Social Investment Manual // A Guide for Social Entrepreneurs

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The basis for this manual was laid at a social entrepreneurs gathering during the World Economic Forum’s Annual Meeting of New Champions in Tianjin (China) in September 2010. Thirty social entrepreneurs in the Schwab Foundation community came together from all continents to share their current challenges and deliberate how these challenges could be addressed by pooling their shared experiences and leveraging the Foundation’s networks.

Subsequently, several task forces were formed to address these common challenges. The task force on social investment quickly caught the interest of further members within the Schwab Foundation community, which comprises 200 of the world’s most advanced social entrepreneurs.

The Schwab Foundation recognizes that social enterprises span the spectrum of grant based to financially self-sustainable to profitable. The social enterprises in the Schwab community are classified by one of three business models (leveraged non-profits, hybrid non-profits and social businesses). The majority of Schwab social entrepreneurs (70%) either has a hybrid or a social business model and could therefore benefit from different debt and equity structures to expand their impact.

Most of the entrepreneurs participating in the social investment task force had collected experience with social investors. They have gone through long negotiations and learning processes to access debt or equity capital for their organizations. While networks like the Global Impact Investing Network (GIIN), the Aspen Network of Development Entrepreneurs (ANDE) and the European Venture Philanthropy Association (EVPA) provide opportunities for the social investors to exchange experiences, few, if any investees had exchanged notes with fellow social entrepreneurs.

The task force therefore set out to assist fellow social entrepreneurs on the path into the social investment space with this manual. The decision to engage with social investors, as is any decision by the founders to share responsibility and ownership of their daily operations and results of their organization with external stakeholders, is one that must be well researched and the implications carefully considered.

We hope that this manual provides the basic toolkit for social entrepreneurs to begin these conversations, not only with prospective investors, but also with themselves. Social investment can offer entrepreneurs the chance to scale up and out their impact exponentially, but it can also lead to unintended consequences, such as a change in strategic direction, a divergence from the original values and mission, or a loss of control over the organizational culture and direct engagement with the community it is serving. Given this, the need for a manual is ever more important for social entrepreneurs.

It is our hope that the Schwab Community of Social Entrepreneurs will embrace both the challenges and opportunities represented by the social investment space, and will use as a launching point this guide and the work of this taskforce. With this, we can deepen our understanding and widen our use of the practices and metrics of social investment. Given the rapid evolution of this field, the task force welcomes continuous feedback and insights from entrepreneurs to incorporate in the guidebook.