There have been rumors lurking in the corners of social entrepreneurship gatherings. I have heard them whispered: “There are investors who want to pursue impact investing, but we don’t have the right deal flow.” Impact investing is growing rapidly. A recent piece in Forbes shared a report by GIIN (Global Impact Investment Network) that the private impact market grew by 63% to $1.2 trillion from 2019 to 2021. It’s an important opportunity for us as a sector to transform the work we do and impact we’re able to make.
In fact, the opportunity mentioned in this article is why I chose to pursue social entrepreneurship. I realized early in my career that we could never solve the big social issues through charitable dollars and traditional means alone. I wanted to learn new methods for solving old problems, so I left a wonderful career at the national office of American Heart Association to spend the next chapter getting my MBA in social entrepreneurship at Duke University and experimenting alongside dozens of nonprofits and social enterprises to find the best path forward. Now, I teach social entrepreneurship. In each class, I share the five truths all social architects need in their toolkit to ensure that the supply of the right deals meets the demand of future investors
Fall in Love with the Problem, Not the Solution
As Albert Einstein once said, “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions.” The opposite is often true in the social sector – in part because of our traditional funding mechanisms. But this is changing, and as social sector experts it is incumbent upon us to ask the right questions so that we can reach the optimal solutions. In addition, by focusing on the problem, we can shift the solution as circumstances or needs change.
Build from the Bottom Up
When investigating the problem, it is essential to involve those you serve in developing the solution. This is the most effective way of getting to “root-cause issues” and designing solutions that will last. For more ideas, we suggest reading thought-provoking books, such as Bridges Out of Poverty, to learn about how our own assumptions about poverty get in the way of alleviating it. In addition, techniques like Design Thinking can also help facilitate this process.
Think Outside the Box
Thinking outside the box is easy to say, but not as easy to do in the social sector. It requires a whole new mindset, which we discussed in our blogs on multiple intelligences and entrepreneurial culture. It also requires each of us to engage in a community mindset, putting the interests of our clients ahead of our own.
Impact Is the Bottom Line
The key to greater investment in social change is impact measurement. As Global Impact Investing Network chief executive Amit Bouri said, “The better we can measure impact and agree what constitutes success, the more effective we can be at directing investments to areas and issues of greatest need.” As social architects, our focus must be elevated to impact rather than exclusively on the traditional model of outputs, activities and outcomes. We built a framework – Social Alchemy – to help social sector leaders take ideas and turn them into the gold that investors are looking for. Once we have proven impact, we must also determine how to replicate similar results in the most efficient manner possible. Finding ways to create social change that saves taxpayer dollars in the long run is the underpinning of all impact investments.
Scaling Is the Final Frontier
We know what works for many social issues – our problem is an issue of scale. We must develop the discipline needed to make the tough trade-offs and systematically invest in what works. If we can do this, it will move us from an innovation model to a franchise model. We also need to move beyond using traditional programs alone and look at layering all types of interventions – e.g., policy change, coalitions and social marketing – together to drive systemic change.
While these new truths are daunting and will require new ways of thinking and doing, I predict that the ever-resilient social sector will catch up with demand for investment. We welcome your thoughts on these five truths.