There seems to be a make or break moment for a budding social enterprise. According to Jennifer Walske, the program director of the Conscious Capital and Social Innovation program at the University of San Francisco School of Management, it’s scaling the business and impact. “I think there’s risk in scaling,” admits Walske. “And I want my students to understand that risk and have an appetite for risk and feel confident they’re committed to it no matter what, because that is the journey in doing a social startup.”
And Walske certainly would know. She has spent a decade in the innovation epicenter of Silicon Valley, as a managing director for an investment fund. Most recently, she’s taken her expertise from industry to academia and multiple non-profit and for-profit boards.
After gaining her doctorate from Boston University’s Questrom School of Business, Walske moved back to her native Bay Area, California, to work as a senior fellow at the UC-Berkeley Haas School of Business. Soon after, she moved into the director of social entrepreneurship role at the Lester Center for Entrepreneurship and was faculty director of the Global Social Venture Competition. Now she has landed at the University of San Francisco while simultaneously serving as the Social Impact Fellow at Haas.
SOCIAL ENTERPRISE: ‘STILL IN THIS INTERESTING PERIOD OF TIME’
WeSeeGenius recently sat down with Walske in between panel discussions at the Tech4Good conference on March 4th at the University of San Francisco School of Management’s campus. In an in-depth and robust interview, Walske talks about her uncertainty with the stability of social enterprise, what challenges social entrepreneurs will face and her advice for overcoming those challenges.
“I think we’re still in this interesting period of time,” believes Walske. “Is it the new entrants that are going to change the world? Or is it the larger companies that are going to get more of this psychology around it? And for my students, I don’t really care what they do as long as they stay in this (social impact) mindset.”
Walske believes scaling is the crux of a successful business of all sorts–but especially social enterprise. In the interview below she outlines the three most important strategies to tackle the challenge. See those answers and more by clicking on the questions below.Open All Close All
What Laura Tyson (director of the Institute for Business and Social Impact at the UC-Berkeley Haas School of Business) and I have been looking at is the scaling. One of the things that’s been interesting for me to watch in social enterprise is initially it was, what is this new thing? Then it was is this a fad? And I still think we’re trying to prove out if this is a fad or not. But if you look at what’s happening with B-Corp legislation, it’s getting to be systemic.
And also with social finance. My family and I have a foundation, and I was recently approached by Goldman Sachs to invest across ESG (environmental, social and governance) measures. And I’ve had to fire family foundation trust managers just to let me do social investing, because they’ve been so nervous about it. It’s the mindset of you’re supposed to make your money and give it away–you’re not supposed to blend it.
I was just having breakfast recently with Ronald Cohen, who basically founded the social finance movement in the U.K. for writing a case on Bridges. And he said they’ve had more trouble raising money here in their fund than they ever have in the U.K. and he asked why. Culturally compared to the U.K., just as a nation it’s still not clear if you can have these blended measures of value. Do we have to be purely capitalistic and charities do the other piece? It’s so interesting to watch culturally and try and understand where this is going.
I’m gratified to see the big institutions–and investment banking is one of them–start to embrace this as more normal. Overall that’s really good for that movement because it’s blended into big companies. Because big companies can influence huge change and it takes a startup a while to be able to deliver that. I think we’re still in this interesting period of time. Is it the new entrants that are going to change the world? Or is it the larger companies that are going to get more of this psychology around it? And for my students, I don’t really care what they do as long as they stay in this mindset. Even on the board of Net Impact, we say go and work for a big company and change it from the inside out. Because that’s also a huge impact for making change.
I think it’s a challenge even if you’re doing traditional entrepreneurship. I hate to use that analogy but it’s true. Our research shows a lot of traditional entrepreneurial companies fail. I thought it was just social enterprises that had real struggles because of all the issues around organizational form and raising money and trying to do good and does that effect the bottom line–but so many regular businesses have trouble scaling. I think there’s risk in scaling and I want my students to understand that risk and have an appetite for risk and feel confident they’re committed to it no matter what, because that is the journey in doing a social startup.
