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Phase: Applause

Evolver: An accelerator for social enterprises

Accelerators give startups a rocket boost in the development of their product or service. Where better to site an accelerator for social enterprises than in a struggling city? The perfect place to try out social business concepts locally.

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23 21

Written by DeletedUser

[Evolver 2.0: A update based on all the great comments and links below.] 

Social enterprises are commercial business which also try to solve a social or environmental problem. I write about technology, and high-tech startups in particular, and accelerator programs are a popular way for new startups to get seed funding, mentoring and access to investors. The only accelerator program (not incubator) I could find that does something similar for social enterprises is run by The Unreasonable Institute ( http://unreasonableinstitute.org/). 

An influx of young entrepreneurial talent, at least a subset of which should be able to apply their social enterprise concepts in the local city, would surely be beneficial.

In most high tech startup accelerators, the founders come to live in the city which is the base of the accelerator for 3 months and work intensively on their product or service. Some accelerators have follow-on programs which encourage founders to stay for longer. Most accelerator programs are privately funded, for-profit businesses which supply the following to the participating startups:

- A cash investment of up to 15,000 EUR (5,000 per founder), i.e. enough to get the founders through the 3 month program, in exchange for equity - typically around 8% of the company. 
- Shared office space for all the startups in the current batch. 
- A structured program for accelerating the development of each business. This is usually based around mentors in the form of entrepreneurs, investors, PR firms, legal advisors, sales experts, etc. 
- Sometimes free access to services like software, legal advice, HR advice, etc. 

What this accelerator adds to the formula is the following:

1) Focuses on for-profit, social enterprises. 
2) Uses the city itself as a testing ground for the social enterprise concepts.The city could share its top 5 challenges with the accelerator as well as (ideally) access to relevant data, people and infrastructure relevant to those challenges. 

I don't think this concept will work for every city. It will take something more than investment and cheap real estate to attract and retain young entrepreneurs in the city - a fantastic music or art scene as in Berlin, great people as in Ireland, etc. 

What resources (money, time, people, technology, etc) will your concept need to be successful?

1) Leadership: The people leading the accelerator should preferably have a personal connection to and love for the relevant city as well as relevant skills. Former entrepreneurs, investors or executives with a big network would be suitable. 2) Seed funding: Funding for the accelerator's investments in the startups. Mostly this is raised privately, i.e. not government money, since the accelerator itself is a for-profit business. 3) Access to cheap or free real estate: The 10-15 companies participating need office space. Support from the city government or enterprises would be handy here. Nokia, which is in the process of closing down their development centre in Copenhagen, gave Startup Bootcamp some of that space for free. 4) Founders: A sufficient number of high-quality social entrepreneurs whose businesses are relevant to the city's problems and who are willing to participate in the accelerator. 5) City resources: Access to people running city government employees, programs, city data, etc. relevant to the challenges the startups will help tackle. 6) Corporations: Participation from relevant local businesses and corporations could help, e.g. give free services or access to their sales channels. In Dublin, for example, you have IBM's smarter cities research centre. Corporations are also possible future investors or acquirers of the participating social enterprises.

What steps could you take to implement this idea today?

Get feedback from social entrepreneurs and city governments to see if this idea is actually viable and what they would change in the concept.

How can your idea be scaled so that it's implemented in cities around the world?

Accelerator programs like Techstars, IBM smartcamp and StartupBootcamp are already in multiple cities. The latter went from 1 to 5 cities in less than 2 years. However, as I mentioned above I don't think this idea works for every city. There needs to be something unique in the character of the city itself, Berlin is an example, which draws in founders.

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23 comments

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DeletedUser

Ciara, I think the keys to running an accelerator like this in Detroit or a similar setting as opposed to in an already vibrant city (as exists in some of the links provided) are 1) immediate need in the surrounding environment, and thus easily-reachable test sites, and 2) simplification of the logistical/administrative issues mentioned by Ayoub below. I imagine finding cheap, abandoned office space to share, for example, would be fairly easy, and the surplus of labor in Detroit (both unskilled to, say, work as clerks in a service business, and skilled, say, to provide legal advice) also makes it an attractive venue.

