Social entrepreneurship: Startup challenges with added value - Activate World

Social entrepreneurship: Startup challenges with added value


social entrepreneurship

Dr. Thane Kreiner, Executive Director, Miller Center for Social Entrepreneurship, Santa Clara University

I lead Miller Center for Social Entrepreneurship at Santa Clara University. Our mission is to accelerate entrepreneurship to end global poverty and protect the planet. We align our work with the United Nations Sustainable Development Goals and Pope Francis’ encyclical, Laudato Si’, with a particular emphasis on women’s economic empowerment and creating resilience to climate change in poor communities.

Miller Center has accelerated more than 1000 social enterprises in 100 countries. These enterprises have collectively raised nearly $1 billion to scale their impact and improved, transformed, or saved the lives of over 380 million people living in poverty.

As co-architect of Miller Center’s award-winning Global Social Benefit Fellowship, I have the honor of accompanying Santa Clara University undergraduate students who work in interdisciplinary teams on action research projects for social enterprises that have participated in our accelerator programs. Ten of our Fellows have won Fulbright awards and three have been named valedictorian.

I recently published my first book, Composition of Life, a memoir of science and spirituality.

Before joining Santa Clara University in 2010, I was start-up CEO for four biotech companies, three of which survive, one acquired by a major pharmaceutical company. Prior to launching new ventures, I spent 14 years in various roles building Affymetrix, the pioneer in whole genome analysis.


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Social Entrepreneurship: Startup Challenges with Added Value

Applying entrepreneurial principles to serve the poor and protect the planet is the definition of social entrepreneurship at Miller Center for Social Entrepreneurship, Santa Clara University. Dr. Thane Kreiner, executive director, discusses the Global Social Benefit Institute for accelerating for-profit, nonprofit, and hybrid social enterprises. Our conversation explores the business model of social entrepreneurs – persevering through challenges to achieve greater social and business value.

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Transcript

Social Entrepreneurship: Startup Challenges with Added Value

Dr. Thane Kreiner, Executive Director, Miller Center for Social Entrepreneurship, Santa Clara University

Jon Mertz:          00:03          Welcome to the Activate World Podcast, a series on how business leaders have more power to solve societal issues than any elected official. We explore business activism with substance and depth of thought.

Jon Mertz:          00:20          As we continue our exploration of different business and organizational models, we’re joined today by Dr. Thane Kreiner, Executive Director at Miller Center for Social Entrepreneurship at Santa Clara University.

Jon Mertz:          00:31          Welcome to Activate World, Doctor Kreiner.

Dr. Kreiner:        00:33          Thank you very much, Jon. It’s a pleasure to be with you.

Jon Mertz:          00:36          Tell us about your background and what led you to Miller Center for Social Entrepreneurship.

Dr. Kreiner:        00:41          Yeah, that’s an interesting question. After I finished my undergraduate degree in chemistry at University of Texas, I came out to California to study neurosciences at Stanford. And my goal was to understand how the human brain worked and why some people think and behave differently than others. But at the time, the reductionist approach to biological sciences was very much in vogue, and I ended up studying peptidergic secretory vesicles in aplysia californica, which basically means I was looking at one neuron at a time and looking at how different neuropeptides were packaged and how those controlled behavior.

Dr. Kreiner:        01:22          And I had a really phenomenal experience. My thesis advisor was a young investigator who was a natural leader. I tried to recapitulate that during my post doc at U.C. Berkeley but my principal investigator didn’t have those leadership talents. And I realized while I was there that some of those were innate to me, so I decided to go back to Stanford and get an MBA and moved over to the biotech sector with the hope of applying biomedical research to improve the quality of people’s lives.

Dr. Kreiner:        01:54          So I spent about 17 years in biotechnology, 14 of them at a company called Accumetrics, which pioneered whole genome analysis, which has radically transformed the way that we understand diseases like cancer, immunological disorders, and so forth. And then I started on several enterprises on my own, one in regenerative medicine, one in cancer drug discovery, and one in the human microbiome. And that was a lot of fun being an entrepreneur, but at the end of the day, a CEO of what I call a traditional Silicon Valley enterprise, your primary job is to maximize returns, profits, for the venture investors. And while I understand that that is how the system works, it was not particularly compelling to me to make money for other people.

