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In this particular detailed elucidation pertaining to social entrepreneurship in the uk rebecca harding.
Social Entrepreneurship in the UK
Rebecca Harding
Dennis Harding
It is a privilege to introduce to you the Delta Economics
report on ?Social Entrepreneurship in the UK?. The report
is an insightful analysis of five years of ground breaking
research into Social Entrepreneurship. I am particularly
pleased that this valuable work is being launched at the
Coalition?s first Black, Asian and Minority Ethnic (BAME)
conference, given that the report shows that social
entrepreneurial start ups are significantly more common
in BAME communities than in non-BAME communities.
It also shows that social entrepreneurial activity approaches,
and in some places, exceeds parity between men and
women. In both cases this is in marked contrast to
mainstream entrepreneurial activity. The finding that social
enterprise owner-managers are more common in areas
of high Index of Multiple Deprivation contrasts interestingly
with that in the NCVO Almanac that found general charities
to be most common in the wealthiest neighbourhoods.
As Dr. Harding says: ?Not only has the literature on the
subject expanded, but also the awareness in policy circles
in the UK has grown that social enterprise may hold the
key, not only to pubic service reform but also to regeneration
and economic growth as well as a potential solution to
some of the world?s greatest environmental and social
challenges.? The Coalition has been working to raise this
awareness and recognises the importance of developing
the evidence base to show what social enterprise can do
and to help make these solutions happen. Delta?s report
outlines reasons for optimism, including the fact that
11.9% of those engaged in early stage entrepreneurial
activity are trying to start a social venture.
The Coalition is committed to building the evidence base
on and for social enterprises, by our own work (such as
the forthcoming State of Social Enterprise survey of social
enterprises affiliated to the Coalition), and by working with
others including the Economic and Social Research
Council (ESRC), the forthcoming Third Sector Research
Centre and independent researchers like Delta Economics.
Delta?s report highlights the need for:
Clarity on definitions of social enterprise and social
entrepreneurialism for researchers, policy makers and
financiers,
Further work on the barriers faced by social enterprises,
More research into the social enterprise life cycle; onto
how those barriers are overcome and how social
enterprises compare with conventional businesses and
more traditional philanthropy,
Adding robust data to the existing case studies.
Delta Economics should be congratulated on their work
and Dr. Harding personally on her award from Prowess
as Women?s Enterprise Researcher of the year. I commend
this report to anyone wanting to learn more about social
entrepreneurship in the UK. The Coalition looks forward
to further work from Delta Economics and other
researchers and to continuing support from Barclay?s (who
sponsored the social entrepreneurship element of the
Global Entrepreneurship Monitor from 2003-7 which this
work extends) and others to generate and transfer
knowledge and understanding to practitioners, financiers
and policy makers to improve the environment for social
enterprises and so improve their contribution to social
and environmental solutions in the UK and around the
world.
Jonathan Bland
Acknowledgements
We gratefully acknowledge the support of the GEM UK
team, Jonathan Levie, Mark Hart, David Brooksbank and
Dylan Jones-Evans for their support. In particular, the
whole team is indebted to Jonathan Levie and Mark Hart
for their statistical and analytical work on the datasets.
Disclaimer
Any GEM data used in this report are compiled by the
GEM UK team as part of the annual adult population
survey. Their analysis and interpretation are entirely the
responsibility of the authors.
Preface
This report focuses on the social entrepreneurs who may
grow the social enterprises of the future. In the five years
since attempts were first made by the Global
Entrepreneurship Monitor to measure the prevalence of
entrepreneurial activity in the UK population, we have
established: first, that around 3.3% of the UK adult
population is engaged in entrepreneurship for social or
community purposes; that there are no significant regional
differences within the UK and that under-represented
groups in enterprise generally (such as women and ethnic
minority groupings) are more likely to be engaged in social
entrepreneurial activity than they are in mainstream
entrepreneurial activity.
There are challenges for the sector in terms of the scalability
and financing of social enterprises and, in particular, social
entrepreneurs tend to fall back on charitable status as
they become more established as a means of ensuring
their long-term finance.
Alongside this, the burgeoning literature and practice in
the area over the past five years tends to promote social
enterprise as a separate business model where profits
are re-invested in the company itself in the pursuance of
the goals and objectives of the organisation. This approach
has also informed policy.
However, a review of the literature and practice in this
area suggests a real gap in our understanding of three
things: first, the changing nature of social entrepreneurship
itself, second, how social entrepreneurs become social
enterprises and, third, how social enterprises themselves
grow, how they are financed and the challenges they face.
There is a desperate lack of data to inform the evidence
base both for policy and potential investors. The need
for further research is raised as a key recommendation at
the end of the report.
Overview of key findings
What is social entrepreneurship?
Definitions of social entrepreneurship and social
enterprise have become more sophisticated during the
course of the last five years. Where five years ago the
issue of profit and its distribution was highly contested in
the sector, there is now a consensus that social
entrepreneurs need to pay salaries and hence need external
finance while social enterprises will need growth finance
in order to expand.
The report distinguishes between social enterprise,
social entrepreneurship and philanthropy arguing that
philanthropy is the desire by successful entrepreneurs to
?give back? while social entrepreneurs and social enterprise
start with a values-based set of operational and
organisational goals and grow in order to achieve them.
A matrix of organisational types measured against
governance structure on the one hand and profit motivation
on the other allows a more inclusive definition of social
entrepreneurship, social enterprise, social business and
philanthropy.
Key findings from the data
5.8% of the UK adult population of working age is
engaged in early stage entrepreneurial activity. This is
some 2 million people and 11.9% (or 238,000 people) of
these are trying to start a social venture.
35% of all nascent early stage entrepreneurs, those
who have been involved with start-up activity for up to
three months, are social entrepreneurs
5.5% of all established business owners in the UK are
social owner-managers.
There are no significant differences generally between
men and women in terms of either social entrepreneurial
start-up activity or owner-manager activity. This contrasts
with mainstream activity where men are twice as likely to
be entrepreneurs as women.
However, men in the youngest age group (18-24) are
substantially more likely to be starting some form of social
enterprise activity compared to women (5.6% compared
to 3.1% respectively).
Social entrepreneurial start-ups amongst the Black
and Minority Ethnic (BAME) communities are higher than
for the white community. For example, 3.8% of White
respondents were engaged in some form of start up social
entrepreneurial activity compared to 8.9% of those from
mixed ethnic origins, 6.7% of those from the Indian sub-
continent and 10.5% of those from the Black African and
Caribbean communities.
Recreation, Education and Support and Care Services
dominate social entrepreneurial start-up and owner-
manager activity.
Social entrepreneurs have very positive attitudes
towards entrepreneurship and are more positive than the
UK population as a whole. They are not as confident as
their mainstream counterparts, however, and do appear
to be less confident as their activity becomes more
established.
55% of start-ups expect their entity to have charitable
status, although some 13% are set up as companies
(such as community interest companies).
Just 34% of social start-ups and 24% of social owner-
managers receive greater than 50% of their funding from
public sources. Some 43% of social owner-managed
entities have a commercial revenue stream.
Key implications
The research in 2007 has summarised the results of the
past five years, incorporated a literature review and cases
and lays out the foundations for further research in the
area given the substantial policy interest in building the
evidence base. It is argued that:
Over the five years the definition of social
entrepreneurship and social enterprise has become less
clear: it is now important for both policy makers and
investors to understand that ?for profit? social businesses
deliver value financially and socially as well as not-for-profit
entities. This requires a more inclusive approach to public
policy to ensure that all types of social enterprise are
catered for through adequate access to finance and
coaching and mentoring.
Research has focused on social policy and case studies
with GEM UK over the past five years being the only
attempt to measure the scale and size of activity in the
UK. It is now important to build a more robust evidence
base of social enterprises themselves to establish the
challenges they face as they grow in terms of finance,
markets and perceptions. This should be gender and
regionally disaggregated across the UK.
Although attrition between social start-ups and levels
of social owner-management, levels of business closure
amongst the social entrepreneurial community are nearly
twice those in the general UK population. This suggests
that mentoring and coaching as well as access to finance
through the growth process are important.
Finally, social entrepreneurs use similar patterns of
finance to mainstream entrepreneurs to fund their
businesses and interestingly are nearly twice as likely at
the owner-manager stage to attempt to access equity
finance. Indeed, the proportion of social entrepreneurs
that use charitable or public sector sources for financing
their activity appears relatively low. This suggests a need
to recognise that social enterprises have similar financial
needs to their mainstream counterparts.
However, even though social owner managers are less
likely than their mainstream counterparts to fail to gain
access to finance because of business planning or
management team issues, they are far more likely to fail
to gain access to finance because of the nature of the
business. This suggests that the sector needs to improve
how it communicates the investable diversity of the sector
to investment audiences.
Social entrepreneurship, innovation and
regeneration: how our understanding has
changed
The growth in interest in social entrepreneurship and social
enterprise has increased exponentially since the first social
entrepreneurship monitor was published in 2004. As was
reported then, ?Much of the literature, commentary and
discussion of social entrepreneurship and social enterprise
has, at its base, a frustration that awareness of it as a
primary driver for change for good is so limited.?
In the intervening four years, not only has the literature on
the subject expanded, but also the awareness in policy
circles in the UK has grown that social enterprise may hold
the key, not only to public service reform but also to
regeneration and economic growth as well as a potential
solution to some of the world?s greatest environmental and
social challenges. The understanding that there is a need
for more research in the area has resulted in a dedicated
programme to be run through the Economic and Social
Research Council; and the focus on social, community and
environmental goals amongst mainstream, profit making
entrepreneurial businesses has increased. As one
interviewee argued, ?there?s no doubt that the number of
social enterprises is increasing. We estimate that one in
twenty businesses now classifies itself as a social enterprise.?
Although measurements and maps of social enterprise in
the UK and beyond have improved there is still a long way
to go before there are consistent and longitudinal data
available across countries that allows us to understand
both the scale of social entrepreneurship and social enterprise
and the issues and challenges that social enterprises in
particular face when growing their businesses. There is
plenty of qualitative material to suggest that social
entrepreneurship is important as a driver of social reform
1
and there is a body of literature providing cases of how it
has contributed to the professionalisation of public services
such as health, education and social work and welfare
programmes in the US and the UK as well as in less
developed regions of the world
2
. There is a long-standing
literature that points to the importance of social
entrepreneurship as a phenomenon in social life and as a
feature of Corporate Social Responsibility
3
and there are
cases to teach how to become a good social entrepreneur
as a for-profit or a not-for-profit firm and to measure the
social impact of the enterprise
4
.
However, the process by which entrepreneurs a) decide
on a socially-oriented business model and b) grow is less
well understood. As was recently reported at the World
Entrepreneurship Summit, the whole area is suffering from
a paucity of quantitative and comparative survey data
5
.
One of the reasons for this lack of data is arguably because
it is hard to define social entrepreneurship in such a way
that isolates the relatively small-scale, often voluntary or
charitable, work that individuals do to make a social
difference, from a social entrepreneur who may go on to
establish a high turnover social enterprise.
1 See for example, Bornstein, D. (2004): ?How to change the world:
social entrepreneurs and the power of new ideas? Oxford, Oxford
University Press.
2 Pomerantz, M (2003): ?The Business of Social Entrepreneurship in a
down economy? In Business March/April 2004, Vol 25, Issue 2
3 Dees, G. (1994): ?Social Enterprises: private initiatives for the common
good.? Harvard Business School case study, November. Dees, J. Gregory,
Battle-Anderson, B. and Wei, J. (2004): ?Scaling social impact strategies
for spreading social innovations.? Stanford Social Innovation Review
(1), No 4, Spring 2004, 24-32. Putnam, D (2004): Social Entrepreneurs,
New Statesman, Issue 4674 p 26. Dholakia, N. and Dholakia, R (1975):
?Marketing Planning in Social Enterprises.? European Journal of Marketing
Volume 9, Issue 3. Wooster, M. (1995): ?Doing good for profit? American
Enterprise July/August 1995, Issue 4, p 97
4 Emerson, J., Wachowicz, J., and Chun, S. (2001): ?Social Return on
Investment (SROI): Exploring aspects of value creation? HBS Working
Knowledgehttp://hbswk.hbs.edu Boschee, J. (1995): ?Social
Entrepreneurs? Across the Board March 1995, volume 32, Issue 3, p20.
See also the New Economics Foundation, www.neweconomics.org.
12 www.ashoka.org
5 The World Commission on Social Entrepreneurship: financing social
innovation. This is a year-long project launched at the World
Entrepreneurship Summit (www.wes08.net) in January 2008 that is
gathering information globally on the challenges that social entrepreneurs
face when trying to access start-up and growth finance. The interim
findings will be available in September 2008 and the full report in January
2009 and the 2009 World Entrepreneurship Summit. More information
from www.deltaeconomics.com.
Focus of the report
This report examines key writings from the literature and
attempts a synthesis that does two things: first, distinguishes
social entrepreneurship and social enterprise from
philanthropy. This has become a major obstacle to
developments in thinking with considerable confusion in
practice and the literature. Second, it develops a matrix
which allows the funding and profit distribution models of
socially motivated structures to be understood. In short,
it argues that Foundations, Trusts and the emerging model
of social business requires some form of philanthropy.
However, social enterprises that emerge from social
enterprise activity start with value creation at their core and
require growth and investment in order to achieve their
goals.
It goes on to look at the existing evidence base using the
2007 adult population survey from the Global
Entrepreneurship Monitor. It finds that social entrepreneurship
is an important phenomenon in the UK entrepreneurial
landscape with some 35% of all nascent entrepreneurship
motivated by social or community objectives. Geographical
differences are generally not statistically significant but there
are important differences between demographic groups:
for example women are more likely proportionately to be
motivated by social or community goals than by profit and
ethnic minority groupings are also more likely than their
white British counterparts to be social entrepreneurs.
Finally, the weakness of the evidence base as it currently
stands is emphasised and implications for the sector, for
policy and for further research are drawn out of the analysis.
Although GEM has helped provide baseline data over the
last five years on social entrepreneurship, we know very
little about social enterprises ? how they grow, the challenges
they face, their governance structures and their sources of
finance ? on a systematic basis. We know even less about
those social enterprises, or social businesses, with a for-
profit motivation but who nevertheless serve community,
social and environmental goals.
GEM does not pick up an expansion in the sector, largely
because it is a study of individuals. However, there is
evidence that the supply-side is growing with increased
activity and interest around different financing models for
this very specific group of businesses. This suggests that
the demand-side (the number of businesses) is also growing
yet we do not know much about it at all.
It appears that the sector has the capacity to expand yet
without the evidence base present, it is difficult to assess
accurately suitable policy or private sector interventions to
address any market failures that might enable the sector
to accelerate its growth. Given the challenges that the
world faces in terms of climate change and the urgent need
for regeneration and economic development, this is a
weakness that is too urgent to ignore.
Towards some definitions:
What we can learn from the literature and
cases
Entrepreneurship has tremendous power to transform
and change society. The conventional view is that
entrepreneurship is about mainstream start-up businesses
and the contribution that they make to economic growth.
However, if we are to harness the role that all entrepreneurial
activity plays then entrepreneurship should be conceived
more broadly as it has a wider applicability to important
social concerns and may even be a better driver of
regeneration and employment in deprived communities
than orthodox activity
6
.
Social entrepreneurship
One individual interviewed for the purposes of this report
argued that is was best not to define social
entrepreneurship, social entrepreneurs or social enterprise
as the area is not only highly debated but also emotionally
charged. However, since this document is essentially
reporting on measurement attempts, it is important to
classify what we are measuring. This also helps us
understand how terminology over the past few years has
changed.
As reported in 2004, social entrepreneurs are the
entrepreneurs who, ?recognise that a part of society is
stuck and provide new ways to get it unstuck?
7
. They act
as change agents in the social sector?: they innovate and
act according to the desire to create and sustain social
value and consider themselves to be accountable ?to the
constituencies they serve for the outcomes they achieve?.
In short, they are ?one species within the genus
?entrepreneur?. They are entrepreneurs with a social
mission?
8
.
6 The social entrepreneurship monitor of 2004 found that unemployed
people and excluded groups were proportionately more likely to set up
social rather than mainstream enterprises.
7 Boshee, J. and McClurg, D. (2003) ?Toward a better understanding
of social entrepreneurshipL some important distinctions.? Minnesota,
MN: Institute for Social Entrepreneurs.
8 Dees, J. Gregory (2001 ? revised version): The Meaning of ?Social
Entrepreneurship??. Stanford Graduate Business School.
CASE STUDY:
Liam Black ? social entrepreneur
Liam Black has an exacting definition of a social
entrepreneur. ?In my view,? he argues, ?you
should have to create at least, say, 100 net new
jobs or generated 500K worth of real value in a
business before you can call yourself a social
entrepreneur?. Social enterprise and social
entrepreneurship, he goes on to say, are terms
which have become blurred by interpretation
and re-interpretation to suit particular causes or
ideologies.
In a career motivated by the desire to improve
access to the labour market of some of the UK?s
most under-represented groups, however, he
has had a defining impact on the sector. He is
the son of an Irish brickie and was brought up
with a strict, Catholic, ethic of, ?you must look
after the underdog? which has underpinned his
career over the last 20 years: from a campaigner
against apartheid and social injustice through to
his role as CEO of Fifteen growing, with Jamie
Oliver, the restaurant brand into a global success
story. In Liverpool, he led the growth of the FRC
Group from a grant funded second hand furniture
charity to a profitable multi-million pound social
business, creating work and training for hundreds
of people and furnishing the homes of thousands
of low income families across the north of
England. On the back of that success, other
enterprises like Create, Bulky Bob?s, and Revive
were established and continue to trade
successfully. In response to the huge demand
to understand and learn from FRC?s experiences,
Liam founded the Cat?s Pyjamas, to provide
aspirant social entrepreneurs with a warts and
all immersion in the real world of double bottom
line business, creating events as far afield as the
west cost of America and South Africa. Liam?s
book There?s No Business Like Social Business
has been widely read in the sector. His most
recent venture is wavelength100.com, a forum
for the world?s best private companies and social
entrepreneurs to connect and do business.
Liam is passionate about social business but
wants to de-bunk some of the myths that
surround it. He is resolute in his view that social
businesses must be profitable, but equally
determined that the focus of the business itself
must be on how to help excluded or under-
represented groups, either with the profit or
through the activities that the venture undertakes.
?It?s no good,? he says, ?having a model that will
not work in the market place. Take Fifteen, for
example. If the food?s no good, then people
don?t come back because there?s plenty of
competition out there. Without the thriving
business it?s just a youth centre unconnected
from the market. Without the social purpose it
is just a fancy restaurant like so many others in
London?
