One arena where American start-up firms’ numbers have increased in recent years, rather than shrunk, is the space called “social entrepreneurship” – at the crossroads between profit-based growth and not-for-profit ideals of changing the world for the better.
One face of the trend is Revolution Foods, a company founded by two mothers – Kristin Groos Richmond and Kirsten Saenz Tobey – in 2006. The motive was to give American children access to healthier school lunches and, more broadly, help transform American eating habits. But to achieve that goal they had to deliver at a price schools could afford – while making a profit. By 2012 they had $54 million in annual revenue and 942 employees.
It’s hard to say exactly how many for-profit firms have been founded in recent years by people explicitly putting social good alongside profit as a top objective. But here’s one peripheral indicator: In the database of US newspaper and news wire services collected by the firm Nexis, the phrase “social entrepreneurship” cropped up in only a handful of articles in the early 1990s. That rose to hundreds in the early 2000s, and thousands since 2006.
“It is really a growing trend for ... entrepreneurs to say, ‘Hey, I also want to have social impact,’ ” says Sean Greene, a former entrepreneur who is now with the nonprofit Case Foundation. Part of the reason is that social goals are wired into the mind-set of the Millennial generation, he says.
Mr. Greene, who is helping mobilize more money for these start-ups, estimates that several hundred social-impact investing funds already exist in the United States. One challenge is simply for potential investors to wrap their minds around a relatively new field – and help define it. Are they trying to simply plow in seed money for a good cause and eventually get their money back? Or do they expect returns comparable to what they’d get from any other start-up?
As with traditional business, the social-impact landscape is increasingly global. One American firm, d.light, aims to turn a profit by bringing solar-powered devices to developing nations.
And Greene is part of a National Advisory Board on impact investing in the US, which parallels similar efforts in other Group of Eight countries.