Dr. Kreiner:        02:50          So I started imagining what else I might do with my background in both science and entrepreneurship, and this opportunity at Santa Clara University arose to head what was then the Center for Science Technology and Society. What attracted me to Santa Clara was our accelerator program, GSBI, Global Social Benefit Institute, and the notion that Silicon Valley executives like myself could accompany leaders in ventures that were serving the poor and protecting the planet.

Dr. Kreiner:        03:20          So I joined Santa Clara in 2010. I’ve been there about nine years now, and it’s been an incredible and amazing journey so far.

Jon Mertz:          03:29          How do you define social entrepreneurship?

Dr. Kreiner:        03:32          Well, there are many, many different definitions for social entrepreneurship out there. And I think it’s important to differentiate entrepreneurship from capitalism. Capitalism is the accrual of capital wealth accumulation, as it were. Entrepreneurship is really more about recognizing opportunities, being able to assess them, applying innovative skills, using many what we would call “frugal” innovation skills, resilience tenacity, leveraging resources that don’t belong to you, maintaining a focus but adapting to conditions of any people you’re trying to bring these inventions or technologies to. That’s classic entrepreneurship.

Dr. Kreiner:        04:15          Social entrepreneurship is all of those things plus more. And I think that’s a really important point is, entrepreneurship is challenging. I’ve done it myself, I can say that. Social entrepreneurship is much more challenging because on top of all the other entrepreneurial characteristics, there’s also unequivocal commitment to creating social value.

Dr. Kreiner:        04:38          Osberg and Martin, Sally Osberg and Roger Martin defined social entrepreneurship as disrupting unjust social equilibrium to create more just ones. The working definition that we use at Miller Center is really applying entrepreneurial principles to serve the poor and protect the planet.

Jon Mertz:          04:56          I know there’s nonprofit, for profit, and hybrid models of social entrepreneurship. Are those the three primary ones?

Dr. Kreiner:        05:04          I think classifying social enterprises based on business structures that are derived from the economic systems that we all live in is certainly one way to approach it. And Miller Center is somewhat agnostic as to whether the social enterprise is structured as a for profit, a non-profit, or a hybrid model. In fact, we often see that as social enterprises move through our accelerator programs or enter different stages of their growth, then they adopt elements of more than one of those models.

Dr. Kreiner:        05:38          And that’s exactly what happens with hybrid models where services that we would classically think of as social services, humanitarian aid for example, rescuing people from human trafficking, may be done by a non-profit arm of a social enterprise, but the for profit element of the social enterprise then provides livelihood skills training to those people, enabling them to engage in a dignified livelihood, while the for profit enterprise generates a surplus that can help fund the non-profit part of the organization. So hybrid models bring together elements of both non-profit and for profit models.

Dr. Kreiner:        06:20          But there are new models emerging too where, I’m sure you’re aware of benefit corporations, B Corp, where the primary goal is to generate benefit. They may generate some return, but unlike classical for profit businesses where profit maximization has been the maxim for 20 or 30 years, benefit generation is a core part of the returns and it’s built into the mission and the charters of the company.

Jon Mertz:          06:48          It sounds like it can get complicated. It also seems like benefit corporations are just another type of social entrepreneurship. Would you agree with that?

Dr. Kreiner:        06:55          It can be. And you’re right, it is complicated, and I don’t think it’s the predominant factor in determining whether an enterprise is a social enterprise or not. The structure is not the predominant factor in determining whether an enterprise is social or not. The predominant factor is the mission and starting with an impact model. What kind of impact do you want to generate in the world? And the business model is basically how are you going to do that.

Jon Mertz:          07:21          How does social entrepreneurship play out in larger corporations versus startups?

Dr. Kreiner:        07:25          There has been a lot of discussion in recent years about social intra-preneurship, where large corporations launch programs basically that have an intention to generate impact. Large corporations often are very structured and have a lot of rules and processes that need to be followed, whereas startup enterprises, there’s a lot more freedom in determining what direction you’re going to go and how to bring all the resources together to make things happen.