Liam has championed social reporting as way
of social businesses verifying and communicating
the social impacts they claim to make. FRC and
Fifteen have both produced independently
audited social accounts. ?Without a commitment
to prove the real value created, the social
entrepreneurship bubble will burst ? and will
deserve to. The hype and cheer leading worry
me. Awards given out with only the most
superficial analysis of the real impacts being
made?.
And what of his own celebrity status as one of
the world?s leading social business leaders? He
is actually quite disparaging about it. ?We all
play the game to a certain extent, promoting
ourselves to promote our enterprises. But we
have to be very careful. How does the creation
of a celebrity ?A list? of social entrepreneur super
heroes really help people on the ground having
a hard time getting started? We must be our
own fiercest critics? Don?t focus on definitions
or star turns ? focus on results. That?s what
social entrepreneurship should be about.?
CASE STUDY:
Anna Fiorentini Theatre And Film
School
The Anna Fiorentini Theatre and Film School (AF)
started in Hackney just over 7 years ago to
provide professional performing arts training to
165 children and young people aged 7-18
regardless of any financial, physical or learning
disabilities. Most professional training is extremely
expensive and therefore only available in more
affluent areas. Yet the importance of performing
arts in developing confidence, self-esteem and
life skills is equally as relevant to people from all
backgrounds.
Getting the balance right between being
community based and yet being a professional
drama school with the costs this entails is difficult.
Drama schools are normally professional or
community based. Not both. However, Anna
Fiorentini seems to have struck the correct
balance with teachers who include directors from
companies such as the National Theatre, RSC
and choreographers who have worked with
performers including Tina Turner and Peter Andre.
The pupils are fortunate as these teachers are
highly respected within the entertainment industry
but also want to give something to disadvantaged
children that need these opportunities.
Financing top quality teaching costs money. But
there is a financial problem because to be giving
professional on-going training forces the Drama
school to compete with other professional drama
schools for money. It is notoriously very difficult
to get mainstream funding. Therefore the income
is primarily from fees. But this cuts across the
ethos of the school to try and help families that
cannot afford fees. AF aims to have 10% free
places and allow payments in instalments for
others.
One partial and innovative solution has been to
set up a Friend?s Scheme so individuals can
sponsor a child and see their progress throughout
the year. Another has been to set up an Agency
so that the students can audition for TV, Film
and Theatre. Recently one student was given a
free place for a year as she could not afford
drama school fees. She now has a 3 year
contract with EastEnders and helps AF sponsor
events to raise fees for other students.
Another innovative idea has been to set up the
City Academy with Equator Media. This is a
performing arts school for city professionals
wanting a creative outlet one evening a week.
This is expanding into corporate firms to give
training on teamwork, public speaking and
communication skills etc. Profits go towards
bursaries for the children that want to attend the
AF School. This expands contacts within the
corporate sector and possible sponsors of the
AF School.
Due to these innovative financing solutions, AF
does not rely on grant-funding or sponsorship
to remain sustainable. The cash flow is sufficient
to achieve the immediate goals for each term.
AF is expanding in September when a youth
theatre for 17 ? 24 year olds opens as an
extension to the current school giving more
intensive training and the chance for tour
productions to elderly people?s homes and
schools. Financial assistance would be most
welcome !
Her tip to any start-up business is to start small
and make sure you keep an eye on the cash
flow at all times. You also have to be extremely
passionate about what you are doing rather than
setting up a business just for the sake of trying
to make thousands and it helps if you are
innovative in finding financial solutions.
Such a definition captures a whole spectrum of social
entrepreneurial activity, however, not all of which needs
to be either generating revenues or growing and making
an economic as well as social contribution over the long
term. We need a definition that reflects the two critical
features of a social, as opposed to a mainstream
entrepreneur and the enterprise they might eventually
establish:
The project has community, environmental or social
goals rather than profit as its primary motivation. This does
not preclude profit but does suggest a trade-off between
the social, environmental or community goals and profit
maximisation.
Any profit is used to support the social and community
goals rather than returned to shareholders in an orthodox
sense. This does not preclude shareholdings in a social
enterprise but does require a different approach to returns
on investment.
For the purposes of the this report we use the definition
of social entrepreneurship derived from the definition of
mainstream entrepreneurship contained in the annual
Global Entrepreneurship Monitor (GEM) reports as follows
9
:
?Social entrepreneurship is any attempt at new social
enterprise activity or new enterprise creation, such as self-
employment, a new enterprise, or the expansion of an
existing social enterprise by an individual, teams of
individuals or established social enterprise, with social or
community goals as its base and where the profit is
invested in the activity or venture itself rather than returned
to investors.?
Social Enterprise
Many social entrepreneurs will never establish social
enterprises instead preferring to work within socially-
oriented organisations to fulfil their own social motivations.
However, many social entrepreneurs will establish and
grow social enterprises and it is important to have a
working definition that enables us to understand where
the gaps in our understanding of this market are as well
since the sector is large and growing. The UK government
estimated in 2006 that there are 55,000 social enterprises
in the UK
10
. This is some 5% of all businesses with
employees and constitutes a total turnover of nearly £27
billion
11
. Focussing just on the social enterprises with
which are Companies Limited by Guarantee or Industrial
and Provident Societies, this is still 1.2% of all enterprises
in the UK
12
.
These businesses are formally constituted companies with
a revenue stream from trade in goods and services. Thus,
the Cabinet Office defines social enterprises as businesses
with ?primarily social or environmental objectives who are
principally reinvesting surpluses in the business or in the
community?
13
or, in short-hand, ?businesses trading for
a social purpose?
14
.
The essence of this definition means that any surplus, or
profit, is recycled for the benefits of the activity rather than
for shareholders or directors. Because of their structure
and constitution, they are able to serve a ?triple bottom
line? achieving profitability, societal impact and
environmental sustainability simultaneously.
9 Harding, R. (2004, 2006 and 2007 forthcoming): ?Social
Entrepreneurship Monitor?, part of the Global Entrepreneurship Monitor
Study.
10 Cabinet Office, 2006 Social Enterprise Action Plan.
www.cabinetoffice.gov.uk/third_sector/social_enterprise/action_plan/
11 Seehttp://www.sbs.gov.uk/sbsgov/action/detail?r.l3=7000021093&r.l2=7
000000634&r.l1=7000000412&r.s=sc&type=RESOURCES&itemId=7
000031657
12 SBS (2005): Survey of Social Enterprises Across the UK Research
report prepared by IFF for the SBS.
13 Cabinet Office, 2006 Social Enterprise Action Plan.
www.cabinetoffice.gov.uk/third_sector/social_enterprise/action_plan/;
see also DTI (2002): Social Enterprise: A Strategy for Success. Available
at: www.BERR.gov.uk/social enterprise.
14 This is the Social Enterprise Coalition?s definition,
www.socialenterprise.org.uk.
CASE STUDY:
Sev Necati - Women And Young
People?s Safety Solutions
Sev Necati runs a project called ?Women &
Young People?s Safety Solutions?. The project
assists young people, women and front line
workers on all safety issues that affect them.
It provides practical and simple real life tools,
techniques and information by teaching
participants about threat awareness and
avoidance, the law, how to manage risk, self-
esteem and confidence building. It provides a
forum where people can share their experiences,
find new strategies/techniques to change the
way they resolve difficulties as a result of abuse
from criminal activity, gang culture or cultural
beliefs which have caused physical, mental,
sexual, emotional, financial or psychological
distress. All of the work stems from Sev?s personal
experiences and already has a substantial track
record.
Awards for the work include: Community
Champions, UnLtd, Shell LiveWire Young
Entrepreneur Awards, The New Entrepreneur
Scholarship Programme from the University of
East London, East London Small Business
Centre, HBV Enterprise, The Prince?s Trust and
sponsorship to attend the i-Genius World
Summit.
She has, however, experienced severe problems
in financing her project. As a self-employed
entrepreneur there are few funds which target
individuals. Additionally, this funding is usually
reserved for start up costs for equipment, web
development etc. They will not fund your project
if it is for wages. As a result, she often finds
herself working for free and find paid work on a
sporadic basis. Her goal is to run the project on
a continuous basis through the inner London
boroughs but is currently hindered by access to
finance. She comments wryly, ?If I decided to
set up as a charity and a voluntary\community
group then other options would be open to me
but this has its own issues. Again money is given
out on a limited basis, so many groups fight for
this funding, although again not normally for
salaries.?
This example illustrates a huge gap in the market
in giving growth finance to grass roots
organisations. She says, ?decision makers need
to set up funding/grant money that people like
myself, social entrepreneurs can access for start
up, then increase the amount so I can roll out
the project\work on a paid basis. Entrepreneurs
are visionaries have some excellent ideas for
change. Unfortunately, it feels that they are not
always given the opportunity to put their
community changing ideas into practice to serve
wider society.?
CASE STUDY:
Nema Foundation
Nema?s objective is to relieve poverty while
protecting the environment, achieved through
replicable, low cost projects designed to
empower rural communities. The Nema
Foundation is part of a larger model under the
umbrella of Bespoke Experience, which operates
commercial tourism lodges. The lodges operate
in such a way that maximise all possible benefits
to the local area while giving a growing
percentage of revenue to Nema projects. The
commercial entity ensures that all administrative
costs are covered so 100% of all donations go
directly to projects on the ground.
In Guludo life expectancy is estimated at 38
years old with 29% of children, less than 2% of
houses have latrines and less than 1% of children
reach secondary school. In the last 12 months,
with Global Angel?s support, Nema has
implemented a school feeding programme,
tripling school attendance, protected over 10,000
women and children from malaria through training
and net distribution, ran hygiene and sanitation
workshops in every household in six villages,
provided every eligible child in the region a chance
for a secondary school scholarship and is
currently building 2 primary schools and providing
over 15,000 people with clean water through
the rehabilitation of 26 wells/boreholes. This has
all been achieved through training community
volunteers who implement and monitor the
projects and integral involvement with the
government.
CASE STUDY:
Parag Shah And Art-switch
?Why is it,? asks Parag Shah, the founder of Art-
Switch.com, ?That most people can earn a living
being average but artists need to be brilliant
before they can start to get above subsistence??
This was the starting point of his social business,
set up in 2003 to provide a means for returning
incomes from art work to the artists themselves
for the value they create in strengthening society
through artwork as catalysts for positive change.
In short, the vision and ultimate goal behind Art-
Switch is to establish a properly functioning
transparent art ?market? that allows artwork to
be priced properly so artists are remunerated
properly.
The model is simple, involving three things: First
creating a market where the supply and demand
of artwork can interact without the social and
cultural barriers that currently exist; Second,
educating consumers and, equally importantly,
non-consumers of art to value meanings and
not just aesthetics by exposing them to it more
frequently; Third, eradicating the barriers that
currently prevent artists from establishing
themselves.
Art-Switch is a fine art library-cum-marketplace
concept. Clients pay £1 a day for being a member
of the library and ?borrow? artwork profiled on
the website for an agreed time and then switch
for free or buy. Clients thus experience many
artworks at their premises by borrowing without
purchasing.
The benefit for consumers is they can ?return?
art whenever they want, which fosters artwork
literacy through experimentation, while the benefit
for artists is exposure for their work and a higher
proportion of the revenue. The whole £1 that the
consumer pays is returned to the artist. In
addition, Art-Switch gives artists a huge 75% of
sales and is pioneering royalties on re-sales.
So that every avenue is covered, the same model
is used for corporate art consumption with £1
a day charged per wall allowing companies to
re-brand and re-design without throwing out
redundant artwork, while being socially
responsible. ?Switchability? ensures corporate
image is never compromised so employees even
enjoy voting for artwork, which educates and
inspires.
Art-Switch measures each artwork?s popularity
to publish its daily demand driven price. The
more ?trades? there are on a particular piece,
the higher its price goes. Ultimately, Parag wants
Art-Switch to leverage the ensuing price
confidence with a transparent secondary market
for art owners to add their stock to the library
and benefit from proper valuations, while also
serving as an incubator for ?start up? artists to
launch and grow careers.
Besides art literacy, the social benefit of
transforming artworks into income generating
as well as capital gain assets is liberation of
artists to earn through their vocation rather than
having to add skills after finishing art school.
Incorporating social innovation and social business
Evidence of the sheer potential of social enterprise is
evident in the literature. While authors also comment on
the lack of reliable and consistent data
15
, there are strong
reasons to expect the sector to expand:
1. There is a visible change in the ways in which consumers
behave with a greater focus on ?ethical? consumption.?
16
2. Evidence that investors are beginning to thing in terms
of broader, ?intangible? returns other than just profit: for
example, social, ethical and increasingly environmental
value creation.
17
3. An increasing interest in academia, policy and business
in business models with community/social or environmental
goals that allow residual profit to be re-invested in the
company itself to allow it to expand and maintain its
work.
18
4. Changing contracts for delivery of key public sector
areas such as health, education and community care
reducing reliance on employment or grants and increasing
numbers, especially of women, in ?socially motivated?
enterprises.
19
5. There is a growing interest in the undoubted impact
that social enterprises can have on job creation
20
, the
environment and local communities. As the BERR
enterprise directorate survey of social enterprises in 2005
found, some 49% responded that ?helping people? was
their main goal, while a further 17% said that ?helping the
environment? was their main goal. 34% said that both
were objectives.
21
6. The growth in new technologies that enable
entrepreneurs to network in a ?social? way and this has
to some extent created an increased awareness of ?profit
with a purpose? organizations and business models and
allows them to flourish. For example, i-genius, the ?facebook
for social entrepreneurs? creates networks and partnerships
between social entrepreneurs and allows them to connect
in ways that will allow them to build their business.
15 Nicholls, A. (2007): ?What is the future of social enterprise in ethical
markets?? A social enterprise think-piece for the Office of the Third
Sector (November 2007).
16 Ibid. See also Leadbeater, C. (2007): ?Social Enterprise and Social
Innovation.? A social enterprise think-piece for the Office of the Third
Sector (November 2007).
17 Davis, S., Lukomink, J. and Pitt-Watson, D. (2006): ?The New
Capitalists: How Citizen Investors are Reshaping the Corporate Agenda.?
Harvard Business School Press, Harvard.
18 Harding, R. (2007): ?Understanding social enterprise? Industry and
Higher Education, London, March 2007, pp74-86
19 Harding, R. (2007): ?The State of the UK ? Women?s Enterprise.?
Prowess, November 2007.
20 Aiken, M. (2007): ?What is the role of social enterprise in finding,
creating and maintaining employment for disadvantaged groups?? A
social enterprise think-piece for the Office of the Third Sector.
21 See also DTI/Small Business Service (2005): ?A Survey of Social
Enterprises Across the UK.?
There is no evidence to suggest that social entrepreneurs
behave in different ways to mainstream entrepreneurs. The
case studies have all demonstrated that many social
entrepreneurs, like their mainstream counterparts, will work
for nothing or out of their own resources until the project
becomes self-sustaining. All of the social entrepreneurs
covered in this report have worked without remuneration
or from their own self-funding to get projects off the ground.
It is their belief in the ?idea? that motivates them to continue
in exactly the same way as the well-publicised mainstream
entrepreneurs who have built businesses from scratch.
Traditionally, economists regard entrepreneurs as market
creators who are motivated by their own desire for, ?wealth,
power and prestige? as a reward for the risks that they
take
22
, but many who observe entrepreneurs generally and
social entrepreneurs in particular argue that it is more
complicated than this. Commonly it is argued that there
are three characteristics that make up the overall ?genus?
of entrepreneur, regardless of the form that their
entrepreneurial activity takes
23
:
They are innovators ? they want to make a difference
by bringing a product or service to market. How they go
about doing that, and then how they distribute their profits
(either back into the organisation or to the community or
stakeholders or to shareholders) is immaterial. They are
natural change agents either in the economic or the social
space.
They are risk takers and naturally take that risk on
themselves ? many entrepreneurs regard risk as part of the
excitement of their work, whether that work is in setting up
a business or in ?paid? employment. Many are prepared
to take reputational and financial risks in order to see an
idea through because their evaluation of the opportunity
suggests that the ultimate returns will be worthwhile.
Accordingly, they collect information, make judgement calls,
raise finance and set up new business entities (either within
firms or outside of them) to carry their opportunity forward
24
.
They are entrepreneurial as a state of mind ? they push
at the boundaries of accepted norms ? of behaviour or
knowledge or business practice. In the words of one senior
Human Resources professional, ?They are a pain to manage
and a pain to keep in the business. But the rewards of
keeping them are so great that we have to do everything
to keep them.?
25
22 Baumol, W.J. (1990): ?Entrepreneurship: productive, unproductive and
destructive.? Journal of Political Economy 98, pp893-291 cited in Metcalfe,
S. (2006): op cit.
23 See also Parker, S. and van Praag, M. (2006): ?The Entrepreneur?s
Mode of Entry ? Business Takeovers or New Venture Start?? Max Planck
Institut für Wirtschaftsforschung, Jena, Discussion Paper No 26-2006 for
a more detailed discussion of the personal characteristics of entrepreneurs,
their schooling and their social capital background and the likelihood that
they will take over an existing firm or start a new one.
24 Casson, M., Yeung, B. Basu, A., and Wadeson, N. (2006): ?Introduction?
Chapter 1 in Casson, M., Yeung, B., Basu, A., and Wadeson, N. (2006):
?The Oxford Handbook of Entrepreneurship.? Oxford University Press,
Oxford.
25 GEM England Regional Entrepreneurship Monitor (2007) Expert
Interview.
CASE STUDY:
i-genius
i-genius is a world community of social
entrepreneurs with members in over 90 countries.
Established by Tommy Hutchinson, i-genius acts
primarily via its online social network platform
enabling its members to connect with one
another and form partnerships. It also encourages
partnerships between social entrepreneurs and
governments, corporations, media organisations
and NGOs. Using a variety of media outlets, i-
genius also seeks to promote its members and
their work in order stimulate fresh thinking and
bright ideas, and inspire a new generation to
become social entrepreneurs. It hosted its first
World Summit for Social Entrepreneurs in Phuket,
Thailand, March 2008.
CASE STUDY:
David Dickie - Advance Aid
After the Asian Tsunami in 2005 David Dickie, like
most people, was appalled at the devastating
slowness with which aid reached the region. Unlike
most people, David decided to do something about
it and, with Simon Lucas, set up the charity, Advance
Aid. This was not the first time that disaster had
struck a region and it certainly will not be the last ?
climate change, war, famine and disease make
crises in Africa progressively more likely over time.
More than this, if Africa is to lift itself permanently
out of poverty, argues David, there have to be real
and meaningful jobs created to combat the increased
aid-dependency of the continent since Live Aid
some 23 years ago. For many, Africa is too big an
issue to tackle but for David and Simon it represented
a major social business opportunity.