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DeletedUser

Hi Clara,
I love the accelerator idea.

I would encourage you to take a look at StartX, the Stanford Startup accelerator. It started as a startup itself, that helps accelerate all types of companies related to Stanford students. These companies include social enterprises (such as 6dot), or companies with a social vocation (such as Carbon Lighthouse).

In my experience, there are two great contributors to an accelerator's success:
1) Mentorship of entrepreneurs:
Entrepreneurship is a lonely job! On the one hand, you have to show a strong and confident face to investors, partners, and employees. On the other hand, you are confronted to one issue after the other, many of them affecting your ideas, the product you are developing, the livelihoods of your teams, or even your own resources.
Mentors can help you navigate this environment. They will point you to the right resources, pick you up when you are exhausted, and maybe sometimes pat your back when you do a good job.
While it is helpful to have experienced people as mentors, they can also be peers, or any people who are not fully invested in your idea, to give perspective.

2) Administrative and logistics support:
Entrepreneurs take an idea and make it real. Regardless of the beauty of the idea or the product, there are inevitable steps to go through, and they are generally unpleasant: find office space, hire a lawyer, setup a bank account, incorporate, pay bills, manage time and agenda, find meeting rooms, buy software licenses etc...
All those are necessary steps regardless of the size or development stage of the venture that are not particularly related to an enterprise's value proposition. There are economies of scale for them (e.g., legal services, shard office space, shared printers, group).
In this perspective, it makes sense to have them as part of the support offered by the accelerator.

Hope that helps!

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DeletedUser

Hi Ayoub, these things are definitely part of the concept although I should probably flesh this out more, in particular the second one. I agree that these issues are a pain for most startups including social enterprises.

Any ideas on issues specific to social enterprises especially related to 2) I'm pretty familiar with the tech startup and startup accelerator worlds but not so much with social enterprises, so I don't know all the issues.

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DeletedUser

Hi Ciara,

I can think of a few challenges related to social enterprises, and the support they may need:

1) Funding:

The amounts and timings of funding available for social causes is often irregular and may seem disorganized. They come as very large endowments or commitments to established institutions (e.g., the SEED donation to the Stanford GSB for innovation in developing economies), or in focused donations to certain causes (e.g., donations for research into cardiac transplants), or in small amounts from a multitude of sources (e.g., a kickstarter campaign, or private donations).

Additionally, social enterprises may have longer times to break-even, or lower returns in the short term, and may need funding terms that are different than the standards of regular enterprises.

In this perspective, in addition to traditional accelerator funding support, it may be helpful to provide social entrepreneurs with knowledge and skills to raise funds differently:
* What are the "free" funds available (grants, philanthropy, crowd sourcing)?
* What are the appropriate sources of funds relative to the cause advocated, or the amount of funds needed, or the model (non-profit v/s for profit), or the timeline?
* What are the impactful stories and pitches that appeal to funders of social enterprises?
* What are examples of similar social enterprises that can be used as role models?
* Could the social enterprises in an incubator "pool" funds to reach a critical amount/ return that would interest traditional investors?

2) Business model:

It may be helpful to offer social entrepreneurs tools to help answer questions around their business model and operating model such as:
* Are there special business models for social enterprises? Under which conditions do traditional business models and operating models work in social enterprises?
* Should it be a profit or not for profit organization?
* Should there be a revenue center that subsidizes the costly social part or should it be a fully sustained and profitable enterprise?

These tools would include decision frameworks, former success stories and setbacks, prototyping and survey tools, etc.

