The Seven Growth Strategies of Social Entrepreneurship

Social entrepreneurs apply different growth strategies depending on their company’s development stage and whether they have quantitative or qualitative value-adding ambitions. It is about finding an optimal organizational size and the right way to grow in terms of development, rather than pursuing growth for the sake of growth.

In other words, size does not always matter, and small can be beautiful too.

In the field of social entrepreneurship one of the following strategies are, therefore, typically applied:

a. Remain small in organizational size and focus on other growth parameters, e.g. employee happiness, environmental improvements or building local economies.

b. Grow quantitatively in size, e.g. turnover and number of employees by attracting investors, expanding into new markets and/or increasing the customer base.

c. Replicate the business concept to other national or global regions, e.g. through systematic franchising or ‘amoebic’ multiplication of small independent units.

d. Build a movement, e.g. by spreading the core idea and principles so that governments, mainstream businesses, local communities or other entrepreneurs decide to work in support of the same purpose.

e. Collaborate or merge with other social ventures in the same cluster to develop processes, products and services or engage in ‘network production’, e.g. so micro-entrepreneurs can join forces to supply large companies.

f. Enter into partnerships with actors in the private, public or civil sectors, e.g. to gain access to knowledge, skills, infrastructure and/or capital.

g. Sell parts of or the entire social venture to a mainstream, commercial business, e.g. to increase the knowledge and impact of the concept or so it goes mainstream.

The choice of growth strategy is closely linked to financing the social venture: models range from what the Schwab Foundation for Social Entrepreneurship categorizes as :

- leverage nonprofit ventures, i.e. 100% external financing through, for example, donations, sponsorships and public funding but where upscaling is generated through private and public sector partnerships;

- hybrid nonprofit ventures, i.e. a mix of external financing like grants or subsidized loans and revenue income from own products or services;

- social business ventures, for-profit entities with 100% revenue income from own products or services, also referred to as for-profit social enterprises, ‘FOPSEs’.

To overcome the limitations that either purely charitable or commercial companies entail, the hybrid not-for-profit model is, according to the Schwab Foundation for Social Entrepreneurship, increasing in popularity. It enables social entrepreneurs to use the profits from their main business to cross-subsidise their charitable work. It also enables them to take up other forms of capital, such as debt and venture capital through the for-profit entity, while the nonprofit entity can receive tax-exempted grants and provide nonprofit-making services to a community – a blended value space that is also seen in the private sector where some companies place their altruistic or CSR-related activities in a company foundation.