Philanthropists and Social Entrepreneurs Collaborating for Innovation

It's been over 25 years since Ashoka, a pioneer in social entrepreneurship, appointed its first fellows in India, and nearly a decade since the approach to social change gained widespread notoriety. Since then, Ashoka has been joined by the Schwab Foundation for Social Entrepreneurship in Geneva, Switzerland, along with the Skoll Foundation and Echoing Green in the United States, plus a host of others. Academic centers now exist at Columbia, Duke, Harvard, Oxford and Stanford Universities. In short, the field of social entrepreneurship has grown into a global phenomenon.

It's easy to see why. For starters, social entrepreneurship took root at a time when technology, knowledge, capital, and social problems were all going global. It's no accident that the same epoch that gave rise to the Internet and saw the emergence of India and China as global economic powers also saw the emergence of HIV/AIDS, global warming, and persistent poverty in the developing world as inter-connected, transnational problems. As Pamela Hartigan, Managing Director of the Schwab Foundation, notes, social entrepreneurship is an approach that, in cutting across traditional disciplines, opens up new approaches to dealing with complex social, economic and political issues. "Social entrepreneurship is not about a funding model. It's an approach. It's an innovative approach to a social problem that uses entrepreneurial thinking to create sustainable change."

Not surprisingly, this new approach to social change resonates with a new class of entrepreneurs and business leaders who made their fortunes using innovative approaches to business challenges. Many contemporary business leaders -- like Jeff Skoll, the founding President of eBay, or Robin Richards Donohoe, a venture capitalist and co-founder of the Draper Richards Foundation -- made their money at a relatively young age and are eager to apply their business skills to making the world a better place.

Over the past decade, these social investors have begun creating an entire ecosystem to support social entrepreneurs worldwide. "Think about the institutions and networks that sustain the technology industry in Silicon Valley," explains Lance Henderson, Skoll Foundation Vice President for Program and Impact. Stanford and Berkeley are centers of research and scholarship, drawing talent from around the world. The venture capital industry provides financing for technology start-ups. Talent, ideas and innovations move across business and social networks. And entrepreneurs come to Silicon Valley because of that infrastructure. "That's what we need to create in the social entrepreneurial sector."

Yet if the practice of social entrepreneurship has grown up, it's by no means mature. Social entrepreneurs and investors still lack a rigorous capital market capable of allocating resources efficiently to nonprofits, hybrids and social businesses. Performance metrics are still fairly idiosyncratic. And, as Sally Osberg and Roger L. Martin argue in a recent Stanford Social Innovation Review article, there is no consensus even on basic questions such as: What is social entrepreneurship? Who is an entrepreneur? How does the approach differ from social service or activism? Let's call it an awkward adolescence.

In the end, the practice of social entrepreneurship grows by the experience of entrepreneurs dealing with concrete, real-world challenges. Here is how four leading social entrepreneurs have tackled some of the biggest challenges facing the field -- and how social investors have helped them along the way.

Scale Up

When Vicky Colbert created the Escuela Nueva ("New School") methodology in 1975, with the participation of rural Colombian teachers, it represented a breakthrough for the country's rural schools. Escuela Nueva upended the conventional teacher-centered model, replacing it with a cost-effective educational model that emphasizes active, cooperative learning, small-groups, and cast teachers as facilitators. Equally important, the Escuela Nueva methodology provided a roadmap for strengthening the ties between teachers, administrators, and community members. In its expansion phase in Colombia, Escuela Nueva reached over 20,000 rural schools and, to date, over five million children in 16 countries throughout Latin America and Asia. Yet Escuela Nueva's long-term success -- and the setbacks it overcame along the way -- illustrate how an idea moves from an innovation to silent a revolution.

From the outset, Colbert says, Escuela Nueva approached reform systemically. "This was not just at the classroom level," Colbert says. "It was with the teachers, with the administration, with the community, so you had to have a systemic approach." Colbert also had the foresight to build her reform from the bottom up, and to root demands for reform in empirical results. Once the first few schools had proven superior results, Colbert could point to rising test scores, increased self-esteem, democratic behavior, and citizenship skills among students, and improved teacher attitudes as evidence that Escuela Nueva worked. "And cost effectiveness, of course," she adds. "You have to consider that the innovation is feasible, technically, politically and financially -- and that it's easily replicated. It's not how one teacher can do it, but how thousands can do it."