Although Advance Aid is set up with not-for profit
status, its operations are ruthlessly commercial in
the interests of ensuring that the venture achieves
its objectives. Its ultimate goal is to create jobs in
Africa by ensuring that emergency relief reaches the
places where it is most needed as soon as is humanly
possible. It does this by ?pre-positioning? stocks in
the warehouses used by NGOs and charities close
to areas where this is likely to be most needed. This
differs to the traditional approach to relief in that the
resources are pre-produced and on-hand ? they
do not need to wait for stocks to become available.
But rather than filling the warehouses with cast-offs
from the developed world, Advance Aid works with
locally based manufacturers across the continent
to provide the supplies necessary. Their latest
venture, in Nairobi, is creating 300 jobs immediately.
Advance Aid has only been operational since 2006
but already boasts major networks and achievements
across Africa. By cutting out the ?middle man? in
the emergency aid supply chain, it ensures that a
£1 donation can contribute 60 pence directly to job
creation. Thus far, the project is entirely self-funded
by the founders but Advance Aid is raising funds
from both government and corporates to establish
a recyclable fund which will create much needed
sustainable employment as well as an accessible,
affordable stockpile of emergency goods.
All of this means that there is increasing political and
business interest in those entrepreneurs who set up social
enterprises and therefore innovate in the social space.
There is little in the innovation literature itself that focuses
on the social innovators
26
and yet, as a business sector,
this area is growing rapidly as a route, not to economic
growth as such but to sustainable economic development.
The growing number of companies who combine social
innovations with business or technological innovations
27
employing the innovative business model of social
enterprise is too important to be excluded from any
understanding of entrepreneurship.
As an area of research, social entrepreneurship, social
innovation and social enterprise is still emerging and there
are still issues around the appropriate organisational
structures for maximising and perpetuating social
innovations with some arguing that the profit motive is
more consistent with business and technological innovation
while a not for profit organisational structure is more
appropriate for producing replicable social innovations.
28
The most recent contribution on the subject is that of
Muhammad Yunus who introduces a new term, that of
Social Business. For him, a social business is, ?A company
that is cause driven rather than profit driven with the
potential to act as a change agent for the world.?
29
For
Yunus, profit itself is not incompatible, indeed is necessary,
for a social business to pursue its social or environmental
goals. The profit remains within (in other words is re-
invested in) the business itself. In this sense, the definition
is consistent with that of social enterprise. However, the
critical difference is in the relationship with long term
investors who will not expect to see any return on their
investment since they share the mission of the social
business itself.
26 Interest in the area is growing and work at the Skoll Centre for Social
Entrepreneurship and the Young Foundation is increasingly focusing on
this area. See, for example, Mulgan, G. with Tucker, S., Rushandara,
A. and Sanders, B. (2007): ?Social Innovation: what it is, why it matters
and how it can be accelerated.? Skoll Centre for Social Entrepreneurship,
Working Paper and The Young Foundation.
27 Examples include the social network for social entrepreneurs: www.i-
genius.org or attempts in the South East of England to re-integrate
young offenders with behavioural difficulties into mainstream employment
through use of social networking and music.
28 Mulgan, G. et al (2007): op cit
29 Yunus, M. (2008): Creating a World Without Poverty: Social Business
and the Future of Capitalism with Karl Weber, Public Affairs Press, New
York.
From social business to social finance
Arguably Social Business as a definition is more helpful
than that of Social Enterprise as it incorporates the need
to generate profit, or wealth, in order to fulfil social objectives
for any organisation outside of the voluntary sector.
However, it nevertheless points to a real tension across
the whole social sector (policy, research and delivery alike)
around the issue of finance for these types of organisation.
For example, Emerson and Spitzer in their definition of
social capital markets includes charitable donations in the
whole market serving socially, environmentally or community
oriented organisations
30
. Arguably this is a different financing
mechanism oriented towards maintenance rather than
growth and again highlights the impact of definitional
confusion on the relationship between the social enterprise
or business and its financiers.
As has already been argued, these are entrepreneurs who
have similar finance requirements to those of mainstream
enterprises which can be termed social businesses. Like
any start-up, they are restricted by cash-flow, experience
challenges in accessing growth finance and have require
support to learn how to be ?investor ready? in just the
same way as their mainstream counterparts. However,
if they are unable to provide a return to investors for
governance reasons, this magnifies their difficulties.
Yet, as one social investor commented, ?If the sector is
to grow, it needs money. There is no earthly reason why
an entity motivated by social goals cannot make profit.
The key thing is how that profit is distributed. We need
a new model of social finance to cater for profit that is
used for social purposes.? Another argued, ?The key
challenge for social enterprises in the UK is access to
finance. All too many are willing to receive philanthropic
or public sector donations and this makes them weak
and ultimately unsustainable as viable business entities
that are of interest to the commercial investment sector.?
30 Emerson, J and Spitzer, J (2007): ?From Fragmentation to Function:
Critical Concepts and Writings on Social Capital Markets? Structure,
Operation and Innovation.? Oxford University, Said Business School,
Skoll Centre for Social Entrepreneurship, Working Paper.
CASE STUDY:
Olly Donnelly And Sheetal Mehta -
Shivia
Shivia is a charitable organisation which makes
it easy to give to and participate in grass roots
social enterprise through microfinance work in
India and Nepal. Their overall goal is to help the
poor to help themselves out of poverty. The idea
evolved when Sheetal Mehta and Olly Donnelly,
the two founders, decided there was a gap for
Western organizations and individuals to play a
role in the economic development of the poor.
Large banks, corporations and high net worth
individuals don?t want to send their money to
organizations that have high administration costs
and therefore cannot deliver the bulk of funds
because they dwindle in the process. The
investors like the process because Shivia?s interest
rates at an average of 15% are nowhere near
as high as the usual 60-80% and they know the
relationships are at the grass roots ? hence there
is transparency in the process and investors can
visit the projects if they choose.
Shivia?s social goal is to empower some of the
poorest communities in the world to set up their
own businesses and become self sustainable
thereby improving their economic conditions.
It does this by lending money for specific
opportunities in deprived communities, in a similar
way to Microcredits, but with the interest recycled
into the fund for further loans. Shivia is looking
to initially raise a fund of $2.5 million and when
appropriate, a larger fund to support similar work
in other countries. The fund is currently being
raised by partnering with organizations whom
Sheetal and Olly have worked with over the last
ten years and they will select the projects they
want to support.
Shivia, in that it must attract investment, will have
economic as well as social goals and will measure
value in terms of repayment, time to repayment,
jobs created locally, interest generated and fees
resulting from consulting work conducted on
behalf of corporations. Returns currently are
essentially social. Investors know that their funds
have been placed in the hands of people who
are going to work to build their business and re-
invest into the fund and the communities they
support. However, Sheetal Mehta and Olly
Donnelly note somewhat wryly that many of the
investors ?already get? social entrepreneurship.
There will be a big campaign in the media to
educate ?the rest?!
Sheetal has three top-tips for social
entrepreneurs:
1. Run your vision as a business (you can be
passionate about a not for profit and make
money at the same time)
2. Make sure your intentions are aligned ? making
money and giving back is key
3. Realize that not everything that claims to be
social is in fact social.
CASE STUDY:
Big Issue Invest
Big Issue Invest is the leading provider of finance
to high-performing social enterprises delivering
business solutions that tackle social problems.
It is a member of The Big Issue Group of
Companies founded by John Bird MBE and
Gordon Roddick. It delivers both social and
financial returns to its investors and dividends
are reinvested in The Big Issue and Big Issue
Invest.
Big Issue Invest is led by social entrepreneurs
staffed by mission-driven financiers with a wealth
of experience from the World Bank, Shore Bank
(the oldest and largest community bank in the
US) and private retail and investment banking.
In the words of Nigel Kershaw, the Chief
Executive, it is this combination, along with the
first-hand experience gained through The Big
Issue, that gives the organisation unique trust
and understanding of the social enterprise sector.
Since February 2006, Big Issue Invest has lent
£5 million to 25 social enterprises with no defaults
or late payments. Investments span five core
mission areas: jobs, education and training;
health and social care; social and financial
exclusion; environment and disability.
Big Issue Invest acts as one entry point of
financing options for social enterprises, providing
a ?one stop finance solution, to social enterprises?
need for capital:
The Loan Fund provides tailored loan finance to
meet the needs of social enterprises wishing to
scale-up. It provides loans as well as innovative
financing products including royalty structures,
guarantees and loan conversions that allow it to
make investments and take risks that are normally
associated with equity financing.
The Venture Capital Trust offers social enterprises
bidding on public sector contracts a new source
of low-cost, flexible contract finance ? typically
6-7% per annum with no arrangement fees in
packages of up to £2 million. This initiative
primarily looks at the strength of the social
enterprise to deliver the contract rather than its
balance sheet.
The Social Enterprise Venture Fund, currently
being raised, will provide equity-like risk capital
for scaleable social enterprises. Venture
philanthropy has typically provided grants but
this fund will take an investment approach that
offers both financial and social returns to
investors. Funding may be used for acquisitions
by social enterprises of commercial companies
and backing them into established social
enterprises with strong management and proven
delivery records.
Big Issue Invest has also launched an initiative
to increase access to regulated credit among
low-income people ? the Alternative Credit
Ratings Index. Eight million people are refused
mainstream credit each year. They have no
alternative but to borrow at very high rates of
interest. Such people may not be poor credit
risks, rather there may be too little information
in their credit files to assess their creditworthiness.
Big Issue Invest is conducting a feasibility study
of adding in new sources of positive data, such
as rent payment data, to credit assessment
models so as to increase access to mainstream
credit and believe that they could bring up to
2.5 million people into mainstream regulated
credit and away from the predatory lenders.
The matrix of social entrepreneurship and social enterprise
The cases and discussion above highlight five reasons
why social entrepreneurship and social enterprise is of
growing importance for policy makers and businesses
alike:
1. Social entrepreneurs and social enterprises are very
similar in their characteristics and potential to mainstream
entrepreneurs and enterprises. However, their primary
motivations are to help people or the environment and, as
a result, use business models that allow profit to be reinvested
in the business itself rather than to be re-distributed to
shareholders. This requires a new way of thinking about
investment and financing of these entities.
2. Changes in the way that contracts are delivered in many
of the public services has increased the prevalence of
female self-employment in the ?caring? sectors such as
education, health and community work. These are likely to
be organised as social enterprises rather than as charities
or as mainstream businesses.
3. Data on the growth of the sector and of impact that such
businesses have is very limited both globally and across
the UK. However, established social enterprises are more
likely to be found in the most deprived wards of England
31
and this suggests that they are fulfilling an important social
need.
4. Since social entrepreneurs behave in a similar way to
mainstream entrepreneurs, they are as likely to be innovating.
Examples such as i-genius demonstrate the importance of
social networking to connect groups of like-minded social
entrepreneurs who are as reliant on building social and
intellectual capital as are their mainstream counterparts in
order to grow their businesses.
5. The growing number of for-profit but social or
environmentally focused businesses requires a new financing
model that marries the fact that profit is re-invested with
the need to provide a clear financial return to investors.
There is a growing academic and policy interest in the
role of social entrepreneurs in particular as the phenomenon
itself grows globally. Social entrepreneurs are seen as
?pragmatic, innovative and visionary? with a particular role
in creating social value
32
. They are vital in creating the
social innovations that drive positive change in delivery of
services and welfare
33
but equally important in defining a
new and sustainable business model that integrates the
desire for social or environmental sustainability by
addressing negative externalities with the need to make
revenue and profit simultaneously
34
.
31 Harding, R. (2007): Barclays Social Entrepreneurship Monitor,
forthcoming; DTI/SBS Survey of Social Enterprises across the UK found
that over half of social enterprises are located in the wards with higher
levels of multiple deprivation.
32 Nicholls, A. (2006, ed): ?Social Entrepreneurship: New models of
sustainable social change? Oxford University Press, Oxford
33 Mulgan, G ., with Tucker, S., Ali, R. and Sanders, B. (2006): ?Social
Innovation: What it is, why it matters and how it can be accelerated.?
Skoll Centre for Social Entrepreneurship Working Paper:http://www.youngfoundation.org.uk/files/images/SI-sp.pdf
34 Harding, R. (2007): ?Understanding social enterprise? Industry and
Higher Education, London, March 2007, pp74-86.
However, the most important aspect of the discussion
outlined above is the change in the definition of social
entrepreneurship that has taken place over the past five
years. In 2003 the social entrepreneurship sector itself
struggled with the word ?profit?, arguing that it ran counter
to achieving the social goals of the social entrepreneur or,
ultimately, the social enterprise. As a result, it was argued,
many projects would inevitably stay small, largely voluntary
and community-based and not all social entrepreneurs
would build social enterprises.
Increasingly, however, there is a new breed of social
entrepreneur that, like their mainstream counterpart,
absolutely acknowledges the need for professionalism,
adequate resourcing and ultimately growth, to be able
effectively to serve the double bottom-line. These
entrepreneurs have as a starting point the need to build
an entity based on values and value creation but are
sufficiently pragmatic to know that business principles of
wealth creation must also be followed.
This renders the definition of social entrepreneurship more
complex but not impossible: what is important is the
motivation of the entrepreneur or enterprise in the first
place and not the ultimate attitude towards profit. In the
words of one interviewee, ?You need money, i.e. a revenue
stream and ultimately profit, in order to make things
happen. But it?s the way in which that profit is distributed
that distinguishes between a social enterprise and a
mainstream enterprise.?
A note on philanthropy
Successful global entrepreneurs like Bill Gates, Warren
Buffet and Sir Tom Hunter have raised public awareness
around a new area, especially for the UK, of philanthropy.
The activity of these entrepreneurs is often confused in
the media with social entrepreneurship and it is worthwhile
dwelling for a moment on exactly how what they do differs
to social entrepreneurship and social enterprise.
Perhaps the quickest way of illustrating the difference is in
terms of the Entrepreneurial Life-Cycle model in Figure 1:
Start-up
A philanthropist will
start here: grows,
creates wealth and
then creates value
Create value
A social entrepreneur
starts here and develops
a structure to support
value creation
Grow up
Create wealth
Figure 1:
The Entrepreneurial Life Cycle
Source: © Delta Economics
The entrepreneur-philanthropist: begins their entrepreneurial
life by starting a company. While this company may be
a ?values driven? company like Microsoft, whose objective
is to ?maximise the opportunities for people to reach their
full potential?
35
their ultimate objective at the start-up
phase is to create wealth around the central business idea
or innovation that they are developing. Once their personal
wealth has amassed, this is then used to set up
Foundations and Trusts which have social, community or
research objectives. While this model is frequently
associated with the US
36
, examples also abound elsewhere
in the world such as the Glaxo-Wellcome Trust, the
Bertelsmann Foundation, the Rowntree Trust and the
Robert-Bosch Stiftung, all of which have emanated from
the personal resources of the founding entrepreneur.
A new breed of entrepreneur-philanthropist whose
business-model is profit oriented and whose activities are
commercial but who dedicate a proportion of their profits
from the outset is represented by the XL Results Foundation
and Roger Hamilton. This is a network of entrepreneurs
who are coached and mentored on how to grow their
businesses, irrespective of business goals, in the interests
of returning a percentage of their profit to social, welfare,
economic development or community causes. They regard
themselves as social entrepreneurs although their model
is actually philanthropic: their goals are to create a
commercial organisation that generates profit and that
hence can give back to communities. The communities
themselves are the beneficiaries but not the purpose of
the business operation.
The social entrepreneur building a social enterprise is
motivated by the desire to create value in the form of a
social, environmental or welfare return in the first instance.
Many social entrepreneurs may find it hard to get out of
the values box, as the example Sev Necati demonstrated:
her goal is to generate greater welfare for the women with
whom she was working but she finds the process of
raising resources to develop an appropriate organisational
structure with growth potential extremely difficult. In
contrast, the Art-Switch example at the other end of the
spectrum was motivated entirely by social objectives to
provide income directly to artists but uses a commercial
structure and has external investors in order to be able to
achieve this.
Understanding the sector
In the end, then, social entrepreneurship and social
enterprise are arguably linked in a matrix as shown in
Figure 2. On the vertical axis is the governance structure:
from ?charitable? or ?Foundation? status and thereby
?governed? ultimately by Trustees through to ?Social
Enterprises? structures such as Community Interest
Companies and even cooperatives with investors expecting
a social as well as a financial return. On the horizontal axis
is the profit motivation of the entity from ?not-for-profit? to
?for profit?.
35 Gordon Fraser, CEO, Microsoft UK at the Cass Business School,
?Hidden Innovators? report launch.
36 See for example Acs, Z and Phillips, R. (2002): ?Entrepreneurship
and philanthropy in American capitalism.? Small Business Economics.
2002. v. 19, p. 189-204.
Social Business
Grameen Danone
Operates commercially but
returns profit to business;
external investors do not
expect a financial return but
do expect a social return
Social Enterprise
Shivia and Art-Switch
Operate commercially and
make a profit; returns to
external financiers social
and economic
Charity or Foundation
Large-scale/global (Robert
Bosch Stiftung) through global
cause (Global Angels) to small-
scale community
Charity Law prohibits
development of commercial
trading revenue; funding from
public, foundation, philanthropic
or CSR sources
For profit charities
Small entities (Advance-Aid)
through charity trading arms
to global organisations like
Robert Bosch
Owned by the Charity or
Foundation and return all profit
to it to allow charitable
objectives to be met
Not for profit/ For profit
Philanthropy Enterprise
Profit motivation
P
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o
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:
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t
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t
Figure 2:
A matrix of socially motivated
organisational structures
Source: © Delta Economics
The matrix in Figure 2 summarises both the literature and
the cases covered in the report so far. No one model is
right: for example, more philanthropic structures serve a
purpose for providing aid and support to specific global
or community causes such as hunger, or welfare or health.
Similarly the social business model, as described by
Mohammud Yunus?s new book, requires a degree of
philanthropy simply because investors should expect only
social return and not economic return from their investment.
In contrast, investors in social enterprises can expect
both a social and an economic return as the entities are
similar in structure but not in motivation to their mainstream
counterparts.
The issue of measurement, both of scale and of impact,
remains, however, since the sector itself has only recently
started to understand the diversity of models that
co-exist. It is to this that the discussion now turns.
Measuring social entrepreneurship and
social enterprise in the UK
37
Attempts to measure the scale and scope of the social
entrepreneurship and social enterprise sector are in their
infancy and the only longitudinal study is that conducted
by the Global Entrepreneurship Monitor (GEM) UK project
between 2003 and 2007. The other study surveyed here
is that conducted by the Department for Business,
Enterprise and Regulatory Reform (BERR) Enterprise
Directorate in 2005. The methodological approaches of
each are examined.
The GEM Approach
GEM defines entrepreneurship as: ?Any attempt at new
business or new venture creation, such as self-employment,
a new business organization, or the expansion of an
existing business by individual, teams of individuals, or
established business.?
