Clinton Foundation: http:// www.clintonfoundation.org/index.htm
Google.org: http:// www.google.org /

Resources
Search for Volunteer opportunities or post openings
Volunteer Match: http:// www.volunteermatch.org ./
Network for Good: http:// www.networkforgood.org /
Idealist.org: http:// www.idealist.org /
Charity and Foundation Evaluation/Search sites
Guidestar: www.Guidestar.org
Charity Navigator: http:// www.charitynavigator.org /
Global Giving: http:// www.globalgiving.com /

Further Reading
How to Change the World: Social Entrepreneurs and the Power of New Ideas, Updated Edition by David Bornstein
The Fortune at the Bottom of the Pyramid by C. K. Prahalad
Creating a World Without Poverty: Social Business and the Future of Capitalism by Muhammad Yunus
Business Planning for Enduring Social Impact: A Social-Entrepreneurial Approach to Solving Social Problems , Andrew Wolk & Kelley Kreitz
Capitalism at the Crossroads: Aligning Business, Earth, and Humanity by Stuart L. Hart
The End of Poverty: Economic Possibilities for Our Time by Jeffrey D. Sachs
Banker To The Poor: Micro-Lending and the Battle Against World Poverty by Muhammad Yunus
Leaving Microsoft to Change the World: An Entrepreneur’s Odyssey to Educate the World’s Children by John Wood
Three Cups of Tea: One Man’s Mission to Promote Peace . . . One School at a Time by Greg Mortenson & David Oliver Relin

Questions?
Contact me
Raj Melville
Email: [email_address]
Blog: http://socialecosystem.wordpress.com/

Social Entrepreneurs
Unlike traditional business entrepreneurs, social entrepreneurs primarily seek to generate "social value" rather than profits. And unlike the majority of non-profit organizations, their work is targeted not only towards immediate, small-scale effects, but sweeping, long-term change.
http://www.pbs.org/opb/thenewheroes/whatis/index.html

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Finance II: Raj Melville

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