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If Not Now, When? If Not You, Who? A Call for Social Entrepreneurship

We are in a profound moment of polarity.

We see it in the news, where the polar ends of political, religious, cultural, gender-conscious, racially-aware spectra voice their opinions with fury, feist, and without apology.

For those of us who see ourselves as problemsolvers driven by impact, we may feel overwhelmed and even momentarily paralyzed by the din of feuding opinions, the viscidity in reaching common ground and commonly-held beliefs. Where delivering and distributing social impact has often been associated within the purview of government and agencies, a new reality leaves these channels for impact less available and less accessible for those purposes.

However, those championing inclusion, innovation, and gamechanging innovation still have an important lever to pull. Business. Specifically, impact-driven business.

Social entrepreneurship has never been more important than it is right now.

Divisiveness around the role of government to support citizens, by default, seems to favor business, scaling, and job creation as measures of success.

Fortunately, changemakers have also increasingly been tinkering with business as a medium for change over the past decade or longer. This exploration has resulted in the passage of new legal structures including benefit corporations and social purpose corporations in over 32 states and jurisdictions that solidify the legal precedence of for-impact + for-profit companies. It has also led to creative and adaptive business models that seek to prioritize impact and account for impact. And, the foray into business practices is paving new ways of measuring and reporting impact; so that our accounting of social impact is not abstract and anecdotal, but a measurable means of evaluating success. This field of championing social impact and business is maturing as new kinds of capital-raising–including impact investing, community notes, and crowdfunding–are letting investors choose where their money grows and rests.

We realize that far from immobile, we are finding new muscles and new ways to move, connect, fly. Far from overwhelmed, we are building the scaffolding for a future that hasn’t been fully envisioned and architected.

Can social entrepreneurship be a common language?

It bares question whether, in this moment of polarity, we can turn to business as a common language.

Fortunately, social entrepreneurs not only speak the language but have become experienced in bridging gaps of knowledge and resources toward cultivating communities of conscious consumers, investors, and achieving new milestones in success.

We are seeing that beyond language, social entrepreneurship is a mindset. One that individuals across aisles, across industries, and across business and enterprise can adopt to create change and inclusion in their own ecosystems.

To be an effective way to express and empower impact, we need broader and deeper engagement in social entrepreneurship.

I have spent the better part of six years, since founding Innov8social, on the path of exploring, sharing, and building ways to make social entrepreneurship more actionable accessible. Spanning blog posts, podcast episodes, a book, live events, and now, consulting–I feel my personal life’s work entwined with this work of inviting, educating, and helping launch social entrepreneurs.

Here are steps I have found helpful in feeling more comfortable to create and grow as social entrepreneurs:

  1. Learn what social entrepreneurship is
  2. Define the impact you seek to make
  3. Understand the legal options for formation and fundraising
  4. Explore (and invent) business models
  5. Measure social impact, and the effects of the absence of social impact
  6. Tell a compelling story and share it personally and professionally
  7. Lead with empathy, clarity, and with impact-aligned team members
  8. Raise capital that fits your goals and your impact
  9. Always remember that we are problem-solvers first. Be ready to problemsolve thoughtfully and often
  10. Build your networks big and small–that serve to challenge you, empower you, and give you a forum of inviting others into the space and empowering their success

Social entrepreneurship will not reach its potential to create impact and shift the norms of business as a spectator sport. As millennials, Gen Z, and “Zoomers” look to start businesses and engage in meaningful work–I have little doubt that we will discover new ways of delivering impact through the medium of business.

 

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Neetal Parekh is the founder of Innov8social, author 51 Questions on Social Entrepreneurship, host of The Impact Podcast, and convener of Impactathon. She consults with social entrepreneurs, companies, and institutions to help them reach their impact potential. On Twitter and social media: @innov8social

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California Congressman Mike Honda Speaks to Emerging Leaders [VIDEO]

A lively gathering of young South Bay progressives gathered in downtown San Jose on Thursday evening, March 28th, 2013 to connect, network, and honor Congressman Mike Honda as part of a Young Progressives Spring Mixer.

