Capitalization%20cycle

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Introduction to Social enterprise Loic
Comolli NESsT Nairobi, Kenya February 9, 2007
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NESsT Mission

• NESsT is dedicated to finding lasting solutions
  to systemic poverty and social injustice through
  the development of social enterprises --
  mission-driven businesses that increase the
  financial sustainability and social change impact
  of civil society organizations.

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About NESsT Four Initiatives

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NESsT University
NESsT Venture Fund
Promoting accountability, innovation, leadership
and professionalism in the field
Philanthropic investment funds supporting social
enterprise portfolios in emerging markets.
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NESsT Marketplace
NESsT Consulting
Providing professional services in social
enterprise development
A global on-line shopping directory of social
enterprise products services
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Venture Philanthropy
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Engaged Philanthropists

• Limited portfolio of organizations
• Focus on one or two issues
• Want lasting relationships with NGOs and to make
  a significant impact on organizations (at all
  levels)

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Engaged Philanthropists

• Engaged in organization as volunteer (Board,
  expert advice, etc.)
• Multi-year support
• Build organizational capacity (systems, admin
  staff, policies)

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Definition of venture philanthropy
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Business Advisory Network
Expertise
Networks
Funding

• Strategy
• Marketing
• Fundraising
• Finance
• Accounting

• New programs
• New countries
• Specialized expertise

• Multi-year
• Co-financing

NESsT

• Specialized expertise
• Training and advice

• Feasibility studies
• Business plans
• Trainings and advice

• Business plan funding

Social enterprises
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Social Enterprise
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What is Organizational Sustainability?

• Organizational sustainability is not strictly a
  financial consideration
• Financial sustainability is only one of several
  factors contributing to a CSOs overall
  sustainability and
• Self-financing is only one factor contributing to
  overall financial sustainability and
  diversification.

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Organizational Sustainability
Financial Sustainability
Organizational Sustainability
Self-Financing
Organizational sustainability
Organizational sustainability
Organizational sustainability
Financial sustainability
Financial sustainability
Financial sustainability
Self- financing
Self- financing
Self- financing
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Organizational Sustainability
Strategy/Strategic Plan
Social enterprise
Fundraising
Social enterprise
Fundraising
 
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Typical NGO FinancingThe Short-Run Approach

• short-term project cycles
• limited, competitive pool of donor resources
• difficulty securing core operating resources
• shifting donor priorities

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More Sustainable NGO Financing The Long-Run
Approach

• more steady flow of secured income

• diverse funding sources,
• decreased dependence

• more unrestricted income

• ability to think and plan more long-term

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Social Enterprise Definitions

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Social Enterprise Definitions
Hybrid Spectrum
NGO with Income Generating Activities
NGO Enterprise
Socially Responsible Business
Corporate Social Responsibility
Traditional NGO
?Mission Motive ?Stakeholder Accountability ?Incom
e reinvested in social programs
Profit-making Motive? Shareholder Accountability
? Profit redistributed to shareholders ?
SourceAlter, Kim, Social Enterprise Typography.
The Inter-American Development Bank, Washington,
DC, 2003.
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What is Social Enterprise?

• - an activity providing products or services
  through an on-going, professional business
  strategy
• a deliberate business activity launched following
  rigorous feasibility evaluation and planning
• - an entrepreneurial income-generating activity
  designed to strengthen -- in a significant manner
  -- the mission of the organization.

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Social Enterprise Methods
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Social Enterprise Methods
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NVF Later Stage Portfolio La Morada Santiago,
Chile
Mission Committed to confronting patriarchal
power relations and public policies in Chile in
order to overcome gender discrimination, change
sexist practices, and improve the quality of life
for women. Social Enterprise Psychological
Attention Center through differential rates,
provide psychological attention services mainly
to women from mid to low income levels, with the
objective of reaching and consolidating their
operations by breaking even, retaining a strong
and experimented team (shifting from a fee to a
salary structure).
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Spectrum of NGO Social Enterprise Activities
Related to CSO Mission
Unrelated to CSO Mission
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Social Enterprise Definitions
Social Enterprise Archetypes

