Backing success by being 'fair'

In Andrew Mawson's book The Social Entrepreneur, he uses the example of how investors backing science projects did not back those that were researching the most importance subjects (e.g. cancer in children), but rather the best researchers.

By backing the best researchers their investments would ultimately be used the most effectively for the public.

This approach is perhaps not the most democratic way to decide on what projects or communities to invest in, but it does mean that those who can make the most significant difference will be invested in.

It is, after all, people rather than structures and governance that make the difference.

In order to be successful in addressing our social issues, we need to invest in our people, not just in our ideas.

This is what I call a fair approach, when the investment is made in the people first.


Mike.

Moving your charity in to social business

The social business principles make sense when starting from scratch.

But what if you have an existing organisation that is currently being run as a charity?

Below are the ten principles of moving your charity into social business.

1. Start with small changes, but don't lose sight of the big picture

2. Stick to your vision and objectives

3. Change your behaviours to operate as a social business

4. Focus on opportunities within your current proposition

5. Identify the social and financial returns for investors

6. Research and short-list preferred investors

7. Create a compelling investment proposition and sell it to investors

8. Launch your new venture

9. Track and communicate progress to key stakeholders

10. Use profits to invest in new opportunities

Over the coming weeks I'll be writing about each of these principles in more detail. You can keep track via the e-mail sign up page at the top right of this page.


Mike.

Social business investors are paid back

Social business investors can be in the form of social entrepreneurs, corporate organisations (through CSR initiatives), philanthropists, financial institutions including banks and even the Government.

They invest in social businesses to get both a social and a financial return on their investment.

The social return is gained through investing in a social business that is striving to address social or environmental issues that the investor has a interest or concern about.

The financial return is realised through being repaid their investment at market rates.

It is important that the investment is repaid for three primary reasons:

1. The investment can be reused to address other social issues

2. The investors don't get equity in return for their investment, because they don't own the social business

3. The social business operates with commercial business principles and doesn't focus on a donation mentality.

Paying back the investment at market rates means the social business can widen the net of investors to commercial banks and other institutions that are focused primarily on the financial return. This can provide quicker access to funds, and in some cases at better interest rates.


Mike.