A Gathering of Emerging Progressive Leaders

Campbell Mayor Evan Low welcomed attendees—who represented groups including the Silicon Valley Young Democrats, NextGen Bay Area, SJSU Campus Alliance for Economic Justice (CAFEJ), and the Young Workers Council.

Silicon Valley Young Progressives Mixer with Congressman Mike Honda
Campbell Mayor Evan Lowe

Mayor Lowe provided a funny, poignant introduction to the evening. Lowe is a trailblazer himself, who was elected as the nation’s youngest openly gay mayor in 2010. As an Asian American, he also maintains strong ties to the community. He concluded his opening by noting that though he can officiate marriages, he cannot himself marry; and though he can host Boy Scout groups at City Hall, he is not welcome in the organization.

California Congressman Mike Honda

Congressman Mike Honda took to the stage to share his own experiences and observations about the importance of young progressives taking an active role in shaping their communities and local offices.
Silicon Valley Young Progressives Mixer with Congressman Mike HondaCongressman Honda, representing California’s 17th congressional district, was born in the Bay area (Walnut Grove) in June 1941—six months before the December 1941 attack on Pearl Harbor.  He spent the majority of his first five years in a Japanese internment camp in Colorado—one of 100,000+ Japanese and Japanese-Americans physically relocated and excluded from society.
Over a decade later, in 1953, Honda’s family returned to California and he completed high school in San Jose and went on to pursue a teaching credential, interrupted by two years of service as Peace Corps volunteer in El Salvador. His career as an educator spanned 30+ years and his first foray into local government was when he successfully ran for election to the San Jose Unified School Board in 1981.
Honda served as an elected official in various capacities before running for U.S. Congress in 2001. He has been re-elected four times consecutively.
Here an excerpt of Congressman Honda’s remarks on equality, justice, and leadership.

“When We Oppress Other People, We Become Oppressed.” – Rep. Mike Honda

References:

Mike Honda (Wikipedia)
Japanese American Internment (Wikipedia)
California 17th Congressional District (Wikipedia)

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Crowdfunding Bill Goes to the U.S. Senate

In Innov8Social’s earlier post, “What is Crowdfunding”, we talked about the concept of raising funds through smaller investments or donations as a capital-raising option for a start-up or social enterprise—and limitations to crowdfunding investment due to securities laws.

That post also outlined the efforts to pass new legislation that would establish crowdfunding mechanisms to support small business, create jobs, and pave new pathways for innovation.
The House of Representatives took on crowdfunding in November

In November 2011, the House took on crowdfunding via the Entrepreneur Access to Capital Act (H.R. 2930) which passed 407-17. You can read the full post about the House’s bill and its key features here.

Now, it is the U.S. Senate’s turn
Last Friday, on December 2nd 2011, the United States Senate introduced its version of a crowdfunding initiative to the floor. Key features of the Senate bill include:
  • entrepreneurs could raise up to $1M from unlimited number of unaccredited investors (without registering with the Securities and Exchange Commission)
  • entrepreneurs seeking to raise capital through crowdfunding must do so through a website and must disclose risks to investors
  • entrepreneurs must incorporate as a business according the applicable state law and must file with the SEC
  • individual investors could invest up to $1000
Unlike the Senate Bill, the House bill enabled a $2M capital raise through crowdfunding. It also specified that individual investors could invest up to $10,000 (or 10% of their income).
The ultimate balancing act: supporting innovation and minimizing risk
While there has been bipartisan support for ushering in new securities provisions to encourage innovation, investment by unaccredited (i.e. non-wealthy) investors, and spur local job creation—there is also concern that we are moving to fast towards a future that can create new kinds of risk for new kinds of investors.

One group voicing their hesitation is the North American Securities Administrators Association. It fears that legislated crowdfunding measures could lead to speculative investment that could be risky to new or small-fund investors.