During the 1980s, Colbert served as Colombia's Vice-Minister of Education, a position she used to expand the Escuela Nueva model throughout the country, a tenure that imparted an important lesson about the fragility of reform. "Once I left the Ministry of Education, I realized that innovations are not sustained in government bureaucracies," she recalls. Under the next Colombian administration, schools began sliding back into old ways of doing business. "Innovations are very vulnerable to political and administrative change."

Seeking to insulate Escuela Nueva from the educational bureaucracy, Colbert reached out to the private sector and civil society, and launched the Escuela Nueva Foundation, a nonprofit organization that develops and provides curriculum, consults on implementing the Escuela Nueva model, and ensures quality and sustainability. In addition to enjoying broad support from Colombia's private and citizen sectors, Colbert has received support from the Schwab and Skoll Foundations and Ashoka and was recently given one of five inaugural Clinton Global Citizen Awards by the Clinton Global Initiative. Still, she insists, government support is the key to long-term sustainability. It's the balance of power that needs to be recalibrated. "Through governments you reach coverage and create public policy. Through public private partnerships, you reach quality and sustainability."

Acquire the capital to finance change

One of the perennial challenges facing social entrepreneurs comes down to the question of money: How do you find big chunks of flexible, patient capital that will sustain measurable change? Financial metrics and traditional capital markets do a poor job of capturing social value, while philanthropic capital markets inconsistently reward efficiency and scale. Beginning in 2005, J.B. Schramm, the founder and CEO of College Summit, a national US nonprofit organization that helps school districts develop a college-attending culture throughout high schools and a planning infrastructure for post-secondary education to match, forged a new solution to this dilemma. Instead of waiting for the capital markets to evolve, he created an investment instrument that met College Summit's needs: the College Summit Proof Fund, a $15 million philanthropic investment fund that promised investors clear, measurable returns in four areas -- growth (measured by the number of children served), sustainability (fee-for-service revenue), efficiency (cost-per-student) and success (the number of young people who apply to college).

Granted, Schramm had some high-powered help. When his vice president of development left in 2005, board member Charles Harris, a former Partner and Managing Director at Goldman Sachs, served as the interim development director for six months. During his tenure, Harris saw first-hand the inefficiencies and strategic misalignment traditional fundraising caused, fragmenting revenue into restricted grant pools and under-funding core operations in favor of programs.

Drawing on Harris's experience in private equity, he and Schramm devised the Proof Fund and took the idea to investors drawn from Harris's Wall Street rolodex. Within six months, Harris and Schramm raised the entire $15 million Proof Fund from ten wealthy individuals. Investors loved the accountability of the Proof Fund's bottom-line approach. Schramm loved not just the money but how it was structured as a big, up-front pool of funds with no strings attached. (Harris went on to found SeaChange Capital Partners, a nonprofit investment fund that will replicate the Proof Fund model with other high-performing nonprofits; two weeks ago, Schramm was named the 2008 US Social Entrepreneur of the Year by the Schwab Foundation.)

"The Proof Fund has allowed us to say no to non-strategic opportunities that have come our way," Schramm says. Because the organization was aligned from the board on down, there was no reason to chase grants that didn't align with College Summit's core strategy. Since implementing the Fund's underlying business plan, College Summit has achieved a 50% annual growth rate in the number of children served and in its fee-for-service revenue -- the cornerstone of long-term sustainability. Applications are up an average of 18% per year, while per-student costs have gone down 10%. "If we hit our four metrics in four years, we win," Schramm says. "And that allows for much more long-term decisions to be made."

Attract bold people for bold ideas

Back in 1999, when John Wood left his position as a Microsoft's Director of Business Development for China to start Room to Read, he did what any ambitious entrepreneur should do: established his big hairy audacious goal and started getting the right people on board to help him meet it. The goal? To help 10 million children in the developing world get an education by developing schools, libraries, and other educational infrastructure. The people? Therein lies the story of how Wood, in just eight years, took Room to Read from a first-year start-up that brought 3,000 books to a Nepalese village on the back of a yak to an organization that has built 440 schools, over 5,000 bilingual libraries, and reached over 1.7 million children throughout Asia and Africa.

