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.

Using jail to get funding

I've mentioned recently that if donations can be obtained in a low cost, low effort manner, then they may be a good way to supplement your income stream as a social business.

But was the Jail4Bail initiative taking this too far?

Perhaps, but well done to Gerhard Pieterse, who raised more than R600 thousand for some fantastic causes!


Mike.

The power of online communities

I am a strong believer that donations are not a sustainable way to address social issues, but rather through social business.

However, donations, if obtained in a low cost, low effort manner, can still be a valuable supplement to your income stream whilst operating as a social business.

The continuing evolution of the world-wide web is providing ways to do this.

Recently an organisation called Epic Change launched a 48 hour fund raising initiative that raised $10,000. The funds were raised in typically $5 and $10 donations, mostly from people who found out about the cause at the time of donating. They found out through Twitter, the ever growing social media website.

The initiative was called TweetGiving and was a remarkable success.

There are a number of online tools that are available to do this sort of fund raising. Unfortunately most rely on PayPal and Google Checkout for the actual payments, which at the moment do not accept transactions in South African Rands. Hopefully this will change soon, but if anyone is aware of ways to make this work in South Africa, please let me know.

Read more about TweetGiving here: http://tweetsgiving.org


Mike.

Social business is not reliant on donations and grants to survive

Charities are reliant on donations and grants to survive, meaning they need to spend a significant amount of time building relationships to obtain their funding.

Unfortunately there is no such thing as a free lunch.

Charities generally have little control over what funding they get and when they get it. Sure if they are running an effective organisation that is meeting its social objectives, they are more likely to attract developmental funders and philanthropists; but the donations are not guaranteed and when the economy is in a downturn or a commercial organisation is not meeting its financial objectives then CSR budgets and donations will be cut, impacting charities revenue streams.

The fourth key principle is that social business is not reliant on donations and grants to survive, paying back any investment made to the business.

Social businesses have full control of their own revenue stream by selling products and services that cover their costs.

There will be times when external investment is required for social business (e.g. a new business or project start-up), which is the same for any commercial business. It is important that these investments are taken as a loan, and not as a donation or in return for equity which will impact the ownership of the business.

The loan should be repaid at market rates, which will provide focus to operate as a commercial business. The loan interest will be covered by the products and services the social business sells.

Typically the turn-around time for gaining funds via a loan will be much quicker to obtain than a donation or grant, allowing the business to address social issues in a much quicker time-frame.

A challenge now is for organisations addressing social issues in South Africa is to remove their reliance on donations and grants to survive (as identified in my recent survey) and start operating as social businesses.


Mike.