Read More:
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Update on Crowdfunding Bill: House Passes 407-17

As we discussed in the post “What is Crowdfunding?”, there is a new crowdfunding bill making its way through Capitol Hill that aims to establish an SEC exemption for small investments to provide early capital to small businesses and start-ups.A Quick Look at the Entrepreneur Access to Capital ActThe bill, titled the Entrepreneur Access to Capital Act (H.R. 2930) would let small businesses use crowdfunding mechanisms to:

  • sell unregistered securities up to a total of $2M; and
  • would let investors individually invest up to a total of $10K (or 10% of their income) using crowdfunding
The UpdateThis week has been a big one for SEC reform. As reported by Portfolio.com, on November 2nd, 2011 the House passed Regulation A reform. Specifically the bill (Small Company Capital Formation Act) upped the amount of non-SEC registered stock that small companies could offer to the public from $5M to $50M.And on November 3rd, 2011 — the House made history by progressing the Entrepreneurship Access to Capital Act with its vote of 407-17.

What’s Next

The crowdfunding bill will make its way to the U.S. Senate for vote. If the overwhelming support in the House and President Obama’s endorsement of both bills are any prediction, it seems like SEC reform that could support social entrepreneurs may become law in the near future.

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What is Crowdfunding?

Quarter and PennyWhen you are contemplating how to fund a new social venture, the idea of reaching out to individuals to make small contributions may seem like a good option in addition to trying to secure funding from impact investing firms or established investors.If that describes your view on raising capital, you may already have a better idea of what crowdfunding is than you realize.

What is crowdfunding?

 

Crowdfunding is the process of raising capital through soliciting small contributions from a broad group of people.

As the arena grows, there are 2 main headlining flavors of crowdfunding:

1. Crowdfunding for Donations. A number of websites have successfully created a platform for crowdfunding on a donation basis. For example, KickStarter, IndieGoGo, RocketHub are established platforms allowing individuals to make donations to fund small projects. Similar new platforms in the space focus on niche areas such as making a donation for civic projects (CivicSponsor) or funding conscious media (LoudSauce).

2. Crowdfunding for Investment. Start-ups and small businesses may seek to raise capital using crowdfunding in addition to or in lieu of contacting investment firms or accredited investors. There are a number of laws surrounding such transactions and start-ups are advised to contact an attorney to make sure that there’s no breach in securities law.

What current law says about crowdfunding for investment

Set up a website, create profiles for social ventures, set out terms of the small investments and returns, let individuals small amounts in social start-ups, and you’re set to crowdfund investment, right? Wrong.

The Securities and Exchange Commission (SEC) has strict rules around who can invest in small businesses and start-ups. On the whole, small private businesses seeking funding are required to register securities with state and federal governments—a process that can be pricey and time-consuming.

As a result, small private businesses tend to solicit “accredited investors”, wealthy investors, who can more easily invest in private start-ups. There a few ways to try to steer clear of compliance issues, as were outlined at the Green Business Academy.

 

Crowdfunding petition submitted to SEC

To facilitate crowdfunding for investment, a petition for rulemaking was submitted to the SEC in July 2010 (see petition PDF) by the Sustainable Economies Law Center. The petition sought to:

  • create new exemption for securities offerings up to $100,000, with a limit of $100 per investor
  • exempt securities offerings up to $100 from Section 5 registration and from the extensive requirements imposed on exempt private and small offerings

New crowdfunding law proposed, the Entrepreneur Access to Capital Act

The actual legislation created, titled H.R. 2930 and dubbed the “Entrepreneur Access to Capital Act” (see full text here) includes the following provisions:
  • creates new exemption for annual aggregate individual investments of up to lesser of: (1) $10,000; and (2) 10% of investor’s annual income.

