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 Aug 20,2010

 G uestAuthor  11 M in Read

[W e have covered SocialEntrepreneurship in depth and here is a great article

w ritten by AartiShrivastava covering the various aspects ofSocialBusiness]

The m ajor boost in socialentrepreneurship w as given by the N obelPrize w inner D r.

M oham m ad Yunus w hen his brain-child G ram een bank becam e successfulin
helping people lift them selves out ofpoverty in ruralBangladesh by providing them
w ith credit w ithout requiring collateral.Yunus developed his revolutionary m icrocredit system w ith the beliefthat it w ould be a cost-eective and scalable w eapon to
ght poverty.It w as soon realized that prots can be m ade along w ith serving the
society,provided you treat prots as a m eans and not the end result.

The im pact ofsuch enterprise largely depend on its successfulim plem entation to
those that need it the m ost,those at the Bottom ofthe Pyram id.And ofcourse a
discussion about the BO P w ouldnt be com plete w ithout m ention ofIndia;w here
hundreds ofm illions critically need a com pelling m ovem ent in social
entrepreneurship to im prove their w elfare.There is a naturalpredilection tow ards
ruralareas as 70% ofthe population lives in the hinterland.Recently,the rural
scenario in the country has em erged as a lucrative option for the m ainstream
econom y.Various organizations are view ing ruralareas as potentialm arkets,
resulting in a gam ut ofinnovative solutions w ithin the socialentrepreneurship
space that focuses on and em erges from ruralareas.

The popularity ofSE is grow ing at a very high pace in India even through the current
econom ic dow nturn.In the last three years m ore and m ore youth are developing
interest in this eld including those from prestigious Stanford,M IT and O xford.This
new evolving eld has also got early venture capitalist interested in funding w ith
m any seeking out such enterprises that hold out huge potential.Earlier,

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organizations solving socialproblem s w ere often assum ed to be idealistic,

philanthropic and lacking business acum en or the ability to be entrepreneurial.
H ow ever,as the socialsector has been com ing in touch w ith the private sector,both
have begun to realize that just one approach either pure philanthropic or pure
capitalist is inadequate to build sustainable institutions.

In recent years,not-for-prothas been pushed to the back partly because of

responsible lenders and socialenterprises are being run m ore like businesses today.
The focus is on enterprising m icro groups w hich w ant to transform their ow n,and
the com m unitys,circum stances but cant access any nance.

Fast com pany in their M arch 2010 listed top 10 by Industry.And four ofthe top 10
m ost innovative com panies in India w ere standalone socialenterprises or have
socially entrepreneurialinitiatives.

In India alone socialentrepreneurship space has a countless m ixture ofm odels w ith
a one billion thinking structure.O ne billion thinking requires cost-eective m odels
involving the bottom ofthe pyram id.The m ajority ofthese m odels are scalable and
replicable.

