"How to Create a Social Enterprise Today to Solve the Problems of Tomorrow" - Impact Hub Houston presentation for Houston Area Urban League (HAUL) Symposium 2020
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"How to Create a Social Enterprise Today to Solve the Problems of Tomorrow": Presented by Grace Rodriguez, CEO/Executive Director of Impact Hub Houston, for the Houston Area Urban League (HAUL) Symposium 2020
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"How to Create a Social Enterprise Today to Solve the Problems of Tomorrow" - Impact Hub Houston presentation for Houston Area Urban League (HAUL) Symposium 2020
- 1. How to Create a Social Enterprise Today To Solve the Problems of Tomorrowgrace rodriguez ceo/executive director
- 2. @gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact https://houston.impacthub.net 2 We offer intentional programs, inclusive communities, and an international network dedicated to helping diverse entrepreneurs create impact at scale. We inspire, connect, and empower people with purpose. https://houston.impacthub.net 2@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 3. https://houston.impacthub.net 3@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact 1: What Social Entrepreneurship Is 2: Identify Your Purpose 3: Create Your Theory of Change 4: Plan for Sustainability 5: Plan for Scalability Today we’ll cover ...
- 4. https://houston.impacthub.net 4@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact https://houston.impacthub.net 4 What is Social Entrepreneurship? @gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 5. https://houston.impacthub.net 5@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact What is Social Entrepreneurship?
- 6. https://houston.impacthub.net 6@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact What is Social Entrepreneurship? ● Nonprofit ● Cooperative ● Social Firm ● Socially Responsible Business ● For-Profit: Sole Proprietor, LLC, Corporation ● B Corporation
- 7. https://houston.impacthub.net 7@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact https://houston.impacthub.net 7 What is My Purpose? @gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 8. https://houston.impacthub.net 8@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact What is My Purpose? ● Who do you think needs help, but isn’t getting it? ● What social issues do you care about? ● Where are there gaps that need to be filled? ● When have you needed something but you couldn’t get it, or no solution existed for it? ● How have others failed due to lacking some experience/expertise/network/etc. you have?
- 9. https://houston.impacthub.net 9@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact What is My Purpose? Create your [Interest + Skill + Problem] Triad: ● Gather three colors of index cards/sticky notes and assign one color to one of the above topics. ● Write one example of the color-coded topic per card/note. ● Flip them over. Randomly select one from each color. ● Try to combine them into one purposeful idea.
- 10. https://houston.impacthub.net 10@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact https://houston.impacthub.net 10 Create Your Theory of Change @gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 11. https://houston.impacthub.net 11@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact Create Your Theory of Change ● Whom do you want to benefit? ● What benefits do you want to deliver? ● When will you achieve that? ● How will you and others execute this? ● What environment/context do you need? ● Why do you believe your theory will succeed?
- 12. https://houston.impacthub.net 12@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 13. https://houston.impacthub.net 13@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact https://houston.impacthub.net 13 Plan for Sustainability @gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 14. https://houston.impacthub.net 14@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact Plan for Sustainability ● Business Model ● Revenue Model ● Revenue Streams
- 15. https://houston.impacthub.net 15@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact Plan for Sustainability ● Earned Income: YAWP Records “Just Add Beats” ● Microfranchising: Mwinda Technologies ● Cross-Subsidization: Impact Hub Houston ● Market Linkage: Sangar Rum ● Microphilanthropy: McMac CX ● Employment Generation: Spectrum Fusion
- 16. https://houston.impacthub.net 16@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact Plan for Sustainability ● Scope ● Market ● Model ● Map
- 17. https://houston.impacthub.net 17@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact https://houston.impacthub.net 17 Plan for Scalability @gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact
- 18. https://houston.impacthub.net 18@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact Plan for Scalability ● Open Source ● Replication ● Government Adoption ● Commercial Acquisition ● Mission Achievement ● Sustained Business
- 19. https://houston.impacthub.net 19@gracerodriguez . @impacthubhou . @impacthubhouston . #houimpact Plan for Scalability ● Geographies ● Offerings ● Customer Segments ● Value Chain ● Ideas ● Impact
- 20. Grace Rodriguez grace.rodriguez@impacthub.net tw: @gracerodriguez | ig: @thatgracerodriguez https://houston.impacthub.net thank you!
