He answers a question from Ganesh R, a first year student at IIM-B.
Entrepreneurship is as such not a chosen path because one doesn’t see the returns quickly. Social entrepreneurship becomes further difficult since this is not a venture where the goal is to maximise return, which hence tends to be typically low. How is the support from the investor community for such ideas?
You are partly correct. Entrepreneurship is not a popularly chosen path. Entrepreneurship is not a path that provides a sustainable income in the initial years (or perhaps even never, in some cases), but it is certainly a path that can deliver “high” returns to the entrepreneur, faster than through the “salaried employment” approach.
The timing of the returns and the likely amount of return is not very predictable, and hence an important requirement is a person who can live with ‘risk’. Essentially, “entrepreneurship’
And it is not the right thing to pursue at all stages of one’s life. Having said that, it does deliver much better returns and faster, for entrepreneurs who are committed, focused and have a good ‘risk appetite”. A few clichés here, but I thought it best to be clear.
On the other hand, “social entrepreneurship”, has two possibilities in terms of outcomes. And their risk/reward profile varies based on which model/approach one goes with. (I am defining the “reward” as being monetary in this specific instance.) One model where the “social venture’ has a huge social impact but it is also a for-profit initiative. And, of course, the other variety is one where they are essentially an almost NGO type of organisation. The risk/reward profile in the former is perhaps no different from the pure for-profit ventures I talked about above. Micro-finance organisations are one good example.
If as an entrepreneur if one were to go with a high social impact venture, that is for-profit however, we come to an interesting situation vis-a-vis funding. My view is that the investor appetite for social entrepreneurship has improved dramatically. In fact, I would wager that it would be easier to both come up with socially impactful business propositions and to raise capital, then for mainstream ventures. While it is true that the amount of monies for social impact ventures is less than that available for mainstream ventures, the proportion of credible entrepreneurs seeking funding for social ventures that are for-profit is also low.
The VC/PE directories and the Internet offer you lead on the numerous social impact funds that are on the lookout for good investment propositions.