The Value of Difficult Financing

The thing that struck me most from the articles on financing social enterprise was from the Stanford Social Innovation Review which was that “Entrepreneurs starting social enterprises should find it difficult to raise capital.” As was mentioned in class 80% of new business fail in the first five years, but of the 20% that survive 90% had well thought out business plans. The same must hold true for social enterprise as well. Merely having a good idea that will help society is not enough to be truly effective, there must be a plan. Even if that plan is to continue to rely on the charity of others; success is based on sound planning. This can be seen in the individuals chosen to participate in the “Global Impact 50”. This organization is comprised of companies and individuals who are experts in investing not only those seeking to ‘do good’ in society. This shows on a very large scale the necessity of business expertise in social innovations. Divide Data is another example of how making difficult to find funding can benefit social enterprise. Jeremy Hockenstien found it difficult to grow his enterprise as fast as he wanted, but it is possible that slow controlled growth could be beneficial in the long run. My time in Iraq I witnessed powerful example of money without a plan. It was nothing for the US Army to build a $100,000 water project, and the impact created good for the people in the area that received these new water pipes. The question was where does that leave the water situation for the entire area? The men and women creating and overseeing these projects had the best intentions, but gave little thought to, or more accurately, did not have the expertise to see these small projects in a larger context. As a result in my mind the money spent did not create the most value for the money, in essence there was little ‘bang for the buck’. I believe that this same lack of planning would be equally detrimental to social enterprises. Using financing to force social innovators to asses and evaluate their long term goals and impacts is absolutely necessary if the field of social enterprise is going to grow in any significant way.