This is a sufficiently broad definition to include anyone
who is adding value to the work they do by acting
entrepreneurially, although too narrow to identify those
enterprise that fulfil a not-for-profit or specific social
purpose. Indeed, with the exception of the UK, GEM
globally does not consider social entrepreneurship.
How does GEM measure entrepreneurial activity?
Each of the countries in the study has a team of researchers
who use a standardised questionnaire survey of the adult
population to create the Total Entrepreneurial Activity (TEA)
index. This random adult population survey is conducted
by telephone during June and October of each year and,
on the basis of the 18-64 year olds within the population
it is used to identify:
1. Nascent ventures: these are the firms that would be
called start-ups by most analysts. Anyone in the survey
who said they were actively involved in creating a new
business that they would own all or part of and had not
paid any salaries or wages to anyone for more than three
months fell into this category.
2. Baby businesses: these are the more established,
owner-manager, businesses that have been running for
up to 42 months and have not paid salaries for longer
than that.
There will be some double counting between these two
groups ? serial entrepreneurs may be setting up and
running businesses simultaneously. This problem is
overcome by allocating these individuals either to nascent
or to baby businesses, but not to both. Adding together
the two categories of people makes the TEA index that
can then be used to illustrate differences and similarities
between countries, regions, types of people and types of
entrepreneurship.
37 Disclaimer: Any GEM data used in this report are compiled by the
GEM UK team as part of the annual adult population survey. Their
analysis and interpretation are entirely the responsibility of the author.
GEM UK
The level and importance of social entrepreneurship were
investigated for the first time by GEM UK in 2003. GEM?s
broad approach to defining entrepreneurship was adapted
to ask similar questions about social entrepreneurship.
The method is based on the approach taken in the rest
of GEM UK requires individuals to respond to the following
questions:
1. Are you alone, or with others, currently trying to start
any kind of social, voluntary or community service, activity
or initiative? This might include providing subsidised or
free training, advice or support to individual or organisations;
profit making activity, but where profits are used for socially
orientated purposes; or self-help groups for community
action.
2. Are you alone, or with others, currently trying to start
any kind of social, voluntary or community service, activity
or initiative as part of your job? This might include providing
subsidised or free training, advice or support to individual
or organisations; profit making activity, but where profits
are used for socially orientated purposes; or self-help
groups for community action.
3. Are you, alone or with others, currently managing any
such social activity, voluntary or community service, activity
or initiative?
Like Total Entrepreneurial Activity (TEA), Social
Entrepreneurial Activity (SEA) is the sum of our adult
population of those answering positively to one of the
above questions (minus double counting). Since the
questions make clear that the use of profit or revenues is
for community or social purposes, this is effectively
measuring the potential within the general adult population
to set up social enterprises.
The 2007 dataset differs somewhat from previous datasets
thus the material presented here examines all those
individuals who are involved in some form of start-up
activity with social, environmental or community goals and
all those individuals who own and manage a socially,
environmentally or community oriented entities. It does
not allow us to provide comparative SEA results with
previous years but, as the level has remained static since
2004 at some 3.3% of the working aged population in
the UK, the data from 2007 can be used to provide
additional depth of understanding about social
entrepreneurs from a demographic, regional and
governance perspective.
The Department for Business, Enterprise and Regulatory
Reform?s (BERR) Survey of Social Enterprises
This study was a one-off survey of 8, 401 organisations
of which 1,480 fell into the BERR definition of social
enterprise (as outlined above). It is not a monitoring
exercise and does not claim to be representative of the
sector. However, it was an important first attempt to
improve understanding of social enterprises in terms of
their client base, sectors, governance structures, sources
of income and number of employees.
Since the 2005 study there have been regional and local
level surveys but systematic, UK-wide data collection for
the social enterprise sector has been limited. The BERR
2007 Annual Small Business Survey (reporting in 2008)
included filters for the sector to provide similar types of
data to the one off survey in 2005.
Summary
Each study measures different things: GEM measures the
propensity of people in the general adult population to set
up socially, community or environmentally motivated
businesses. Effectively it measures the number people in
the adult population of working age who set up or run
ventures or activities for such purposes. It does not
measure the businesses that they run nor does it aid our
understanding of the growth process since this falls outside
of the remit of an adult population survey.
The BERR study provides a baseline evidence base on
the sector itself and can therefore yield greater
understanding of the enterprises themselves. As a cross-
sectional analysis, however, it is limited in telling us how
the sector has changed or what the challenges and barriers
(especially in terms of access to finance) actually are.
Why measure social entrepreneurship?
With the social enterprise sector estimated to be as large
as it is in the UK, it is important to understand the cultural
and entrepreneurial base that supports it in the interests
of developing policies to support more social
entrepreneurship and, hence, more social enterprise.
Thinking around social enterprise has developed over the
past few years and it is worth mapping the development
of policy as it reflects the changes. The then Department
for Trade and Industry?s Small Business Service saw two
main areas in which social enterprises contribute to the
UK economy:
By providing an alternative business model for firms
to trade commercially in an environmentally and socially
sustainable way.
By providing an alternative delivery system for public
services such as health, education, housing and community
support.
To this end, it?s Strategy for Success (DTI 2002), focused
on defining the size of the sector and its value to the
economy, on creating an appropriate and enabling
regulatory and business support environment and on
improving the performance of social enterprises. By 2005
the government had:
Launched and established the Community Development
Finance Institutions (CDFIs).
Provided Community Investment Tax Relief to investors
in CDFIs.
Ensured that Business Links operatives and all major
government enterprise support schemes included support
for social entrepreneurs and social enterprises.
Extended the Small Firms Loan Guarantee Scheme
to include social enterprises.
Created Community Interest Companies (CICs) which
plugged an important legal gap in the corporate governance
of social enterprises by providing an ?asset lock? to ensure
that revenues remained within the firm and by requiring
companies applying for CIC status to pass a ?test of
community value?.
Built and developed the evidence base on social
enterprises.
Integrated social enterprise thinking into cross
governmental initiatives such as the Local Enterprise
Growth Initiatives (LEGI), DEFRA?s £1.5m ?Enterprise for
Inclusion? rural support programme and the
?FutureBuilders? £1.25m programme to assist the
community and voluntary (or Third) sector to win public
sector contracts.
The Strategy for Success is now five years old and was
reviewed during 2006. Of most relevance to this report, the
review process resulted in a move of the whole social
entrepreneurship and social enterprise agenda to the Cabinet
Office?s Office of the Third Sector and recommended:
that the specific support needs of mainstream and social
enterprises be investigated further,
that the needs of the Third Sector are better understood
and
that new entrants are encouraged into the social enterprise
market place while helping to establish social enterprise as a
viable business model and to open markets to social
entrepreneurs.
The resultant Action Plan published at the end of 2006 stresses
the enabling role of government through:
Fostering a culture of social enterprise: by raising awareness,
appointing social enterprise ambassadors, promoting social
entrepreneurship amongst young people, providing guidance
to schools on social enterprise and raising the profile in
secondary and tertiary education, developing a new research
programme to build the evidence base and a programme of
fostering links between the conventional private sector.
Ensuring that correct information and advice is available
to those running social enterprises: by providing additional
funding from April 2007 to Regional Development Agencies
(RDAs) to improve the capacity of Business Links to deliver
support, by improving information about social enterprise
through the business link network, working with partners to
identify national, regional sub-regional and local networks, and
by commissioning a review of the specific needs of social
enterprises
Enabling social enterprises to access appropriate finance:
by making available £10million for investment in social
enterprises, rolling out financial awareness programmes
including social enterprise within mainstream ?access to
finance? interventions and by conducting a review of the
Community Investment Tax Relief system and other incentives
by the Budget 2007.
Enabling social enterprises to work with government: by
publishing a third sector public service action plan, by tackling
barriers to the use of social clauses and by reducing the
barriers to social enterprise in public procurement.
These initiatives are supported by the appointment of a new
Council on Social Action, an award for Social Technology and
to look at mechanisms for establishing a new social Investment
Bank
39
. Further, the Enterprise Strategy published by HM
Treasury and BERR in March 2008 additionally recognises
the need for a dedicated venture fund for social enterprises
and signalled the intention to dedicated £12.5m for this
purpose
40
.
The profile that has recently been given to ?celebrity? social
entrepreneurs such as Liam Black or Tim Smit (founder and
CEO of the Eden Project), and the prominence in policy that
this whole area now has through the Office of the Third Sector
suggest that the sector is a large scale and important
phenomenon. The analysis of GEM in the next section allows
us to understand a little more about what is happening in the
sector generally.
39 Gordon Brown, Prime Minster, in speech at the launch of ?Britain?s
Everyday Heroes? www.pm.gov.uk/output/Page12600.asp
40 HM Treasury and BERR (2008): ?Enterprise ? Unlocking the UK?s
Talent?http://www.berr.gov.uk/files/file44992.pdf
How much social entrepreneurship is there
in the UK?
41
Overall in the UK, GEM estimates that some 3.3% of the
working age population is engaged in social entrepreneurial
activity. This represents nearly 1.3 million people and, as
Figure 1 shows, although the rate of engagement with
social entrepreneurial activity is not as high as for
mainstream entrepreneurial activity (at 5.8% of the working
population), this is still a substantial number of individuals.
Figure 3 does not give a figure for SEA for 2003 or for
2007. The SEA rate in 2003 was calculated then as 6.6%
of the population but was not directly comparable with
TEA as it included established businesses older than 42
months. As a result, it over-estimated the SEA-active
population which only measures the newest activity up to
42 months. It does, however, demonstrate that a
proportion of the SEA active social entrepreneurs will
continue to run more established social enterprises.
In 2007, the GEM survey did not allow for a calculation
of SEA as such but does allow us to look at all those
involved in some form socially, community or
environmentally oriented start-up activity and all those
who own and run a socially, environmentally or community
entity. The highlights from the data are as follows:
11.9% of all TEA active individuals (in other words the
nascents starting up but who have not been active for
more than three months and all those who have owned
or managed a firm for more than three months but less
than 42 months) are engaged in some form of socially
motivated start up.
35% of all nascent entrepreneurs are socially motivated.
5.5% of all established business owners (owning and
managing firms older than 42 months) are social
entrepreneurs.
41 Full methodological details, including sample sizes and weightings
are given in Appendix 3
Figure 4 compares social entrepreneurial start up and
owner-manager activity with mainstream start up and
owner-manager activity. It should be noted that the owner-
manager activity in the social enterprise population is
filtered in the survey questionnaire and excludes owner-
manager activity that has been covered by questions
elsewhere in the survey. The mainstream entrepreneurial
activity does not have this caveat thus the figures appear
substantially higher.
Immediately interesting from Figure 4 are two things:
Social entrepreneurial start-up and owner-managed
activity do not differ substantially in scale at some 4.2%
and 3.8% of the adult population respectively. The
comparative figure for mainstream entrepreneurial start-
ups is 3.9% and although some 11.6% of the adult
population are estimated to be owner-managers of
businesses, there may well be some overlap, both with
mainstream start-ups and with social enterprises.
Social entrepreneurship start-up and owner-manager
activity does not differ substantially by gender, but
mainstream activity does. For every three women?s social
enterprise start ups there are four male and there are five
male owner-managers for every four female social enterprise
owner-managers.
Figure 5 looks at the level of activity by UK region for social
and mainstream activity. Regional differences are generally
not statistically significant as the sample sizes between
regions differ.
Men
Women
Total
0
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4
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8
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start-up
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entrepreneur
owner-manager
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entrepreneur
start-up
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entrepreneur
owner-manager
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TEA
SEA
Figure 3:
Total Entrepreneurial Activity and Social
Entrepreneurial Activity Compared
Source: GEM UK Adult Population Survey 2003 - 2007
Year
2003 2004 2005 2006 2007
Figure 4:
Social and mainstream entrepreneurial start-up and
owner-manager activity compared, 2007
Source: GEM UK APS 2007
However, there are some interesting indicative findings in
Figure 5 as follows:
The region where there is the highest social
entrepreneurial start-up activity is the East of England at
5.1% of the adult population of working age. The region
where it is lowest is Northern Ireland at some 3.3%.
The range is narrower for social enterprise owner-
manager activity: the level is 4.3% of the adult population
in both the East of England and London and 3.2% in
Wales.
Again the levels of mainstream start-up activity (which
may include social enterprise) are not significantly different
to social enterprise activity. Indeed in some regions, such
as the North East, the North West, Yorkshire and
Humberside and the East of England, social entrepreneurial
start-ups appear higher.
The social entrepreneurial start-up and owner-manager
activity by urban and rural location in England only are
reported in Figure 6.
There is no significant difference in start-up activity between
urban and rural locations but social enterprise owner-
manager activity is signficantly higher in rural locations at
5.8% of the adult population compared to 3.5% in urban
locations
42
.
Figure 7 looks at the same results by index of multiple
deprivation, again for England only
43
, which measures the
level of deprivation across seven ?domains? in each super-
output area in the country: income deprivation, employment
deprivation, health deprivation and disability, barriers to
housing, education, skills and training, crime and the living
environment. The area ?1? is the most deprived while ?5?
is the least deprived.
Figure 7 suggests two things:
For the most deprived areas, the differences between
owner-manager and start-up activity are not statistically
significant. For example, in IMD 1 some 3.8% of the
population are engaged in social entrepreneurial start-up
activity compared to 4.8% who own or manage a social
enterprise. For IMD 5 the figures are 4.9% and 2.9%
respectively.
Social enterprise start-up activity is much higher in the
least deprived areas at some 4.9% of the population
compared to 3.8% in the most deprived areas. This is
reversed, however for owner-manager activity at 2.9%
and 4.8% respectively.
42 ?Urban? and ?Rural? are defined according to government statistical
procedures (seehttp://statistics.gov.uk/geography/nrudp.asp). 43http://www.communities.gov.uk/pub/443/Indicesofdeprivation2004su
mmaryrevisedPDF154Kb_id1128443.pdf
Figure 5:
Social entrepreneurial start-ups and owner-managers by
UK region, 2007
Source: GEM UK APS 2007
0
2
4
6
8
10
12
14
16
%
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Social Enterprise start-up activity
General start-up activity
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Social enterprise owner-manager
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rural
urban
Figure 6:
Social entrepreneurial start-ups and owner-managers
in rural and urban locations
Source: GEM UK APS 2007
Type of activity
Social entrepreneurial start-up Social enterprise owner-manager
0
1
2
3
4
5
6
7
%
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Social entrepreneurial start-up
Social enterprise owner-manager
Figure 7:
Social entrepreneurial start-ups and owner-managed
activities by index of multiple deprivation (England only)
Source: GEM UK APS 2007
IMD Quintile (most to least deprived)
IMD 1 IMD 2 IMD 3 IMD 4 IMD 5
Finally for this section, Figure 8 reports on the attitudes
of social entrepreneurs compared to mainstream
entrepreneurs.
There are several highlights that can be drawn out of this
table:
Social entrepreneurs are more positive than the general
UK population but not as positive as mainstream
entrepreneurs. There is one notable exception. Although
they are more likely than the UK population to think they
have the skills and experience, to see good business
opportunites and to know an entrepreneur, social
entrepreneurs starting up are not significantly less likely
than their mainstream counterparts to fear failure.
Fear of failure is lower amongst the more established
social enterprise owner-managers and is even lower
amongst mainstream entrepreneurs.
For both mainstream and social entrepreneurs,
perceptions seem to deteriorate with experience. Although
both mainstream and social owner-managers are more
likely to say that they have the skills to start a business,
they are less likely to know other people who have set up
businesses in the last two years, less likely to see good
opportunities in the next six months and more likely to
fear failure. They are also significantly less likely to be
thinking of starting another activity in the next three years.
44 Harding, R (2006): ?Stairways to growth: women?s enterprise
in the UK? Report for Prowess.
45 Harding, R and Cowling, M (2004); Harding, R. (2006) and Harding,
R. (2007).
Summary
The level of social entrepreneurial activity, at some 3.3%
of the adult population of working age in 2006, is
substantial. In 2007 complexities in the questionnaire
meant that the results were not directly comparable with
the previous years. However, the levels of social enterprise
start-up and owner-manager activity suggest that a
significant proportion of the population is engaged in this
type of activity and that therefore it cannot be ignored.
The locational differences by region are not statistically
significant but there are significantly more social enterprise
owner-manager in rural locations and most deprived wards
in England than in urban or least deprived wards. Combined
with anecdotal evidence and evidence from previous GEM
studies
44
the higher prevalence of social entrepreneurial
owner-managed entities in rural areas suggests that rural
responses to the decline in the rural economy are taking
the form of socially oriented activity. Similarly, the higher
levels of owner-manager activity in most deprived wards
in England also suggest that social enterprise responses
are more appropriate to problems of regeneration and
welfare than mainstream ones.
Finally, it is interesting that the attitudinal results reflect
those reported in GEM Social Enterprise Monitors in
previous years
45
. Social entrepreneurs develop more
negative attitudes towards entrepreneurship as they
become more established. This is also the case for
mainstream entrepreneurs and, combined with the fact
that fewer expect to start a business, it suggests that
coaching and mentoring through the growth process may
help social entrepreneurs to convert their visions in to
sustainable social enterprises.
I expect to start a business in the next three years
I have shut down a business in the last 12 months that has ceased to trade
I know someone who has started a business in the last 2 years
In the next six months there will be good start-up opportunities where I live
I have the skills to start a business
Fear of failure would prevent my starting a business
Figure 8:
Attitudes of social entrepreneurs compared with all
entrepreneurs and the UK population
Source: GEM UK APS 2007
S
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21.6 11.0 51.2 20.1 7.4
2.2 2.8 3.6 3.2 1.2
47.5 33.9 48.1 42.1 25.7
56.7 53.7 70.3 58.1 39.1
64.9 68.4 79.9 86.5 48.5
34.2 26.4 19.5 22.0 35.8
Who are the social entrepreneurs?
This section provides information on the demographic
profile of social entrepreneurs. It has already been
established that the ratio of women?s social start up and
owner-manager activity to male activity is higher than for
mainstream activity. Indeed, as illustrated in Figure 9, in
the East of England, female start up activity and owner-
manager activity is higher than male activity.
Again, the regional differences should be treated with
caution. However, the East of England is the region with
the highest level of female social entrepreneurial start-ups
at 5.7% compared with 2.6% in the North East. London
has the highest level of male start-up activity at 5.5% and
Wales the lowest at 3.7%.
Interestingly, there are two regions, the South West and
the East of England where female start up activity is higher
than male activity. In both regions there are four female
social entrepreneurs for every three male social
entrepreneurs. In Wales the ratio is nearly one-to-one. In
Wales and the East of England there appear to be more
female owner-managed social enterprises compared to
male.
Figure 10 shows start-up and owner-manager activity by
age grouping.
