Social Entrepreneurship Discussion Slides

What do you think about when
you think about social

entrepreneurship?
Slides prepared to kick-start
discussions in class.
Ashutosh Tiwari
August-September 2016
Why be an entrepreneur?
Mindset
A sense of challenge
Lifestyle choices
Purpose in life
Having tried everything else
Average age (in the US) of those
starting their own business?
Slides to kick-start discussions in class
Risk
What is it?
Are entrepreneurs risk-takers?
The concept of return

The concept of uncertainty
The concept of probability
The concept of using failures as steps
to success
Diversification as a strategy
Slides to kick-start discussions in
class
Mindset
Failures can be changed

Failures can be turned around
The road may be different, but the
destination is clear.
Stop. Reflect. Rethink.
Talk to all, make your own
decisions.
Change course.
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Success ko photo

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Can you become smart?

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Which is better?
The idea of being a risk-taker and

starting a new, new business, or
The idea of starting a niche
business within an existing industry

class
What are some examples?
From Nepal
From abroad
In recent times

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Niche business
How do you protect your business

from competition?
Price
Quality
High switching cost
Captive customers
Different market segments

Brand loyalty

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Moat

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10
Do you need money or ideas?
Money
Those who have money
Ideas
Those who have ideas

How do you know which idea works?
You dont.
Therefore, experiment small, fail fast
and change or scale up.
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11
Where do you get money?
Banks?
Borrow money from strangers or
relatives?
Personal savings?

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12
The fundamental questions
What compelling reason exists for

people to give you money to buy
your product or service?
How do you get what you are selling
for less than it costs to sell it?
Anyone can sell a good worth Rs. 100

at Rs. 90.

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13
The fundamental questions
What insulation (moat) do you have

from commoditization (just like
what everyone has) and price war
(from competitors)?
How will strangers find out about
the business and decide to become
customers?
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14
Hiring people
You
Family members
Team members = key
Others come later
Service providers
Lawyers
Accountants
Sales people, etc

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15
Core business or money-making

patterns
Product: make a physical product,

then sell and deliver it for more
than it cost.
Service: provide a useful service,
then charge a fee.

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16

patterns
Shared Resource: create a shared

resource that can be used by many
people (like a gym), then charge for
access.
Subscription: offer an ongoing
subscription, then charge a
recurring fee
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17

patterns
Insurance: write an insurance policy against

some specific bad thing happening, collect
premium payments up-front, then pay out claims
only when the bad thing happens.
Resale: acquire an asset, then sell the asset to
another buyer at a higher price.
Lease: acquire an asset, then allow another
person to use that asset for a certain amount of
time in exchange for a fee.

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18

patterns
Audience Aggregation: create

and distribute information that
appeals to a specific set of people,
then sell access to that audience
(advertising, direct mail, etc.) to an
interested third-party.

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19

patterns
Commission: sell an asset you dont own

on behalf of a third-party, then collect a
percentage of the sale price as a fee.
Dividend: purchase an ownership stake
in a business, then collect a
corresponding portion of that business
profit over time as a dividend.

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20
What have we covered?
Risk
Idea generation
Sources of funds
Sources of workers
Core business patterns

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21
The framework so far
Cross-sector problem
Opportunity
Business model
Social value creation
Demonstrable small impact
Sustainability
Replication
Scale up
Big impact
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22
Private sector
Creates private wealth
Sells products and services

Provides jobs
Raises workers standards of living
Provides a tax base for government
May donate to charities and non-profits

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23
Private sector
Corporate charity
Corporate social responsibility
Social enterprise
An example of TOMS shoes Buy
One Give one idea

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24
Non-profit sector
Delivers social services

Creates (new) ideas
Does work from activism to
awareness raising to providing
goods and services
Received funding from donors and
individual contributors
Plows profits back into the mission
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25
Non-profit
Government funding cut

Social services neglected
More needs, fewer resources
Non-profits started thinking like
private sector businesses for
efficiencies and scale
Example: Girl Scout cookies

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26
Government
What does government generally

do?
Collects taxes
Provides defense, security, manages
borders
Maintains foreign policies
Takes the lead in building large-scale
infrastructure
Provides various social services
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27
Government
By virtue of its size and scale,

government can accomplish things
that could not be done by other
institutions
Can act as an investor
Can provide data
Can be a partner to scale things up
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28
Social entrepreneurship
Ignore boundaries
Can it work with private,
government and non-profit sectors?
What are the strengths of each
sector? Make use of those.

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29
Institutional actors in a market

economy
Characteristics
Governments
What is its role?
Centralized mechanism
through which the
infrastructure of the economic
system is created and
enforced
What is its dominant

institutional role?
Defend public interest
What is its dominant logic of

action?
Regulations

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30

economy
Characteristics
Social activism
What is its role?
Distributed mechanism
through which behaviors that
bring negative externalities
are selected out

institutional role?
Change social system

action?
Political action

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31

economy
Characteristics
Commercial business/
entrepreneurship
What is its role?
through which societys
resources and skills are
allocated to most valuable
activities

institutional role?
Achieve competitive
advantage

action?
Control and direction

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32

economy
Characteristics
Charities and non-profits
What is its role?
Distributed mechanisms
through which economic
outcomes are made more
equitable despite uneven
resource availability

institutional role?
Support marginalized,
vulnerable and disadvantaged
populations

action?
Goodwill

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33

economy
Characteristics
Social entrepreneurship
What is its role?
through which neglected
positive externalities are
internalized in the economic
system

institutional role?
Deliver sustainable solutions

action?
Empowerment

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34
Michael Porter article
Businesses as a problem
Social
Environmental
Economic
Companies prospering at the

expense of the broader community
Outdated idea of value creation:
narrow, short
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35
Consumers well-being: Pepsi, Coca