And I find some of my students either don’t have the appetite for it or they are going to wait until they are ready to do that because maybe they’re in a financial position where they can’t afford to do that. They need to pay student loans. Some are perhaps still sending support to their families somewhere. Here we have a very diverse student body and I think some struggle going home and telling their parents this is what they want to do. Especially when there are huge family businesses to be a part of and there are cultural differences. I have several women from Saudi Arabia. And they’re amazing young women that are passionate. It’s fascinating to see what they can do that’s realistic for them to make change.
We found three things in our research from those that scaled. One is the funding is important. Two is media. And the third one is getting your supply chain right. And those three are the most important for companies to scale–like Revolution Foods–or others that have reached $1 million in equity.
It’s essential to talk about those three in tandem. Funding is important and what most people who have had success in funding have found is that they raise money from whomever will give them money. So don’t be a purist and only take money from social investors. Because, quite honestly, they’re small and their isn’t enough of them yet. Go ahead and take money from VCs. Two of the people in our sample got money from the Draper Richards Foundation. They got $250,000 from Tim Draper and they had to sell him on why this was a great entrepreneurial idea and not talk as much about the social impact. They also received money from social investors as well. And I think anyone who has been raising money in the past 10 years has had to go to both pools because there hasn’t been enough capacity there on the social investors side.
But don’t forget the other two that are really important. Media is hugely important because any startup has to make themselves seem bigger than they are–and relevant and hot and all these things so they can attract money. The other issue is supply chain. We interviewed Embrace, that does infant warmers, we interviewed Delight (Korea-based hearing aid social enterprise), we interviewed Back to the Roots and several other companies. We found it’s really hard to get a cost model that works for your supply chain. It’s hard to figure out how to sell to people and get your supply. But those that were ultimately able to survive had to figure that out, especially if you have a product-based business.
The first thing is figure out a good idea that you personally are passionate about. As I tell my students, it’s a 10 year journey to be successful in a business. If things go well, maybe seven. So you better be OK with that. They shouldn’t just be doing it because there’s a gap in the marketplace. I think social entrepreneurs have the additional responsibility of making sure what they do is truly additive. We don’t need 10 more of something that’s already there. Let’s do something really unique. You’re taking the donor pool and resources away from the larger community so really make sure it’s of value.
The second thing I’d say is figure out your organizational structure. And that depends on your business model. Take Embrace for example, which went and started a for profit arm (Embrace Innovations) because they were creating products and they needed money. Jane Chen (Embrace co-founder) found out it took her six months to raise money as a nonprofit and they didn’t get enough money to run their product testing. So they had to switch their business model, which was kind of complicated to do three years or so after they started.
The third thing is baking your social impact into your business model. I talk to Revolution Foods founders quite a bit about this. They decided what they report and what the social impact measure is early. Because it should be something that’s measurable and part of your business. You have to be building that in from the ground up and collecting that data from the beginning. Because it’s too hard to collect it later.
I hope for business school students this isn’t true, but at the end of the day, they’re still running a business. So they need to have good operations. They need to think about having a diverse team. One of the things we talk about that’s especially hard from a people point-of-view in a social enterprise space is you need to have people who actually connect with the mission. It’s not OK to recruit somebody who just wants to make a lot of money or is looking for a title inflation. And I think that’s why this field gets really tough. But then you look at Google and do they really have 10 hiring interviews to check for culture fit? I think that becomes a conundrum for some. I’ve been on the board of some companies that have been around for a while and they try to recruit great talent because they need to grow to the next level. But at the same time, they don’t want to recruit somebody who doesn’t connect to the mission. I think some of the COs I’m working with are finding if they don’t, those people don’t last. They work there a couple years and don’t find it a comfortable fit.
I’m sitting here at this point, personally, a little flummoxed. I’m not sure. Is it going to become mainstream? Is it going to stand alone? I hope it doesn’t lose its value in the marketplace. That’s the only thing I’d be disappointed by. If it gets to be too hard or too complicated to measure these things and people walk away from it–large companies and startups. That would be a sad day for us as a society.