3) Team:

Social enterprises are often mission-driven organizations, in addition to being profit-driven. While mission and profit can overlap, some challenges may create tensions within the organization.
Below are examples of such challenges, and possible trade-offs between them:
* Profit-driven organizations seek the most competent people in their fields. Mission-driven organizations require key team members to be committed to the mission. Should the social entrepreneur compromise on one of these aspects when building her team?
* How will performance be managed, and what would the main performance drivers be related to? (profits, mission, other?)
* When a very committed team member is not performing well, how does the social entrepreneur let him go without compromising the mission?

Managing trade-offs on the team's objective, performance, and processes may be different in social enterprises than traditional ones. In an incubator for social enterprises, it would be helpful for entrepreneurs to share their experiences and knowledge, and test one another's assumptions, and maybe even share some of the trainings, conversation facilitators, etc.

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DeletedUser

Clara,

I think this is a great idea as accelerator programs have shown much promise in recent years.

I think there is a lack of support for social enterprise in general--even in larger cities where you would expect, such as NYC where I live. It's a fragmented arena and rallying people across the sector is challenging.

I do think drawing people to places like Detroit will be the initial hurdle. I also think if you are able to do so, there needs to be a real effort to create community among the classes of entrepreneurs that come for the same duration not only while they are there, but after they leave or continue to a different venture.

Good luck!

Best,
Katie

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DeletedUser

Hi Kathryn, based on the other accelerator programs I have seen, one of the founders benefit a lot from being in a peer group who are facing the same issues and problems. They help each other out and form great relationships that persist past the end of the program. If social enterprise, in particular, is fragmented then this could be a big draw.

In addition once you have had a few cycles, accelerator alumni become a great resource for the new crop of startups.

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DeletedUser

Hi Ciara,

There is definitely a growing need social enterprise accelerators! A bunch of great links have already been provided. I would like to add the StartingBloc Fellowship and Institute for Social Innovation which educates, inspires & connects emerging leaders to drive social innovation across sectors. I was fortunate enough to be a part of the New York 2011 class and highly recommend this to any aspiring socent! www.startingbloc.org

This link is also a 'Mega List of Incubators for Socents:
http://compassioninpolitics.wordpress.com/2011/03/14/mega-list-of-incubators-and-accelerators-for-social-entrepreneurs/

Best regards!!
Jamie

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DeletedUser

Thanks Jamie. Checking these out now..

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DeletedUser

Great idea! The Greenlight Fund is a similar concept in Boston that identifies a need within the city and then looks for organizations to support locally or models nationally that can be implemented locally to fill the need.

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DeletedUser

Nice Sarah. I like the idea of the city posting its top 5 problems, let's say, and then the accelerator looking for startups who think they have a relevant product/service.

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Photo of Arjan Tupan

Great concept, Ciara. I think in Europe we have quite some cities that need a bit of revitalizing, and an abundance of talent. I'd like to see this combined with some sort of European network, so that people can learn from eachother. Another thing that might interest you is Garage 48: http://garage48.org/

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DeletedUser

Hi Arjan, Thanks for the link. Will definitely check that out.

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Photo of Vincent Cheng

Ciara, I really think you're onto something here!

Detroit seems like a great location for a social entrepreneurship accelerator, with both high needs & lower costs of experimentation/living.

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DeletedUser

And a great music scene :)

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DeletedUser

Hi Ciara,
About the problem of social entrepreneurs not staying on permanently... what if the accelerator were to bring in out-of-town talent to partner temporarily with local organizations and social change agents. Rather than founding something new, they could work with those already there to start up new projects or just to inject some new vibrancy into ongoing endeavors. I would suggest perhaps thinking about combining your concept with Fred's Collaborative Approach.
http://www.openideo.com/open/vibrant-cities/concepting/revitalizing-detroit-a-collaborative-approach/
Just a thought...

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DeletedUser

Hi Rose, you are right. It's not necessarily a big problem that they leave as long as they make an impact and get things moving while they are onsite. However, the founders participating should still be trying to create commercial businesses for themselves as well as contributing to society/the city. That's what makes this different from just doing pro bono or non-profit work. A business that scales can be the best way to benefit as many people as possible as quickly as possible. It also gives the investors the motivation to provide the seed capital the accelerator needs.