Obama White House in Support

The Obama administration has expressed support for the Act in Statement of Administration Policy issued November 2nd 2011 (read official statement here):

“In the President’s September 8th Address to a Joint Session of Congress on jobs and the economy, he called for cutting away the red tape that prevents many rapidly growing startup companies from raising needed capital, including through a “crowdfunding” exemption from the requirement to register public securities offerings with the Securities and Exchange Commission.”

The legislation recently cleared The House Financial Services committee, and is due for a vote in the House floor later this week.

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Building a Social Innovation IQ

When you are in the midst of an emerging field, there is often no shortage of related terms and buzzwords. Social innovation is a prime example. Associated words and phrases include:Social innovation IQ

  • social entrepreneurship
  • social enterprise
  • impact investing
  • conscious capital
  • double bottom line
  • triple bottom line
  • social accounting
  • benefit corporations
  • flexible purpose corporations
  • low-profit limited liability companies (L3C’s)
  • hybrid corporations
  • blended value
  • social ventures
  • maximizing stakeholder value
  • doing well, by doing good
  • corporate social responsibility
  • and more….
Terminology, a Social Innovator Does Not Make
Through Innov8Social or various other blogs and resources, you may be (as I am) building your familiarity with key buzzwords in the field. But, as I begin to read books, listen to podcasts, and become more familiar with questions that those outside of social innovation have about the field—I realize that terms and buzzwords may not be enough to achieve the overarching goals of building new kinds of businesses that generate monetary profit while positively benefiting society & the environment.
We Need to Collectively Build Our Social Innovation IQ
What makes social innovation an intriguing prospect is also what makes it complex: it blurs the traditional distinctions between sectors such as financial, government, social, and environmental and seeks to connect them in new ways that align with mainstream business.
Judging by the burgeoning number of social innovation fellowships and accelerator programs available, it looks like more people and institutions are seeking connect with and expand the social innovation arena.
If we are putting out time into engaging and investing ourselves in this emerging field, it may be helpful to build our collective social innovation intelligence.
Components of Social Innovation IQ
Full disclosure, I am not an expert in this field. But as I learn and grow into it, I find myself developing more focused questions about what it will take to succeed as a social innovator and what it will take for the field of social innovation to succeed in impacting the way business is done. Here is my (evolving) understanding of components that can make up a social innovation IQ:
  • Financial intelligence
  • Social & environmental cause intelligence
  • Adversity intelligence
Much of it, I suspect, will begin with understanding the flow of money. Even though capital is one element of the triple bottom line, it is the one that is often most identifiable with mainstream business. Currency is like the electric current that powers machines. Though causes and action often eclipse capital in their reach and karmic importance—to understand that even the most compelling projects will require steady, consistent, and adequate funding is to understand the important role it plays.
Additionally, if we do not have a clear understanding about the history, root, and context of the social and environmental causes we aim to address—we may not be addressing issues in the most effective ways possible. Worse, we may not realize future problems that we are seeding with our best-intention ‘fixes’.
Finally, any start-up entrepreneur will tell you that there can be a fair dose of adversity required to launch and succeed. And, this likely only multiplies when your business is focused on maximizing a triple bottom line (people, planet, profits). We have to be able to identify re-frame our problems, dwell in resilience, and connect with the social innovation community for support and guidance.
What to Read
I am in the process of trying to build my social innovation IQ. I would love to connect with others interested in doing the same. Here are a few books I thought could get the ball rolling:
If this topic interests you, and you are also seeking ways to build a social innovation IQ, connect through the comments below, on the Innov8Social Facebook page, on Twitter, via email.
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6 States That Have Passed Benefit Corporation Legislation

The movement to create new legal structure for social business called benefit corporation, took a definitive step forward in April 2010, when the first state passed the legislation.To Pass State LawPassing a bill requires no small amount of work.  A bill must be drafted with consideration of existing corporate codes and state law infrastructure, and it must be sponsored by a state legislator(s). Support for the new law must be established by affected constituents such as state and local business, entrepreneurs, and other state actors. The bill must be persuasive, relevant, and must address an unmet need. The bill must be presented in and voted on by various committees and representatives of state assemblies, and state senates.

