What is the difference between social entrepreneurship and entrepreneurship? Typically, entrepreneurs are beholden to shareholders and must measure their success through company valuation and profitability. A social entrepreneur is a category within entrepreneurs that has the community as their stakeholder, so their definition of success includes how their operations impact this community of interest. Social entrepreneurship focuses on social, cultural, or environmental issues through implementing solutions or creating funds. The key is that there is a focus on helping society, though this doesn’t have to mean the entity doesn’t also benefit, and this concept can be applied to a wide range of organizations.
Social entrepreneurs have a common interest in social responsibility. That means the company should be aware of its actions and be accountable to its customers, stakeholders, and the world at large. There are a few categories to consider for the socially responsible entrepreneur:
Socially responsible business practices can bolster customer trust and public respect, plus impact employee satisfaction and retention. There are a variety of different entity types that can incorporate social responsibility.
The concept of social entrepreneurship emerged in the 1980s and since then, has grown and gained momentum. Decades later, there’s still no consensus on specifics of the concept or categories. Often, any social work or environmental innovation gets put into this definition, as well as any business efforts that seek to do something rather than maximize profit gains. Many people associate social entrepreneurship with the type of entity that the company forms. For-profit businesses are typically structured as corporations, LLCs, or sometimes sole proprietorships or partnerships. Social enterprises are often assumed just to be non-profits, and while this is one option, there are many potential structures depending on the strategic and financial structure and goals of the company. Let’s go over a few different business structures that social entrepreneurship can typically adhere to.
All entities, even non-profit organizations, must generate revenues to cover their costs. There are different options for where they generate these revenues, and non-profit organizations typically choose one of two key options, or a combination of these:
An example of a nonprofit organization is Teach For America, a nonprofit organization whose mission is to "enlist, develop, and mobilize as many as possible of our nation's most promising future leaders to grow and strengthen the movement for educational equity and excellence”.
A big misconception around a Benefit Corporation is that it is the same as a B-Corp. This is not true. A Benefit Corporation is the legal structure for businesses that allows you to put the mission ahead of stakeholder or financial gain. Benefit Corporations are not non-profits, hybrids, or charities. Non-profits may not become benefit corporations unless they switch to a for-profit structure. An example would be Kickstarter, a public benefit corporation based in Brooklyn, New York, that maintains a global crowdfunding platform focused on creativity. Their mission is to “help bring creative projects to life".
An L3C is a Low-Profit Limited Liability Company. This model is for entrepreneurial entities who value purpose and profits. This can be a business that benefits society and also generates profits for its owners. Examples include companies like the Mission Center, a Missouri-based company that provides administrative services to nonprofits, and InterSector Partners, a Colorado company that helps nonprofits achieve sustainability.
These types of organizations can still be socially responsible. A great example is TOMs Shoes, this is a for-profit entity that gives away one pair of shoes for every pair sold, supporting larger health, education, and community development programs through strategic partnerships. To this day TOMs gives ⅓ of profits for grassroots good.
The pursuit of financial gain doesn’t have to be at odds with ethical, conscience-driven action, as shown by the above entity types. A socially responsible business has multiple options for how it might be funded:
Similar to there being many incubator and accelerator programs for emerging startups more generally, there are programs targeted specifically for the fledgling social entrepreneurs. Here are a few examples for you to target as you start your social ventures.
Awareness around social entrepreneurship continues to grow around the world. As more aspiring young entrepreneurs find problems that they wish to solve in the world, they may find that social entrepreneurship is a right fit for them. If you feel a strong connection to social entrepreneurship, continue to do your research and follow the steps necessary to start your journey in social entrepreneurship. LaunchX encourages entrepreneurs of all backgrounds, types, and passions. Many of our alumni go on to make tangible contributions in social entrepreneurship. Join the thousands of innovators and change-makers who make up our alumni community of young entrepreneurs today by applying to our summer program.