Social Entrepreneurship – Comparison with Nonprofits & Examples
Social entrepreneurship is a growing trend that benefits both companies and customers. Corporate responsibility is on customer’s minds, especially younger generations. In this article, we’ll delve deeper into what social entrepreneurship is and how it’s different from traditional nonprofit fundraising. We’ll also share how nonprofits can benefit from social entrepreneurs and provide a few examples.
Social entrepreneurship started in the 1980s as a way for corporations to attract more customers. More people than ever are focused on corporate responsibility, and businesses have noticed. Hence, social entrepreneurs take social responsibility to the next level by creating an organization with the primary goal of addressing a cause or community need.
In this article, we’ll discuss what social entrepreneurship is and how it differs from most nonprofit organizations. We’ll also share how nonprofits can benefit from social entrepreneurs and give you 3 examples of social entrepreneurs that have made a significant difference while gaining personal recognition.
Social entrepreneurship is based on an on-profit business model, which is started to address social issues. It’s a growing trend that has gained traction thanks to a new focus on corporate responsibility.
While profit is a goal, it isn’t the organization’s primary purpose.
There are 4 types of social entrepreneurship.
1. Community social entrepreneur
The first type is a community social entrepreneur. These leaders see a need in a specific location and step in to address it. Usually, these entrepreneurs are individuals or smaller organizations that work directly with community members.
Community social entrepreneurs focus on long-term solutions that can take more time, but their efforts will usually last past their involvement.
2. Nonprofit social entrepreneur
Nonprofit social entrepreneurs focus on the organization’s social, not financial, impact. In this case, social entrepreneurs start nonprofits organization to answer a need in their community or a larger cause.
Instead of making significant amounts with their organization, they’ll reinvest the profits into the business to ensure its long-term success.
These organizations have a better chance of success than most since they have more funding. These organizations often grow into larger nonprofits with greater name recognition.
3. Transformational social entrepreneur
Some may say all social entrepreneurs are transformational, but specific entrepreneurs make such a difference that their impact can be seen in government and the larger society.
Transformational social entrepreneurs focus on needs not being met by other nonprofits or the government. These entrepreneurs must work with existing rules and regulations, but they can have a significant impact if they’re willing to put in enough time and effort.
4. Global social entrepreneur
Global social entrepreneurs don’t stop with a local community or even country. Instead, these entrepreneurs want to change society and address a global need.
Companies that start with enough funds and resources can make global changes that affect access to education, clean water, and more.
Companies that hope to make global changes work with smaller organizations to get things done. These companies will often provide grant funding to nonprofits working on the ground.
Comparison Between The Nonprofit Sector and Social Entrepreneurship
Nonprofits and social entrepreneurship have similar goals, but there are differences between the two.
Nonprofits and social entrepreneurs exist primarily to address a social need instead of making a profit.
Most of the time, entrepreneurs, like nonprofit leaders, do not see tangible personal gain from their efforts.
The purpose of both organizations isn’t to make a profit. Instead, they exist to benefit the public.
While the overall goal is similar between nonprofits and social entrepreneurship, some differences can make a significant impact.
Social entrepreneurs have fewer rules and restrictions than nonprofits, which allows them to get more external support. For instance, they can bring in outside investors to support their mission and programs and pay them a return.
Social entrepreneurs usually sell products or services to raise money for furthering their cause. Whereas nonprofits primarily depends on donations to raise funds for their mission. For this reason, you wouldn’t see the need for raising donations in the social entrepreneurship sector. Donors also feel more comfortable giving to nonprofits because of the oversight available.
For nonprofits, it’s 100% social ROI. Which means whatever revenue they make almost completely goes into the cause they work on. On the other hand, social entrepreneurship model is highly based on a mix of social and financial ROI. A significant part of their revenue goes into the cause they support. However, some part of it also goes into improving the product or service they’re offering.
3 Inspiring Examples of Social Entrepreneurship
There are many examples of social entrepreneurship. We chose the following 3 because of their impact, name recognition, and the unique ways they’ve made a difference.
1. Grameen Bank – Muhammad Yunus
Many people have heard of microloans. These loans can be used to start a new business or improve an existing one. Most people who receive microloans live in abject poverty, and 97% of borrowers are women.