0
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6
7
%
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Figure 10:
Social Entrepreneurial Activity by age
Source: GEM UK APS 2007
Age Catergory
18-24 25-34 35-44 45-64 55+
Social entrepreneurial start-up
Social enterprise owner-manager
Figure 9:
Social entrepreneurial activity by gender in UK regions
Source: GEM UK APS 2007
Male SE starts
Female SE starts
Male SE OM
Feale SE OM
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U
K
UK region
Again the results are not statistically significant but are
interesting indicatively as they reflect the findings of previous
social entrepreneurship monitors. The widest gap between
start-up and owner-manager activity is amongst the
youngest age group where 4.4% are social entrepreneurs.
The lowest level of start-up activity is in the oldest age
group at 3.8%. However, it is the oldest two groups, 45-
54 and 55+ who are most likely to be the owner-managers
of social ventures, activities or enterprises.
Figure 11 breaks the age differences down by gender.
The widest gap is at the start-up stage where young men
are substantially more likely to be starting social
entrepreneurial ventures at 5.6% of the total male population
aged 18-24 compared to a level of 3.1% in the female
group.
Figure 12 shows the ethnic breakdown of social
entrepreneurship by broad ethnic grouping. The least
socially entrepreneurial group appears to be the white
ethnic grouping. However, the attrition between start-up
and owner-managed activity is negligible amongst this
group while it is more substantial amongst other ethnic
groupings.
The ethnic grouping most likely to be starting a social
venture, activity or initiative is the Black African and
Caribbean group at 10.5%. This is two and half times
the level of white British people at 3.8%. The mixed ethnic
grouping are the most likely to own-manage a social
enterprise at 5.0% while the Black African and Caribbean
group are the least likely at 2.5%.
Gender differences should be treated with caution but the
gap between male and female activity is narrowest in the
White ethnic grouping, as illustrated in Figure 13.
0
1
2
3
4
5
6
7
%
A
d
u
l
t
P
o
p
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l
a
t
i
o
n
1
8
-
6
4
Social entrepreneurial start-ups men
Social entrepreneurial start-ups women
Social enterprise owner-manager men
Social enterprise owner-manager women
Figure 11:
Social entrepreneurial activity by age and gender
Source: GEM UK APS 2007
Age group
18-24 25-34 35-44 45-54 55+
0
2
4
6
8
10
12
14
%
A
d
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t
P
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p
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l
a
t
i
o
n
a
g
e
d
1
8
-
6
4
Figure 12:
Social Entrepreneurial Activity by Ethnic Grouping
Source: GEM UK APS 2007
Ethnic grouping
White Mixed
ethnic origin
Indian sub-
continent
Other Asian Black
African or
Caribbean
Social entrepreneurial start-up
Social enterprise owner-manager
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
1
8
-
6
4
Social entrepreneurial start-ups men
Social entrepreneurial start-ups women
Social enterprise owner-manager men
Social enterprise owner-manager women
Figure 13:
Social entrepreneurial activity by ethnic grouping and
gender
Source: GEM UK APS 2007
Age group
White Mixed
ethnic origin
Indian sub-
continent
Other Asian Black
African or
Caribbean
0
2
4
6
8
10
12
14
Figure 14 illustrates the differences by occupational status
and demonstrates that the ?other? grouping is most likely
to be starting up and owning and managing a business.
This could include individuals who are not classified in the
mainstream labour market or who are self employed.
Interestingly, the level of social entrepreneurial start-ups
in the student grouping is also high at 7.2%.
Figure 14:
Social entrepreneurial activity by occupational status
Source: GEM UK APS 2007
Social entrepreneurial start-ups
Social enterprise owner-managers
0
2
4
6
8
10
12
14
%
a
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f
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O
t
h
e
r
Occupational status
Figure 15:
Social entrepreneurial activity by occupational status and gender
Source: GEM UK APS 2007
Social entrepreneurial start-ups men
Social entrepreneurial start-ups women
0
2
4
6
8
10
12
14
%
a
d
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r
Occupational status
Social enterprise owner-managers men
Social enterprise owner-managers women
16
Figure 15 shows that entrepreneurial owner-manager
activity in the ?other? group is predominantly amongst
women at 15.8%. 6.0% of women in full time education
are engaged in social entrepreneurial start up activity while
8.7% of men who are in part time employment are starting
up social entities. This is also the group most likely to be
owning/managing a social enterprise.
As with mainstream entrepreneurship and as reported in
previous Social Entrepreneurship Monitors, the likelihood
of being involved with either social start-up or owner-
manager activity increases with level of qualification. This
is illustrated in Figure 16. For example, start up activity
amongst those with Doctorates is 9.5% and with Masters
qualifications is 8.6%. This drops to 5.9% for Bachelors
level qualification.
Levels of social enterprise owner-manager activity are
8.7% in the two post graduate groups and 5.6% in the
Bachelors group.
Summary
The differences between men and women in terms of
levels of social entrepreneurial activity have been shown
over the last five years to be insignificant in contrast to
mainstream activity where men are twice as likely as
women to be starting a business. Indeed there are some
regions and groupings where social entrepreneurship
amongst women is higher than it is amongst men. This
corroborates a general picture that has emerged over the
last few years that policy should focus on encouraging
socially motivated business activity amongst women as
this might encourage more women into labour market
engagement through enterprise. Similar arguments have
been made for other under-represented groups such as
ethnic minorities.
The results of this section, however, do suggest that social
entrepreneurial activity is higher amongst those with higher
qualifications and, particularly amongst men, some form
of income through part time employment. The fact that
attrition is also lower amongst white social entrepreneurs
also suggests that a pattern similar to that of mainstream
entrepreneurship is emerging. Except by necessity, social
entrepreneurial activity is focused in groups where education
and income are higher, especially at the start-up stage.
Finally, though, there is an interesting pattern of young,
male social entrepreneurs evident in the data. Here there
are three female social entrepreneurs for every five male.
Our case studies reflect this pattern and further anecdotal
and interview evidence for this report suggest that young
men are taking a more philanthropic approach to their
entrepreneurial activity, as outlined above but are classifying
themselves as ?social entrepreneurs?.
Figure 16:
Social entrepreneurial activity by occupational status
Source: GEM UK APS 2007
Social entrepreneurial start-ups
Social enterprise owner-managers
0
2
4
6
8
10
12
14
%
a
d
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t
p
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s
Educational qualification
Social entrepreneurship structure and funding
Focus on social entrepreneurial start-ups
It is important to understand where on the matrix the
social entrepreneurs covered by GEM appear in order
to assess its usefulness in the evidence base. This
section focuses on socially motivated start-up activity
while the next focuses on the social enterprise owner-
managers.
Figure 17 shows the ownership structure of the social
venture anticipated by the respondent once it is
established. It suggests that the majority of social
entrepreneurs will own part of the entity once it is
established at nearly 65%. Of the remainder, 16.5%
will own all of the entity with no statistically significant
differences by gender and 18.1% likely to own none of
the entity (20.1% amongst men and 15.5% amongst
women).
Women are more likely to be working in education or
support and care services than men, as illustrated in
Figure 18 but the most common sector is the recreation
sector for both men and women. This includes youth
clubs run through churches and community centres.
Accordingly the greatest number of social entrepreneurs
will be working away from their home in separate
premises. Women are slightly more likely to be working
in other premises than men. This is shown in Figure 19.
I will own all of the entity once established
I will own part of the entity once established
I will own none of the entity once established
Figure 17:
Ownership status of social entrepreneurs once entity is
established (% all respondents)
Source: GEM UK APS 2007
16.4 16.7 16.5
63.3 67.7 64.8
20.1 15.5 18.1
M
e
n
W
o
m
e
n
T
o
t
a
l
Activity will be run from home
Activity will be run from separate premises
Mobile service or activity
Other
Figure 19:
Location of social entrepreneurial start-ups
Source: GEM UK APS 2007
21.5 19.8 20.7
65.4 68.7 66.9
9.8 10.9 10.3
2.7 0.3 1.6
M
e
n
W
o
m
e
n
T
o
t
a
l
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
s
t
a
r
t
-
u
p
s
Sector
Education Environment Health Recreation Support and care Other Regeneration
Figure 18:
Social entrepreneurial start-ups by primary sector of activity
Source: GEM UK APS 2007
Some 30% of the social entrepreneurs responding to this
question have some form of for-profit capability in that
they are socially motivated companies or cooperatives.
There are a substantial number of unincorporated and
trust-based companies and the ?other? group, which
includes charities, is the most significant in terms of size.
This is corroborated by Figure 20 which suggests that
more than half of social entrepreneurs expect their entities
to have charitable status once established.
Roughly a third of revenue for the social enterprise start-
ups will come from public sources and 53% expect to get
revenue from sales of goods or services. Of these, some
26% of all respondents expect more than 90% of their
revenue to come from sales (33.1% of men and 16.9%
of women).
Figure 22 presents the numbers of jobs that social
entrepreneurs expect to create, both for start-ups and
owner-managers. The difference between the two stages
of development is really quite marked. 54.4% of social
start-ups expect to create 1-5 jobs with a median of 4
jobs for the whole sample. However, for the owner-
managers, with a higher proportion of established social
enterprises the median job creation is zero while 52% do
not create any jobs.
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
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e
n
t
r
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p
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e
n
e
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r
i
a
l
s
t
a
r
t
-
u
p
s
Legal status
Unincorporated Trust Company (eg
Community
Interest
Company)
Cooperative,
community
benefit society
or credit union
Partnership Other Sole trader
Figure 20:
Legal status of social entrepreneurial start-ups
Source: GEM UK APS 2007
No Jobs
1-5 Jobs
6-10 Jobs
> 10 Jobs
Median Jobs
Figure 22:
Job creation by social entrepreneurs (start ups and
owner-managers compared)
Source: GEM UK APS 2007
7.9 52.0
54.4 21.6
18.8 7.0
12.1 13.4
4.0 0.0
Social
start-up
Social
owner
manager
My activity will have charitable status once established
Greater than half of the funding for the social start-up comes from public sources
My activity will generate revenue through sales or charging for goods or services:
Of these
> 90% revenue from sales
>75% revenue from sales
> 50% revenue from sales
>25% revenue from sales
>10% revenue from sales
0-10% revenue from sales
Figure 21:
Charitable and funding status of entity once established
Source: GEM UK APS 2007
55.0 55.2 55.1
34.6 33.1 33.9
53.9 51.9 53.0
33.1 16.9 26.0
7.7 7.7 7.7
16.5 17.9 17.2
13.3 16.9 14.9
7.7 11.8 9.5
1.6 4.6 2.9
M
e
n
W
o
m
e
n
T
o
t
a
l
Focus on social enterprise owner-managers
The patterns of owner-managed social enterprise are
similar to start-ups. Predominantly owner-managed activity
is in the ?recreation? sector and women are more likely
than men to be working in education and support and
care services. This is illustrated in Figure 23.
Figure 24 shows where the social entrepreneurial activity
is located and here there are differences. The number of
enterprises run from home has fallen and 72% are run
from separate premises. Similarly there are marginally
fewer mobile activities at 7.9% compared to 10.3% of
start-ups.
Figure 25 shows the ownership structure. Again, it is the
?other? sector, which includes charities which dominates
at 35.1% overall. This compares to 15% which have a
cooperative or mutual/benefit structure.
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
o
w
n
e
r
-
m
a
n
a
g
e
r
s
Sector
Education Environment Health Recreation Support and care Other Regeneration
Figure 23:
Social entrepreneurial owner-managers by primary sector of activity
Source: GEM UK APS 2007
50
Activity will be run from home
Activity will be run from separate premises
Mobile service or activity
Other
Figure 24:
Location of social entrepreneurial owner-managers
Source: GEM UK APS 2007
16.9 17.5 17.2
69.1 75.4 72.0
10.5 4.9 7.9
2.5 0.6 1.6
M
e
n
W
o
m
e
n
T
o
t
a
l
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
s
t
a
r
t
-
u
p
s
Legal status
Unincorporated Trust Company (eg
Community
Interest
Company)
Cooperative,
community
benefit society
or credit union
Partnership Other Sole trader
Figure 25:
Legal status of social enterprise owner-managed entities
Source: GEM UK APS 2007
The funding and status of the entity are illustrated in Figure
26. As Figure 26 would suggest, 50% of all owner-managed
entities have charitable status (with women more likely to
take this structure) and substantially fewer get more than
half of their funding from charitable sources (23.7%
compared to 33.9%).
There are similarly fewer social enterprise owner-manager
respondents who expect revenue to come from sales of
goods or services at 42.7% compared to 55% of start-
ups. Accordingly 32.8% of these get more than 90% of
their revenue from sales.
Focus on funding
Figure 27 illustrates the sources of external finance other
than sales revenue and private donations.
The dominant form of finance is bank overdraft for social
start-ups and owner-managers and this is the same in
the UK as a whole. Friends and family are also important
for all categories.
Public sector grants are twice as important as funding
mechanisms for social entrepreneurs compared to the
whole UK and individual investors are also a substantial
part of the overall funding portfolio compared to UK-wide
mainstream busineses.
My activity has charitable status
Greater than half of the funding for the social start-up comes from public sources
My activity will generate revenue through sales or charging for goods or services:
> 90% revenue from sales
>75% revenue from sales
> 50% revenue from sales
>25% revenue from sales
>10% revenue from sales
0-10% revenue from sales
Figure 26:
Charitable and funding status of owner-managed entity
Source: GEM UK APS 2007
47.4 53.9 50.4
22.3 25.4 23.7
44.8 40.3 42.7
33.7 31.5 32.8
14.7 9.8 12.6
11.0 13.4 12.1
8.6 8.7 8.6
5.5 7.1 6.2
9.2 7.9 8.6
M
e
n
W
o
m
e
n
T
o
t
a
l
Overdraft
Friends and family
Unsecured bank loan
Mortgage or other secured loan
Credit cards
Government grants
Individual investor (not related or known)
Non bank unsecured loan
Equity finance
Figure 27:
Finance sources accessed social start-ups and owner-managers compared to all UK owner-managers
Source: GEM UK APS 2007
27.2 28.2 29.4
26.6 27.8 21.7
16.8 14.6 14.7
11.1 12.8 15.5
16.0 17.8 16.4
20.2 14.9 10.4
19.9 18.9 7.7
16.8 14.6 6.0
5.9 6.4 3.6
Social start-ups Social
owner-managers
UK
Finally, Figure 28 reports on the reasons why social and
UK-wide mainstream entrepreneurs have failed to gain
finance. The ?nature of the business? at 41.2% for start-
ups and 43.4% for owner-managed social enterprises are
the dominant factor. Other factors that suggest community
based projects at the start-up phase include the costs of
finance, the smallness of the business and fear of debt.
Summary
The evidence presented in this section suggests that an
adult population survey such as GEM is picking up social
enterprise start-up activity and owner-managed activity
that falls into the charity quadrant of the matrix. Both start-
up and owner-managers either expect their entities or are
managing entities that have charitable status. The funding
structures reflect a reliance on donations that increases
as the entities become more established and the reasons
for not being able to access finance are around the nature
of the business and business planning. The more
established, owner-managed entities are more likely to be
charities and their median job creation is zero.
Cost of finance too high
Business too small
Nature of business
Fear of debt
Not investor ready
Unwilling to share ownership
Inadequate business plan
Weak management team
Figure 28:
Comparison of the reasons for not accessing particular sources of finance amongst social entrepreneurs and all UK
Source: GEM UK APS 2007
35.1 11.8 29.2
30.6 19.7 32.7
41.2 43.4 35.4
27.8 33.3 26.0
14.8 18.7 20.6
18.6 19.7 18.7
35.1 11.8 22.7
19.6 9.3 7.5
Social start-ups Social
owner-managers
UK
Concluding Comments:
Developing the Social Enterprise Agenda
The report started with a statement that interest in social
entrepreneurship has grown significantly in the five years
since the first attempts at measurement in the UK were
made. The definition has become more complex and two
points of clarification have been made by way of case
studies and a summary literature review that may help to
develop the research, policy and business agendas:
A distinction was made between social entrepreneurship
leading to social enterprise and entrepreneurial philanthropy.
The first starts with the goal of creating value in the first
instance with the development of an enterprise structure
subsequently. Entrepreneurial philanthropy, in contrast,
starts with a business idea or concept that will create
wealth which then allows value to be ?put back?
subsequently.
A matrix of social enterprises was established linking
governance and profit distribution with profit motivation
(from not-for-profit to for-profit). No one quadrant in the
matrix is ?better? than another as each serves a specific
market and purpose.
A review of attempts to quantify the sector was undertaken
using GEM data for the UK. Although there is one other
attempt to benchmark the sector conducted by BERR in
2005 for the UK, it was argued that attempts to measure
the scale, size and impact of the sector in the UK or even
on a comparative basis are relatively under-developed.
GEM finds that levels of social entrepreneurial activity were
stable at around 3.3% between 2004 and 2006. The
data in 2007 was not directly comparable but nevertheless
suggested that:
5.8% of the UK adult population of working age is
engaged in early stage entrepreneurial activity. This is
some 2 million people and 11.9% (or 238,000 people) of
these are trying to start a social venture.
35% of all nascent early stage entrepreneurs, those
who have been involved with start-up activity for up to
three months, are social entrepreneurs
5.5% of all established business owners in the UK are
social owner-managers.
There are no significant differences generally between
men and women in terms of either social entrepreneurial
start-up activity or owner-manager activity. This contrasts
with mainstream activity where men are twice as likely to
be entrepreneurs as women.
However, men in the youngest age group (18-24) are
substantially more likely to be starting some form of social
enterprise activity compared to women (5.6% compared
to 3.1% respectively).
Social entrepreneurial start-ups amongst the Black
and Minority Ethnic (BAME) communities are higher than
for the white community. For example, 3.8% of White
respondents were engaged in some form of start up social
entrepreneurial activity compared to 8.9% of those from
mixed ethnic origins, 6.7% of those from the Indian sub-
continent and 10.5% of those from the Black African and
Caribbean communities.
Recreation, Education and Support and Care Services
dominate social entrepreneurial start-up and owner-
manager activity.
Social entrepreneurs have very positive attitudes
towards entrepreneurship and are more positive than the
UK population as a whole. They are not as confident as
their mainstream counterparts, however, and do appear
to be less confident as their activity becomes more
established.
55% of start-ups expect their entity to have charitable
status, although some 13% are set up as companies
(such as community interest companies).
34% of social start-ups and 24% of social owner-
managers receive greater than 50% of their funding from
public sources. Some 43% of social owner-managed
entities have a commercial revenue stream.
