Money & Finance Opinion

Social Entrepreneurship: Summing Up

February 20, 2008 4 min read
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This is the sixth in series addressing the questions implied by Alexander Russo’s statement.

“Social entrepreneurship is everywhere these days…. And of course it’s a big buzzword in certain education circles as well. I still don’t know what it means.”

In this series of posts, I’ve tried to strip away the vague and overbroad use of the phrase; its applications to intrapreneurship within school districts or dominant publishers, commercial entrepreneurship in public education, and any new nonprofit in public education. This leaves us with two operationally useful definitions, and the answer to Uberblogger Russo’s fundamental question whether “social entrepreneurship” is mostly hype.

My answer:

No. As a new unformed model for social change in general, and school reform in particular, social entrepreneurship is not hype – it has real potential and is worthy of attention, investment and study.

Yes. It is hype in its glorification of the unproved nation–wide company-owned growth model and the transfer of venture-capital objectives and valuations to philanthropy, all at the expense of the local social entrepreneur.
I’ve defined an entrepreneur as:

One who is able to begin and sustain a (business) entity that organizes supply to satisfy a previously unmet demand and, when necessary, to dissolve it effectively and efficiently.

I would define a social entrepreneur as:

One who employing the skills of the commercial entrepreneur, is able to create a nonprofit entity and organize supply to satisfy a previously unmet demand, based largely on fee for service.

The second definition recognizes that commercial and social entrepreneurs bring similar drive and capacities to the enterprise, but that social entrepreneurs lack legal ownership and control. It distinguishes social entrepreneurs from other nonprofit leaders with the former’s interest on dissemination through fees earned from paying clients and ultimately public tax funds devoted to public education rather than grants.

If there is a core of ideas around the phrase, its about people who bring business thinking, systems, analytical techniques, and delivery models to social problems. Getting down to cases – and after separating out the commercial entrepreneurs in public education, it amounts first and foremost to the individuals who formed 3000 independent charters. Then to the small number of people who have founded nonprofit organizations that run charter schools – Charter Management Organizations (Don Shalvey – Aspire, Steve Barr - Green Dot). The balance consists of the handful whose organizations provide schools – charter and traditional, with services including teachers (Wendy Kopp - Teach for America), principals (John Schnur - New Leaders for New Schools), after-school programs (Eric Shwarz - Citizen Schools), and advice (Michele Rhee - The New Teacher Project). Cap the group off with the individuals who founded or run the organizations finance these nonprofits (although this group is better known as venture philanthropy) (Kim Smith - New Schools Venture Fund) and provide them with advice (Jeff Bradach - The Bridgespan Group).

The single most important thing to remember about the objective definition of social entrepreneurship as applied to the real world is that it’s not a proven model. After 300 or so years, there’s is no argument that commercial entrepreneurs can be successful, despite the debatable http://www.allbusiness.com/buying-exiting-businesses/exiting-a-business/110076-1.html but very high failure rate. After a decade, only a few nonprofit providers (mostly former New American School Design Teams) are financially self-sustaining on fees. In the paragraph above, all but perhaps Aspire would fold without their substantial subsidies.

The question of success in social enterprise, and so of social entrepreneurs, remains a work in progress - as to the appropriate balance of fees to grants, and whether that level is achievable. There are two issues here: how little does a public education client have to pay for the nonprofit to be confident of program buy-in, and how much must the nonprofit earn from fees to offer its public education clients quality service when grants are not a reliable source of long term financial support.

There is also a subjective, social definition of social entrepreneur, and this is mostly hype. This reminds me of courses I took on ethnicity and transnational politics studying international relations in college and graduate school. One of the few points that stuck was that people define their own ethnicity and that of others. You are a Palestinian or a Jew if that’s what you call yourself. To others, you are an African-American, whether just flew over from Ghana or trace your roots back to the Amistad.

There are quite a few charter school founders and New American Schools Design Team leaders who fit the objective definition but would not embrace the label. There are quite a few people in education nonprofits who don’t fit the objective definition but enjoy the label. These people know who they are in part because they are recognized as such by those who fund them. If you are funded by New School Venture Fund or New Profit you are, ipso facto, a social entrepreneur. Many in this group would call independent charters “mom and pops’” just as venture capital might discuss the firms targeted in the potential “roll up” of the dry cleaning industry. In short, “social entrepreneurship” is mostly applied in social discourse to describe a club.

And so as the term “social entrepreneur” is employed by the media it is mostly hype. It more likely to be applied to the handful of people heading large nonprofits going for scale (Green Dot’s Steve Barr (1999)) than the thousands of founders of an individual charter school (Shiela Balboni of the Community Day Charter School in Lawrence, Massachusetts (1995)). It accepts the label applied by the in-crowd to itself, rather than an objective definition that might exclude many club members.

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