Editor's Notes
- Good afternoon! Many thanks to the Houston Area Urban League for inviting me to talk with you today about Social Entrepreneurship and “How to Create a Social Enterprise Today to Solve the Problems of Tomorrow.” My name is Grace Rodriguez, and I’m the CEO/Executive Director of Impact Hub Houston.
- Impact Hub Houston is a nonprofit organization dedicated to empowering you with intentional programs, inclusive communities, and an international network to help you thrive. We work along with ~100 independently founded but globally allied Impact Hubs in over 52 countries around the world, all dedicated to helping social entrepreneurs create solutions with scalable impact for the United Nations Sustainable Development Goals (SDGs). I’m proud to support the Houston Area Urban League and its Small Business University program because we believe that together, we can help more innovators become effective founders who go on to lead successful startups. And even if you ultimately decide to take a different path, that’s ok: At least you’ll now have the skills to be more financially resilient and thrive as a leader along your journey.
- Which is why I’m excited to join you today to talk about how you can create your own social enterprise to build a better future. Some people start businesses because they see an opportunity in a market that they want to capitalize on. Some want to be their own boss and improve their quality of life. Social entrepreneurs start their ventures because they are passionate about creating positive impact, and want to make it their life’s work versus something they just volunteer a few hours a week to. In the next few minutes, we’ll cover … and we’ll have some time at the end to address any of your questions, so please drop them in the chat box.
- First: What is Social Entrepreneurship? Social entrepreneurship is about exercising your entrepreneurial problem-solving capacity for the betterment of society. Social entrepreneurs are entrepreneurs who intentionally start a business to solve problems for their community, for a population they care about, for the environment, for their city or country, or for a global or universal issue. A social enterprise is simply a venture started by a social entrepreneur. Social enterprises have been referred to as “not-just-for-profit” businesses; or “Triple-Bottom Line” businesses -- ones that cares about People and Planet in addition to Profit. Many corporations now refer to it as ESG, a business approach that considers its environmental, social, and governance impact. Regardless of what you call it, social enterprises all prioritize positive impact and intentionally optimize the business model to create that impact.
- Impact Hub uses the United Nations Sustainable Development Goals as directional guides for social innovation; and we support entrepreneurs working on solutions in any of these areas. In general, though, to identify whether a venture is a social enterprise, you can ask these 3 questions: Does the enterprise prioritize impact? A social enterprise prioritizes purpose as much as, or even more than, it does profit. The venture’s ability to change people’s lives or improve the world isn’t just a side effect of their work, but is really a core part of who they are, what they do, and how they do it. Does the enterprise create impact? The outputs and outcomes created by a social enterprise should demonstrate progress towards the positive impact they’re aiming for. Does the enterprise use smart business practices? Whether using a for-profit or non-profit model, a social enterprise should strive for financial sustainability and growth.
- Some people think that if you want to do good, you should start a nonprofit organization; but there are many different models for financial sustainability that you can consider for your own structure: Nonprofit. A tax-exempt, non-business entity that invests excess funds back into the mission. Co-operative. A business organized by and for its members. Credit unions and community grocery stores are some examples of co-ops. REI is also an example of a co-op. Social firm. Social firms employ those in the community who need jobs. FareStart is a great example—it employs at-risk youth and serves healthful meals. Socially responsible business. These companies support social missions as a part of their day-to-day business operations. For-profit. Perhaps the vaguest category, these businesses are profit-first but donate funds, raise awareness, or otherwise support causes. Warby Parker’s Buy a Pair, Give a Pair program is a prime example. B Corporation. private certification issued to for-profit companies by B Lab, a global nonprofit organization. To be granted and to preserve certification, companies must receive a minimum score on an online assessment for "social and environmental performance", satisfy the requirement that the company integrate B Lab commitments to stakeholders into company governing documents, and pay an annual fee ranging from $500 to $50,000, depending on annual sales.[1] Companies must re-certify every three years to retain their B Corporation status. I recommend starting with an LLC, then change your formation as you get more data on what model makes the most sense for your venture.