Embedded
Integrated
Complimentary
SourceAlter, Kim, Social Enterprise Typography.
The Inter-American Development Bank, Washington,
DC, 2003.
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Social enterprises can help organizations
increase social impact

• Enterprises provide funding to the nonprofit
  organization
• They also create opportunities to support the
  mission through a business
• Jobs for disadvantaged populations
• Improvements in the environment

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Benefits of Social Enterprise

• Increased income
• Diversified revenues
• Greater flexibility
• Improved overall organizational performance
• Positive impression on donors
• Strengthened board
• Increased visibility
• Increased self-confidence

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Later Stage Portfolio Central Europe
Vydra
Vydra (Slovakia) www.vydra.sk
Mission Preservation of local traditions,
culture environment in rural Microregion,
Cierny Hron. Social Enterprise With support
from NESsT, Vydra has launched a "Tourist Camp
(café, cultural, environmental recreational
events) in the Vydrovská Valley to encourage
tourism, create local employment opportunities,
and sustain itself.
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Goals will not be met if the enterprise is not
well planned!

• However, social impact will decrease if the
  nonprofit is not healthy and/or the enterprise
  does not match the needs of the organization.
• If the organization is not currently sustainable,
  the focus on the enterprise will further dilute
  its impact
• If the enterprise does not fit with the current
  mission and culture of the organization, it will
  also limit the overall impact of the organization

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Benefits of Social Enterprise

• Not appropriate for all nonprofits
• Its not easy
• Not for nonprofits that are in a financial crisis
• Not a way to get quick money
• Not risk free
• There is no recipe
• Can cause internal conflicts

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Comunidad Terapeutica PeñalolenSantiago, Chile
Social Enterprise Gardening services. Creation,
maintenance and cleaning services for public and
private gardens and parks, employing
beneficiaries.
What went well Gain a contract quickly and gave
stability and income to a group of beneficiaries.

• What went wrong
• Underestimated operational issues and costs
  related to transport.
• Didnt consider importance of productivity level
  vs. capacity of beneficiaries
• Didnt plan on permanent supervision and
  associated costs
• Legal and administrative problems due to lack of
  planning

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Examples from Sports Organizations
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National Council of Sports Uganda

• Focus Organizes national schools and
  institutional championships. A total of 26
  national events are held each year.
• Income generation Council has a sports complex
  composed of a club house, indoor courts,
  guesthouse, and hostel.
• Club house
• Indoor courts
• Guesthouse/hostel

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National Council of Sports Uganda

• Financial history
• 5 years ago 100 government-funded
• 2006 35 self-financed

• Cost recovery programs
• Souvenirs sold at national championship events
  (t-shirts, caps, etc.)
• Schools/districts/clubs pay participation fees
  for the national events
• Once they have reached certain target usage,
  national associations pay small fees to use the
  facilities

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Sports in Action Zambia

• Focus Empowerment of youth, children, women, and
  the disabled through sports.
• Income generation
• Consulting sports trainings on sports for
  social change programs. Also consult on how to
  organize sports events.
• Transport rents out truck and bus.
• Young Farmers Club through Sports capacity
  building in farming and linkages with
  supermarkets to sell produce sustainable program.

• Self-financing
• 2006 45 of budget
• Plan to scale up activities to pay salaries and
  administrative expenses

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Other Examples

• sports events
• T-shirts
• township tours
• manufacture and sale of sports equipment
• sports tourism
• workplace trainings on HIV/AIDS
• job placement agency

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Enterprise Development Process
Organizational Readiness Are we ready? Is
this the best moment? Are we committed? Timing
2/ 4 weeks
Feasibility Is the business worth pursuing?
Business Plan How can I implement this
business?
Pre-feasibility Is the idea worth
investigating in-depth?
Timing 2/ 4 weeks OVERVIEW
Timing 2/ 3 months IN DEPTH
Timing 2 months

• It is risky to skip steps in this process
• putting significant effort/resources into a
  business not appropriate for you
• starting a risky business that does not meet your
  financial/mission goals
• Objectives minimize risk build on previous
  stage acquire a methodology and build capacity
  within your organization