And, if that process wasn’t involved enough, each state differs in its rules and process of how a bill is passed.

So it is noteworthy that benefit corporations did not only become law in a single state. The legislation has gone on to be introduced in various states, and has recently been passed in another 5 states. And similar legislation is being introduced in various other states.

So which states were first on the scene for benefit corporation?

6 in black, white, silver
6 States That Have Passed Benefit Corporation Legislation

  1. Maryland passed SB690/HB1009 in April 2010.
  2. Vermont passed S.263 in May 2010.
  3. Virginia passed HB2358 in March 2011.
  4. New Jersey passed S2170 in March 2011.
  5. Hawaii passed SB298 in July 2011.
  6. California passed AB361 in October 2011.
Read the text of the bills, find out about the legislative sponsors, and follow links to press coverage of the benefit corporation bills on B Lab’s Public Policy page.
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Signed Into CA Law: AB 361 (Benefit Corporations) & SB 201 (Flexible Purpose Corporations)

California Capitol Building ceilingIn reviewing the last batch of the nearly 600 bills that he had to process, California Governor Jerry Brown signed into law both social innovation bills—just in time for the midnight deadline on October 10th, 2011.Both AB 361 (benefit corporations) and SB 201 (flexible purpose corporations) which create new legal structures for social enterprise are now officially California law.You can read the key points of each bill here.Read the official legislative update from the Governor’s office here.

California is #6

The passage of the benefit corporation legislation makes California the 6th state to recognize a new form of corporation that is for-profit and committed to creating a positive impact on society and the environment. California joins Maryland, Vermont, Hawaii, Virginia, and New Jersey in the benefit corporation club.

A Look Back

If you have been following the benefit corporation legislation movement on the B Corporation public policy page, here on Innov8Social, or on any number of sites following the developments, you may have been awaiting the midnight decision.

You can catch up on the progress of AB 361 in California:

  
A Look Ahead
   
Non-urgent bills such AB 361 and SB 201 signed into law will become effective January 1st, 2012. Until then, social entrepreneurs interested in becoming among the first benefit corporations in California, can use the time to decide which legal structure is the best fit, and become prepared to meet the various requirements.
Attorney Donald Simon shares some tips on how a company can get ready for benefit corporation certification or re-certification as a benefit corporation in these two videos:

Attorney Donald Simon Defines 3 Terms Related to AB 361 (Benefit Corporations) [VIDEO]

Attorney Donald Simon’s Q & A on California Benefit Corporation Legislation [VIDEO]

 

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5 Ways Social Entrepreneurs Can Raise Money

Legal structure and funding for social entrepreneurs were key topics at the Green Startup Legal Discusson on Day 2 of the San Jose Green Business Academy, with attorneys addressing various aspects of legal set-up for startups. The panelists and topics included:

Glass with coins

Securities Law & Social Entrepreneur Funding
Before introducing key ways in which social entrepreneurs can raise funds, Attorney Jenny Kassan mentioned that current securities laws dictate with specificity how investors can and cannot be solicited.
(note: a security is a form of investment or ownership that can be assigned a value and be traded.)
Securities laws dictate that companies cannot offer or sell securities unless the securities have been registered with the Securities and Exchange Commission (SEC) and with applicable state commissions. And securities laws only allow sale of securities to accredited investors (i.e. those with net work over $1M or annual income over $200K)—unless one of the narrow exceptions apply. (Read more about this on socaltech.com)
Considering the rise of crowdfunding initiatives, a social entrepreneur startup may wonder—how can I raise money by tapping my friends, family, and the general public—who may not qualify as accredited investors?
5 Ways Social Entrepreneurs Can Raise Money
Attorney Kassan highlighted five ways of raising capital in her presentation. (You can also read more on cuttingedgecapital.com).(note: considering the specificity of securities laws, it is probably a good idea to work with your attorney to ensure you’re money-raising efforts are above board)

1. Try to avoid falling under purview of securities laws. For example, offer donations for a perk, lend money without interest, pre-sell product.

