Social Entrepreneurship- Combining Profit and Purpose by Hamid Farooqui, CEO, SoGoSurvey

A decade ago, TOMS founder, Blake Mycoskie’s plan was to donate a pair of shoes to a needy child for every pair that he sold. It was considered by many a groundbreaking model for entrepreneurship at the time. With TOMS (short for Tomorrow’s Shoes), a venture backed $400 Million business, Blake Mycoskie, reinvented the idea of a company that does well while doing good. Increasingly, entrepreneurs are not simply satisfied with creating a business that delivers a great product or service and generates a profit. Rather, they want their enterprise to directly impact a social problem of world hunger to global warming, accelerating positive change in the world. 

Agents of Social Change

For today’s millennial generation especially, it’s not enough to just get a fat paycheck; they want to create a better world environment with their passion, persistence, and innovation. Market-driven social entrepreneurship appeals to the idealist in the young person while also offering the perks of being a self-made, confident, innovative business person. Look at social entrepreneurs as agents of social change, and it’s the ‘change’ that distinguishes them from social service providers who act directly to better the effects of social problems. According to a 2015 report released by the Global Entrepreneurship Monitor assessing social entrepreneurship worldwide, “people across cultures, demographics and continents believe business is about more than making a profit -- it’s about doing good for others.”

A New Business Model

Increasingly, people are choosing this new way of doing business, and new model, because it allows them to devote themselves to something they are passionate about, creating a greater sense of fulfillment in the workplace.

High visibility examples such as TOMS Shoes and Frogtek launched by young people who had access to considerable seed funding—are recognized for operating profit-generating business models. TOMS, with $300,000 in seed funding, started with a buy-one-give-one model. Frogtek—with $2.5 million in venture funding, an undisclosed amount in seed funding, and $400,000 in debt financing—started by creating business tools for entrepreneurs in emerging markets to increase business efficiency and reduce prices for low-income clientele. “Tomorrow’s Shoes” People love Mycoskie’s “one for one” model—they buy something, and that helps someone at the same time. The elasticity of the TOMS brand is clear: The launch of a coffee company enabled tens of thousands of people to gain access to clean water, and a bag company offers safe birth kits for women who give birth at home, through the sale of canvas tote bags and backpacks. And they have launched eyewear, helping 500,000 people get their eyesight back.

Economics Matter

The non-profit model, relying on grants and charity, is shifting to a business model driven by social entrepreneurship, where young upstarts are working to tackle major social issues around the world, while still generating profits for stakeholders in the company. As a not-for-profit business, you are focused on receiving donations, and people’s attention span to non-profits are usually short-lived—there’s always another worthy non-profit around the corner to capture benefactors’ attention.

As a for-profit, you are selling something of value that enables you to give, instead of just asking for donations. What’s more, you don’t have to worry about the percentage of overhead used. Nonprofits are scrutinized by benefactors: “If I donate $100, how much of that is actually going to the cause?” Because it is the way non-profits are measured, they can’t afford to hire and retain the best talent. For-profits have far more flexibility and can do just as much good. It’s more about how resources are leveraged to affect change. Business and philanthropy can work together, using business to improve lives and contribute to society. An example of this is my own company called SoGoSurvey (www.sogosurvey.com), which offer a survey tool through a subscription model. We have been offering our paid software for free to students and non-profit organizations for over three years now. So far, we have issued more than 1000 such free licenses. It is our way of giving back to the society. Students can visit the following link to and request a free license https://sogosurvey.com/survey-plans-pricing/free-survey-for-students/

Losing Site of the Social Mission

Social enterprises, whose success is measured by their commitment and impact, can become easily distracted building and managing their business, instead of focusing on the problem they are trying to solve. A strong business model and management style are critical to success. Yet, a social entrepreneur can run the most transparent, well-managed, profitable social enterprise in the world, and still lose sight of the social problem their business is founded upon as a result of conflicting goals and shifting criteria.

For over 30 years Bill Drayton, founder and chair of Ashoka: Innovators for the Public, an organization dedicated to finding and helping social entrepreneurs around the world, has been a zealous advocate of transitioning the world to a place where everyone is a contributing change-maker. Additionally, Drayton, known as the “pioneer of social entrepreneurship” extends his social entrepreneurship savvy to various other organizations, working as a chairman at Community Greens, Youth Venture, and Get America Working! There are tremendous opportunities for entrepreneurs interested in reinventing themselves while impacting the world. However, the right questions have to be asked at the right time.

As the demand for solutions to reduce inequalities, diminish poverty, and foster community spirit grows, it is imperative to think about new and innovative economic models. Social entrepreneurship presents an extraordinary opportunity to develop cost effective and high impact businesses. These hybrid models combine philanthropy, subsidies, and income-generating activities to generate revenue. New drivers of growth and development lie in new forms of “win-win-win” collaboration with other players, such as the private sector or government. The best advice for perspective social entrepreneurs? Focus on what matters most. Execute the best you can.