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New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
New trends in social enterprise and new opportunities for social investors.
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New trends in social enterprise and new opportunities for social investors.

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Jerr Boschee, Founder And Executive Director - The Institute For Social Entrepreneurs - USA

Jerr Boschee, Founder And Executive Director - The Institute For Social Entrepreneurs - USA

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  • 1. “ New trends in social enterprise...”
    • “ ...and new opportunities for social investors”
    • Jerr Boschee
    • Founder and Executive Director
    • The Institute for Social Entrepreneurs
    • Copyright ® 1999 – 2007 Jerr Boschee. All rights reserved.
    • Reproduction in whole or in part in any form or medium
    • without the express written permission of Mr. Boschee is prohibited.
  • 2. Reality check . . .
    • Social enterprise isn’t new – despite the recent hype, the nonprofit sector did not discover it full-blown ten years ago
    • With a few notable exceptions, most social enterprises prior to the mid-1990s emerged from the commercial sector
  • 3. Harbingers . . .
    • 1960s: “Our mission is to address the major unmet needs of society as profitable business opportunities.”
    • (William C. Norris,
    • Founder and Chair,
    • Control Data Corporation)
  • 4. Some of Control Data’s social enterprises
    • Creating a vast array of computer-based learning programs for colleges, universities and self-paced learners
    • City Venture and Urban Venture: Revitalizing entire urban neighborhoods and rural communities
    • Working with Chief Justice Warren Burger to create businesses and training opportunities in prisons
    • Launching the first small business incubators in the country
    • Developing some of the nation’s first corporate wind farms
    • Operating mobile medical vans on a Native American reservation
    • Herding Caribou beyond the Arctic Circle by using computer technology
  • 5. Harbingers . . .
    • 1982: “Only if business learns how to convert …major social challenges…into novel and profitable business opportunities can we hope to surmount these challenges in the future....
    • “ Social needs can be solved only if their solution in itself creates new capital, profits, that can then be tapped to initiate the solution for new social needs.”
    • (Peter Drucker)
  • 6. Harbingers . . .
    • 1994: “Making a profit is no more the purpose of a corporation than getting enough to eat is the purpose of life. Getting enough to eat is a requirement of life. Life’s purpose, one would hope, is something broader and more challenging. Likewise with business and profit.”
    • (Kenneth Clark, Chair, Quaker Oats)
  • 7. Definition of “social enterprise”
    • “ Social enterprise” is not the same as “corporate social responsibility”
    • . . . and “social investors” are not the same as “socially responsible investors”
  • 8. “ Social enterprise”
    • Social enterprises differ from traditional businesses and expand on the concept of corporate social responsibility by directly confronting social needs through the business itself
    • . . . rather than indirectly through socially responsible business practices such as corporate philanthropy, equitable wages and environmentally friendly operations
  • 9. New opportunities for social investors
    • Four trends are changing the landscape
    • -- and offering the possibility of a blended return . . . a combination of both social and financial returns on investment
        • . . . sometimes through equity investments, sometimes through debt financing
  • 10. Trend #1: “Pure plays”
    • Businesses that begin life as for-profit entities and stay that way
        • “ Private sector social enterprise”
        • First wave – 1970s
        • International conference – 1982
  • 11. “ Pure plays” (examples)
    • Ombudsman Educational Services (1981)
    • and Educational Services of America (1999)
        • Ombudsman: Teaches potential high school dropouts
        • 60 schools in 13 states, profitable since year one
        • Served 100,000+ students during its first 30 years
        • ESA: Students autistic or have severe behavioral or learning problems
        • Acquired Ombudsman in 2005
        • Consolidated annual revenue: $80M; 1,500 employees; 6,000 students
    • Café Direct (1992)
        • U.K.’s largest Fairtrade hot drinks company (coffee, tea, hot chocolate)
        • 2005: £19.8M annual sales, £568,000 in after-tax profits
        • Buys from 37 producer organizations in 12 countries
        • More than 250,000 growers
        • Raised £5M in expansion funding through a 2004 public share issue
        • 2005: 86% of operating profits funded customized support and training initiatives for the growers
  • 12. “ Pure plays” (examples)
    • America Works (1984)
        • Welfare-to-work program training and placing people in private industry
        • 100,000+ people trained and placed since company’s inception
        • Average trainee: 5 years on welfare, 8 th grade ducation
        • Original focus: Single mothers; recent addition – ex-prisoners
        • 88% remain off welfare during their first three years after placement
