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Social Enterprise, Startup, and The Future Of Doing Business

According to Paul Graham, the Startup guru at Y combinator, Startup is all about growth. Something that is growing exponentially or that has the potential to grow manifold can be termed as a startup. Since the idea of exponential growth is attached, it is easy to understand that startups will usually deal with not-so-common ideas.

On the other hand, Social Entrepreneurship (SE) is about doing business in a profitable manner, while continuously trying to improve and benefit the society. Since Social Enterprises are business ventures, they are different from Charity and can grow and sustain independently out of the proceed it generates from its daily business transaction.

So, it is apparent that Startups can be social enterprises and vice-versa. In fact, that is the current scenario of UK’s small business landscape. A staggering 70,000 social enterprises are living and breathing in the UK, while many other new ventures are being launched every day. The Social Enterprise Survey, a publication by Social Enterprise UK, noted that a third of all social enterprises working in the UK are startups.

So, Why Social Enterprise?

The Social Enterprise UK described in their FAQ section of the website as follows:

[blockquote]Social enterprises trade to tackle social problems, improve communities, people’s life chances, or the environment. They make their money from selling goods and services in the open market, but they reinvest their profits back into the business or the local community. And so when they profit, society profits.[/blockquote]

So, it is evident from the above statement that when a founder is committed to making the lasting impact in the society through his venture, Social Enterprise, as a business model, is a good choice for her.

Social Enterprise is about Business Model Innovation

Different types of organizations are morphing themselves into social enterprise. Here are a few examples:

Social enterprise and startup

It is evident from the above that Social Enterprise is about innovation in the business model, this is not a sea-change in the way businesses are working now. To address this innovation, UK legislation has even allowed forming a new type of company namely Community Interest Company (CIC).It’s a type of limited company that is regulated so that a business’ assets are protected from being sold privately, and it cannot deviate from its social mission.

However, in Britain, there is scope of launching a Social Enterprise in other popular formats such as sole-proprietorship, partnership, or regular company.

In Bangladesh, there is no CIC type format allowed in business acts. However, we can expect to see some changes in legislation as advocacy for Social enterprises are going on and government policy makers are heard following through in the same tune in latest Social Enterprise Forum organized by British Council lately.

What's in it for Startups?

Forbes noted that “Today’s young people are as concerned with making a positive impact on the world as they are with making money. A whopping 94% want to use their skills to benefit a cause. Meanwhile, only half of Americans have confidence in the free market system, down from 80% just 15 years ago. Against this backdrop, social enterprise has taken off as a new formula for success, combining capitalism with a do-gooder mentality.”

Founders across the planet are seeking a purpose to their lives along with making money in their ventures. When it comes to Social Enterprises, young founders also have the chance to make other’s life meaningful, through their ventures.

Besides these intangible perks, there are positive PR and media attention that social enterprises receive continuously, also help spur their customer acquisition and let them get along easily when it comes to regulatory issues.

Consumers are also actively seeking products and services from socially responsible companies. Buy Social is a dominant consumer trend in the UK, where consumers actively seek products and services from a social enterprise against regular business.

Social enterprises in the UK receive significant tax benefit and other regulatory support. UK legislation introduced Social Investment Tax Relief to encourage investment in social enterprise. Though there is no such benefit in place in Bangladesh for now, large-scale social enterprises like Grameen Bank are enjoying significant tax benefit. It is possible that Bangladesh will introduce different tax relief measure in near future following the example of the UK and other countries.

When it comes to funding, impact investment across the world is beefing up. In Bangladesh, we are seeing launch of agriculture impact fund “agri-business booster” recently. We can expect to see such investors in another sector as this matures.

Scale: Startups and SEs

In recent Social Enterprise Forum held in British Council, Dhaka, Dr. Ananya Raihan, CEO of Dnet said, “Profit is what drives scale, and scale is what makes an impact. Impact without sustainability and scale does not make sense! Talking about profit is never a crime, it shouldn’t be. Create value, make money, and grow.”

This exactly highlights the thinking of traditional NGOs and charities that never focused on scale and now there is a major change in their mindset. This was also echoed by Naveed Akbar, Head of Strategy, Enterprise, BRAC, Bangladesh when he said, “Small is beautiful, big is necessary”. So, the question of scale holds same meaning either for startups or SEs.

So, as a startup founder, if you want to make a profitable business along with your intention to pay back to the society, Social Enterprise is the idea you are looking for.

Nezam Uddin is a Co-founder at Future Startup and looks after finance.

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