Imagine a geeky dude, along with a bunch
of friends, sitting in his dad’s garage, coding away to glory, struggling to
make ends meet. And something radical happens one fine morning, an angel
appears and they get rich. This bootstrapper is now a Silicon Valley funded company.
Wikipedia defines bootstrapping
as, “Bootstrapping usually
refers to the starting of a self-starting process that is supposed to proceed
without external input.” In my opinion, bootstrapping refers to a
relatively new organization, operating on a shoe string budget, firefighting with
the marketplace and related stakeholders, to make an impact – economically,
socially or otherwise.
Entrepreneurs, social, silicon valley or otherwise,
have managed to bootstrap relatively easily by pooling in resources from
friends, family, venture competitions, and sometimes unique crowdfunding
campaigns. However, the funding gap magnifies multiple times over when the
social enterprise wants to scale vis-à-vis when a profit making companies need
to grow. Though Digital Divide Data from “the Funding Gap” [1] is one case in
point, there are explanations why numerous other such enterprises are stuck in firefighting
mode. Limited number of funders in the space, social enterprises not fitting the
traditional profit or not for profit mode, reservations of commercial funders
and trusts/foundations, fewer robust models to measure impact etc. are just a few
to name. However, in the light of these factors, there seems to be an underlying
pressure to create new efficiencies while meeting investor expectations. And this
is a complex matter.
Social entrepreneurs, by virtue constantly
trading off between social and financial returns, are wary of measuring social
value. The strategy that helped them grow ground up doesn’t necessarily assist
them in scaling. When you’re starting off, the idea seems exciting, the energy
is high, and there are measurable results for a relatively small dataset.
However, as the bootstrapper increases beneficiary tallies, it finds itself
compromising on key objectives, and making trading offs that are not always
effective. In the fear of keeping the conversation with potential investors going,
the social entrepreneur finds herself handing the drivers wheel to the venture
capital/investor/foundation in question.
Case in Point: The Covenant Centre for Development [3],
a not for profit that started off in the drought prone areas of Tamil Nadu state, India. Their initial aim
to provide sustainable livelihood options in these areas culminated in the then
bootstrapper implementing multiple number of programs relating to medicinal
plant growing, small farmer sustainable agriculture, Self-Help group lending
and relief support for backward communities. Though their initial plan was to
develop a successful medicinal plant unit, investor whims directs them towards
a series of high funding yet low/no impact projects. Currently, a training unit, an ailing
medicinal plant and a part-functioning mango-pulp factory lie dormant amidst
flowing funds and newer projects.
Though this is an
extreme case of a naïve and a terrified entrepreneur, the urge to satiate the investor demands without foresight in to long term vision can severely dilute the value of a growing social enterprise. Hence a reasonable
question to ask is, is it always good idea to “skate to where the puck is going”?
[4] http://venturebeat.com/2015/09/19/4-lessons-on-switching-from-bootstrapped-to-vc-funded/
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