You probably have many wonderful ideas for starting a new business, but may be wondering how you could get seed money for you startup venture. Have you thought about becoming a social entrepreneur? If you have a sound business plan that fulfills a mission, then you may be eligible to receive some initial funding for your social enterprise.
The Social Entrepreneur
A social entrepreneur is someone who creates a viable business to address an important social issue. The business venture may try to attack the social problem directly or may devote a substantial portion of the profits to fund its mission-oriented affiliate. The social enterprise differs from a nonprofit organization in that it seeks to fulfill a mission and make a profit at the same time. In other words, a social entrepreneur endeavors to achieve a double bottom line.
Your Organization’s Social Mission
As a social entrepreneur, you must first identify a particular social problem you want to address. What are you passionate about? Is it alleviating hunger? Benefitting the environment? Helping children with special needs?
After identifying the social problem, you’ll need to articulate your vision for a better world without that problem. Your vision is not necessarily what you could achieve, but what you hope to achieve. It is your aspiration. This is the time to think big. For example, The Hunger Project envisions “a world where every woman, man and child leads a healthy, fulfilling life of self-reliance and dignity.”[1]
Once you’ve articulated your vision, you will need to set forth the mission of your organization towards achieving that vision. If you envision “a world without hunger,” then how will your organization realize that vision? This is when you’ll need to focus on what is achievable. You must first research how other organizations are also trying to solve the same social problem. There are many ways to alleviate hunger in the world. The Hunger Project does it by targeting countries in Africa, South Asia, and Latin America. You may decide to concentrate on feeding the hungry in your home town, city, or state. You don’t want to end up doing exactly the same thing as some other organization. How is your idea of dealing with the social problem different from what everyone else is doing?
Last, but most important, what impact will your organization make? Some impacts are measurable, while others are not. In the feed-the-hungry example, you will be able to count how many people your organization will feed in any given day, week, month, or year. But how does one measure the impact on the physical, mental, emotional, and spiritual well-being of a child who does not have to go hungry? These types of immeasurable impacts will need to be told in stories and will form an important part of the narrative of your organization.
Your Business Plan
What we have outlined so far – mission, vision, and impact – are what non-governmental organizations (“NGOs”) and charities do every day all over the world. For that, we are thankful. But what makes the social entrepreneur different is that s/he develops a revenue-generating business that allows the social enterprise to become at least self-sustaining, if not profitable. To do so, you must develop a business plan.
While the basic elements of a good business plan are well known, one important difference is that it must be integrated into your social mission. Thus, instead of simply identifying the market need for your products or services, you’ll need to explain how your business plan will fulfill your vision, implement your mission, and achieve the desired social impact. In the feed-the-hungry example, there is the Biblical concept of “gleaning,” which commands that farmers leave some of their harvest “for the poor and the alien.”[2] One tech company, Spoiler Alert, has modernized this concept of “gleaning” by developing a platform that “introduces advanced inventory management, accounting, and reporting capabilities to help food businesses reduce costs of unsold inventory and maximize tax deductions for food donations.”[3]
Once you’ve identified the market-based, mission-oriented need, how will your organization generate revenue? As with any good business plan, you will need to, among other things: (1) describe how your products or services will meet that need; (2) assess what market you are in; (3) analyze the competitive landscape; (4) develop a sound strategy for bringing your products or services to market; (5) evaluate your management and staffing needs; (6) put together a marketing plan; (7) determine how much initial capital you will need; and (8) set your pricing to cover your costs and realize a profit. Under the Spoiler Alert business model, a 5% service fee is deducted from the supplier’s payout once a transaction with a buyer is completed. However, the fee is waived for nonprofits and food donations.[4]
Perhaps the most important parts of your business plan from an investor’s point of view are your pro forma financial statements. What assumptions are you making in arriving at your projected profit-and-loss statements, cash-flow analyses, and balance sheets? Are those assumptions valid? Are you erring on the conservative side or are you being overly optimistic? If those assumptions do not pan out, what is your plan B – or even plan C?
The ProtoStar Group
The ProtoStar Group is a set of pioneering companies that find resourceful ways to fund innovative projects and organizations that have a social mission. The social problem that we have identified is that there is not enough funding to support the great work that nonprofit organizations are doing. We therefore envision a world in which all mission-oriented organizations will become at least self-sustaining and perhaps even profitable. Our funding targets are, therefore, social entrepreneurs.
Our mission is to:
♦ Empower organizations to better serve unserved and underserved communities worldwide.
♦ Challenge nonprofit entities to be self-sustaining and more entrepreneurial.
♦ Transform the way in which funders engage in philanthropy.
The strategy that we employ to achieve our vision and mission includes:
♦ Engaging in traditional grantmaking.
♦ Investing in start-up ventures or innovative ideas that have a social impact and could generate revenue.
♦ Incubating prototype projects and launching them as star companies that are socially responsible and become profitable.
We are essentially a hybrid between a philanthropic foundation, a venture capital firm, and an incubator.
1. As a Philanthropic Foundation (“Empower”)
The ProtoStar Group makes traditional grants to worthy projects and deserving organizations that have a well-defined mission and a measurable social impact. There are some endeavors that simply do not lend themselves to generating revenue. These types of initiatives would receive a grant.
To be considered, applicants must undergo a rigorous vetting process to ensure that they will deliver on their promises and that their proposals will have a demonstrable impact on improving the lives of individuals, benefitting the environment, or otherwise contributing to the betterment of the world. A key factor in deciding whether to fund a particular project or organization is how well the proposal will meet an unserved or underserved need.
2. As a Social Venture Capitalist (“Challenge”)
The ProtoStar Group invests in start-ups and new projects that have both a social impact and a return on investment (“ROI”). It applies the concept of Venture Philanthropy to spur Social Entrepreneurship. Social enterprises are challenged to become self-sustaining and more entrepreneurial.
To qualify for funding, the social enterprise must have a:
♦ Clear social mission.
♦ Sound business plan.
♦ Strong management team.
3. As an Incubator (“Transform”)
One of the unique features of the ProtoStar Group is the ability to incubate prototype projects and to launch them as star entities that are socially responsible and self-sustaining – hence the portmanteau “ProtoStar.” Such entities may include nonprofit organizations, benefit corporations (“B Corps”), and commercial companies that are not only profitable, but also socially responsible. Depending on the nature of the enterprise, the ProtoStar Group may retain an equity interest.
The concept of an incubator is not new, but has its origins in the commercial world. The ProtoStar Group’s incubation model is unique in the sense that it seeks to combine the best of both the nonprofit and for-profit worlds. Its primary goal is to incubate projects that have a social mission – be it in education, senior/elder care, music and arts, or the environment, to name a few sample areas of interest. But similar to commercial incubators, the ProtoStar Group believes that social entrepreneurship could open up new possibilities that result in mission-oriented organizations becoming self-sustaining and even profitable. In some cases, an initial public offering (“IPO”) could even be launched.
By engaging in the incubation method, the ProtoStar Group hopes to transform the manner in which philanthropy is conducted.
The ProtoStar Challenge
The ProtoStar Group is always open to new ideas. Our existence depends on the innovation and creativity of social entrepreneurs, like yourselves. Our philosophy is that we must earn your trust as much as you need to earn our trust. What can we do together to make the world a better place? Please Share Your Ideas.
________
[1] http://www.thp.org/who-we-are/mission.
[2] Leviticus 19:9-10.
[3] https://www.spoileralert.com.
[4] https://spoileralert.zendesk.com/hc/en-us/articles/212275478-What-are-the-fees-associated-with-Spoiler-Alert-.
