Impact capitalism! Social entrepreneurs getting the upper hand
Social entrepreneurism means running a nonprofit while raising money by selling a product instead of relying on donations and grants.
The Elevating Impact Summit on Monday Feb. 13 was put on by Portland State University's School of Business Administration. Now in its fourth year, attendance and the mood of the event showed how popular social entrepreneurism has become with younger generations. After being asked to stand up, around half the crowd was high school- or college-aged.
As one panelist, Ross Baird of Village Capital, put it, "Ninety percent of our investors under 30 are more motivated by the mission than the paycheck."
Baird has spent years working with "impact" investments, which is jargon for companies that do some sort of social good rather than just aim for profits and pleasing shareholders.
Social entrepreneurism is still a marginal business concept. The conference goal was to explore "entrepreneurship and innovation for positive social, environmental and economic impact." But as co-organizer Abby Chroman, Project Manager, Impact Entrepreneurs at PSU, put it, "People are here to network. The event is not just for business owners. The tools from across industries can be effective in addressing complex social problems." She explained that architecture, design, international
development, nonprofits, business and academia should pool their ideas and cross-pollinate to come up with new ways to solve problems.
Out of Africa
A typical problem well-meaning westerners try to solve is bringing clean drinking water to the estimated 1 billion people who don't have access to it.
"I went to Rwanda with Engineers Without Borders, and I was the thing I am now trying to reduce the effect of," said Evan Thomas, a professor in the Thermal & Fluid Science Group at PSU. He went into it thinking about water filters and "chasing Rotary Clubs" for their donations, then realized he needed to "get smart" about public health, and then about policy, "or at least learn some of the words."
Now he is trying to use all those disciplines together, and has formed Globalpdx.org to prevent other nonprofits wasting their energy reinventing the wheel. It calls itself "a consortium of Oregon-based international development organizations whose aim is to increase the effectiveness and impact of our members through networking, training, collaboration, coordinated research and mentorships."
Thomas added that in a typical business model you have a product and a customer, and a feedback mechanism, so you soon know if the customer is happy or not.
"In global development you don't have a feedback mechanism." He said if you are distributing bed nets to fight malaria or dealing with water sanitation issues, your customer is often the World Bank or USAID — not the end user. And then you get into endless arguments about process.
"Half of water installations fail 18 months in," he said. "The incentives are aligned with pitching new products not long-term commitments in partner communities. We should be incentivized to deliver water — not for drilling wells."
Another example he gave was the billions of dollars in aid spent on digging pit latrines to combat open defecation in rural communities south Asia, only to find that people don't use them.
Friends with Benefit Corps
Co-organizer Abby Chroman stressed to the Business Tribune that young people are looking for professional pathways to social entrepreneurism.
"Instead of asking 'What can I do in my career?' they can say 'Even if I want to be a scientist or business person, those don't preclude me having a positive social impact. It doesn't have to be your side project. You can volunteer in your extra time, and combine those and have a career of social impact. For example, leverage your skills as a lawyer without abandoning your career. You do your 60 hours a week of legal support and then volunteer five hours a week at a legal clinic."
Those short of time can also be intrapreneurs, working in a big company where they are given time and money to try new things.
Lawyers are a common group who suffer from burnout, seized by the desire to do something meaningful, even if it means making less money.
During the pitch competition (five minutes, one slide, $1,500 cash to the winner and free coworking space at CENRTL Office for all) Amanda Caffall of the Catalyst Law Institute talked about how unjust it is that poor people cannot afford basic legal services, and also how many lawyers drop out of the field and take corporate jobs. As well as providing sliding scale legal services, it trains qualified lawyers for three years in a specialty fields and pays them around $50,000 a year.
The Shark Tank format of competitive pitching to a panel of experts captured the entrepreneurial spirit of the room. With their wild valuations and vague promises, they were part of the entertainment. For example, CINCH makes the CINCH pod, a coffee-cup-sized cylinder into which outdoors people can put trash, especially when cleaning up after others out in nature. The latex top has soft grooves to keep hands clean when picking up items. The unique selling point is that it is made from plastic waste picked up on beaches in Haiti.
Another handy gadget was the JikoPower, a device that creates electricity when teamed with a cook stove.
Marine Wiley is the cofounder of Seattle-based JikoPower, "a triple bottom line clean power company." She pointed out that women in a Maasai tribe in Kenya cook over kerosene stoves, which are unhealthy, and while 80 per cent of Kenyans have mobile phones, only 20 percent have access to electricity at home to charge them. Now instead of wasting time to fetch firewood they walk for hours to charge smart phones. JikoPower is meant to be an earner. The owner uses microloans to afford the $50 device. Then she bills her neighbors a few cents to charge their phones. Wiley said the gadget should pay for itself in two to three months. According to Wiley the customer would pay $100 or $150 for the gadget for its timesaving and convenience, but they are keeping a two-tier pricing system so as not to exclude the very poor.
Just as Puralytics offers a water filter for well-heeled campers and a larger, cheaper light activated filter for developing nations, so JikoPower offers the Spark version to campers. Companies have to make their money where they can.
Another pitcher was Ground Up PDX (see sidebar) which takes a designer product — at $16 for a 12oz jar it's the Salt & Straw of nut butter — and uses it as platform to help formerly homeless women find work. The project is similar to Central City Coffee, the homeless service provider's way of getting people who like fine coffee to help people living on the streets.
Abby Chroman cites Dave's Killer Bread, the company that goes out of its way to employ formerly incarcerated people, and Health Leaves of Rhode Island. The latter was started by a medical student who realized that pneumonia medication was being wasted on low-income people who had no heating or the means to cook a hot meal— they were just not getting better. "These were recurring problems related to lifestyle," explains Chroman.