- When you’re in the early stages of starting a social enterprise, you have two immediate tasks: Find a problem you care about --your Purpose -- and Seek to understand the problem deeply, both from the perspective of the individuals who encounter this problem every day (your stakeholders) and from the ecosystem level (your community, colleagues, collaborators, or competitors). Sometimes identifying and understanding a problem can occur at the same time if you’re working to solve a problem that you’ve experienced. We started Impact Hub Houston because there was no organization in Houston that was specifically dedicated to bridging the startup and small business communities and inclusively and equitably helping people who wanted to change the world through innovation and entrepreneurship. I took my experiences from working in the tech, venture, creative and startup ecosystems, along with the experiences and feedback I was hearing from the entrepreneurs I’d been mentoring and my co-founders and peers in the community, and used that to create programs and services that would fill gaps that existed among our startup and small business development ecosystem.
- If you already have your Purpose in mind, great! You can get straight to work establishing your organization and building your venture. If not, or you’re stuck, or you realize you want to learn more about the problem you want to solve before deciding whether it’s something you want to pursue full-time, here are some ways you can jumpstart ideas: Interview people who are experiencing the problem you want to solve Volunteer with organizations addressing a social issue you care about: VolunteerHouston.org Research and observe existing ventures and solutions Do a life audit Draw a transition map and see where you could provide supports for more successful transitions
- To Create Your Passion-Skill-Problem Triad: Gather 3 colors of post-it notes or index cards.One color for your "passions"; one color for your "skills" and one color for your "problems." On each card or post-it note, write down one passion, skill, or problem.For example, a passion could be "gardening" or "reading"; a skill could be "visual design," "mechanical engineering" or "teaching"; and a problem could be "homelessness"; "water access"; or "lack of girls in STEM careers." Brainstorm at least 10 different passions, 10 different skills and 10 different problems. Once you've written something on all of your cards, flip them all over. Then, randomly select one from each pile. See if you can combine them in ways that might spark an idea for a new social enterprise. For instance, if you are passionate about "visual design," have skills in "photoshop," and are interested in the problem of "homelessness," you might be able to combine these into a volunteer activity like creating graphic designs for a campaign to fight homelessness, or creating infographics that map all of the resources and services that are working to address housing issues and homelessness in your community. Some of the combinations might seem ridiculous, but this exercise is just designed to get you to start thinking creatively about these critical intersections. When you've tried a bunch of different combinations, pick one that speaks to you. Arrange these three in a triangle, with space left in the middle. In the center space, write a one-sentence statement of how you might unite those three things. This is your first step to envisioning a social enterprise. Make time to identify your purpose -- successful social enterprises most often start with entrepreneurs who can deeply empathize with the people they want to help and who are able to thoroughly understand the root causes and systemic influences on the problem they want to solve.
- A Theory of Change describes what needs to happen for the desired impact to be achieved. Creating one allows you to identify areas that require further review and to determine what data to collect over time to validate whether the theory holds. It includes: Inputs: The primary products or services you offer. What activities do you have to undertake to ensure that an Input becomes an Output? Outputs: The products or services used by customers. How is the customer using the product/service? What could make it unsuccessful? Outcomes: The results of that usage. What needs to happen for an Outcome to become an Impact? What could go wrong? Impact: The long-term change that can be attributed to the Inputs and Outputs. How do you know that this change is something your customers want?
