Social enterprise and risk capital
4:54:00 PM
Can a social enterprise be successful and attract investors?
On the 6th of September at the New World Street Festival, Tallinn Helpific* tour within the framework of a discussion group, brought together employers, entrepreneurs, investors and non-governmental organizations to work together and find answers to the questions of whether social enterprises can be successful? And under what conditions it is possible to combine third sector with the private sector and attract investors and venture capital.
Beginning with mapping the definition of social enterprise and the way it differs from traditional enterprises. Estonian Network of Social Enterprises (hereinafter SEV) chairman Jaan Aps suggested that social enterprise has set a legal goal of making something better in society, and has a sustainable business model for profit. Estonian Business School (hereinafter EBS) docent Mari Kooskora agreed with him, in the words: "The most important thing in social entrepreneurship is to solve social problems and make the social pain points to business - and so it is quite useful for the society, and other businesses."
Chris Holtby, UK Ambassador to Estonia, participated in the discussion and shared the experience of the United Kingdom, stating that in the last 10-15 years, a group of people has been able to develop social enterprises to sustainable businesses, but it is not enough. "The government can help, for example, by reducing the tax burden, and we hope that the Estonian government will do the same here, amending the way in which public contracts are made. It creates social values, and the company can more easily get contracts, even though it might not be just the cheapest bid, " said Holtby. He added that in distincting companies should avoid discrimination against usual companies and properly express itself - the benefits to society a social enterprise offers, is better than a small amount of income.
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| The benefits to society a social enterprise offers, is better than a small amount of income. |
Social policy lecturer at Tallinn University and Helpific co-founder Zsolt Bugarszki stated that discrimination against social entrepreneurship is caused by low income: "It seems to me that here in Estonia the term social has negative connotation. There are social enterprises and so-called ordinary businesses and a social enterprise is like a second hand business. " On a long run maybe it would be better not to make any difference between enterprises and social enterprises. He added that he likes the aim of social enterprises - to help those who are vulnerable, and at the same time you can change the values and taxpayer-funded welfare solutions to something more sustainable.
Then they proceeded discussing the question whether NGOs could be successful startups and whether it is possible to combine the third sector and the private sector and attract investors and venture capital. Ott Pärna from Estonian Investment Corporation said that we need to solve the sustainability problem of the social entreprises. "As a development economist, I see that non-profit organizations that are principally engaged in charity work, are completely different-minded than capitalists. How to connect two different characters? This could be done in such a way that they both surround the social problem, and solve the company’s sustainability, " said Pärna.
Siim Lepisk, CEO of equity interest free financing Prototron, found that non-profit organizations and capitalists do not conflict with each other, because funded startups are also solving someone's problem, while they make profit. "It's not really a capitalist attitude, but rather similar as NGO," said Lepisk. Representative of Ideesahtel, Jana Kukk, said that such funding is required, but agrees similar with Pärna that small non-profit organizations' way of thinking differs quite a lot from those of large enterprises and have difficulties to cope with even the most common business models.
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| To investors is also important the passion of the team that attracts investors to contribute financially. |
Non-profit business acumen to resolve the incompetence emerged also in discussion, highlighted in a number of variants - SEV Chairman Jaan Aps suggested that there should be more joint events to raise awareness of businesses and NGOs. EBS docent Mari Kooskora brought up a solution, which is the Master of Business Administration students' involvement in non-profit organisations. "NGO leaders are really interested in Business Administration MA students and how to engage entrepreneurial spirit - it's quietly been going on." To this solution, Ott Pärna brings parallel of Americans, who are operating as freelancers and have a good understanding of ecosystems that can be connected, because they have the opportunity to work with various non-profit organizations and for government and enterprises.
Lecturer Zsolt Bugarszki highlighted that the 19th century concept of capitalists is changing, taking for example of modern sharing economy. "They empower ordinary people - as Uber drivers only need their own car, they don’t need to set up the taxi business." Teacher follows with interest the carmaker Tesla activities and outlines how they lose 4,000 dollars with each sold car, but at the same time the money flows from investors to the company - Tesla promises for a different future and everyone wants to participate. It was commonly agreed that, for the investor the product or service, profit, and the opportunity to promote society, is essential, but equally important is the passion of the team that attracts investors to contribute financially.
Discussion was summed up by the ambassador Chris Holtby, who said to prepare a lesson that social entrepreneurship is difficult, but fortunately there are those who assist them. "Estonia has Heateo Sihtasutus, where people are willing to give their time and expert opinion - but not the money. You can use it to build a successful social enterprise. Of course it is also necessary to enhance the overall system. England has created a more acceptable system - the system will try to help social enterprises, but here it's in the beginning. The government and local authorities, which can provide social benefits, have not yet been drawn into this. It is time to encourage them, " said Holtby.
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