These loans are meant to help them become self-sufficient. Muhammad Yunus is the father of microloans. As a banker in Bangladesh, he saw the need and came up with a solution.
Microloans have become common practice; unfortunately, some organizations have acted unethically. Grameen Bank stands out because it requires no collateral from borrowers.
Some may have questioned Muhammad Yunus’s business sense because of this, but so far, the company has earned over ten million dollars, and Yunus has received the Nobel Prize for his idea.
2. Bombas – David Heath and Randy Goldberg
Did you know the number one request from homeless shelters is socks? David Heath and Randy Goldberg started Bombas as a crowdfunding campaign on Indiegogo to address this issue. Customers buy a pair of socks, and a matching pair is donated to those in need.
Their buy-one-give-one model quickly gained the attention of Daymond John and received millions of dollars in investment. Today, Bombas partners with over 600 organizations in all 50 states.
In 2015, Bombas partnered with Gap to reach more customers. Their social entrepreneurship is an inspiration to many.
3. Yoga Girl – Rachel Brathen
Most social entrepreneurs are business leaders. Others have used newer technology to spread a message and develop their ideas. Rachel Brathen, also known as Yoga Girl, is one of these new leaders.
Brathen is a well-known influencer on Instagram with over two million followers. She founded one of the first online yoga platforms, oneOeight.com, which has become a significant community of yoga teachers. The platform provides tools like yoga, meditation, holistic therapy, and mental health support to those without access.
Brathen also runs two other organizations. St. Pepper’s Friends is a nonprofit animal rescue organization in Aruba. Yoga Girl provides financial and medical aid for women and children suffering from trauma, injustice, abuse, and poverty.
3 Best Ways Nonprofits can Benefit from The Social Entrepreneurship Sector
Social entrepreneurs help communities and society at large. Hence, nonprofits can definitely benefit from these social and business leaders.
1. Partner with social entrepreneurs
The best way nonprofits can benefit from social entrepreneurs is by forming partnerships. Social entrepreneurs are leaders in their community and have access to more resources and business leaders than others.
Nonprofits that build partnerships with social entrepreneurs can engage with more people and businesses outside of their area and see an increase in funding and workforce.
Additionally, support from an established social entrepreneur can also help nonprofits build trust for their own brand and attract more support and sponsorship for their cause. Here’s a Donorbox webinar giving you 3 actionable steps on opening the door to new partnerships –
2. Invest in social entrepreneurs
Nonprofits can also benefit from investing in social entrepreneurs. Organizations can choose to invest in equity and index funds of social sector startups.
The benefit of this investment is two-fold. First, nonprofits can earn vast amounts of revenue to support their mission. They can also feel comfortable investing in these companies because of their social goals.
3. Create and leverage marketing opportunities
Social entrepreneurs are usually larger corporations or influential individuals with significant connections with the media. Joining forces with these entrepreneurs gives nonprofits additional marketing options and publicity.
Since social responsibility has become more important to corporations, they also want to sponsor nonprofit events and campaigns to expand their name recognition in the social field.
It’s a win-win for both sides, and social entrepreneurs would love to grab such opportunities created by nonprofit organizations.
Social entrepreneurship started as a way for corporations to improve their image and gain customer trust. That doesn’t mean social entrepreneurs are only out for publicity. These individuals spend significant amounts of money and time trying to address social needs, initially with little financial benefit to themselves.
Their passion for the cause, connections to other business leaders, and more resources help make a difference. Nonprofits can highly benefit from partnering and investing in social entrepreneurs. Events and fundraisers created in conjunction with these businesses can also bring in a lot more funds for nonprofits.
Speaking of raising funds, your nonprofit needs an online system that helps you elevate your ways of fundraising. Donorbox has helped over 50,000 organizations across 96 countries raise money online and acquire more donors. Our features are simple to use and free to get started. There’s no need for documentation or contracts. Just sign up and get fundraising!
Donorbox also believes in being there for nonprofits to help them every step of the way. Hence, we have designed Donorbox Premium – an initiative that ensures success for you! Get expert fundraising coaching, an account manager, powerful tools, and technical support right at your fingertips. Book a demo to learn more.
Explore other insightful blogs, guides, free resources, and tips and ideas on the Donorbox Nonprofit Blog. Subscribe to our newsletter to receive the best resources directly in your inbox!
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.