However, it is argued that GEM, being an adult
population/household survey, picks up predominantly
entities in the bottom left-hand corner of the matrix: those
with charitable status and who return any revenue to the
venture itself. Since over 50% of the population of social
entrepreneurial sector in the survey fall into this category,
it suggests that this is the most prevalent form of activity
in the UK. From a policy perspective, then, given this
profile, the UK policy focus on the ?Third Sector? (that is
voluntary and community work) appears appropriate.
Nevertheless, there is growing interest in the social
enterprises that are set up with their social, environmental
or community goals rather than profit at their heart, and
the development of the fund will support these entities.
Such entities have growth potential and wealth creation
potential in the same way as mainstream enterprises and
their founding entrepreneurs behave in a similar way even
if they are motivated by different objectives.
The evidence base for this group of enterprises is less
systematic in that it is neither longitudinal nor comparative
across regions of the UK or between countries. The paucity
of quantitative data that looks at the turnover, employee
and growth profile of the sector nationally and internationally
supported by survey-based data that identifies gaps in
provision both from a policy perspective, an investment
perspective and from the enterprise perspective would
surely help us understand how to suppor this sector which
has so much potential simultaneously to create wealth
and to create value.
Key implications
The research in 2007 has summarised the results of the
past five years, incorporated a literature review and cases
and lays out the foundations for further research in the
area given the substantial policy interest in building the
evidence base. It is argued that:
Over the five years the definition of social
entrepreneurship and social enterprise has become less
clear: it is now important for both policy makers and
investors to understand that ?for profit? social businesses
deliver value financially and socially as well as not-for-profit
entities. This requires a more inclusive approach to public
policy to ensure that all types of social enterprise are
catered for through adequate access to finance and
coaching and mentoring.
Research has focused on social policy and case
studies. GEM UK is the only attempt over the past five
years to measure the scale and size of activity in the UK.
It is now important to build a more robust evidence base
of social enterprises themselves to establish the challenges
they face as they grow in terms of finance, markets and
perceptions. This should be gender and regionally
disaggregated across the UK.
Although attrition between social start-ups and levels
of social owner-management, levels of business closure
amongst the social entrepreneurial community are nearly
twice those in the general UK population. This suggests
that mentoring and coaching as well as access to finance
through the growth process are important.
Finally, social entrepreneurs use similar patterns of
finance to mainstream entrepreneurs to fund their
businesses and interestingly are nearly twice as likely at
the owner-manager stage to attempt to access equity
finance. Indeed, the proportion of social entrepreneurs
that use charitable or public sector sources for financing
their activity appears relatively low. This suggests a need
to recognise that social enterprises have similar financial
needs to their mainstream counterparts.
However, even though social owner managers are less
likely than their mainstream counterparts to fail to gain
access to finance because of business planning or
management team issues, they are far more likely to fail
to gain access to finance because of the nature of the
business. This suggests that the sector needs to improve
how it communicates the investable diversity of the sector
to investment audiences.
Appendix 1: Chart data
Figure 3: TEA and SEA compared, 2004-2006
TEA
2003 6.4 -
2004 6.3 2.5
2005 6.2 3.2
2006 5.8 3.3
2007 5.6 -
SEA
Figure 4: Start-up and owner-manager activity
Men Women Total
Social entrepreneur start-up 4.7 3.6 4.2
Social entrepreneur owner-manager 4.1 3.6 3.8
Mainstream entrepreneur start up 5.2 2.6 3.9
Mainstream entrepreneur owner-manager 16.0 7.2 11.6
Figure 5: Start-up and owner-manager activity by region
Social enterprise start-up activity General Start up activity Social enterprise owner-manager General Owner-Managers
North East
North West
Wales
Yorks and Humber
East Midlands
West Midlands
South West
East of England
London
South East
Scotland
Northern Ireland
UK
3.6 3.2 3.6 8.7
4.1 3.6 3.8 11.1
3.6 4.0 3.2 11.8
4.1 3.4 3.2 11.0
4.2 3.7 4.0 11.2
3.6 4.5 3.4 11.2
3.9 4.9 3.5 13.5
5.1 3.3 4.3 14.5
4.7 5.3 4.3 11.6
4.3 3.5 4.2 11.9
4.0 2.7 3.9 8.6
3.3 3.4 3.8 12.6
4.2 3.9 3.8 11.6
Figure 6: urban and rural social entrepreneurship
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
Figure 7: index of multiple deprivation
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
IMD 1 3.8 4.8
IMD 2 4.1 4.7
IMD 3 4.4 4.0
IMD 4 4.4 3.1
IMD 5 4.9 2.0
Social entrepreneurial start up Social enterprise owner-manager
Figure 9: regional differences by gender
Male SE starts Female SE starts Male SE OM Female SE OM SE ratio OM ration
North East
North West
Wales
Yorks and Humber
East Midlands
West Midlands
South West
East of England
London
South East
Scotland
Northern Ireland
UK
4.6 2.6 4.5 2.7 0.6 0.6
5.1 3.1 4.6 2.9 0.6 0.6
3.7 3.6 3.7 2.8 1.0 0.8
4.6 3.5 3.1 3.3 0.8 1.1
5.2 3.3 4.1 3.9 0.6 1.0
3.9 3.1 3.8 3.1 0.8 0.8
3.4 4.3 3.7 3.2 1.3 0.9
4.4 5.7 3.7 4.3 1.3 1.2
5.5 3.9 4.5 4.1 0.7 0.9
5.2 3.5 4.4 4.1 0.7 0.9
4.8 3.3 3.8 3.9 0.7 1.0
3.8 2.9 4.4 3.2 0.8 0.7
4.7 3.6 4.2 3.6 0.8 0.9
Figure 10: social entrepreneurial start-up and owner-manager activity by age
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
18-24 4.4 2.2
25-34 4.0 3.3
35-44 4.5 3.9
45-54 4.1 4.9
55+ 3.8 4.6
Social entrepreneurial start up Social enterprise owner-manager
Figure 11: social entrepreneurial and general entrepreneurial activity by age and gender
Men Women Men Women
North East
North West
Wales
Yorks and Humber
East Midlands
5.6 3.1 2.9 1.5
4.6 3.4 3.5 3.0
5.0 4.1 3.8 3.9
4.2 3.9 5.4 4.5
3.9 3.5 4.9 4.3
Social entrepreneurial start up Social enterprise owner-manager
Figure 12: social entrepreneurial activity by ethnic grouping
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
White 3.8 3.8
Mixed ethnic origin 8.9 5.0
Indian sub-continent 6.7 4.2
Other Asian 5.9 4.1
Black African/Caribbean 10.5 2.5
Social entrepreneurial start up Social enterprise owner-manager
Figure 13: social entrepreneurial activity by ethnic grouping and gender
Men Women Men Women
White
Mixed ethnic origin
Indian sub-continent
Other Asian
Black African/Caribbean
4.2 3.4 4.1 3.5
13.2 6.1 6.2 4.2
8.6 4.2 4.7 3.6
6.7 5.1 5.2 3.1
10.9 10.1 0.3 4.4
Social entrepreneurial start up Social enterprise owner-manager
Figure 14: Social entrepreneurial activity by employment status
Social entrepreneurial start up Social enterprise owner-manager
Full time
Part-time
Homemaker
Retired
Full time education
Long term sick or disabled
Out of work and claiming benefit
Out of work but not claiming benefit
Other
4.0 4.0
4.9 4.1
4.3 3.4
2.7 4.8
7.2 2.5
2.8 2.8
3.7 1.1
3.2 1.5
7.2 11.6
Figure 15: Social entrepreneurial activity by employment status and gender
Men Women Men Women
Full time
Part-time
Homemaker
Retired
Full time education
Long term sick or disabled
Out of work and claiming benefit
Out of work but not claiming benefit
Other
4.3 3.3 4.3 3.5
8.7 3.9 5.3 3.8
6.0 4.2 2.2 3.5
2.6 2.8 5.1 4.5
8.4 6.0 3.6 1.5
2.4 3.2 2.6 3.0
4.1 3.1 1.0 1.2
5.6 0.8 1.1 1.9
9.9 7.2 1.6 15.8
Social entrepreneurial start up Social enterprise owner-manager
Figure 16: Social entrepreneurial activity by educational qualification
Social entrepreneurial start up Social enterprise owner-manager
Doctorate
Masters
Bachelors
A levels or equivalent
GCSE/'O' levels or equivalent
Vocational qualifications
Other
No formal qualifications
9.5 8.7
8.6 8.7
5.9 5.6
4.0 3.1
2.5 2.5
3.3 3.5
6.2 1.5
1.3 1.2
Figure 18: Social entrepreneurial start-ups by sector and gender
Men Women Total
Education 11.4 17.1 14.0
Environment 1.7 2.1 1.9
Health 5.4 4.1 4.8
Recreation 42.3 29.5 36.5
Regeneration 2.4 1.8 2.1
Support and Care 15.3 23.9 19.2
Other 12.7 13.6 13.1
Figure 20: social entrepreneurial start-up governance structure
Men Women Total
Unincorporated 12.2 5.3 9.1
Trust 17.8 14.2 16.2
Company (eg Community Interest Company) 15.4 10.0 13.0
Cooperative, com. benefit society/credit union 15.2 18.0 16.4
Sole trader 2.0 5.6 3.6
Partnership 9.8 5.3 7.8
Other 21.0 28.0 24.2
Figure 22: Social enterprise owner-managers by sector and gender
Men Women Total
Education 9.8 16.0 12.7
Environment 1.5 1.6 1.5
Health 2.6 4.1 3.3
Recreation 46.4 32.9 40.1
Regeneration 1.7 1.1 1.4
Support and Care 14.2 24.2 18.9
Other 12.1 10.3 11.3
Figure 24: social enterprise owner-manager governance structure
Men Women Total
Unincorporated 10.7 9.1 10.0
Trust 12.0 11.1 11.6
Company (eg Community Interest Company) 10.0 8.1 9.1
Cooperative, com. benefit society/credit union 14.9 15.1 15.0
Sole trader 5.9 4.6 5.3
Partnership 2.9 3.8 3.3
Other 35.1 35.8 35.4
Appendix 2: Case Study contacts
Anna Fiorentini: Theatre and Film School
www.annafiorentini.co.uk
+44 (0)207 682 1403
David Dickie: Advance Aid
www.advanceaid.org
102 Pembroke Road, London N10 2JB
[email protected]
+44 (0)7818 420977
Liam Black: Wavelength
www.wavelength100.com
[email protected]
+ 44 (0)7714 521 061
Amy Carter: NEMA at Bespoke Experience
www.bespokeexperience.com
[email protected]
+44 (0)1323 766655
Molly Bedingfield: Global Angels
www.globalangels.org
Nigel Kershaw: Big Issue Invest
www.biginvest.co.uk
16/19 Southampton Place, London WC1A 2AJ
+44-(0)207 1736027
Parag Shah: Art-Switch
www.art-switch.com
Unit 3, Stratford Workshops, Burford Road, London E15 2SP
Tel: +44-(0)208-555 0037
Sev Necati: Women?s Self Protection Network
[email protected]
+44-(0)7050 614116 +44-(0)7828152837
Olly Donnelly and Sheetal Mehta: Shivia
www.shivia.com
162-168 Regent Street, Suite 446 Linen Hall, London W1B 5TE
+44 (0)7957 564921
[email protected] [email protected]
Tommy Hutchinson: i-genius
www.i-genius.org
10 Colthurst Crescent, London N4 2DS
+44 (0) 7947 881474
Appendix 3: GEM UK Sampling and
Weighting Methodology
GEM UK is the largest national study of entrepreneurial
activity in the world. It has grown from a survey of 1,000
adults in 1998 to 42,713 adults aged 16-64 in 2007. The
distribution of respondents is not even across the UK as
some Regional Development Agencies (RDAs) and the
Government Agencies in Wales and Northern Ireland
choose to boost their sample in order to have more detail
about entrepreneurship in their region
46
. Every attempt is
made to ensure that the results reported are as reliable
and robust as possible. To do this, four sets of weights
are calculated for the UK data:
Weights for the whole UK that take the UK area sub-
samples and the age, gender and ethnic minority proportion
of the population of the UK (aged 18-64) into account,
based on the latest available area estimates from the UK
Office of National Statistics, typically mid-year estimates
for the previous year.
Sub-sample area weights that take into account the
population distributions within GEM UK sub-sample areas
by age, gender and ethnicity. These are used when we
report comparisons between GEM UK sub-sample areas.
Government Official Region (GOR) weights that create
representative samples at the GOR level from all sub-
samples within the same GOR. Nine out of twelve GORs
were not sub-sampled in 2007; London had three sub-
samples and Northern Ireland and Yorkshire & Humberside
had two sub-samples
47
.
In addition, separate weights were constructed for
England, based on balanced GOR samples for each
English region, as some variables (e.g. urbanity, deprivation)
are only available for English regions.
46 The raw sample of 42,713 was distributed across 16 geographic
areas within which representative sub-samples of the population aged
16-64 were taken. These areas and the sample sizes are: South West
England (2997); South East England: (3003); East of England (1000);
West Midlands (3000); East Midlands (3023); North East: 3003; North
West England (3008); Wales (7989); Scotland (1998); Inner London
(370); Dagenham & Barking (2006); Outer London excluding Dagenham
& Barking (630); Doncaster (2987); Yorkshire and Humberside excluding
Doncaster (2817); Belfast (1330); Northern Ireland excluding Belfast
(3552).
47 In order to minimise the effect of over-samples in sub-regions within
a GOR, random samples were created from these areas to produce
representative samples of GORs
Notes
doc_636361234.pdf
In this particular detailed elucidation pertaining to social entrepreneurship in the uk rebecca harding.
Social Entrepreneurship in the UK
Rebecca Harding
Dennis Harding
It is a privilege to introduce to you the Delta Economics
report on ?Social Entrepreneurship in the UK?. The report
is an insightful analysis of five years of ground breaking
research into Social Entrepreneurship. I am particularly
pleased that this valuable work is being launched at the
Coalition?s first Black, Asian and Minority Ethnic (BAME)
conference, given that the report shows that social
entrepreneurial start ups are significantly more common
in BAME communities than in non-BAME communities.
It also shows that social entrepreneurial activity approaches,
and in some places, exceeds parity between men and
women. In both cases this is in marked contrast to
mainstream entrepreneurial activity. The finding that social
enterprise owner-managers are more common in areas
of high Index of Multiple Deprivation contrasts interestingly
with that in the NCVO Almanac that found general charities
to be most common in the wealthiest neighbourhoods.
As Dr. Harding says: ?Not only has the literature on the
subject expanded, but also the awareness in policy circles
in the UK has grown that social enterprise may hold the
key, not only to pubic service reform but also to regeneration
and economic growth as well as a potential solution to
some of the world?s greatest environmental and social
challenges.? The Coalition has been working to raise this
awareness and recognises the importance of developing
the evidence base to show what social enterprise can do
and to help make these solutions happen. Delta?s report
outlines reasons for optimism, including the fact that
11.9% of those engaged in early stage entrepreneurial
activity are trying to start a social venture.
The Coalition is committed to building the evidence base
on and for social enterprises, by our own work (such as
the forthcoming State of Social Enterprise survey of social
enterprises affiliated to the Coalition), and by working with
others including the Economic and Social Research
Council (ESRC), the forthcoming Third Sector Research
Centre and independent researchers like Delta Economics.
Delta?s report highlights the need for:
Clarity on definitions of social enterprise and social
entrepreneurialism for researchers, policy makers and
financiers,
Further work on the barriers faced by social enterprises,
More research into the social enterprise life cycle; onto
how those barriers are overcome and how social
enterprises compare with conventional businesses and
more traditional philanthropy,
Adding robust data to the existing case studies.
Delta Economics should be congratulated on their work
and Dr. Harding personally on her award from Prowess
as Women?s Enterprise Researcher of the year. I commend
this report to anyone wanting to learn more about social
entrepreneurship in the UK. The Coalition looks forward
to further work from Delta Economics and other
researchers and to continuing support from Barclay?s (who
sponsored the social entrepreneurship element of the
Global Entrepreneurship Monitor from 2003-7 which this
work extends) and others to generate and transfer
knowledge and understanding to practitioners, financiers
and policy makers to improve the environment for social
enterprises and so improve their contribution to social
and environmental solutions in the UK and around the
world.
Jonathan Bland
Acknowledgements
We gratefully acknowledge the support of the GEM UK
team, Jonathan Levie, Mark Hart, David Brooksbank and
Dylan Jones-Evans for their support. In particular, the
whole team is indebted to Jonathan Levie and Mark Hart
for their statistical and analytical work on the datasets.
Disclaimer
Any GEM data used in this report are compiled by the
GEM UK team as part of the annual adult population
survey. Their analysis and interpretation are entirely the
responsibility of the authors.
Preface
This report focuses on the social entrepreneurs who may
grow the social enterprises of the future. In the five years
since attempts were first made by the Global
Entrepreneurship Monitor to measure the prevalence of
entrepreneurial activity in the UK population, we have
established: first, that around 3.3% of the UK adult
population is engaged in entrepreneurship for social or
community purposes; that there are no significant regional
differences within the UK and that under-represented
groups in enterprise generally (such as women and ethnic
minority groupings) are more likely to be engaged in social
entrepreneurial activity than they are in mainstream
entrepreneurial activity.
There are challenges for the sector in terms of the scalability
and financing of social enterprises and, in particular, social
entrepreneurs tend to fall back on charitable status as
they become more established as a means of ensuring
their long-term finance.
Alongside this, the burgeoning literature and practice in
the area over the past five years tends to promote social
enterprise as a separate business model where profits
are re-invested in the company itself in the pursuance of
the goals and objectives of the organisation. This approach
has also informed policy.
However, a review of the literature and practice in this
area suggests a real gap in our understanding of three
things: first, the changing nature of social entrepreneurship
itself, second, how social entrepreneurs become social
enterprises and, third, how social enterprises themselves
grow, how they are financed and the challenges they face.
There is a desperate lack of data to inform the evidence
base both for policy and potential investors. The need
for further research is raised as a key recommendation at
the end of the report.
Overview of key findings
What is social entrepreneurship?
Definitions of social entrepreneurship and social
enterprise have become more sophisticated during the
course of the last five years. Where five years ago the
issue of profit and its distribution was highly contested in
the sector, there is now a consensus that social
entrepreneurs need to pay salaries and hence need external
finance while social enterprises will need growth finance
in order to expand.
The report distinguishes between social enterprise,
social entrepreneurship and philanthropy arguing that
philanthropy is the desire by successful entrepreneurs to
?give back? while social entrepreneurs and social enterprise
start with a values-based set of operational and
organisational goals and grow in order to achieve them.
A matrix of organisational types measured against
governance structure on the one hand and profit motivation
on the other allows a more inclusive definition of social
entrepreneurship, social enterprise, social business and
philanthropy.
