Cultivating an Ecosystem for Social Entrepreneurs

The Role of Investors, Researchers and Philanthropy

With the emergence of the social entrepreneurship sector in recent years, the questions how to further grow the sector and thus scale social impact are becoming more and more important. It is quite evident that social entrepreneurs will benefit from a strong ecosystem that includes a variety of stakeholders from different fields.

The Interactive Session „Cultivating an Ecosystem for Social Entrepreneurs – The Role of Investors, Researchers and Philanthropy“ at the Tecnológico de Monterrey in Mexico City aimed at identifying further insights about the role of effective and efficient ecosystems for social entrepreneurs.

The event had been organized in the context of the publication of „Insights from an exploratory study on social enterprises and social investors in Colombia, Mexico, Kenya and South Africa”. The research scholars Aline Wachner and Tim Weiss from Zeppelin University in Germany shared key findings from their study. In their study they took a closer look at social investors and their partnership approaches related to funding, as well as the capital structure of social enterprises. While social investment funds tend to co-fund with organizations from various sectors, foundations and NGOs tend to co-fund with similar organizations.

Cultivating an Ecosystem for Social Entrepreneurs - Panel discussion.

Cultivating an Ecosystem for Social Entrepreneurs – Panel discussion.

Moreover, they identified a tendency that within recent years, more and more social entrepreneurs had started their organizations with a for-profit structure, rather than a non-profit structure. The finding that the end consumer is the main source of revenues through purchasing products backed this. They concluded with several recommendations: cross-sector collaboration should be enhanced in order to strengthen social entrepreneurs; there is a need for more innovative financing instruments; continuous subsidization is needed in order to reach the poorest of the poor; financing needs to be made available for social entrepreneurs from all educational backgrounds.

The following Panel Discussion brought together experts from different parts of the social enterprise world in order to share additional insights around the importance of ecosystems.

Jorge Camil Starr who has co-founded ENOVA, Rodrigo Villar the Founding Partner of New Ventures Mexico, Katia Dumont the Regional Chapter Coordinator for Central America & Mexico at ANDE – The Aspen Network of Development Entrepreneurs and as a representative of academia, Lisa Hanley, a postdoctoral research fellow at Zeppelin University.

Rolf Huber, the Managing Director of Siemens Stiftung explained more about the empowering people network that has been established with several partners in order to help social entrepreneurs to professionalize their work. He further pointed out, that foundations (especially in Germany) are limited by law and tax regulations when it comes to financing social enterprises through loans and equity.

The discussions emerged around a variety of topics, dealing with questions related to financing, the role of governments and potential tensions related to collaboration and competition.

Access to finance is certainly one of the main topics in the field and subject for major discussions. While many social entrepreneurs highlight a lack of available funding and difficulties in accessing appropriate financing, financial institutions often mention a lack of ready to invest opportunities. As Rodrigo Villar emphasized “there is a bunch of money, but we need to find the right instrument for the right organization”. In addition, Katia Dumont pointed out that there is a need to come up innovative financial instruments and creative ways to get to the social entrepreneur.

There was more or less consensus among the panelists that there is probably enough funding available for the existing pipeline of social enterprises, but certainly not enough funding when it comes to solving all or at least most of the social problems in the world. Slightly in contrast to the common opinion and with a chuckle Rolf Huber stated that he “would love to have much more money for the foundation”.

Based on the statement of Jorge Camil that his social enterprise would always need government support in order to compensate the mismatch of purchasing power of the poor and the costs to operate, the question about the role of governments emerged; whether more involvement of the government is a curse or a cure for the sector. The panelists mostly agreed that the sector needs a stronger involvement of the government. As Lisa Hanley stated: “If you partner with the government you can scale, if you partner you can subsidize or cross-subsidize, so therefore the government is a key part”.

A final topic of the panel discussion dealt with possible tensions between collaboration and competition. It was pointed out that there is generally a strong will for collaboration. While there is certainly some competition among selected players, this is in many cases taking place on a healthy basis.

This interactive session provided an insightful discussion that greatly benefitted from the vast experience and diverse backgrounds of the panelists. They were able to convey insights from their work and furthermore to point out important aspects that need to be considered when creating effective ecosystems for social entrepreneurs.

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