Dr. Kreiner:        07:56          So it can happen. Social entrepreneurship can happen in any size organization, but the conditions have to be right.

Jon Mertz:          08:03          You mentioned earlier the Global Social Benefit Institute, or GSBI. Tell us more about that.

Dr. Kreiner:        08:09          Sure. GSBI, Global Social Benefit Institute is an accelerator program that actually started in 2003. The genesis of it was the observation by several faculty members in our business school, Leavey School of Business at Santa Clara University, that a lot of innovations meant to address at the time. The Millennium development goals were not getting to significant scale relative to the size of the problem.

Dr. Kreiner:        08:36          So you might have an awards banquet where someone was honored for creating a new safe drinking water filter that used silver impregnated rice husks, but if you look back three years later, only 5,000 people had access to that safe drinking water filter, which is literally a drop in the bucket compared to the 1.1 billion people in the world who don’t have access to safe drinking water on a reliable basis.

Dr. Kreiner:        09:01          So these faculty asked whether or not we might be able to, through a structured curriculum help the entrepreneurs figure out an app to scale their impact, how to achieve what we call operational excellence, which you can measure by lowering the cost per beneficial outcome whatever that is, and then also formulating what any reasonable impact investor would consider a justifiable ask for an appropriate form of capital to scale the impact.

Dr. Kreiner:        09:33          So let me break that down a little bit. The way that we actually work is we select social entrepreneurs for our GSBI accelerator programs depending on what the programs are, they might be sector focused or geographically focused. And then the social entrepreneurs are matched with mentors, usually two mentors per social entrepreneur. And the program is both tailored and structured.

Dr. Kreiner:        09:58          So it’s structured in that there’s a set of curricular modules that are appropriate for the stage of that social enterprise’s life cycle. If it’s an earlier stage social enterprise that’s trying to validate its impact model and its business model, the curricular modules are going to be different. And if it’s a later stage social enterprise that’s really preparing to scale its impact, for example going from one country into three countries throughout the course of six to nine months, the mentors and social entrepreneurs meet virtually, an online platform that we have.

Dr. Kreiner:        10:33          And in the course of that beyond what’s in the curriculum, the entrepreneurs start asking for advice on problems that many entrepreneurs encounter as they’re building and scaling their ventures. Having someone you really can count on to reflect back to you what they’re hearing from you and what makes the most difference to your venture in your view is incredibly valuable. So it’s a fairly rigorous set of accelerator programs that we offer.

Dr. Kreiner:        11:03          But our goal at the end of the day is based in our theory of change, which is helping as many social entrepreneurs as we can become ready for investment. And the way that we tell if they’re ready for investment is that impact investors make investments in a social enterprise. And then the impact is that the social enterprises are able to improve, transform or save the lives of people in poor communities that they’re serving.

Jon Mertz:          11:29          Are there certain characteristics you look for when reviewing applicants to the program?

Dr. Kreiner:        11:33          Yeah, absolutely. It depends on the program and the stage of social enterprise, what we look for exactly.

Dr. Kreiner:        11:41          The what we call our GSBI online accelerator model is typically for programs for social enterprises that have been in existence one to five years. They’re a little bit on the smaller size. They might have 20 to 30 staff members and they have served hundreds to thousands or maybe tens of thousands of beneficiaries. The program’s completely conducted online and really focuses a lot on the impact and business model, the growth plan, developing a financial model, a funding plan, and then marketing materials to reach out to impact investors.

Dr. Kreiner:        12:24          Our more advanced social enterprises go through what we call the GSBI in residence program which includes the online components that I already mentioned with different curricular modules, but then also an in residence boot camp. We’ve done those at Santa Clara University every year since 2003. We also did one at SOCAP last year, which is the largest gathering of impact investors for social enterprises serving refugees, migrants and human trafficking survivors. And we’ve done a couple in partnership with GE, focused on maternal and child health in Nairobi.

Dr. Kreiner:        13:04          These social enterprises, we’re looking for ones that are really … have proven traction with their impact model and their business model and the potential to scale pretty dramatically. They’ve normally been around for five years or more. Depending on the form of organization and the business model, the staff may be anywhere from five to 500, and they are typically serving tens to hundreds of thousands, or even millions of beneficiaries.

