Crowdfunding Primer for Social Enterprises

Crowdfunding.

Crowdfunding is one way of raising funds from the public or friends, family, customers, and individual investors. This approach helps in getting large number of individual investor through Social media and Crowdfunding platforms and leverages their networks for greater reach and exposure.

Crowdfunding is essentially the opposite of the mainstream approach to business finance. Traditionally, if you want to raise capital to start a business or launch a new product, you would need to pack up your business plan, market research, and prototypes, and then shop your idea around to a limited pool or wealthy individuals or institutions. These funding sources included banks, angel investors, and venture capital firms, really limiting your options to a few key players.

Crowdfunding platform helps the entrepreneur to showcase and present the innovative idea. With crowdfunding, you get the funds from one who is interested in your project which gives them more ways to help grow your business.

Types of Crowdfunding

Unnati: Transforming Lives

Raghunandan, a young lad, in his twenties from Doddaballapur, used to lead a life of struggle.  With no earning members except his father, who is a tailor, he had to quickly support his family of 3 sisters and parents. He was pursuing a Bachelor’s degree in English that he could not complete. All through school, he studied in the Kannada medium, which made it difficult for him to cope up during his undergrad years. At this point in his life, he read about Unnati in a newspaper article and joined its 16th batch.  Raghunandan joined SLK BPO Services back in 2013. Today he has moved on to HR roles in the same organization; earns a decent income and leads a much improved quality of life.

There are numerous such stories of young men and women who have given a new meaning to their lives.

Laxmi's experiences at Unnati
Testimonial of a trainee (click to enlarge)

They have equipped themselves with essential life skills to negotiate a successful path for themselves professionally and personally.  (Find more stories here).  The critical catalyst in this transformation is “Unnati“.

Unnati,an initiative of SGBS Trust, was started in Oct 2003 with the purpose of enabling underprivileged, unemployed youth to get employed. Its purpose of existence is defined as: “To help unemployed youth become employable so that they go from being dependent and discouraged to being Independent and empowered.”

Unnati-Program-Overview “Unnati runs a 50 day vocational training program offered at a subsidized cost to the less educated, unemployed and economically backward youth with an assured job at the end of the training period. Unnati enables inclusive growth by empowering families below poverty line.  Training is offered for the following vocations:

Core Vocations
Core Vocations

Unnati has trained and facilitated employment for more than 10000 youth nationwide since its inception.  It’s 55th batch has recently commenced. If you know of youths who will benefit from this training, you can direct them to the Unnati Center in Sadananadanagar, Bangalore.  Mr. A.S. Narayanan, Trustee and Director, Unnati says, “There are no minimum qualification criteria for the program. All are welcome. The hunger to learn is enough.”    Unnati operates multiple centers across Karanataka, Tamilnadu, Delhi, Maharashtra and Gujarat. It has ambitious plans of scaling across many more locations, including north-eastern states of India.

Unnati is a wonderful example of a social enterprise defining a sustainable business model for profitable growth and transformative social impact. Be inspired !

If you are a social enterprise OR are aware of other impactful social enterprises, please join us on Entirelyso! . You can also write to us on entirelyso@gmail.com.

CSR: A Social Enterprise Ecosystem Enabler ?

On December 13, 2014 the Entirelyso! team organized its first conference ”Dreamer Doers 2014”: a baby step in its ambitious goal of democratizing social entrepreneurship. Besides interesting topics like “Inclusive business” and “need of scale of social enterprises”, we also visited the role of “Corporate Social Responsibility” as an enabler of social enterprises. Intuitively it seems that social enterprises could be one of the major execution channels for CSR initiatives. The thought was further strengthened given the amendment to the Company’s Law, mandating a 2% share of profits to be spent on CSR activities.

CSR-Spend-2014
CSR Spend Analysis of the Top 100 Companies listed on the BSE

At EntirelySo!, we decided to do a quick study of the CSR spend (2014) and CSR activities of the top 100 companies (by revenue) listed on the Bombay Stock Exchange.  Here are the findings:

  • The cross-industry average CSR Spend is approximately 1% of ‘Profit Before Tax’.
  • Yes, ‘Profit Before Tax’ is the realistic metric to be taken to compute CSR spend amount. Once you get into the details of the law, you’ll realize that the term ‘net profits’ actually means the “PBT” and not the ‘Profit after tax’ figure.
  • Only 11 companies, out of 100, were proactively meeting or exceeding the mandated 2% spend criterion. Most of these were Steel companies.  Not IT. Reliance Industries stood out as the biggest spender on CSR with 700 Crores being pumped.
  • In fact, IT and Banking companies came out as laggards in spending. These sectors need to scale anywhere between 3X-9X to be compliant.
  • At least 20% companies had a CSR spend deficit of 100 Crores+.
  • Education and Health were the most popular areas of CSR spending (46% initiatives) while Women Centric initiatives were the least popular (11% initiatives).
AreasOfImpact
Distribution of CSR Initiatives

We did not delve into the efficacy of the initiatives. But from the description, most of the initiatives seem like one of projects which do not necessarily have an impact sustainable over the longer term.

I believe that with the push from the government, corporations big and small have an opportunity to make a phenomenal difference to our society and environment, provided we have the will.  The finance ministry and financial analysts have estimated the total inflow into CSR for FY15 to be in the range of 15,000 crores to 22,000 crores (2.5 – 4 Billion USD).

Instead of opting for a ‘tick-in-the-box’ approach, corporations need to invest in transformational initiatives:  which elevate the quality of life and the state of being to a totally new level.  If even after spending 4B$, we do not see a positive, sustainable change in the economically deprived sections of the society, collectively we have failed … and money is definitely not the problem!!

Social enterprises are for profit organizations which redefine the objective of commercial organizations from “maximization of profits / shareholder value” to “maximization of stakeholder value while ensuring self-sustainability”. Stakeholders include both core and fringe.  RangDe (www.rangde.org) and SELCO (www.selco-india.com) are some examples of successful social enterprises which have achieved significant impact and scale of operations. These and many other smaller organizations can act as execution partners for larger corporations for their CSR programs.  Social Enterprises (SEs) will gain operational and business maturity from such partnerships.  Partnership of social enterprises and corporations on CSR will therefore fuel a positive cycle of maturity thereby continuing to make SEs more mature and operationally relevant for large scale/ large impact CSR programs.  I think it is time Social Enterprises and corporations work on the hurdles that prevent cooperation.