If there’s one challenge many social enterprises have in common, it’s finding capital. Insufficient capitalization is a primary reason that small businesses fail or fail to grow, and that’s also the case for social enterprises.
The good news: that seems to be changing. A new field is emerging, so young that it still goes by many names (social capital markets, social stock market, impact investing), but the overall goal is the same: create structures to connect socially focused investors with socially focused ventures.
We’re not talking small potatoes here. According to some sources, there is a $120 billion untapped market of individual investors who are willing to invest resources into social enterprises that produce positive social and environmental impacts. But as yet we do not have the structures (such as social stock markets) to attract those investments.
So the race is on. Next week, the third annual Social Capital Markets Conference (SOCAP10) will convene in San Francisco on just this topic. The conference web site notes “a proliferation of (social) investment funds of $100 million each, and a new index to help investors better target their financing.” Social capital is already flowing.
Since capital flows with little regard to national boundaries, so does the work in this field. The notion of a social stock market seems to have sparked (or had its latest spark) abroad, in the United Kingdom. A recent article about that effort (and connections with the US as well) can be found in a recent article published by Foundation Center, Bring on the Social Stock Exchange.
You can keep in touch with this emerging field by keeping your browser pointed at Social Edge, where this has been a lively discussion topic lately.
Finally, a major challenge for the emergence of this field is figuring out how to measure social performance in a manner that will be meaningful and transparent to social investors. This is often called social return on investment (SROI). Check out the Performance Review discussion on Social Edge about this topic.
We’ll come back to SROI in a future blog. In the meantime, do some thinking about what it would take to make your social enterprise venture (or idea) attractive to that $120 billion opportunity.
Will your venture be ready?
Rolfe Larson provides consulting and training in areas such as strategic planning, market research, feasibility analysis, business planning, marketing and implementation strategies.