One of the many excellent sessions at the Scaling Development Ventures conference held at MIT last week was one on Scaling Innovation-Driven Ecosystems. While the session was focused on what they call innovation-driven enterprises*, the visual below is a good way of thinking about the social enterprise ecosystem as well.
The Greater Toronto Area is estimated to have over a hundred nonprofit social enterprises, many of whom are focused on creating employment and training opportunities for marginalized stakeholders.
They rely on funding from a handful of grantmakers and impact investors that cover a portion of their needs. Years into the growth of the impact investing industry, the supply of capital remains spotty across the board. For nonprofit social enterprises, who appeal to 'impact-first' investors and cannot promise the rates of return that for-profit social enterprises can, there are only a few options. Instead these enterprises tend to be supported by grantmakers, who prioritize a social return. However, with the lack of a commonly accepted impact measurement framework and limited funding for impact measurement, this remains a challenge as well.
As a result these enterprises seek support from intermediaries, who are again a small group that provide consulting, advisory, training and capacity-building support in the areas of management, governance, and investment. The limited range of support that is available tends to be expensive and mismatched to the specific needs of nonprofit social enterprises. For example, one of the major challenges identified by SET members is human resource management - balancing the need to consistently deliver a quality product or service with the need to be flexible when managing marginalized and under-trained workers. This would be tough enough for the most highly trained and well-paid managers, but for social enterprise managers who often lack formal management training and tend to be underpaid and overworked, it's doubly difficult.
As social enterprise has grown in the last few years, the government and other social funders have invested in capacity building efforts, but without aligning efforts and ensuring that their investments are truly complementary. While a number of government agencies at all tiers of government are involved, there is no clear framework and 'fit' for social enterprise. SET members tend to receive funding from at least three different Ontario ministries, which have only recently been formally connected for social enterprise through the Social Enterprise Branch. A diverse and uncoordinated set of funding priorities has resulted in a fragmented sector.
This is reflected in educational institutions in Ontario, who are primarily publicly funded and are in an ideal position to provide high-quality research, incubator support, and a pool of talent. Social innovation and social entrepreneurship have been rising as areas of study in academic settings, and educational institutions are not sure how to deal with them - sometimes it is through the lens of business and entrepreneurship, sometimes through social work, and other times through citizenship and engagement.
Most of the actors in this social enterprise ecosystem know each other, both on an individual and institutional level. However, they tend to pursue differing agendas because they define social enterprise differently. As a member-led network, SET plays an important role in identifying and highlighting the various needs and encouraging collaboration.
While Toronto and Ontario have been acclaimed as hotbeds of social enterprise, rightfully so, much more work is needed to ensure that the different actors collaborate effectively and support enterprises to meaningfully address social and environmental challenges.
*A useful distinction for anyone thinking about how to stimulate innovation through entrepreneurship; for more, see the 2013 Kaufmann paper A Tale of Two Entrepreneurs, by Bill Aulet and Fiona Murray.