Com pany

Activities

Im pact

Future Plan

VN L

M akes telecom

70 station in

Replicating and

equipm ent that

Rajasthan

scaling it

helps m obile

w orldw ide

operators reach
ruralm arkets
protably
N arayan

D elivering

5000 bed

H ealth city w ith

H ospitalIndia

aordable

facility

30,000 bed

healthcare to the

com pleted in

facility by 2016

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m asses

phase 1

w orldw ide
A little w orld

Em pow ering

Custom er base

Touch a billion

m icro business

crosses 3

people through

through m icro

m illion

innovative

banking

technologies

Barefoot

solar energy,

1,000 Barefoot

10,00,000 people

College

w ater,education,

experts in

by the end of
2016

health care,rural

1,000 villages,

handicrafts,

reaches

peoples action,

500,000 people

com m unication,

w ith basic

w om ens

services such

em pow erm ent

as drinking

and w asteland

w ater,health

developm ent

care,and
education

Childline

Countrys rst

9.6 m illion

600 + districts by

toll-free

calls,3 m illion

2013

tele-helpline for

children,73

street children in

cities,10 years

distress
BASIX India

Sustainable

O ver a m illion

livelihoods to the

and a half

ruralpoor and

custom er

w om en
CraftsBridge

A bridge betw een

N /A

To tap 6 m illion

custom ers

village people

w orldw ide and

associated w ith

crafts persons,

the handicrafts

designers

sector

Arvind Eye

Elim inating

In last year

To replicate it in

H ospital

needless

alone 2.5

allstates ofIndia

blindness by

m illion patients

taking its services

w ere treated

to ruralIndia

and over 3 lakh

surgeries w ere
perform ed

CO M AT

Em pow ering rural

D eliver Citizen

75,000 by the

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D light

citizens by

records and

creating local

G overnm ent

econom ies and

benets to over

enabling access

50,000 rural

to inform ation

citizens every

and services

day

H igh quality

10 m illion

solutions for

end of2011

50 m illion by
2015

fam ilies living

w ithout reliable
electricity
ID E India

Providing

19 m illion

Ending poverty

long-term

in the developing

solutions to

w orld

poverty,hunger
and m alnutrition
RangSutra

Sustainable

Approxim ate

Em ploy 5000 by

livelihoods for

2500 artisans

2015

W om en

4600 w om en

Plans to em ploy

Em pow erm ent

em ployed

6000 by 2010

Selco Solar

Sustainable

95,000 villages

Bring dow n the

India

energy solutions

covered

cost ofsolar

artisans and
farm ers,by
creating top
quality
hand-m ade
products based
on the principles
offair trade
Lijjat Papad

and services to

equipm ent by

under-served

75% by 2012

households and
businesses.
U nltd India

Angelinvestor

Each ofthe

W orld w here

and incubator for

projects has,on

individuals take

social

average,

action to bring

entrepreneurs

created 1.6

about positive

new jobs in the

socialchange

econom y

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SKS

Sm allloans

5.3 M illion

Take M icro

M icronance

w ithout

Custom ers

nance to every

collaterals

village

Sum inter

Internationally

Prem ium crop

Scale this m odel

India O rganics

certied organic

price to m ore

nationally

agricultural

than 7000

produce

farm ers

Vortex

RuralSolar

750 ATM

Engineering

Pow ered ATM s

O ne ATM / Village
i.e 6,50,000
ATM s

The other notable change is the involvem ent ofm ainstream nancialinstitutions in
socialentrepreneurship.Various venture capitalrm s are investing in for-prot
entities w ith socialobjectives.Interestingly,specialized socialinvestors provide
capital,netw orking,m arketing and business expertise to such ventures.

This trend w as kick-started in the area ofm icronance w hen Sequoia Capital
invested in SKS M icronance.

Socialventure funds m easure their investm ents on social,environm entaland the

traditionalnancialreturns.Acum en fund expects to m ake an im pact on m illion
people w ith every investm ent in a ve-year tim e fram e.The fund m easures returns
in term s ofnancial,operational(internalprocesses and system s)and socialim pact
(outcom e and output).O utput is num ber ofpeople w ho are im pacted and outcom e
is how it has aected them .For exam ple,if1,000 people have had access to clean
drinking w ater,the investors also check ifthe rate ofdiarrhea has com e dow n.M ore
heartening is the fact that the m ainstream venture capitalists are also recognizing
this as a business opportunity.So far,VCs have invested $220 m illion in 77 social
businesses in India.But there hasnt been a single exit.In conventionalcom m ercial
ventures,VCs w ork w ith a holding period of3-5 years.In socialbusinesses,the
holding period is longer typically,6-8 years.

Acum en Fund :It supports sustainable enterprises providing the poor w ith critical
goods and services at an aordable price.Prim ary focus on healthcare,housing,
w ater,energy and agriculture Com panies invested in:12 Fund size:$40 m illion
(approx)

VenturEast:It builds protable businesses that cater to under-served m arkets.

Focuses on m eeting Indias dom estic needs (prim arily ruraland sem i-urban m arkets)
by backing early-stage / rapid-grow th businesses Com panies invested in O ver 50
(including 25 socialenterprises)Fund size $250 m illion

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O asis Fund:It supports enterprises that develop innovative solutions that provide
the poor w ith better access to criticalgoods and services.Invests m ostly equity,w ith
som e debt.Investm ents generally range betw een $1 m illion to $6 m illion
Com panies invested in 4 Fund size $30 m illion (stillraising)

Song:It supports entrepreneurs in high-grow th sectors like education and training,

agriculture and food,healthcare,nancialservices,basic utilities (w aste,w ater,rural
telecom ,aordable housing,etc)that are aligned w ith inclusive grow th Com panies
invested in N one Fund size $17 m illion

Aavishkaar India M icro Venture Capital:It creates sustainable change by

increasing econom ic activity at the bottom ofthe pyram id and boosting the
entrepreneurialspirit.Investm ents to date have focused heavily on the ruraland
agro technology sectors Com panies invested in 17 Fund size Rs 60 crore (approx
$14 m illion)

G ray M atters Capital:It invests in the inform ation,com m unication and technology
space to bridge the urban-ruraldigitalgap Com panies invested in 4 Fund size $12
m illion

Elevar Equity II:It creates m arket-based solutions for poverty eradication.Focuses

on sectors like healthcare,education and inform ation Com panies invested in 1
(another tw o in m icro-nance ventures)Fund size $40 m illion (additional
fund-raising on)

The above gures sim ply state that there is an estim ated $100 m illion (Rs 400 crore)
chasing deals in Indias socialenterprise space.