        • $7M annual sales; offices in NY, Albany, Indianapolis, Baltimore
    • Community Home Care Associates (1985)
        • Worker-owned cooperative: $24M annual sales, 100 employees
        • Creates jobs for African American and Latino women in South Bronx
        • Provides personal care assistance, light housekeeping, companionship
        • Serves the elderly and people who are chronically ill or disabled
        • Also provides private pay health care services (registered nurses) Anchors national cooperative network with $60M+ annual sales
        • Network has created jobs for 1600+ individuals
  • 13. “ Pure plays” (examples)
    • Adult day care centers
    • Childhood learning centers
    • Low-income housing
    • Vocational training and placement centers
    • Home modification services
    • Hospice care
    • Outpatient mental health and rehab services
    • Computer-based education programs for self-paced learners
    • Alternative schools for potential high school dropouts
    • Private sector prisons
    • Private sector universities
    • Wind farms
    • Psychiatric and substance abuse rehab centers
    • Home care for the elderly
  • 14. Trend #2: “Migrators”
    • Businesses that are born in the nonprofit sector and eventually become for-profit companies
  • 15. “ Migrators” (examples)
    • Vitas Innovative Hospice Care (1978)
        • Started with one patient in the basement of a Miami church
        • Today: $699 million business, serving 11,000 people daily in 16 states
    • Missouri Home Care (1975)
        • Began as a one-person nonprofit
        • Provides non-medical care in the home
        • Serves 2,500 frail elderly people in 44 rural counties
        • Simultaneously creates jobs for farm spouses earning a second income
        • Merged with seven others in 1999 (“Auxi Health”)
  • 16. Trend #3: “Chameleons”
    • Businesses that begin life as nonprofits and stay that way – but in every other respect operate as for-profit businesses
        • Earned revenue represents at least 90% of all revenue
  • 17. “ Chameleons” (examples)
    • Pioneer Human Services (1963)
        • Named by Fast Co. magazine as a model for all nonprofits
        • Partnerships with Boeing, Starbucks, Hasbro, many others
        • Employment/training; housing; behavioral health; re-entry/corrections
        • 2006: $63M revenue, 99% earned
        • 2006: 42 programs, 48 locations, 11,375 people served
    • Minnesota Diversified Industries (1968)
        • Started with $100 + 14 employees who were developmentally disabled
        • Plastics manufacturing; fulfillment; packaging and assembly
        • Blended workforce (610 employees, 72% disabled/ disadvantaged)
        • 2005: $40M revenue, 98% earned
        • 2005: Five plants, contracts with U.S. post office and 50+ corporations
  • 18. “ Chameleons” (examples)
    • Development Alternatives Group (1983)
        • Mission: To create “sustainable livelihoods in large numbers”
        • Based in New Delhi; also operates in Bangalore and Madhya Pradesh
        • Numerous commercial enterprises (information technology; housing; energy systems; water; financial services; others)
        • 2006: Rs52M annual revenues, 94% earned
        • 2006: 500 staff, more than a million people using DA services
        • 500,000+ livelihoods created since inception
        • 330,000+ houses built since inception using DA technologies
    • FRC Group (1988)
        • Based in Liverpool – creates jobs for the long-term unemployed
        • One of Britain’s best-known social enterprises
        • Today: £3.3 million annual sales, 94% earned
        • Three trading companies: Furnishings and removals; retail sales; waste management and recycling
  • 19. Trend #4: Mixed revenue enterprises (MREs)
    • NGOs that do not make a profit from their earned revenue strategies, but use them to reduce dependency on philanthropy and government subsidies
        • Earned revenue represents less than 90% of all revenue
  • 20. MREs (examples)
    • Delancey Street Foundation (1971)
        • Started with four employees and a $1,000 loan
        • Has never accepted funding from the government
        • San Francisco (HQ), LA, New York, North Carolina, New Mexico
        • Today: $24M (est.) annual revenue, 60% earned; 12 businesses
        • 10,000 “graduates” (former convicts, drug addicts and prostitutes)
  • 21. MREs (examples)
    • BRAC (1972)
        • Bangladesh (based in Dhaka)
        • Numerous commercial enterprises that employ low-income men and women (retail handicraft chain stores; second largest liquid milk plant in Bangladesh; poultry hatcheries and feed mills; sericulture process centers; fish and prawn hatcheries; iodized salt factory; cattle breeding; vegetable export; others)
        • 2006: Serves more than 100 million people and employs more than 97,000 in Bangladesh
        • 2006: Operates in 12 other countries
        • 2006: $250M annual revenues, 80% earned
  • 22. “ The Social Enterprise Investment Matrix”® THROUGH EQUITY OR DEBT FINANCING YES “ Pure play” companies Potential financial returns? Potential social returns?
  • 23. “ The Social Enterprise Investment Matrix”® THROUGH EQUITY OR DEBT FINANCING YES “ Migrators” THROUGH EQUITY OR DEBT FINANCING YES “ Pure play” companies Potential financial returns? Potential social returns?
