Success Breeds Success – Is it always so?

I would also refer to Tom Reis, Kellogg Foundation saying: “Everyone is willing to back the already proven horse, but very few are stepping up and taking the early-stage risks that not only would really help these social entrepreneurs, but also are part and parcel for investors who truly want high social and financial returns. High risk, high rewards – isn’t this the game we are supposed to be playing?”

Why success should always be followed? Does that bring the real feeling of accomplishment or achievement? Does success always breed success? Are new things always a failure?

Following an already successful venture may be a good option for most of commercial investors but that surely is not the best for social investors. Social entrepreneurs are expected to be the “very few”, as termed by Mr. Reis, who actually innovate, take risks and usually are the real winners and contributors to the development of a society at large. For a social entrepreneur secure stream of profit should not be the sole influence for investment rather there are multiple factors that should make foundation of an investing decision by a social entrepreneur, which include expected rate of success of the venture; extent of its impact; level of expected sustainability; and above all degree of importance and urgency need of the social problem the venture is going to address.

Financial sustainability is very vital for any social enterprise but at the same time social entrepreneurs must keep this in mind that the category of a social enterprise would be intact only till it could differentiate it from a pure for-profit commercial organization. The two cannot or should not operate on the common values and objectives when it comes to investments and profits. Primary focus on profitability could limit the innovative capacity of social entrepreneurs to solve social problems and will restrain the investors from investing in social ventures that are new and risky. What would that achieve? – Nothing!

For social enterprises, the phrase “the higher the risk, the higher the return” is not limited to its money meanings only but has a much larger interpretation in terms of social contribution and impact, which is the primary most objective of a social enterprise. Successful social entrepreneurs judge their investment options much differently than commercial investors, and if they do not do so they cannot be identified as “social entrepreneurs”.   

The for-profit commercial industry is full with examples of failed-diversity-ventures by very successful corporations, resulting in substantial losses to the investing stakeholders, which confirms that even for the for-profit sector success does not always breed success, so why to expect that from a not-for-profit social enterprise. There are always risks associated with investment options be it a new venture or an already successful one, but one fact remains universal – higher the risk, higher the return would be. Mind you, the word “return” should have very different meanings to a social entrepreneur.  

Ref:

The Funding Gap by Michael Chertok, Jeff Hamaoui, and Eliot Jamison (Stanford Social Innovation Review Spring 2008)

http://www.digitaldividedata.com/media/pdf/DDD-Stanford-Social-Innovation-Review_The-Funding-Gap-Spring-08.pdf