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Photo of LaTeisha

Thanks for posting, Ciara.

For social enterprise accelerator programs, you may want to check out the Unreasonable Institute ( http://unreasonableinstitute.org/ ).

This concept could invite a number of other social entrepreneurial resources to be tapped into as inspiration or partners. Some that quickly come to mind:
http://the-hub.net/ & http://www.goodcap.net/
http://www.startingbloc.org/
http://www.echoinggreen.org/
http://netimpact.org/
http://www.williamjamesfoundation.org/
http://www.presumedabundance.com/
http://www.pipelinefellowship.com/home/
http://www.fastforwardfund.org/
http://www.cdvca.org/

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DeletedUser

Thanks for the links - interesting stuff. A few of them like presumed abundance I know, for a lot of them I didn't.

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DeletedUser

Good links, LaTeisha. It's a great idea, Clara, and a lot of people talking about social enterprise incubators these days. If you want to flesh out the concept, there's a lot more research you can do. And a lot of existing resources to think about tying together.

Creating a system of SocEnt support organizations that help social entrepreneurs along at different stages and with different needs (legal, marketing, financial advice, etc) would certainly be welcome to any social entrepreneur I know. If the city took initiative to put those things in place, like a pipeline social entrepreneurs could rely on, it would be gold.

If you wanted to create something like that, I'd start by mapping out all the existing support resources you can find out about that currently exist and treat them all like they're in one city. Then identify the gaps of services and support that aren't yet met. Maybe this could be the start of an alliance of SocEnt support groups coming together in Detroit to test out a cohesive network all in one city.

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DeletedUser

Hi Dave, Good suggestions. I could combine the kind of support that startups usually get in an accelerator with any specific resources that social enterprises need and combine them into one "supercelerator"

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DeletedUser

The main success of the accelerator programs is the original seed funding, and company valuation (170K / 3M at Ycomb). Without seed funding and company valuation, accelerators become incubators and rarely work. What I think works better is something like the Kinect Accelerator http://www.microsoft.com/bizspark/kinectaccelerator/ . Here an invested entity - Microsoft - takes an internal product and provides pre-seed funding and pushes them towards both a valuation and external investment. This is a great idea, and that's how City's should manage it.

For example, NYC could have a waste management accelerator, that takes a portion of NYC waste expenditures and opens it up to a competitive R&D process. I myself did my graduate thesis at Cornell on NYC's sewage system, and I recommended a distributed tertiary sewage treatment system. With NYC's help, I may have been able to develop a business model that could have not only attracted City funding but also funding from other municipalities. And this final leveraging to other Cities would have been the key to long term success.

If Bill and Melinda Gates think this is a good idea with Toilet 2.0, then perhaps Bloomberg and others may be willing to follow suit.

More info on Toilet 2.0
http://www.grist.org/list/2011-07-20-toilet-2.0-will-turn-waste-into-energy-fertilizer-and-clean-wate

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DeletedUser

Hi Carlo, This concept is an accelerator - therefore it definitely involves seed funding (as described above) and companies with a commercial as well as social return. I'm a tech journalist as well as someone who has worked in startups so I've seen quite a few different ones.

A corporate accelerator might work if the company is already present in a city but I was thinking more an independent accelerator (although corporate sponsorship could definitely be a plus).

But I like the idea of a themed accelerator addressing the particular concerns of a particular city like your waste management one. Startup accelerators are starting to move in that direction as with Techstar's cloud program. "Social entrepreneurship" is quite a wide brief after all.

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Photo of Meena Kadri

Nice one, Clara. To help folks grasp your idea you might want to give an example scenario or two to show the journey of a specific social innovator through your proposed startup accelerator. And maybe you'd like to give it a catchy name too? :^) You can make updates to your entry at any time using the Update Entry button up there on the right. With more than 3 weeks left in the Concepting phase – we're looking forward to seeing discussions grow and your ideas evolve.

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