Models
There are many social entrepreneurship models. As noted in the May 2011 issue of Inc., the models include:
Nonprofits funded solely by donations
The revenue comes only through donations from individuals, corporations and foundations. The Soldiers Project is an example.
Nonprofits that have earned income
The revenue comes from donations and an additional revenue source, like a store or door-to-door sales. An example is Homeboy Industries.
Nonprofit/for-profit hybrid
A nonprofit and a for-profit are linked. An example of a nonprofit/for profit hybrid is the Magic Johnson Foundation and Magic Johnson Enterprises. Echoing Green, which provides two-year fellowships and seed funding to the world’s most promising social entrepreneurs, notes that the majority of its fellows create hybrid entities.
Social Benefit (B) corporation
Proves that it cares as much about society and the environment as it does about profits by conforming to established criteria established by a state government. In 2011, the California legislature passed AB 361 which enables businesses to pursue a “material positive impact on the environment and community in addition to maximizing profits.” Such laws also exist in Hawaii, Maryland, New Jersey, Vermont and Virginia. Legislation is pending in several other states. The outdoor gear and clothing company Patagonia has been certified by the state as a B corporation.
B Certified corporation
Has met the rigorous standards of social and environmental performance, accountability, and transparency of the nonprofit B Lab. Apolis Global is an example.
Impact investors
Seek social change and environmental progress in addition to financial returns. The Acumen Fund, which supports businesses in emerging markets with investment capital, rather than grants, is an example.
For-profits with a social mission
Incorporate social impact into their mission. TOMS is an example.
Definitions
There is also a lexicon of social entrepreneurism that is continually evolving. Key terms are:
Conscious Capitalism
An emerging form of capitalism that holds the potential for enhancing corporate performance while simultaneously advancing the quality of life for billions of people.
Crowdfunding
Occurs when online investors, sponsors or donors make financial contributions to fund for-profit or nonprofit initiatives or enterprises. Crowdfunding is an approach to raising capital for new projects and businesses by soliciting contributions from a large number of stakeholders. Indiegogo is an example.
Disruptive Innovation
A term coined by Harvard Business School professor Clayton Christensen that describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves “up market,” eventually displacing established competitors.
Return on Investment
Financial return on investment (FROI) is concerned with cash flow, profitability, balance sheet and other financial results necessary for an earned income strategy or a social sector business to be deemed successful. Social return on investment (SROI) is concerned with the social outcomes of the strategy or business. Environmental return on investment (EROI) is concerned with the environmental impact.
Patient Capital
A long-term investment. As noted by the Acumen Fund, a champion of this method of investment, neither the financial markets and/or charity is enough to solve the world’s problems. Patient capital bridges the gap between “the efficiency and scale of market-based approaches and the social impact of purse philanthropy.” In the case of the Acumen Fund, patient capital is a debt or equity investment in an early-stage enterprise and the return on investment would be made in approximately seven to ten years.
Philanthrocapitalism
A new way of doing philanthropy, which mirrors the way that business is done in the for-profit capitalist world. Entrepreneurs don’t just want to write checks. They want to be hands on, bringing innovative ideas to scale by investing their time and energy. LA's Eli Broad is an example of a philanthrocapitalist.
Social Entrepreneur
A pragmatic visionary who achieves large scale, systemic and sustainable social change through a new invention, a different approach, a more rigorous application of known technologies or strategies, or a combination of these. Muhammmad Yunus, the founder of the Grameen Bank and a pioneer in microlending, is an example of a social entrepreneur.
Social Sector
Refers to what is commonly called the “nonprofit sector.” Other synonyms are "independent sector" and "citizen sector."
Triple Bottom Line
Simultaneously pursues a return on investment in three areas – financial, social and environmental also known as profit, people and planet. The Foundation for Social Entrepreneurs explains this and other key concepts on its website, linked here.