Making Social Entrepreneurs Succeed

Year after year, 7.3 million tonnes of food are thrown away in the UK – all while 8.4 million families are struggling to put food on the table. In 2013, two friends from London had enough of statistics like these. They decided to act. Thus was born the idea of Snact, making healthy snacks out of fruits that would have otherwise gone into the trash cans.  It wasn’t long until they faced the same problems all start-ups encounter sooner or later. They needed a defined business model and investment. Not an easy challenge for Ilana Taub and Michael Midge-Dixon, who had had little experience with entrepreneurship beforehand – so they decided to look for help. This is how they came to us at Hatch in 2014. They put themselves in the hands of our Incubator program for twelve weeks. After that, their business model was unshakable. They managed to raise £ 13,500 via a highly successful Crowdfunder campaign. Today, their fruit jerkies are sold in supermarkets across the country and they successfully launched their 2nd product last year on Crowdfunder too! Unfortunately, not all good ideas end up with as much success as Snact. Like food, a lot of them simply go to waste. In fact, only 20% of small businesses ever make it past their first 18 months. 90% of them fail within their first three years without dedicated holistic support. This problem is even more serious for one group of entrepreneurs in particular: Social Entrepreneurs. Defining what exactly a social entrepreneur is can be difficult. On a surface level, they often couldn’t be more different. Verterra, an internationally operating manufacturer of dinnerware made from banana leaves is just as much a social enterprise as the small & local London sharing platform Library of Things. But there is one thing that unites them: the aim to help people and create social or environmental impact while also generating revenue. Just like a traditional business would do. The demand for them is there and rising quickly. In 2017, the UK was already home to 471.000 social enterprises employing about 2.27 million people – 7% of the country’s total employees.  But true to their mission, the impact of social entrepreneurs far exceeds cold economic statistics. They create value by bringing together communities or alleviating the environmental stress human activity places on our planet. They come from all backgrounds of life, including disadvantaged, and are much more likely to be female or ethnic minorities than leaders of other SMEs. And it is not least because of this that they work where it is most needed: Almost a third of social enterprises are operating in the top 20% of most deprived communities in the UK.

However, social entrepreneurs have to overcome tremendous challenges:

Funding

Social enterprises are neither conventual commercial ventures nor charities – they sit somewhere in the middle of the chart. Ideally, this can mean that they can receive income from both trading and donors or social financing – most successful social enterprises do. On the flipside, for many others, it can be very difficult to receive either of them. Generating enough revenue from the sale of social goods or services is not always easy, while a lot of donors or institutions are wary of giving funds to organisations they deem to commercial – many social enterprises that are not run as strictly non-profit entities can fall under this label. Government programmes are slowly waking up to the opportunity of social entrepreneurship, and some initiatives can be eligible for public funding or government grants, but developments are happening only slowly. The opposite problem arises for many social entrepreneurs who are trying to get corporate investors on board. Here they face the stigma of social institutions not being able to offer a sufficient return on investment – even though 75% of social enterprises are managing to generate a profit, standing at just about the same rate as other SMEs (78%).    

Check the article THE INCONVENIENT TRUTH ABOUT SOCIAL INVESTMENT

 

Lack of Networks and Business skills

Frequently, social entrepreneurs have a very different background from founders of traditional businesses. They often did not go to business schools and neither did many of their peers growing up. Their different experiences can represent a huge advantage, both for them as well as society, but it also means they are underprepared for some of the challenges of entrepreneurship. And without a network of acquaintances who are knowledgeable in the field, there are not many places of help and support available. Like many SMEs starting off, social enterprises additionally have problems accessing sale channels and finding customers for their products. Making the world and your prospective clients aware of yourself is everything but easy on the very limited budget most of them have. As a result, the internet becomes a powerful and in some cases indispensable tool for them – the cost of access is negligible, and with the creativity and resourcefulness a lot of social entrepreneurs possess, they’re often able to make their name heard with clever marketing and appealing products. Like our friends at Snact or the people behind Beam, a mission-driven business in London specializes in helping ex-rough sleepers into employment by helping them crowdfund their way back to work!  

”They often did not go to business schools and neither did many of their peers growing up

Their different experiences can represent a huge advantage, both for them as well as society,

but it also means they are underprepared for some of the challenges of entrepreneurship.”

    Another strategy employed by many is to look to a local community. What almost seems like a throwback to times long gone by, they simply go out and talk to people personally to build awareness and a base of loyal customers and supporters. That’s what Rebecca Trevelyan and her friends did when setting up the Library of Things in South London. The principle behind the initiative is simple: Instead of borrowing books like you would from a normal library, the Library of Things allows you to borrow tools and devices you might need once every few months but are quite expensive to buy and own. In the weeks leading up their launch, the young entrepreneurs simply went from house to house, knocking on people’s doors, telling them their stories and asking them whether they maybe had some unused tools they could donate.  When the opening date arrived, people came by the dozens, both as lenders and donators. Unfortunately, however, stories like this, showing the potential of social entrepreneurs are still more of an exception than the norm. For many of them, the lack of business expertise and networks is simply too much to overcome.

Providing help and a network, to social entrepreneurs

So how can we solve those problems? That’s the question we ask ourselves every day. One of our answers has been our Incubator program – as used by Taub and Midge-Dixon from Snact. Through twelve weeks of workshops, one-on-one coaching and mentoring, we aim to provide social entrepreneurs with everything they need to succeed. This includes: Educating entrepreneurs on a wide range of topics: business model planning, marketing, building and improving pricing structures, cash flow management, etc. Including practical elements besides the theoretical input. To make sure the entrepreneurs know how to apply their knowledge.  Along the program, members need to meet experts in their field. Workshop teachers as well as other entrepreneurs. Getting to know other people in a similar situation as they are, with often the same struggles is without a doubt one of the most beneficial effects of an incubator programme. Meeting people well-qualified to help them. Building a network of peers and mentors. Now that we also work with 55 East we have a dedicated space for entrepreneurs. It changes the dynamic to get a space with a solid network. it is certainly where the collaboration happens, as working side by side with other entrepreneurs creates a positive ecosystem and makes their challenges easier to overcome.   

We assist the entrepreneurs with their funding. We are providing access to finance opportunities via our networks of investment intermediaries.

Of course even with a dedicated support, getting off the ground remains a difficult challenge. Coming back to the figure from earlier, 80% of small business not surviving beyond their first 18 months sounds disheartening. But fortunately, it’s only half of the story. Because of joining an incubator program, 87% are still alive and kicking even five years after their launch. Expertise and support can make an incredible difference – and we want to provide as many entrepreneurs with it as possible.