Key findings from the data
5.8% of the UK adult population of working age is
engaged in early stage entrepreneurial activity. This is
some 2 million people and 11.9% (or 238,000 people) of
these are trying to start a social venture.
35% of all nascent early stage entrepreneurs, those
who have been involved with start-up activity for up to
three months, are social entrepreneurs
5.5% of all established business owners in the UK are
social owner-managers.
There are no significant differences generally between
men and women in terms of either social entrepreneurial
start-up activity or owner-manager activity. This contrasts
with mainstream activity where men are twice as likely to
be entrepreneurs as women.
However, men in the youngest age group (18-24) are
substantially more likely to be starting some form of social
enterprise activity compared to women (5.6% compared
to 3.1% respectively).
Social entrepreneurial start-ups amongst the Black
and Minority Ethnic (BAME) communities are higher than
for the white community. For example, 3.8% of White
respondents were engaged in some form of start up social
entrepreneurial activity compared to 8.9% of those from
mixed ethnic origins, 6.7% of those from the Indian sub-
continent and 10.5% of those from the Black African and
Caribbean communities.
Recreation, Education and Support and Care Services
dominate social entrepreneurial start-up and owner-
manager activity.
Social entrepreneurs have very positive attitudes
towards entrepreneurship and are more positive than the
UK population as a whole. They are not as confident as
their mainstream counterparts, however, and do appear
to be less confident as their activity becomes more
established.
55% of start-ups expect their entity to have charitable
status, although some 13% are set up as companies
(such as community interest companies).
Just 34% of social start-ups and 24% of social owner-
managers receive greater than 50% of their funding from
public sources. Some 43% of social owner-managed
entities have a commercial revenue stream.
Key implications
The research in 2007 has summarised the results of the
past five years, incorporated a literature review and cases
and lays out the foundations for further research in the
area given the substantial policy interest in building the
evidence base. It is argued that:
Over the five years the definition of social
entrepreneurship and social enterprise has become less
clear: it is now important for both policy makers and
investors to understand that ?for profit? social businesses
deliver value financially and socially as well as not-for-profit
entities. This requires a more inclusive approach to public
policy to ensure that all types of social enterprise are
catered for through adequate access to finance and
coaching and mentoring.
Research has focused on social policy and case studies
with GEM UK over the past five years being the only
attempt to measure the scale and size of activity in the
UK. It is now important to build a more robust evidence
base of social enterprises themselves to establish the
challenges they face as they grow in terms of finance,
markets and perceptions. This should be gender and
regionally disaggregated across the UK.
Although attrition between social start-ups and levels
of social owner-management, levels of business closure
amongst the social entrepreneurial community are nearly
twice those in the general UK population. This suggests
that mentoring and coaching as well as access to finance
through the growth process are important.
Finally, social entrepreneurs use similar patterns of
finance to mainstream entrepreneurs to fund their
businesses and interestingly are nearly twice as likely at
the owner-manager stage to attempt to access equity
finance. Indeed, the proportion of social entrepreneurs
that use charitable or public sector sources for financing
their activity appears relatively low. This suggests a need
to recognise that social enterprises have similar financial
needs to their mainstream counterparts.
However, even though social owner managers are less
likely than their mainstream counterparts to fail to gain
access to finance because of business planning or
management team issues, they are far more likely to fail
to gain access to finance because of the nature of the
business. This suggests that the sector needs to improve
how it communicates the investable diversity of the sector
to investment audiences.
Social entrepreneurship, innovation and
regeneration: how our understanding has
changed
The growth in interest in social entrepreneurship and social
enterprise has increased exponentially since the first social
entrepreneurship monitor was published in 2004. As was
reported then, ?Much of the literature, commentary and
discussion of social entrepreneurship and social enterprise
has, at its base, a frustration that awareness of it as a
primary driver for change for good is so limited.?
In the intervening four years, not only has the literature on
the subject expanded, but also the awareness in policy
circles in the UK has grown that social enterprise may hold
the key, not only to public service reform but also to
regeneration and economic growth as well as a potential
solution to some of the world?s greatest environmental and
social challenges. The understanding that there is a need
for more research in the area has resulted in a dedicated
programme to be run through the Economic and Social
Research Council; and the focus on social, community and
environmental goals amongst mainstream, profit making
entrepreneurial businesses has increased. As one
interviewee argued, ?there?s no doubt that the number of
social enterprises is increasing. We estimate that one in
twenty businesses now classifies itself as a social enterprise.?
Although measurements and maps of social enterprise in
the UK and beyond have improved there is still a long way
to go before there are consistent and longitudinal data
available across countries that allows us to understand
both the scale of social entrepreneurship and social enterprise
and the issues and challenges that social enterprises in
particular face when growing their businesses. There is
plenty of qualitative material to suggest that social
entrepreneurship is important as a driver of social reform
1
and there is a body of literature providing cases of how it
has contributed to the professionalisation of public services
such as health, education and social work and welfare
programmes in the US and the UK as well as in less
developed regions of the world
2
. There is a long-standing
literature that points to the importance of social
entrepreneurship as a phenomenon in social life and as a
feature of Corporate Social Responsibility
3
and there are
cases to teach how to become a good social entrepreneur
as a for-profit or a not-for-profit firm and to measure the
social impact of the enterprise
4
.
However, the process by which entrepreneurs a) decide
on a socially-oriented business model and b) grow is less
well understood. As was recently reported at the World
Entrepreneurship Summit, the whole area is suffering from
a paucity of quantitative and comparative survey data
5
.
One of the reasons for this lack of data is arguably because
it is hard to define social entrepreneurship in such a way
that isolates the relatively small-scale, often voluntary or
charitable, work that individuals do to make a social
difference, from a social entrepreneur who may go on to
establish a high turnover social enterprise.
1 See for example, Bornstein, D. (2004): ?How to change the world:
social entrepreneurs and the power of new ideas? Oxford, Oxford
University Press.
2 Pomerantz, M (2003): ?The Business of Social Entrepreneurship in a
down economy? In Business March/April 2004, Vol 25, Issue 2
3 Dees, G. (1994): ?Social Enterprises: private initiatives for the common
good.? Harvard Business School case study, November. Dees, J. Gregory,
Battle-Anderson, B. and Wei, J. (2004): ?Scaling social impact strategies
for spreading social innovations.? Stanford Social Innovation Review
(1), No 4, Spring 2004, 24-32. Putnam, D (2004): Social Entrepreneurs,
New Statesman, Issue 4674 p 26. Dholakia, N. and Dholakia, R (1975):
?Marketing Planning in Social Enterprises.? European Journal of Marketing
Volume 9, Issue 3. Wooster, M. (1995): ?Doing good for profit? American
Enterprise July/August 1995, Issue 4, p 97
4 Emerson, J., Wachowicz, J., and Chun, S. (2001): ?Social Return on
Investment (SROI): Exploring aspects of value creation? HBS Working
Knowledgehttp://hbswk.hbs.edu Boschee, J. (1995): ?Social
Entrepreneurs? Across the Board March 1995, volume 32, Issue 3, p20.
See also the New Economics Foundation, www.neweconomics.org.
12 www.ashoka.org
5 The World Commission on Social Entrepreneurship: financing social
innovation. This is a year-long project launched at the World
Entrepreneurship Summit (www.wes08.net) in January 2008 that is
gathering information globally on the challenges that social entrepreneurs
face when trying to access start-up and growth finance. The interim
findings will be available in September 2008 and the full report in January
2009 and the 2009 World Entrepreneurship Summit. More information
from www.deltaeconomics.com.
Focus of the report
This report examines key writings from the literature and
attempts a synthesis that does two things: first, distinguishes
social entrepreneurship and social enterprise from
philanthropy. This has become a major obstacle to
developments in thinking with considerable confusion in
practice and the literature. Second, it develops a matrix
which allows the funding and profit distribution models of
socially motivated structures to be understood. In short,
it argues that Foundations, Trusts and the emerging model
of social business requires some form of philanthropy.
However, social enterprises that emerge from social
enterprise activity start with value creation at their core and
require growth and investment in order to achieve their
goals.
It goes on to look at the existing evidence base using the
2007 adult population survey from the Global
Entrepreneurship Monitor. It finds that social entrepreneurship
is an important phenomenon in the UK entrepreneurial
landscape with some 35% of all nascent entrepreneurship
motivated by social or community objectives. Geographical
differences are generally not statistically significant but there
are important differences between demographic groups:
for example women are more likely proportionately to be
motivated by social or community goals than by profit and
ethnic minority groupings are also more likely than their
white British counterparts to be social entrepreneurs.
Finally, the weakness of the evidence base as it currently
stands is emphasised and implications for the sector, for
policy and for further research are drawn out of the analysis.
Although GEM has helped provide baseline data over the
last five years on social entrepreneurship, we know very
little about social enterprises ? how they grow, the challenges
they face, their governance structures and their sources of
finance ? on a systematic basis. We know even less about
those social enterprises, or social businesses, with a for-
profit motivation but who nevertheless serve community,
social and environmental goals.
GEM does not pick up an expansion in the sector, largely
because it is a study of individuals. However, there is
evidence that the supply-side is growing with increased
activity and interest around different financing models for
this very specific group of businesses. This suggests that
the demand-side (the number of businesses) is also growing
yet we do not know much about it at all.
It appears that the sector has the capacity to expand yet
without the evidence base present, it is difficult to assess
accurately suitable policy or private sector interventions to
address any market failures that might enable the sector
to accelerate its growth. Given the challenges that the
world faces in terms of climate change and the urgent need
for regeneration and economic development, this is a
weakness that is too urgent to ignore.
Towards some definitions:
What we can learn from the literature and
cases
Entrepreneurship has tremendous power to transform
and change society. The conventional view is that
entrepreneurship is about mainstream start-up businesses
and the contribution that they make to economic growth.
However, if we are to harness the role that all entrepreneurial
activity plays then entrepreneurship should be conceived
more broadly as it has a wider applicability to important
social concerns and may even be a better driver of
regeneration and employment in deprived communities
than orthodox activity
6
.
Social entrepreneurship
One individual interviewed for the purposes of this report
argued that is was best not to define social
entrepreneurship, social entrepreneurs or social enterprise
as the area is not only highly debated but also emotionally
charged. However, since this document is essentially
reporting on measurement attempts, it is important to
classify what we are measuring. This also helps us
understand how terminology over the past few years has
changed.
As reported in 2004, social entrepreneurs are the
entrepreneurs who, ?recognise that a part of society is
stuck and provide new ways to get it unstuck?
7
. They act
as change agents in the social sector?: they innovate and
act according to the desire to create and sustain social
value and consider themselves to be accountable ?to the
constituencies they serve for the outcomes they achieve?.
In short, they are ?one species within the genus
?entrepreneur?. They are entrepreneurs with a social
mission?
8
.
6 The social entrepreneurship monitor of 2004 found that unemployed
people and excluded groups were proportionately more likely to set up
social rather than mainstream enterprises.
7 Boshee, J. and McClurg, D. (2003) ?Toward a better understanding
of social entrepreneurshipL some important distinctions.? Minnesota,
MN: Institute for Social Entrepreneurs.
8 Dees, J. Gregory (2001 ? revised version): The Meaning of ?Social
Entrepreneurship??. Stanford Graduate Business School.
CASE STUDY:
Liam Black ? social entrepreneur
Liam Black has an exacting definition of a social
entrepreneur. ?In my view,? he argues, ?you
should have to create at least, say, 100 net new
jobs or generated 500K worth of real value in a
business before you can call yourself a social
entrepreneur?. Social enterprise and social
entrepreneurship, he goes on to say, are terms
which have become blurred by interpretation
and re-interpretation to suit particular causes or
ideologies.
In a career motivated by the desire to improve
access to the labour market of some of the UK?s
most under-represented groups, however, he
has had a defining impact on the sector. He is
the son of an Irish brickie and was brought up
with a strict, Catholic, ethic of, ?you must look
after the underdog? which has underpinned his
career over the last 20 years: from a campaigner
against apartheid and social injustice through to
his role as CEO of Fifteen growing, with Jamie
Oliver, the restaurant brand into a global success
story. In Liverpool, he led the growth of the FRC
Group from a grant funded second hand furniture
charity to a profitable multi-million pound social
business, creating work and training for hundreds
of people and furnishing the homes of thousands
of low income families across the north of
England. On the back of that success, other
enterprises like Create, Bulky Bob?s, and Revive
were established and continue to trade
successfully. In response to the huge demand
to understand and learn from FRC?s experiences,
Liam founded the Cat?s Pyjamas, to provide
aspirant social entrepreneurs with a warts and
all immersion in the real world of double bottom
line business, creating events as far afield as the
west cost of America and South Africa. Liam?s
book There?s No Business Like Social Business
has been widely read in the sector. His most
recent venture is wavelength100.com, a forum
for the world?s best private companies and social
entrepreneurs to connect and do business.
Liam is passionate about social business but
wants to de-bunk some of the myths that
surround it. He is resolute in his view that social
businesses must be profitable, but equally
determined that the focus of the business itself
must be on how to help excluded or under-
represented groups, either with the profit or
through the activities that the venture undertakes.
?It?s no good,? he says, ?having a model that will
not work in the market place. Take Fifteen, for
example. If the food?s no good, then people
don?t come back because there?s plenty of
competition out there. Without the thriving
business it?s just a youth centre unconnected
from the market. Without the social purpose it
is just a fancy restaurant like so many others in
London?
Liam has championed social reporting as way
of social businesses verifying and communicating
the social impacts they claim to make. FRC and
Fifteen have both produced independently
audited social accounts. ?Without a commitment
to prove the real value created, the social
entrepreneurship bubble will burst ? and will
deserve to. The hype and cheer leading worry
me. Awards given out with only the most
superficial analysis of the real impacts being
made?.
And what of his own celebrity status as one of
the world?s leading social business leaders? He
is actually quite disparaging about it. ?We all
play the game to a certain extent, promoting
ourselves to promote our enterprises. But we
have to be very careful. How does the creation
of a celebrity ?A list? of social entrepreneur super
heroes really help people on the ground having
a hard time getting started? We must be our
own fiercest critics? Don?t focus on definitions
or star turns ? focus on results. That?s what
social entrepreneurship should be about.?
CASE STUDY:
Anna Fiorentini Theatre And Film
School
The Anna Fiorentini Theatre and Film School (AF)
started in Hackney just over 7 years ago to
provide professional performing arts training to
165 children and young people aged 7-18
regardless of any financial, physical or learning
disabilities. Most professional training is extremely
expensive and therefore only available in more
affluent areas. Yet the importance of performing
arts in developing confidence, self-esteem and
life skills is equally as relevant to people from all
backgrounds.
Getting the balance right between being
community based and yet being a professional
drama school with the costs this entails is difficult.
Drama schools are normally professional or
community based. Not both. However, Anna
Fiorentini seems to have struck the correct
balance with teachers who include directors from
companies such as the National Theatre, RSC
and choreographers who have worked with
performers including Tina Turner and Peter Andre.
The pupils are fortunate as these teachers are
highly respected within the entertainment industry
but also want to give something to disadvantaged
children that need these opportunities.
Financing top quality teaching costs money. But
there is a financial problem because to be giving
professional on-going training forces the Drama
school to compete with other professional drama
schools for money. It is notoriously very difficult
to get mainstream funding. Therefore the income
is primarily from fees. But this cuts across the
ethos of the school to try and help families that
cannot afford fees. AF aims to have 10% free
places and allow payments in instalments for
others.
One partial and innovative solution has been to
set up a Friend?s Scheme so individuals can
sponsor a child and see their progress throughout
the year. Another has been to set up an Agency
so that the students can audition for TV, Film
and Theatre. Recently one student was given a
free place for a year as she could not afford
drama school fees. She now has a 3 year
contract with EastEnders and helps AF sponsor
events to raise fees for other students.
Another innovative idea has been to set up the
City Academy with Equator Media. This is a
performing arts school for city professionals
wanting a creative outlet one evening a week.
This is expanding into corporate firms to give
training on teamwork, public speaking and
communication skills etc. Profits go towards
bursaries for the children that want to attend the
AF School. This expands contacts within the
corporate sector and possible sponsors of the
AF School.
Due to these innovative financing solutions, AF
does not rely on grant-funding or sponsorship
to remain sustainable. The cash flow is sufficient
to achieve the immediate goals for each term.
AF is expanding in September when a youth
theatre for 17 ? 24 year olds opens as an
extension to the current school giving more
intensive training and the chance for tour
productions to elderly people?s homes and
schools. Financial assistance would be most
welcome !
Her tip to any start-up business is to start small
and make sure you keep an eye on the cash
flow at all times. You also have to be extremely
passionate about what you are doing rather than
setting up a business just for the sake of trying
to make thousands and it helps if you are
innovative in finding financial solutions.
Such a definition captures a whole spectrum of social
entrepreneurial activity, however, not all of which needs
to be either generating revenues or growing and making
an economic as well as social contribution over the long
term. We need a definition that reflects the two critical
features of a social, as opposed to a mainstream
entrepreneur and the enterprise they might eventually
establish:
The project has community, environmental or social
goals rather than profit as its primary motivation. This does
not preclude profit but does suggest a trade-off between
the social, environmental or community goals and profit
maximisation.
Any profit is used to support the social and community
goals rather than returned to shareholders in an orthodox
sense. This does not preclude shareholdings in a social
enterprise but does require a different approach to returns
on investment.
For the purposes of the this report we use the definition
of social entrepreneurship derived from the definition of
mainstream entrepreneurship contained in the annual
Global Entrepreneurship Monitor (GEM) reports as follows
9
:
?Social entrepreneurship is any attempt at new social
enterprise activity or new enterprise creation, such as self-
employment, a new enterprise, or the expansion of an
existing social enterprise by an individual, teams of
individuals or established social enterprise, with social or
community goals as its base and where the profit is
invested in the activity or venture itself rather than returned
to investors.?
Social Enterprise
Many social entrepreneurs will never establish social
enterprises instead preferring to work within socially-
oriented organisations to fulfil their own social motivations.
However, many social entrepreneurs will establish and
grow social enterprises and it is important to have a
working definition that enables us to understand where
the gaps in our understanding of this market are as well
since the sector is large and growing. The UK government
estimated in 2006 that there are 55,000 social enterprises
in the UK
10
. This is some 5% of all businesses with
employees and constitutes a total turnover of nearly £27
billion
11
. Focussing just on the social enterprises with
which are Companies Limited by Guarantee or Industrial
and Provident Societies, this is still 1.2% of all enterprises
in the UK
12
.
These businesses are formally constituted companies with
a revenue stream from trade in goods and services. Thus,
the Cabinet Office defines social enterprises as businesses
with ?primarily social or environmental objectives who are
principally reinvesting surpluses in the business or in the
community?
13
or, in short-hand, ?businesses trading for
a social purpose?
14
.