But there is a divide betw een those that have access to m ainstream and/or
com m ercialfunds and those that rely on personalconnections and
grants/donations to raise m oney.The ratio is about 50/50.

Foreign grants:8%
D om estic grants:8%
D ebt (credit loans):11%
G overnm ent Funding:3%
Charitable O rganization:5%
Bank Loan:13%
Loan from Fam ily and friends:21%
Equity Investors:21 %
O thers:10%
As per Beyond Prot survey,Forty-ve percent ofrespondents obtained funds from

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com m ercialsources w hereas 21% ofrespondents source their funds from personal
connections such as fam ily m em bers and friends;another 21% rely on grants and
donations from charitable organizations.Arranging nances for a socialenterprise
in India is stillvery di cult.And know ing in w hich sector to nance is even m ore
di cult.In bar diagram m entioned below is a m ention ofprotable sectors and a
trend w hich clearly states areas to divert funds.

Education:Sector w ith a track record ofprot:The Education sector has show n a

m arked degree ofnancialstability and grow th potential.There are tw o key
elem ents.First,the sector represents the highest num ber ofprot-m aking
enterprises (38% )am ong others,and also has one ofthe low est num bers of
loss-m aking entities (24% ).Second,the observation says that there is a good grow th
potential;38% ofeducation enterprises are breaking even w hich m eans the
num ber ofprot-m aking enterprises in this sector could increase in the com ing
years.

H ealth:Sector w ith large grow th potential:Although the sector currently produces

a very sm allnum ber ofprot-m aking entities,it has the low est percentage (13% )of
loss-m aking enterprises.M ost im portantly,at 73% ,the H ealth sector has the largest
segm ent ofbreak-even businesses.If/w hen these enterprises begin to turn a prot,
the H ealth sector could sustain a m ultitude ofsuccessful,prot-m aking enterprises.

Rural D evelopm ent:Sector to w atch out for future grow th:D espite the fact that
the largest num ber ofsocialenterprises are in this eld,it is the biggest loss-m aking
sector at the m om ent.H ow ever,RuralD evelopm ent dem onstrated the largest
revenue increases last year,so there could be m ore surprises in store.

There are m ore enterprises that are loss-m aking (34% )than those earning a prot

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(25% ).And 41% percent ofenterprises are currently breaking even.Ifyou look at
the protability by m easure ofyears in operation,you can clearly see that m aking
prot through socialenterprise is no easy task.

It is true that the percentage ofloss-m aking enterprises steadily goes dow n as the
com panies get older.But there is virtually no disparity in the num ber ofprotm aking entities across age categories.M any enterprises stop m aking losses as they
grow older but do not begin to turn a prot;they m erely start breaking even.
Surprisingly,even after 11 years or m ore ofoperations,the percentage ofprotm aking enterprises is only 27% .

Socialentrepreneurship in India is em erging prim arily because ofw hat the

governm ent has not been able to do.The governm ent is very keen on prom oting
socialentrepreneurship not necessarily by funding it or by advising on it or
enabling it.W hat they do do,is not disable it.

For exam ple,in M um baialone,non-prot organizations educate m ore than 250,000

children on a daily basis.The governm ent has not told these organizations not to do
it.W hereas in som e countries,w hen som eone takes it into their ow n hands to start
a facility for education or healthcare or em pow erm ent,the governm ent often puts
in place barriers to prevent this from happening.

O ur country does not have a hom ogenous people or geography,so the im pact
largely rem ains regional.W ith the current econom ic clim ate,it is very likely that
socialneeds w illincrease and,consequently,the num ber ofpeople com m itted to
addressing them w illincrease.D enition ofsocialentrepreneurship has changed
over tim e.From corporate philanthropy to non-prot and now to self-sustainability,
SocialEntrepreneurship has evolved and w illkeep evolving w ith tim e and needs of
the w orld.

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[Reproduced from Aartis blog]

Recom m ended Read:SocialEntrepreneurship Interview w ith D esiCrew [RuralBPO ]

Founder | Interview w ith RangD e Founder (on Business M odel,Startup Journey..and
m ore)

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