Dr. Kreiner:        13:36          Another way that I look at it which is a lot simpler and maybe the way I should have started is, for GSBI online accelerator programs, the amount of capital that the social enterprises are looking for is typically anywhere from about $100,000 to $1 million, whereas for the GSBI in residence accelerator, it’s more on the order of $500,000 to $5 million in new capital for impact.

Jon Mertz:          14:04          Impact investing seems to have become a buzzword these days. What does it really mean, and what makes it effective?

Dr. Kreiner:        14:10          It’s a really good question. And it’s a hard question, Jon, because it is a buzzword and a lot of people and organizations are using it in a lot of different ways. The way that I define it is investing with the intention to generate impact. It’s really simple, right? The first word in the two word “impact investing” is impact, that’s what you start with. And the impact might be social or environmental or both.

Dr. Kreiner:        14:37          I think one of the challenges that we have in the social enterprise and impact investing ecosystems is that a lot of large institutional investors are using impact investing as kind of a replacement term for environmental, social and governance, ESG kind of investing. And they’re not the same in my view. I think that if you start with the impact, the question for an impact investor is, what kind of impact do I want to generate. Do I want to end energy poverty? Do I want to improve health care so that women don’t die during childbirth? Do I want to address climate change through sustainable agriculture? Is financial inclusion important to me? Whichever of the sustainable development goals or other frameworks you wish to align yourself with, the first question for an impact investor is what is the impact that I want to generate.

Dr. Kreiner:        15:32          Based on that, you can then look and say, what is a reasonable kind of impact return that I can generate for my investment? Some forms of impact are much more expensive to generate than others. And is it reasonable in that sector to generate a financial return, and what level of financial return is possible, if any?

Dr. Kreiner:        15:57          Holding all impact investments to “market rate” returns basically means that most of the sustainable development goals will not be addressed because most problems of poverty are simply not going to be addressed by solutions that have the potential to generate equity like, or even market rate debt like returns.

Jon Mertz:          16:20          So you mentioned that Santa Clara University is a Jesuit institution. What are some of the Jesuit values?

Dr. Kreiner:        16:26          If you think about the Jesuit values, they’re really rooted in Ignatian spirituality. Saint Ignatius was the founder of the Society of Jesus back in the 16th century. The Jesuits are very much committed to working with the most vulnerable people on the planet and working at the margins, which is where the name of our accelerator program for social enterprises serving or led by refugees, migrants and human trafficking survivors, came from social entrepreneurship at the margins.

Dr. Kreiner:        16:58          So we take the Ignatian spirituality very much as a framework for both what we do and how we do it. And when we think about the mission statement of Miller Center, it’s to accelerate entrepreneurship, to end global poverty and protect the planet. This is exactly what Pope Francis talks about in his encyclical, Laudato Si. And as you know, Pope Francis is the first pope who is a Jesuit.

Dr. Kreiner:        17:27          The interconnection between poverty and climate change is very profound. It’s articulated also in the sustainable development goals. He talks about authentic human development, which is fundamental to the principal of social entrepreneurship as opposed to top-down development paradigms like government to government aid. What Pope Francis call for and what we think social entrepreneurship does is it gives people the possibility of being architects of their own futures. They have agency, they can take control, they can form ventures that best meet the needs of their communities.

Jon Mertz:          18:07          Yeah, I know it’s a challenge to build the right organizational culture at any business. But it seems like there’s an added burden on social enterprises and keeping focused on the mission without getting worn down.

Dr. Kreiner:        18:17          Absolutely. I mean, it is very important at Miller Center and then I would say for almost all if not all of the social enterprises that we’ve accompanied through our accelerator programs to hire for mission. Because it is really hard work as I said earlier, being an entrepreneur is hard. Being a social entrepreneur is even more challenging. Closing, financing deals, can really be tiring for the CEO or executive director, which means that she or he is probably paying less attention to operational details and keeping the team moving forward the way that she or he might wish to.