Perusing the bios of Room to Read's board and management team, one could be forgiven for thinking that Room to Read was not a nonprofit organization but a world-class corporation. Board members include Netscape co-founder and serial entrepreneur Marc Andreessen, as well as John Ridding, Chief Executive of the Financial Times and The management team includes alumni of Goldman Sachs, Gap, Unilever, the Asia Society, and The Nature Conservancy.

"Bold ideas attract bold people," Wood says of his team. "One of the biggest issues in the social sector is the inability and/or the unwillingness to scale. But there are so many great solutions out there, and there is such need out there, why are we not scaling this sector more quickly? If you can get a hybrid -- you get a CFO who went to Wharton and has a decade of corporate experience and you have another person from a top-tier nonprofit -- that's the best of both worlds. Not only can we talk about a great solution, we can take it to scale."

Beyond the bold vision, Wood made the strategic decision to hand over the reigns of day-to-day operations to his management team, a move that has freed him up to play a more public role. "I might be pretty decent at balancing a checkbook or looking at what kind of dental insurance we should give employees, but that's not my unique value added," Wood says. Instead, Wood spends 70% of his time on the road, speaking, evangelizing, and raising money. Room to Read's revenues grew 70% last year, off a $9 million base. To keep up with the pace of leads Wood is developing in his peripatetic fundraising from corporations, high-net-worth individuals, and speeches, Wood has scaled his development team from three people two years ago to 12 people today. "The fact that I have a great team really frees me up to be the classic CEO, Mr. Outside Ambassador."

Room to Read has been equally successful at hiring top-level local managers. "The key is to find people who have the same zeal for education that we do, who see education as the ticket for their country," Wood says. To local managers, Room to Read's focus and discipline hold the promise of widespread change. "They see in us that we are going to take things to a serious scale," Wood continues. "Last year, we opened, on average, a new school library every six hours and created the infrastructure to monitor and evaluate them. What could be more motivating?"

Evolve and adapt

Like any good entrepreneur, Rodrigo Baggio has learned as much from his failures as from his success. In 1993, Baggio, then a young information technology teacher in Rio de Janeiro's private schools, had a radical idea stemming from a newfangled thing called the Internet. He would create an electronic bulletin board through which young people from different social classes -- the middle-class kids he was teaching and the young people living in the favelas overlooking the city -- could interact with each other. Yet when the project was up and running, it turned out that the only kids talking were the ones from privileged backgrounds. Why? Kids from the favelas didn't have computers.

So Baggio retooled his idea. Partnering with the Information for All campaign (whose aim was to bring used computers to poor communities), the C & A Fashion Institute and ECO Group (a local nonprofit organization), Baggio opened the first Information Technology and Civic Engagement Schools. Run by and for local residents, the schools used technology as a foundation for debate, reflection and citizen engagement. The school was a hit with local residents, and they clamored for more.

In 1995, Baggio founded Committee for the Democracy in Information Technology (CDI) to help replicate the schools. Ten CDI schools were launched within a year, and the organization had an annual growth rate of 70% until 2002. Now, six years later, CDI has 840 schools in 20 Brazilian states and ten Latin American countries. Baggio, who became an Ashoka Fellow in 1996, enjoys widespread support among Brazil's business community; CDI receives funding from the Skoll and Schwab foundations.

What is most extraordinary about this growth, however, is not the speed with which it occurred, but rather the extent to which Baggio has managed to expand, improve and evolve CDI through the rigorous use of information management. In 2003, 200 CDI leaders from across the network came together to design an Internet-based assessment tool that would help them track outcomes across the network. With 17 indicators for measuring quality, results and process, the CDI's information system is a vital management tool for local and regional sites, and for CDI headquarters. "The system allows us to take a photograph every four months of the CDI network and work a lot with quality and good decisions to impact our work," Baggio says.