2. Form partnerships with local governments and non-profits. An example of this is Mandela Foods in Oakland partnered with a local non-profit to raise funds. Enables joint application for certain grants.

3. Structure the business as a co-op. Most states have certain exemptions for cooperatives, including exemption from securities registration requirements.

 (note: see Namaste Solar co-founder talk about what it is like to be a co-op here)

4. Do a direct private offering, but have a different audience. This could involve offering an investment without public advertising, or raising capital from unaccredited investors using state exemptions.

5. Do a direct public offering. Do full securities law compliance–like IPO but there is no intermediary. This method may enable entrepreneurs to seek funding from broader base of investors.

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Solyndra and Beyond, NetIP Talks Sustainability & Policy with a Panel on Green Tech

Green on the Go hosted by NetIPPerhaps no one has felt the impact of Solyndra’s recent shutdown more than the city of Fremont, California, where the solar technology firm was headquartered. Drive northbound on the 880 Freeway and you will see not one, but two giant buildings designed to house the manufacturing operations of the company.

Green on the Go, by NetIP
So it’s no wonder that the Solyndra story framed NetIP’s (Network of Indian Professionals) open discussion held in Fremont this week. Titled “Green on the Go”, the panel discussion was organized by NetIP board member Rishi Chopra, moderated by Fremont City Councilmember Anu Natarajan and featured panelists from various sectors who spoke on the changing role of green technology and how cities can achieve building local, sustainable communities where residents can live, work, and play.


The Panel
The panel included the following speakers:
Anu Natarajan (moderator). Elected to Fremont City Council in 2006 and holding degrees in architecture and urban design, she is active in various green initiatives in Fremont and envisions the city as a hub for green technology. She is heading up the “Realizing the California Dream” projects of the American Leadership Forum in Silicon Valley.
Leslie Bar-Ness. Leslie served as Director of State and Local Government Affairs for Solyndra until the company’s shutdown earlier this month. She previously served in Governor Schwarzenegger’s administration in the role of Deputy Director in Silicon Valley.
Anne Smart. Before joining the Silicon Valley Leadership Goup in the role of Associate Director of Energy and Environmental Policy, Anne developed legislation to increase renewable energy use and enable shared savings programs as a fellow in the Delaware State Senate.
Jessica Garcia-Kohl. In her role as Director of Development & Public Affairs for the Housing Trust of Santa Clara County, Jessica works on home affordability issues. Previously she served as a senior policy analyst for the Mayor of San Jose.
What They Said
Panelists discussed a number of issues related to green technology in the San Francisco Bay area.  Bar-Ness recalled her experience at Solyndra and spoke about some of the manufacturing challenges faced by solar manufacturers in California, especially from China. Anne Smart introduced a few key initiatives such as California’s renewable portfolio standard—the most aggressive in the country– and initiatives such as state green banks to invest revenue from cap & trade in green technologies.Garcia-Kohl emphasized the need for affordable housing the Bay Area, and cited an increase of 220K individuals as projected growth of Santa Clara County in the next 20 years. She also redefined “low-income” stating that individuals making under $107K can still be considered for a program through the Housing Trust of California.
Councilmember Natarajan sketched a redefinition of the American dream. Instead of homes with yards and white-picket fences, she envisions vibrant ‘village’ communities with easy access to work, food, and entertainment–and with special attention to sustainability, utility, and top-notch design.SB 375, with its focus on lowering greenhouse emissions and supporting public transportation infrastructure was discussed.In her concluding remarks, Councilmember Natarajan announced a way to join the discussion on California’s budget. She is organizing an event titled “California Budget: New Reality, New Possibilities” on Thursday October 6th from 4-7pm at the Tech Museum in San Jose.

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