Medical students performed lifestyle interviews with patients in their doctors' waiting rooms (which didn't take up much time) and figured that to prescribe heating blankets, fresh food and gas subsidies worked out cheaper than continually prescribing pneumonia medication.
The program spread to other states because it was accountable to the patient rather than to shareholders, but the bottom line was kept intact.
"Social entrepreneurs are looking for systemic change. They aren't out to alleviate a symptom but the cause," said Chroman.
Riva-Melissa Tez is a co-founder at Permutation Ventures, working with venture capitalists and institutional investors in funding transformative technologies. She specializes in artificial intelligence and machine learning - and she wears her learning on her sleeve. She talked about how her degree in philosophy made her question assumptions and systems.
"Technology is pragmatic philosophy," she declared.
She studied systemic failures in the justice system as well as quipping about Silicon Valley's penchant for "bros funding bros," a new term for the old boy network.
While visiting her father in the hospital in Britain (he was in a coma for a month) Tez decided to study hospitals, since it was so difficult to get answers from his competing caregivers. "Acquiring knowledge in healthcare is difficult because of legacy systems and their complexity," she said.
She learned that doctors need help getting the latest information from the web, just as patients do. And that doctors still use paper and pen because it's quicker than opening up a tablet. "I used to be 'Yeah! Let's automate everything!" Now she isn't. "I made my dad's surgeon an advisor of our fund. We need front line people, because impact is often quite counterintuitive."
Nut butter baroness
After overseeing production for 31 Bits Designs, a company that employs women overcoming poverty by selling their beaded jewelry, Sullivan started an employment training program for women in Uganda.
She now works at Ground Up PDX which makes flavored nut butters (no peanuts) such as lavender honey and coconut cardamon.
Ground Up PDX rents commercial kitchen space on the Central Eastside. Sullivan and Ground Up's founder Carolyn Cesario practice social entrepreneurism by taking in two formerly homeless women and training them for six months.
"In Uganda I saw a gap in employment for women in poverty or in transition, even if you have the will to work but lack the skills," Sullivan told the Business Tribune. "So at Ground Up the goal is to train them in the skills (food processing, order fulfillment, sales, marketing, administration, and general life skills like appearance and punctuality) and help them transition to full time employment."
Right now they have two interns they found through Outside In Teen Services.
"We're giving them an opportunity to hone their strengths. Outside In refers people when they think they are ready to take the next step. The training is a big deal, and so is our being able to provide a reference. A big piece for these women is missing confidence."
Cesario also worked in Africa. She worked for Eko Designs in Uganda. Eko means laughter.
GroundUp is mostly sold at farmers markets and by monthly subscriptions, although they are trying to develop some wholesale accounts.
As a tiny operation that rents its equipment, they are looking at getting funding to purchase their own nut butter making machines. When they started, they were working out of her home with a Cuisinart making two jars an hour. The machine they want costs $13,000, so they're using a giant food mixer for now.
They have already partnered with Dress For Success, which collects lightly-used business attire for women to wear to interviews and new jobs.
Sullivan says Cesario was making nut butter for fun but would not have tried to expand the business without the social impact element. She was interested in more than profits. "And we didn't want to be a nonprofit that relied on donations. We had to be confident the product could sell on its own," Sullivan says.
As with most emerging consumer products, the story is half of the pitch, and in this case the "hiring homeless women" meme is written on the jar, along with the hashtag #spreadgood. On a recent evening at the Portland Night Market, which is filled with handmade items from designer smores to pour-over coffees as well as jewelry and accessories, Ground Up PDX had a constant line of people wanting to taste the goods and hear the story. The $16 a jar price tag did not seem out of place.
She studied Business and Sociology at college in Whitworth in Spokane Washington. There she got the bug to travel and try and do some good and came up with the Uganda plan. And she learned the importance of training schemes.
"Living in Uganda solidified it, seeing the impact at 31 Bits Designs.
Sullivan, 26, says she was no stranger to volunteering, as her family did it when she was growing up. She started in middle school and continued in Beaverton High.
"I had a blessed upbringing, my parents were pretty involved. My dad was on some nonprofit boards so I grew up going to fundraisers."
- Jay Harma of Pax Scientific told how on learning the whirlpool is a very common figure in nature and is almost frictionless, they invented a 4 by 6 inch motor which could stir an entire 40 million gallon water storage tank. The result was better distribution of purification chemicals, leading to an 85 percent reduction in their use. And all with a 300 watt machine.
- Vishnu Swaminathan of the bank Ashoka, talked about how rats have been trained to smell land mines. "They are so light they don't set them off, unlike dogs," he reminded the crowd. "But then it was taken a step further. Tuberculosis patients' sputum smells of tar, and rats can detect it very early on in the disease. Rats as health workers! They've early-detected 40,000 people in two years." His point was that the breakthrough often comes first and the business model, or money-generating use, follows later.
Henry Thomas and Hannah Rosenbaum were there with a party from Riverdale High School which is near Lewis & Clark College.
"We're taking Econ so this is an interesting perspective, I didn't know much about it before," said Rosenbaum. Her mom owns a clothing website and her dad owns a company for promotional products, She is starting a clothing website called Elizabella with her mom.
"A lot of the stuff we're learning is economic theory, but coming here we get to see how it directly translates to the real world," said Thomas. "I'm interested in the financial side of biotechnology, investing in startups." So he wants to be a venture capitalist?
"Something like that. I have a couple of friends who are working on starting their own fund. I'm a senior, they are two freshmen in college."