VA
Insights

China is still far from being a fairyland for social investment. Despite of significantly increased public acceptance of the concept and explosive increase of social enterprise start-ups in last 5 years, current social enterprise sector still faces a big challenge for both social entrepreneurs and social investors: how to scale up.

For example, after 3 years of initial success in launching its social business, a Beijing-based social enterprise is fighting against its stagnant business this year. Some core corporate clients start turning to new NGOs after last year’s partnership. The more diversified product portfolio is challenging the already constrained cash flow. Also, a few founding team members left, leaving the social enterprise in low morale.

Such case is not uncommon in China. Among the 50 or so award winning social enterprises that VA has evaluated, 60% of them raised the issue of how to “make next step”, after they survived first 3 years. The common challenges are:

• How to inspire a team to thrive along with social entrepreneurs
• How to compete with other business professionals when servicing clients
• How to advance SE model from selling products to providing solutions and building long-term partnerships

In VA’s view, the above operating challenges are closely associated with social entrepreneurs themselves:

• Many social entrepreneurs came from NPO background – running non-profit is vastly different from running a “profitable” business. Success of business is not just relying on “social impact”, but also on “sustainability” of its financial model
• Many social entrepreneurs were good at “creative ideation” and “obtaining supporting resources” but not on “execution” and “resource management”. Social entrepreneurs should get out of their comfort zone of “envisioning”, but translate a vision to “strategy”, “actions” and “results”
• Many social entrepreneurs are great “individual contributor”, but not necessarily a great team leader who knows how to motivate and delegate. Being a good “key account manager” is different from a business developer

What is worth of noting is that those are also top concerns for impact investors when they evaluate the potential investees – after all, investing a start up company is not too far from evaluating the entrepreneur.

Scaling up social enterprises requiring a breakthrough, not just in the business model, but more importantly, in the social entrepreneurs’ thinking paradigm, and their way of acting and achieving results. More specifically, a ready-to-scale-up social entrepreneur needs to have three key qualities as follows:

• More than just a good story teller, but be solid on actions
• More than just an social impact achiever, but eye on financials
• More than just a hero, but a leader

In VA’s views, what makes “social entrepreneurship” exciting, is not just in the business, but also in the transformation of a person to a leader. The “transformation” from “social” to “entrepreneur” will be exciting.

Get prepared.