Cola
Depletion of natural resources
Viability of key suppliers
Economic distress of the
communities where they serve
Pushing for lower wages

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36
NGOs and the governments remain

suspicious of businesses
Companies must take lead to bring
business and society back together
But most businesses are stuck at
the social responsibility mindset in
which social issues are on the
periphery and not on the center.
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37
Shared value is a solution
Creating economic value in such a way

that creates value for society by
addressing its needs and challenges
Business success linked with social

progress
Shared value = a new way to
achieve economic success (from the
center)
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38
Shared value already in practice
GE, Google, IBM, etc
At the intersection of society and

corporate performance
Deeper understanding of societal
needs

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39
Funding/revenue frameworks
Fee for service

Cross compensation
Employment and skills training
Market intermediary
Independent support
Co-operative (farmers market)

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40
The primary species in the ecosystem
Social mission organisation
Beneficiaries
Under-served population
Social entrepreneur
Seeking funds
Sale of goods and services
Customers
Purchase desired goods and services

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The elements of the SE market
Payment
Goods/services
Demand
Supply
Funding
Impact

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Traditional for-profit
Optimized to generate revenue
Social entrepreneurial ventures:

-Optimized to generate economic,
social and environmental impact.

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Impact
What changed
How
By when
Per unit cost

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Impact
(what changed)
How
Through job training for three months
By when
20 ex-prisoners employed as plumbers
January 2015 to October 2015
Per plumber cost
Rs. 5,000 per month for three months

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45
SE spectrum

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46
Four things to think about
Accounting and finance

Management
Recruiting
Sales

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47
Paper outline
Cross-sector problem
Opportunity
Business model(s)
Social value creation
Demonstrable small impact (pilot)
Sustainability
Replication
Scale up
Big impact or spread
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48
Finance: Income Statement
Gives one signal: profitability on paper

NOT the whole picture of financial health
Does NOT talk about the movement of cash
Reports on making and selling activities of the SE
Whats sold in a time period

Minus
What it cost to make
Minus
Selling and general expense for the period
equal income for the period.
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49
Sales, Revenue (price, if no discount)

Cost of goods sold
Gross margin
Sales and Marketing
Research and development
General and admin
Total expenses
Interest income
Income tax
Net Income

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50
Sales > Costs + Expenses =

Income
Sales < Costs + Expenses = loss
Income is NOT cash

A very profitable company with lots of
income can also be insolvent unable
to pay its bills, no cash left.
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Cash Flow: physical movement of

cash
Cash
Cash
Cash
Cash
you have at the start, plus

received in the time period, minus
spent in the period, equals
on hand at the end of the period

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52

cash
Paying salaries
Paying for equipment
Paying off loans
Receiving money borrowed from a bank
Receiving money for stock from investors
Receiving money from customers

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cash
Beginning balance
Cash receipts
Cash disbursement
Cash from operations
Fixed asset purchase
Net borrowings
Income taxes paid
Sales of stock
Ending cash balance
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54
Leadership
Ethics
Mentors
What to ask for
Fund-raising
Regulations
Timeline
Delegation
Do what only you can do the best

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55
Leadership
Priorities
Board
How to make use of it
Scalability and spread
What makes the SE go forward
The good signal
Impact documentation
Stories, numbers and visuals

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56
Investors
What to look for in investors
Money is a given
Mentorship
Contacts
Experience (similar experience)
Showing up at meetings
Opening doors and challenging you

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57
Investors
Dilution of shares
Grow the enterprise

Give out shares
Youll always be known as the Founder
or Co-founder
Use the money raised to grow the
enterprise
Term sheets = contractlike/agreements
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58
Exit
Time period
Periodic valuation
Discounted cash flow method

Accounting (historical) method
Guess work
Letting new investors in
Cash out or sell

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59

Social Entrepreneurship Discussion Slides

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Social Entrepreneurship Discussion Slides

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What do you think about when

you think about social

Slides to kick-start discussions in class

The concept of return

Failures can be changed

Slides to kick-start discussions in

Can you become smart?

Slides to kick-start discussions in

The idea of being a risk-taker and

Slides to kick-start discussions in

What are some examples?

Slides to kick-start discussions in

How do you protect your business

Different market segments

Slides to kick-start discussions in

Slides to kick-start discussions in

Do you need money or ideas?

Those who have money

Those who have ideas

Where do you get money?

Slides to kick-start discussions in

The fundamental questions

What compelling reason exists for

Anyone can sell a good worth Rs. 100

Slides to kick-start discussions in

The fundamental questions

What insulation (moat) do you have

Slides to kick-start discussions in

Core business or money-making

Product: make a physical product,

Slides to kick-start discussions in

Core business or money-making

Shared Resource: create a shared

Core business or money-making

Insurance: write an insurance policy against

Slides to kick-start discussions in

Core business or money-making

Audience Aggregation: create

Slides to kick-start discussions in

Core business or money-making

Commission: sell an asset you dont own

Slides to kick-start discussions in

What have we covered?

Slides to kick-start discussions in

The framework so far

Creates private wealth

Sells products and services

Slides to kick-start discussions in

Slides to kick-start discussions in

Delivers social services

Government funding cut

Slides to kick-start discussions in

What does government generally

By virtue of its size and scale,

Slides to kick-start discussions in

Institutional actors in a market

What is its role?

What is its dominant

Defend public interest

What is its dominant logic of

Slides to kick-start discussions in

Institutional actors in a market

What is its role?

What is its dominant