- As you start to define your theory of change, it is also important to clarify what you mean by impact. Social impact can take many forms. You can distribute your solution to thousands of people, or change the lives of a few individuals in a really meaningful and transformative way. Both matter when you’re thinking about the kind of impact you want to create. At Impact Hub Houston, we look at three primary indicators of the impact we want to create: Member Growth: Are we delivering good value that is attracting and keeping diverse social entrepreneurs and impact innovators? Organizational Growth: Are we improving our operations and revenue model so that we’re hiring more people and delivering more impactful programs? Ecosystem Growth: Are we collaborating effectively with other organizations to reach and help more people across the region?
- The DIY Toolkit has a great “Theory of Change” template with instructions to help you clarify your priorities, define your goals, and map a path to reach them: https://diytoolkit.org/tools/theory-of-change/
- Social enterprises prioritize social impact, but they must also strive for financial sustainability. While they may rely on philanthropic capital, such as grants, to get their work off the ground, they ultimately look for a model that enables them to stay afloat without a constant infusion of charitable dollars. This is one of the key factors that differentiates a social enterprise from a typical non-profit organization or NGO. This means that, early on in your social entrepreneurship journey, you must determine the type of revenue engine that can effectively fuel your growth. I will be sharing with you some different revenue engines for social enterprises, but consider these just a starting point: You must determine what business models works best for your particular problem, solution and market.
- WHAT IS A REVENUE ENGINE? There are several terms that get tossed around interchangeably, but all serve distinct roles in helping your business achieve financial sustainability: Business model: A business model takes into account your finances, customer acquisition, and the revenue streams that the business has. The revenue model is a sub-section of the business model. Revenue model: This is the overall plan for how all of your different revenue streams fit together. Revenue stream or revenue engine: A single source of revenue for your business. Sales, Fee-for-Service, or Earned Income: These kinds of social enterprises package their products or services and sell them either to their beneficiaries or to an organization willing to pay for them. HOW? These enterprises identified a market need that was not being met, and then developed corresponding services or products that people are willing to pay for. They generate income that allows them to continue to offer these services. YAWP Records “Just Add Beats” program Microfranchising/ “Business in a Box” These social enterprises license members of local community to run a “business in a box” or a microfranchise. The social enterprise typically coordinates overhead or “central office” functions to generate efficiencies of scale, and provide local people with capital and inventory to get their business off the ground. HOW? The enterprise receives a percentage of the franchisee’s sales in order to fund its Costs. Cross-Subsidization The revenues generated from some customers are used to subside the goods or services provided to other customers. HOW? Some customers pay at a rate that allows the services that others receive to be highly subsidized or free. Market Linkage These social enterprises work to connect entrepreneurs to markets. This could take the form of buying a product from local craftsmen at local market prices and then selling it to an international market at an increased price, or the social enterprise could provide a value-added service to local entrepreneurs—such as marketing, technical assistance or financing— and then connect them to expanded markets. HOW? The social enterprise will typically take a share of the profits when the product is sold, or charge the local entrepreneurs a fee for their services. Microphilanthropy An emergent model of social enterprise, micro-philanthropy or crowdfunding-forgood facilitates the donation of money, goods, or services to people in need. HOW? Most of these crowdfunding sites allow donors to opt into allowing part of their donation to be used to fund the social enterprise’s operating expenses (“tip jar”); show screen shot of donation Employment Generation This model of social enterprise creates job opportunities for a target population such as refugees, women, youth, people with disabilities, the homeless, or formerly incarcerated individuals. These employees are engaged in an enterprise that sells products or services on the open market. HOW? Goods and services are sold at market rate so that the employees can be paid and the business can be self-funded.
