Riding the social enterprise rollercoaster in 2014

by Cliff Prior, CEO UnLtd
Wednesday, 29 January 2014 11:00 GMT

* Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.

Prediction is a dangerous game. But as Abraham Lincoln said: “The best way to predict your future is to create it” – and that’s what many thousands of organisations and individuals are doing right now to build a social economy. 

I don’t think there has ever been such a furious flow of developments in this sector. From start up to scale up, from the richest countries to the poorest, from mass popular engagement to government and global actions, this is a time of progress like no other.

Here in the UK we have new tax incentives, revised legal forms for Community Interest Companies, a set of new incubators, and a blossoming of new social impact bonds. In the investment field we see Big Society Capital funds starting to reach investees, the spread of investment into regions including through Local Enterprise Partnerships, and into new sectors; commercial angel investors are joining the fray, and there are the first major retail opportunities for social investment. Social entrepreneurship support is spreading into schools, colleges, universities, community organisations, housing associations and major corporates. 

Internationally, the UN, EU, G8 and the UK’s own Department for International Development are all adopting social enterprise and investment as models for social and economic improvement. Scores of countries are developing social economy frameworks and development agencies. 

Most important of all, the scale and impact of the social economy seems to be growing. It’s still just a handful of countries that have population level surveys – but those that do, including the UK, look very promising. 

So in the midst of all this progress, what comes next? What are the challenges?

Hype is probably the biggest worry. Is the sector becoming overblown? Is there too much social investment for the pipeline of ventures to absorb? Here the French experience is interesting, with 3.5 billion euros raised for social investment through the mechanisms introduced a few years ago on corporate employee plans (loosely translated as pension contributions): this is spent across a wider range of social economy organisations than most countries would regard as social enterprises including, for example, social housing and education institutions. So perhaps one of the trends will be a broadening of what is seen as a social venture.

Even so, in most countries there are far too few new, promising social ventures for comfort. Building the base is critical, getting many more people to start up and start well. Incubators and accelerators come next, followed by angel stage high-risk investors. To get the flow of high-impact ventures we want, we need a pipeline which has a broad base and which is unbroken along the full journey of the social entrepreneur and their venture. It is clear that having a one club strategy of social investment funds is not enough: we need an ecosystem that covers the full range of the stages and styles of support to make it all work to full potential. ‘Ecosystem’ may be the buzzword of 2014. 

Start up and investment is little use without customers. Routes to market are still problematic for many social ventures. Public service commissioning is clunky and offers far too many barriers to entry to new players. This is getting recognition in many developed countries, and measures to recognise social value as well as financial price are starting to emerge. 

But the routes to consumer markets are still very weak. As a result, many new social ventures try to create complete vertical business models – a superhuman task. Some major corporates are helping out here, adopting relevant social ventures into their value chain. But we need much more work on a clear and relevant customer promise for social ventures, before markets really open out. 

So a lot of progress, a worrying level of hype, vital work on pipeline, ecosystem, and routes to market. What might it look like if everything comes together? Let’s assume success, and work out what it might mean.

Social enterprise has been a small, lovely and fascinating gem. It is starting to turn into a mainstream part of economies and societies. I cannot think of a single example where going from cult to mainstream was simply more of the same. Going mainstream changes things, in powerful and sometimes surprising ways. The sector has placed a great deal of emphasis on organisational form and intent. My hunch is that as this goes more public, customers and other stakeholders will be more concerned about results, and place more trust in brands. 

Will social enterprise be the key term in five years’ time, or will we be looking at a broader social economy? Many people say the latter. There are big risks in this possible change and any change of this degree involves considerable pain. But let’s get real: it’s not in our control; it’s getting beyond us into the public domain. We can try to guide, but we can’t determine. 

So my top hunch for 2014: a wild rollercoaster ride for us all. 

Cliff Prior is chief executive of UnLtd, a UK-based foundation for social entrepreneurs. It resources more than 1,000 individuals each year through its core awards programme. Find out more at www.unltd.org.uk