With this system in place, CDI has managed to add programs while also expanding its geographic reach -- while retaining simultaneous commitments to high-quality services and local control of CDI sites. Last year, for instance, CDI launched Connections, a social venture with the Brazilian office of Accenture, the global consulting giant, which will provide job training, internships, and entrepreneur training for students at CDI sites. "This is about digital inclusion and job creation," Baggio explains. "But the basis of Connections is the CDI schools. It all begins with local schools and local people."

Looking Forward

Despite these four challenges, an entrepreneur's outlook is by definition hopeful. How else does one look at the desperate poverty of, say, Rio's favelas and see hope and opportunity where others see only misery? Yet even the most ardent advocates of social entrepreneurism insist that widespread change will require more resources. "That's the uber-challenge," insists the Skoll Foundation's Lance Henderson. "The issues these organizations are trying to address are enormously complex. The challenge of taking on a worldwide intervention takes a level of resources and talent that is beyond the reach of many."

For investors and philanthropists, helping entrepreneurs reach scale means continuing to bet on smart people doing big things. But it also means thinking about using their other resources -- vision, social connections, business skills -- to build an ecosystem capable of sustaining social entrepreneurs worldwide. Because it's not just about money. It's about bringing the same urgency traditional entrepreneurs and investors bring to their traditional work to something more profound: making the world a better place.

Organizations Supporting Social Entrepreneurs


Ashoka --
Founded in 1980 by Bill Drayton, Ashoka pioneered the field of social entrepreneurship. Today it provides financial and other forms of support to social entrepreneurs around the world. It also promotes networking among them and what it calls "group entrepreneurship" -- an approach through which networks of people can more quickly expand their impact. Ashoka has created a website that shares ideas and approaches to social problems and promotes "collaborative competitions" to refine them.

Echoing Green --
Echoing Green provides financial support and technical assistance to its Fellows. To date it has invested $25 million in seed grants to nearly 450 social entrepreneurs.

Schwab Foundation for Social Entrepreneurship --
Established in Klaus Schwab and his wife Hilde in 1998, the Schwab Foundation helps connect social entrepreneurs to sources of funding, other resources and networks that enable them to strengthen and expand their work. The Schwab Foundation is a separate entity from the World Economic Forum but works closely with it and other important organizations promoting global dialogue and understanding in providing opportunities for Schwab Fellows.

Skoll Foundation --
Created by Jeff Skoll in 1999, the Skoll Foundation invests in social entrepreneurs through its award program, the Skoll Awards for Social Entrepreneurship. It also promotes networking among social entrepreneurs and supports documentation of new approaches. Skoll has built a website to promote sharing of best practice information among social entrepreneurs, nonprofit leaders and others.

Other organizations are beginning to work in this space. Synergos itself is an example -- it has recently launched the Middle East/North Africa Social Innovators Program to enable social entrepreneurs in Egypt, Jordan, Lebanon, Morocco and Palestine to bring their successful ideas to scale, build the sustainability of their programs and contribute to lasting social change. Services provided will include financial awards, training, and links to businesses, governments, influential individuals and other social entrepreneurs.

A Diversity of Social Entrepreneurs


Although our examples are drawn from the field of education, social entrepreneurs can promote innovation in many other areas and through both business and non-profit approaches -- or even hybrids of both.

One example is Ajantha Perera, an Ashoka Fellow in Sri Lanka, who is an innovator in building multi-sector cooperation in the field of recycling. She has been able to demonstrate both to local governments and local businesses how recycling programs can be cost-effective and, for the business side, profitable.

Mexican businessman and GPC member José Ignacio Ávalos Hernandez is another example. He has created Gente Nueva and related organizations that together use both business and nonprofit approaches in microfinance, savings, enterprise development, health and nutrition programs. Ávalos' efforts were examined in more detail in Global Giving Matters December 2002-January 2003.

Some social entrepreneurs operate mainly in the for-profit sector. Farouk Jiwa of Honey Care in Kenya has, as the Schwab Foundation describes it, "revitalized Kenya's national honey industry by focusing on smallholder farmers across the country. Central to the success is an innovation in production technology, effective beekeeping training and community-based extension service provision, the provision of a guaranteed market to smallholder farmers through forward contracts, as well as prompt payments." Like Ávalos, Jiwa is a Schwab Entrepreneur.