Dr. Kreiner:        18:56          So it is I would say a real challenge in a sector that salaries tend to be a lot lower than for traditional enterprises. People do this because they have a passion for making a difference in the world. But it is really hard work. And maintaining those cultures when founders step down can be a particularly difficult challenge for social enterprises.

Jon Mertz:          19:24          What leadership skills do you see as being most important in building a social enterprise?

Dr. Kreiner:        19:29          Well, resilience is probably number one. There are going to be, as with any enterprises, there are going to be setbacks. Everything’s not going to work. But it’s the model people are talking a lot about now of lean startup or lean impact, which is learn from failures, but learn fast. And be able to understand based on feedback that you’re getting from your customers or beneficiaries how you can improve your product or service. So I think that resilience is one, adaptation is one, the trait that is absolutely essential for the success of social entrepreneurs.

Dr. Kreiner:        20:13          They also have to be able to leverage resources because they’re very often budget constrained outside of their own organization, and to network very effectively to build partnerships. I think one of the challenges with traditional non-profit organizations that are more focused in social services versus social entrepreneurship is that they try to be vertically integrated and deliver everything to their constituents. And those models are not very scalable and they’re often not very efficient, either. So social entrepreneurs can participate in different aspects of the value chain if they have good networking skills and build good partnerships.

Dr. Kreiner:        21:04          And then as with any entrepreneur, I think the leaders have to be able to articulate and convey a compelling vision for what they hope to achieve and how they’re going to make it happen.

Jon Mertz:          21:17          And what excites you the most about the future of social enterprises?

Dr. Kreiner:        21:22          I would say there are two things. One is the social entrepreneurs. One of the greatest joys for me in this role is meeting all of these incredible entrepreneurs who are devoting so much of their time and energy and passion to addressing problems that we all read about, but they care about very, very deeply and are absolutely committed to making real changes. So I have hope with because of their work, that we can create a better world. That we can address conditions of poverty, that we can provide economic empowerment for women who are the most affected by poverty and the most affected by climate change.

Dr. Kreiner:        22:02          The other thing is that at Santa Clara University I’ve had the extraordinary opportunity to architect with one of my colleagues, Keith Warner, who’s actually a Franciscan, not a Jesuit, a program we call the Global Social Benefit Fellowship, that engages undergraduate students in action research projects that support social enterprises that have been through our GSBI accelerator programs, projects that include things like impact assessment, documentation of operating procedures, creating marketing videos, things the social enterprises often don’t have the resources to do on their own.

Dr. Kreiner:        22:38          What’s happened over the eight years of the fellowship so far is, these young leaders go on to do extraordinary things. They join social enterprise accelerator programs in other parts of the world. Ten of them have won Fulbrights so far. Three have been named Valedictorian. And so when I think about how we can engage the current generation in making a difference in the world, social entrepreneurship I think is a unique opportunity that seems to engage and excite them and help form leaders who I believe we’d all be happy to have as leaders of any organization or our country.

Jon Mertz:          23:20          It sounds like there’s a lot of hope for the future when it comes to social enterprise.

Dr. Kreiner:        23:23          Exactly. Exactly, Jon. I think there is hope. Because there are some dark days, but there is hope with as many of the people I’ve met in this generation, both the Millennials and Gen Z. They really want to make a difference in the world.

Dr. Kreiner:        23:37          And I think that coming back to the definition of social entrepreneurship, some of the systems that we have in place are probably not the right systems for the planet that we all want to live on. And I have confidence that some of the students I’ve had the honor to accompany are going to play major roles in transforming those to more just social equalibria.

Jon Mertz:          24:00          Well, that’s great. Well Doctor Kreiner, thank you so much for your time. I’m just really grateful for the work that you’re doing through Miller Center and with all the leaders and individuals and organizations coming through the different programs.

Jon Mertz:          24:11          So, just thank you for your great work.

Dr. Kreiner:        24:13          Thank you, Jon. And thanks for including me in your podcast.

Jon Mertz:          24:24          Activators, let’s continue the conversation in our Activate World LinkedIn group. We look forward to hearing your thoughts and perspectives.

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Special thanks to Kaela Waldstein and Kent Nutt. Music by Jason Goodyear. For Activate World, I’m Jon Mertz.