- WHAT IS A REVENUE ENGINE? There are several terms that get tossed around interchangeably, but all serve distinct roles in helping your business achieve financial sustainability: Business model: A business model takes into account your finances, customer acquisition, and the revenue streams that the business has. The revenue model is a sub-section of the business model. Revenue model: This is the overall plan for how all of your different revenue streams fit together. Revenue stream or revenue engine: A single source of revenue for your business. Sales, Fee-for-Service, or Earned Income: These kinds of social enterprises package their products or services and sell them either to their beneficiaries or to an organization willing to pay for them. HOW? These enterprises identified a market need that was not being met, and then developed corresponding services or products that people are willing to pay for. They generate income that allows them to continue to offer these services. YAWP Records “Just Add Beats” program Microfranchising/ “Business in a Box”: These social enterprises license members of local community to run a “business in a box” or a microfranchise. The social enterprise typically coordinates overhead or “central office” functions to generate efficiencies of scale, and provide local people with capital and inventory to get their business off the ground. HOW? The enterprise receives a percentage of the franchisee’s sales in order to fund its Costs. Mwinda Technologies Cross-Subsidization: The revenues generated from some customers are used to subside the goods or services provided to other customers. HOW? Some customers pay at a rate that allows the services that others receive to be highly subsidized or free. Market Linkage: These social enterprises work to connect entrepreneurs to markets. This could take the form of buying a product from local craftsmen at local market prices and then selling it to an international market at an increased price, or the social enterprise could provide a value-added service to local entrepreneurs—such as marketing, technical assistance or financing—and then connect them to expanded markets. HOW? The social enterprise will typically take a share of the profits when the product is sold, or charge the local entrepreneurs a fee for their services. Microphilanthropy: An emergent model of social enterprise, micro-philanthropy or crowdfunding-forgood facilitates the donation of money, goods, or services to people in need. HOW? Most of these crowdfunding sites allow donors to opt into allowing part of their donation to be used to fund the social enterprise’s operating expenses (“tip jar”) Employment Generation: This model of social enterprise creates job opportunities for a target population such as refugees, women, youth, people with disabilities, the homeless, or formerly incarcerated individuals. These employees are engaged in an enterprise that sells products or services on the open market. HOW? Goods and services are sold at market rate so that the employees can be paid and the business can be self-funded.
- What are the steps to creating an ecosystem map? Scope your problem and define the issue you want to work on. Map who else is working in the space. Do some research to figure out who might be working on the same problem, or is serving the same customer base or target geography. Identify the business models of those organizations. Evaluate whether your proposed solution is innovative.Figure out the unique approach that you can distinctively offer. Consider what kind of business model you would choose to make your organization both unique and sustainable, given this ecosystem. As you research and later make contact with these organizations, take note of what they've already learned about the issue, geography, and population you're working on. This will help you confirm and refine the assumptions in your Theory of Change, and create a roadmap for moving forward.
- When you succeed, people will inevitably ask if you can bring your solutions to more places and more people; and if you want to keep growing your impact, you’ll probably want to do that at scale. What does it mean to scale a social enterprise? You have to be careful and consider the context of the local communities and markets you want to enter, and whether you can expand without compromising the quality of your products/services and the values of your venture. You don’t even have to scale your venture: You could turn your venture into a platform that allows your ideas and processes to scale. Scaling a business is different from growing one in that it adds impact at an exponential rate while only adding resources at an incremental rate. Although scaling is commonly approached from an operational perspective, it typically has significant implications for design in the way it’s produced and delivered.
- When it comes to planning for scalability, as the saying goes, “Start with the end in mind.” In addition to thinking about the impact you want to create, think about what you would consider a successful outcome for your venture. Do you want it to be open sourced and accessed by more people? Do you want it to be acquired by another company? Do you want it to be adopted by the government? Do you want to hand it to future generations? Your end game options may differ depending on how you structure your venture, too.
- Many people think about scale in terms of bringing their product or service to more people. Although valid, there are other ways to think about scale too. Scale into new geographies: You bring your innovation into new communities, regions, or countries where people could also benefit. Scale into new products or services: You start to produce related goods or services that could also enhance the lives of your customers. Scale into new customer segments: You bring your innovation to new types of customers. For example, you find a way for your mobile payment system to be used not just by urban customers, but also by the rural poor. Scale into different parts of the value chain: Instead of just selling glasses, you also start to manufacture your own low-cost lenses and frames. Scale your ideas and your impact: You start training academies, build online courses, convene conferences, publish reports, or use other means to disseminate what you’ve learned and grow you impact via thought leadership and the scaled adoption of best practices.