It
used to be that people who wanted to solve a social problem — like lack
of access to clean water or inadequate housing for the poor — created a
charity. Today, many start a company instead.
D.light, a company cofounded by Sam Goldman, who spent four years in the Peace Corps in Benin before earning a master’s degree in business from Stanford University,
is an example. Mr. Goldman started D.light with the mission of
replacing millions of kerosene lamps now used in poor, rural parts of
the world with solar-powered lamps.
Having used kerosene lamps
himself while living in Benin, Mr. Goldman learned firsthand of
kerosene’s problems — it is expensive, it provides poor light and it is
extremely dangerous. When the son of his West African neighbor nearly
died after suffering severe burns from spilled kerosene, Mr. Goldman
said he realized he wanted to create a venture to solve both the social
and economic problems caused by these lamps. His time in Benin also
convinced him, he said, that only as a business could a project become
large enough to reach the great number of people who use these lamps as
their primary source of light.
“We could have done it as a
nonprofit over a hundred years, but if we wanted to do it in five or 10
years, then we believed it needed to be fueled by profit,” he said.
“That’s the way to grow.”
Since the company incorporated in May
2007, it has raised $6.5 million from a combination of investors who,
Mr. Goldman said, are able to push the company on both its social
mission and its profitability.
What to call these innovative
businesspeople is the subject of some debate. The terms “social
entrepreneur” and “social businesses” are generally used to
characterize people and businesses that bring entrepreneurship to
ventures that have a social mission. Yet there are those who would
limit the social entrepreneur label only to those without any profit
motive. A separate, but related, category are companies referred to as
“socially responsible.” These are generally companies whose core
business does not necessarily have a social mission, but who display
socially responsible characteristics, like environmental sensitivity.
Because
of the difficulty of defining these social ventures, it is hard to
gauge the exact number of them, but there are indications that there is
increasing interest in the idea of using business to tackle the world’s
big problems. Last year, 630 people attended a new conference, Social
Capital Markets, on social venture investing. According to Kevin Jones,
the creator of the conference and a principal in Good Capital, an
investment firm focusing on social business, two-thirds of the
participants signed up after the collapse of Lehman Brothers, which he called a sign that people are flocking to what he calls a “new asset class.”
Experts
concede that not all social problems respond well to the for-profit
model. One example could be early childhood education. “If you set it
up as a business, you might be able to raise money more quickly and
grow more quickly,” said David Bornstein, the author of “How to Change
the World” (Oxford University Press, 2004), an often-cited book on
social entrepreneurship. “But if you want to be profitable, you might
find that you have to make choices that diminish the quality of your
program and then children won’t learn to read as quickly. While Stanley
Kaplan can make a fortune selling education to well-heeled people,
providing the same services to low-income kids would probably not
provide a very good income.”
Mr. Bornstein said it came down to
one crucial question: “As you grow, will the economics of your business
work in favor of your mission or will they work against it? In the case
of providing access to solar energy for people in villages, the bigger you get, the cheaper your product will be, so the economies of scale make sense.”
Conchy Bretos, right, advises housing agencies on how to care for older
people in their homes. Her daughter Pilar works with her.
Conchy
Bretos, too, chose a for-profit model for her venture. While working as
Florida’s secretary for aging and adult services, Ms. Bretos learned of
the difficulties that force older people to leave their homes and move
into nursing homes for lack of proper care.
With a partner, Ms.
Bretos started the MIA Consulting Group, a business that advises
governments as well as private housing developers on how to bring
assisted living services cost-effectively to low-income housing
communities so that older people can be cared for in their own homes.
Ms.
Bretos said that a business was the natural model for their venture.
“We came from a strong business background and we developed a business
plan,” Ms. Bretos said. “By doing that, we discovered that we were
offering something that no one else was offering. We got our first
client even before we incorporated and within a few hours we had to
form a company to be able to put together a contract. It was just easy
to form an S corporation.”
Ms. Bretos said she also had to make a
living. “In this nation, we equate success with profit,” she said. “We
wanted to be profitable while also doing something that was right and
giving back to the community.”
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