  • 24. “ The Social Enterprise Investment Matrix”® THROUGH DEBT FINANCING YES “ Chameleons” THROUGH EQUITY OR DEBT FINANCING YES “ Migrators” THROUGH EQUITY OR DEBT FINANCING YES “ Pure play” companies Potential financial returns? Potential social returns?
  • 25. “ The Social Enterprise Investment Matrix”® THROUGH DEBT FINANCING YES “ MREs” THROUGH DEBT FINANCING YES “ Chameleons” THROUGH EQUITY OR DEBT FINANCING YES “ Migrators” THROUGH EQUITY OR DEBT FINANCING YES “ Pure play” companies Potential financial returns? Potential social returns?
  • 26. Types of social enterprises
    • Social enterprises that move beyond mixed revenue streams are typically one of three types
        • Affirmative businesses
        • Social sector business
        • Hybrid businesses
  • 27. “ Affirmative businesses” (“social firms”)
    • Created specifically to provide four things for people who are mentally, physically, economically or educationally disadvantaged
        • Real jobs
        • Competitive wages
        • Career tracks
        • Ownership opportunities
    • Usually migrators or chameleons
  • 28. “ Affirmative businesses” (“social firms”)
    • About two-thirds to three-quarters of all social enterprises created by NGOs are affirmative businesses
        • . . . because one of an NGO’s greatest assets is an available labor force
  • 29. “ Social sector businesses”
    • Deliver products or services that directly address a social need other than job creation
        • Can be sub-divided into categories such as “human service businesses,” “environmental businesses,” “educational businesses,” and so on
    • Can be pure plays, migrators or chameleons
  • 30. “ Hybrid businesses”
    • Simultaneously employ the members of a target population and deliver a product or service that directly addresses a social need
    • Usually migrators or chameleons
  • 31. Implications for social investing
    • Two types of social investors
  • 32. “ Social investor”: Type #1
    • Primarily interested in social returns
    • Rarely expect to recoup financial investment
        • If they do, they recycle the money into another social enterprise
        • If they do not, they take a tax deduction
  • 33. “ Social investor”: Type #2
    • Seeking a blended return , social and financial
    • . . . but will accept a lesser level of financial return than traditional investors
  • 34. Investment priorities
    • Both types of “social investors” differ from “traditional investors” and “socially responsible investors”
        • . . . and the four types of investors have different priorities
  • 35. “ Investment priorities matrix” ® NOT A PRIORITY THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY Traditional investors seeking financial returns Nonprofit social enterprises (chameleons) For-profit social enterprises (pure plays and migrators) Businesses with a single bottom line that practice corporate social responsibility Businesses with a single bottom line (financial)
  • 36. “ Investment priorities matrix” ® THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY NOT A PRIORITY Socially responsible investors seeking both social and financial returns NOT A PRIORITY THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY Traditional investors seeking financial returns Nonprofit social enterprises (chameleons) For-profit social enterprises (pure plays and migrators) Businesses with a single bottom line that practice corporate social responsibility Businesses with a single bottom line (financial)
  • 37. “ Investment priorities matrix” ® SECOND PRIORITY FIRST PRIORITY THIRD PRIORITY NOT A PRIORITY Social investors seeking both social and financial returns THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY NOT A PRIORITY Socially responsible investors seeking both social and financial returns NOT A PRIORITY THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY Traditional investors seeking financial returns Nonprofit social enterprises (chameleons) For-profit social enterprises (pure plays and migrators) Businesses with a single bottom line that practice corporate social responsibility Businesses with a single bottom line (financial)
  • 38. “ Investment priorities matrix” ® FIRST PRIORITY SECOND PRIORITY THIRD PRIORITY NOT A PRIORITY Social investors primarily seeking social impact SECOND PRIORITY FIRST PRIORITY THIRD PRIORITY NOT A PRIORITY Social investors seeking both social and financial returns THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY NOT A PRIORITY Socially responsible investors seeking both social and financial returns NOT A PRIORITY THIRD PRIORITY SECOND PRIORITY FIRST PRIORITY Traditional investors seeking financial returns Nonprofit social enterprises (chameleons) For-profit social enterprises (pure plays and migrators) Businesses with a single bottom line that practice corporate social responsibility Businesses with a single bottom line (financial)
  • 39. Forthcoming research
    • Carnegie Mellon University (H. John Heinz III School of Public Policy and Management)
    • Longitudinal studies (pure plays, migrators, chameleons)
    • Qualitative and quantitative
  • 40. For additional information . . .
    • Jerr Boschee
    • Founder and Executive Director
    • The Institute for Social Entrepreneurs
    • [email_address]
    • www.socialent.org
    • +01-214-866-0472
    • 6215 Sandydale Drive
    • Dallas, Texas 75248
    • United States of America

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