The essence of this definition means that any surplus, or
profit, is recycled for the benefits of the activity rather than
for shareholders or directors. Because of their structure
and constitution, they are able to serve a ?triple bottom
line? achieving profitability, societal impact and
environmental sustainability simultaneously.
9 Harding, R. (2004, 2006 and 2007 forthcoming): ?Social
Entrepreneurship Monitor?, part of the Global Entrepreneurship Monitor
Study.
10 Cabinet Office, 2006 Social Enterprise Action Plan.
www.cabinetoffice.gov.uk/third_sector/social_enterprise/action_plan/
11 Seehttp://www.sbs.gov.uk/sbsgov/action/detail?r.l3=7000021093&r.l2=7
000000634&r.l1=7000000412&r.s=sc&type=RESOURCES&itemId=7
000031657
12 SBS (2005): Survey of Social Enterprises Across the UK Research
report prepared by IFF for the SBS.
13 Cabinet Office, 2006 Social Enterprise Action Plan.
www.cabinetoffice.gov.uk/third_sector/social_enterprise/action_plan/;
see also DTI (2002): Social Enterprise: A Strategy for Success. Available
at: www.BERR.gov.uk/social enterprise.
14 This is the Social Enterprise Coalition?s definition,
www.socialenterprise.org.uk.
CASE STUDY:
Sev Necati - Women And Young
People?s Safety Solutions
Sev Necati runs a project called ?Women &
Young People?s Safety Solutions?. The project
assists young people, women and front line
workers on all safety issues that affect them.
It provides practical and simple real life tools,
techniques and information by teaching
participants about threat awareness and
avoidance, the law, how to manage risk, self-
esteem and confidence building. It provides a
forum where people can share their experiences,
find new strategies/techniques to change the
way they resolve difficulties as a result of abuse
from criminal activity, gang culture or cultural
beliefs which have caused physical, mental,
sexual, emotional, financial or psychological
distress. All of the work stems from Sev?s personal
experiences and already has a substantial track
record.
Awards for the work include: Community
Champions, UnLtd, Shell LiveWire Young
Entrepreneur Awards, The New Entrepreneur
Scholarship Programme from the University of
East London, East London Small Business
Centre, HBV Enterprise, The Prince?s Trust and
sponsorship to attend the i-Genius World
Summit.
She has, however, experienced severe problems
in financing her project. As a self-employed
entrepreneur there are few funds which target
individuals. Additionally, this funding is usually
reserved for start up costs for equipment, web
development etc. They will not fund your project
if it is for wages. As a result, she often finds
herself working for free and find paid work on a
sporadic basis. Her goal is to run the project on
a continuous basis through the inner London
boroughs but is currently hindered by access to
finance. She comments wryly, ?If I decided to
set up as a charity and a voluntary\community
group then other options would be open to me
but this has its own issues. Again money is given
out on a limited basis, so many groups fight for
this funding, although again not normally for
salaries.?
This example illustrates a huge gap in the market
in giving growth finance to grass roots
organisations. She says, ?decision makers need
to set up funding/grant money that people like
myself, social entrepreneurs can access for start
up, then increase the amount so I can roll out
the project\work on a paid basis. Entrepreneurs
are visionaries have some excellent ideas for
change. Unfortunately, it feels that they are not
always given the opportunity to put their
community changing ideas into practice to serve
wider society.?
CASE STUDY:
Nema Foundation
Nema?s objective is to relieve poverty while
protecting the environment, achieved through
replicable, low cost projects designed to
empower rural communities. The Nema
Foundation is part of a larger model under the
umbrella of Bespoke Experience, which operates
commercial tourism lodges. The lodges operate
in such a way that maximise all possible benefits
to the local area while giving a growing
percentage of revenue to Nema projects. The
commercial entity ensures that all administrative
costs are covered so 100% of all donations go
directly to projects on the ground.
In Guludo life expectancy is estimated at 38
years old with 29% of children, less than 2% of
houses have latrines and less than 1% of children
reach secondary school. In the last 12 months,
with Global Angel?s support, Nema has
implemented a school feeding programme,
tripling school attendance, protected over 10,000
women and children from malaria through training
and net distribution, ran hygiene and sanitation
workshops in every household in six villages,
provided every eligible child in the region a chance
for a secondary school scholarship and is
currently building 2 primary schools and providing
over 15,000 people with clean water through
the rehabilitation of 26 wells/boreholes. This has
all been achieved through training community
volunteers who implement and monitor the
projects and integral involvement with the
government.
CASE STUDY:
Parag Shah And Art-switch
?Why is it,? asks Parag Shah, the founder of Art-
Switch.com, ?That most people can earn a living
being average but artists need to be brilliant
before they can start to get above subsistence??
This was the starting point of his social business,
set up in 2003 to provide a means for returning
incomes from art work to the artists themselves
for the value they create in strengthening society
through artwork as catalysts for positive change.
In short, the vision and ultimate goal behind Art-
Switch is to establish a properly functioning
transparent art ?market? that allows artwork to
be priced properly so artists are remunerated
properly.
The model is simple, involving three things: First
creating a market where the supply and demand
of artwork can interact without the social and
cultural barriers that currently exist; Second,
educating consumers and, equally importantly,
non-consumers of art to value meanings and
not just aesthetics by exposing them to it more
frequently; Third, eradicating the barriers that
currently prevent artists from establishing
themselves.
Art-Switch is a fine art library-cum-marketplace
concept. Clients pay £1 a day for being a member
of the library and ?borrow? artwork profiled on
the website for an agreed time and then switch
for free or buy. Clients thus experience many
artworks at their premises by borrowing without
purchasing.
The benefit for consumers is they can ?return?
art whenever they want, which fosters artwork
literacy through experimentation, while the benefit
for artists is exposure for their work and a higher
proportion of the revenue. The whole £1 that the
consumer pays is returned to the artist. In
addition, Art-Switch gives artists a huge 75% of
sales and is pioneering royalties on re-sales.
So that every avenue is covered, the same model
is used for corporate art consumption with £1
a day charged per wall allowing companies to
re-brand and re-design without throwing out
redundant artwork, while being socially
responsible. ?Switchability? ensures corporate
image is never compromised so employees even
enjoy voting for artwork, which educates and
inspires.
Art-Switch measures each artwork?s popularity
to publish its daily demand driven price. The
more ?trades? there are on a particular piece,
the higher its price goes. Ultimately, Parag wants
Art-Switch to leverage the ensuing price
confidence with a transparent secondary market
for art owners to add their stock to the library
and benefit from proper valuations, while also
serving as an incubator for ?start up? artists to
launch and grow careers.
Besides art literacy, the social benefit of
transforming artworks into income generating
as well as capital gain assets is liberation of
artists to earn through their vocation rather than
having to add skills after finishing art school.
Incorporating social innovation and social business
Evidence of the sheer potential of social enterprise is
evident in the literature. While authors also comment on
the lack of reliable and consistent data
15
, there are strong
reasons to expect the sector to expand:
1. There is a visible change in the ways in which consumers
behave with a greater focus on ?ethical? consumption.?
16
2. Evidence that investors are beginning to thing in terms
of broader, ?intangible? returns other than just profit: for
example, social, ethical and increasingly environmental
value creation.
17
3. An increasing interest in academia, policy and business
in business models with community/social or environmental
goals that allow residual profit to be re-invested in the
company itself to allow it to expand and maintain its
work.
18
4. Changing contracts for delivery of key public sector
areas such as health, education and community care
reducing reliance on employment or grants and increasing
numbers, especially of women, in ?socially motivated?
enterprises.
19
5. There is a growing interest in the undoubted impact
that social enterprises can have on job creation
20
, the
environment and local communities. As the BERR
enterprise directorate survey of social enterprises in 2005
found, some 49% responded that ?helping people? was
their main goal, while a further 17% said that ?helping the
environment? was their main goal. 34% said that both
were objectives.
21
6. The growth in new technologies that enable
entrepreneurs to network in a ?social? way and this has
to some extent created an increased awareness of ?profit
with a purpose? organizations and business models and
allows them to flourish. For example, i-genius, the ?facebook
for social entrepreneurs? creates networks and partnerships
between social entrepreneurs and allows them to connect
in ways that will allow them to build their business.
15 Nicholls, A. (2007): ?What is the future of social enterprise in ethical
markets?? A social enterprise think-piece for the Office of the Third
Sector (November 2007).
16 Ibid. See also Leadbeater, C. (2007): ?Social Enterprise and Social
Innovation.? A social enterprise think-piece for the Office of the Third
Sector (November 2007).
17 Davis, S., Lukomink, J. and Pitt-Watson, D. (2006): ?The New
Capitalists: How Citizen Investors are Reshaping the Corporate Agenda.?
Harvard Business School Press, Harvard.
18 Harding, R. (2007): ?Understanding social enterprise? Industry and
Higher Education, London, March 2007, pp74-86
19 Harding, R. (2007): ?The State of the UK ? Women?s Enterprise.?
Prowess, November 2007.
20 Aiken, M. (2007): ?What is the role of social enterprise in finding,
creating and maintaining employment for disadvantaged groups?? A
social enterprise think-piece for the Office of the Third Sector.
21 See also DTI/Small Business Service (2005): ?A Survey of Social
Enterprises Across the UK.?
There is no evidence to suggest that social entrepreneurs
behave in different ways to mainstream entrepreneurs. The
case studies have all demonstrated that many social
entrepreneurs, like their mainstream counterparts, will work
for nothing or out of their own resources until the project
becomes self-sustaining. All of the social entrepreneurs
covered in this report have worked without remuneration
or from their own self-funding to get projects off the ground.
It is their belief in the ?idea? that motivates them to continue
in exactly the same way as the well-publicised mainstream
entrepreneurs who have built businesses from scratch.
Traditionally, economists regard entrepreneurs as market
creators who are motivated by their own desire for, ?wealth,
power and prestige? as a reward for the risks that they
take
22
, but many who observe entrepreneurs generally and
social entrepreneurs in particular argue that it is more
complicated than this. Commonly it is argued that there
are three characteristics that make up the overall ?genus?
of entrepreneur, regardless of the form that their
entrepreneurial activity takes
23
:
They are innovators ? they want to make a difference
by bringing a product or service to market. How they go
about doing that, and then how they distribute their profits
(either back into the organisation or to the community or
stakeholders or to shareholders) is immaterial. They are
natural change agents either in the economic or the social
space.
They are risk takers and naturally take that risk on
themselves ? many entrepreneurs regard risk as part of the
excitement of their work, whether that work is in setting up
a business or in ?paid? employment. Many are prepared
to take reputational and financial risks in order to see an
idea through because their evaluation of the opportunity
suggests that the ultimate returns will be worthwhile.
Accordingly, they collect information, make judgement calls,
raise finance and set up new business entities (either within
firms or outside of them) to carry their opportunity forward
24
.
They are entrepreneurial as a state of mind ? they push
at the boundaries of accepted norms ? of behaviour or
knowledge or business practice. In the words of one senior
Human Resources professional, ?They are a pain to manage
and a pain to keep in the business. But the rewards of
keeping them are so great that we have to do everything
to keep them.?
25
22 Baumol, W.J. (1990): ?Entrepreneurship: productive, unproductive and
destructive.? Journal of Political Economy 98, pp893-291 cited in Metcalfe,
S. (2006): op cit.
23 See also Parker, S. and van Praag, M. (2006): ?The Entrepreneur?s
Mode of Entry ? Business Takeovers or New Venture Start?? Max Planck
Institut für Wirtschaftsforschung, Jena, Discussion Paper No 26-2006 for
a more detailed discussion of the personal characteristics of entrepreneurs,
their schooling and their social capital background and the likelihood that
they will take over an existing firm or start a new one.
24 Casson, M., Yeung, B. Basu, A., and Wadeson, N. (2006): ?Introduction?
Chapter 1 in Casson, M., Yeung, B., Basu, A., and Wadeson, N. (2006):
?The Oxford Handbook of Entrepreneurship.? Oxford University Press,
Oxford.
25 GEM England Regional Entrepreneurship Monitor (2007) Expert
Interview.
CASE STUDY:
i-genius
i-genius is a world community of social
entrepreneurs with members in over 90 countries.
Established by Tommy Hutchinson, i-genius acts
primarily via its online social network platform
enabling its members to connect with one
another and form partnerships. It also encourages
partnerships between social entrepreneurs and
governments, corporations, media organisations
and NGOs. Using a variety of media outlets, i-
genius also seeks to promote its members and
their work in order stimulate fresh thinking and
bright ideas, and inspire a new generation to
become social entrepreneurs. It hosted its first
World Summit for Social Entrepreneurs in Phuket,
Thailand, March 2008.
CASE STUDY:
David Dickie - Advance Aid
After the Asian Tsunami in 2005 David Dickie, like
most people, was appalled at the devastating
slowness with which aid reached the region. Unlike
most people, David decided to do something about
it and, with Simon Lucas, set up the charity, Advance
Aid. This was not the first time that disaster had
struck a region and it certainly will not be the last ?
climate change, war, famine and disease make
crises in Africa progressively more likely over time.
More than this, if Africa is to lift itself permanently
out of poverty, argues David, there have to be real
and meaningful jobs created to combat the increased
aid-dependency of the continent since Live Aid
some 23 years ago. For many, Africa is too big an
issue to tackle but for David and Simon it represented
a major social business opportunity.
Although Advance Aid is set up with not-for profit
status, its operations are ruthlessly commercial in
the interests of ensuring that the venture achieves
its objectives. Its ultimate goal is to create jobs in
Africa by ensuring that emergency relief reaches the
places where it is most needed as soon as is humanly
possible. It does this by ?pre-positioning? stocks in
the warehouses used by NGOs and charities close
to areas where this is likely to be most needed. This
differs to the traditional approach to relief in that the
resources are pre-produced and on-hand ? they
do not need to wait for stocks to become available.
But rather than filling the warehouses with cast-offs
from the developed world, Advance Aid works with
locally based manufacturers across the continent
to provide the supplies necessary. Their latest
venture, in Nairobi, is creating 300 jobs immediately.
Advance Aid has only been operational since 2006
but already boasts major networks and achievements
across Africa. By cutting out the ?middle man? in
the emergency aid supply chain, it ensures that a
£1 donation can contribute 60 pence directly to job
creation. Thus far, the project is entirely self-funded
by the founders but Advance Aid is raising funds
from both government and corporates to establish
a recyclable fund which will create much needed
sustainable employment as well as an accessible,
affordable stockpile of emergency goods.
All of this means that there is increasing political and
business interest in those entrepreneurs who set up social
enterprises and therefore innovate in the social space.
There is little in the innovation literature itself that focuses
on the social innovators
26
and yet, as a business sector,
this area is growing rapidly as a route, not to economic
growth as such but to sustainable economic development.
The growing number of companies who combine social
innovations with business or technological innovations
27
employing the innovative business model of social
enterprise is too important to be excluded from any
understanding of entrepreneurship.
As an area of research, social entrepreneurship, social
innovation and social enterprise is still emerging and there
are still issues around the appropriate organisational
structures for maximising and perpetuating social
innovations with some arguing that the profit motive is
more consistent with business and technological innovation
while a not for profit organisational structure is more
appropriate for producing replicable social innovations.
28
The most recent contribution on the subject is that of
Muhammad Yunus who introduces a new term, that of
Social Business. For him, a social business is, ?A company
that is cause driven rather than profit driven with the
potential to act as a change agent for the world.?
29
For
Yunus, profit itself is not incompatible, indeed is necessary,
for a social business to pursue its social or environmental
goals. The profit remains within (in other words is re-
invested in) the business itself. In this sense, the definition
is consistent with that of social enterprise. However, the
critical difference is in the relationship with long term
investors who will not expect to see any return on their
investment since they share the mission of the social
business itself.
26 Interest in the area is growing and work at the Skoll Centre for Social
Entrepreneurship and the Young Foundation is increasingly focusing on
this area. See, for example, Mulgan, G. with Tucker, S., Rushandara,
A. and Sanders, B. (2007): ?Social Innovation: what it is, why it matters
and how it can be accelerated.? Skoll Centre for Social Entrepreneurship,
Working Paper and The Young Foundation.
27 Examples include the social network for social entrepreneurs: www.i-
genius.org or attempts in the South East of England to re-integrate
young offenders with behavioural difficulties into mainstream employment
through use of social networking and music.
28 Mulgan, G. et al (2007): op cit
29 Yunus, M. (2008): Creating a World Without Poverty: Social Business
and the Future of Capitalism with Karl Weber, Public Affairs Press, New
York.
From social business to social finance
Arguably Social Business as a definition is more helpful
than that of Social Enterprise as it incorporates the need
to generate profit, or wealth, in order to fulfil social objectives
for any organisation outside of the voluntary sector.
However, it nevertheless points to a real tension across
the whole social sector (policy, research and delivery alike)
around the issue of finance for these types of organisation.
For example, Emerson and Spitzer in their definition of
social capital markets includes charitable donations in the
whole market serving socially, environmentally or community
oriented organisations
30
. Arguably this is a different financing
mechanism oriented towards maintenance rather than
growth and again highlights the impact of definitional
confusion on the relationship between the social enterprise
or business and its financiers.
As has already been argued, these are entrepreneurs who
have similar finance requirements to those of mainstream
enterprises which can be termed social businesses. Like
any start-up, they are restricted by cash-flow, experience
challenges in accessing growth finance and have require
support to learn how to be ?investor ready? in just the
same way as their mainstream counterparts. However,
if they are unable to provide a return to investors for
governance reasons, this magnifies their difficulties.
Yet, as one social investor commented, ?If the sector is
to grow, it needs money. There is no earthly reason why
an entity motivated by social goals cannot make profit.
The key thing is how that profit is distributed. We need
a new model of social finance to cater for profit that is
used for social purposes.? Another argued, ?The key
challenge for social enterprises in the UK is access to
finance. All too many are willing to receive philanthropic
or public sector donations and this makes them weak
and ultimately unsustainable as viable business entities
that are of interest to the commercial investment sector.?
30 Emerson, J and Spitzer, J (2007): ?From Fragmentation to Function:
Critical Concepts and Writings on Social Capital Markets? Structure,
Operation and Innovation.? Oxford University, Said Business School,
Skoll Centre for Social Entrepreneurship, Working Paper.
CASE STUDY:
Olly Donnelly And Sheetal Mehta -
Shivia
Shivia is a charitable organisation which makes
it easy to give to and participate in grass roots
social enterprise through microfinance work in
India and Nepal. Their overall goal is to help the
poor to help themselves out of poverty. The idea
evolved when Sheetal Mehta and Olly Donnelly,
the two founders, decided there was a gap for
Western organizations and individuals to play a
role in the economic development of the poor.
Large banks, corporations and high net worth
individuals don?t want to send their money to
organizations that have high administration costs
and therefore cannot deliver the bulk of funds
because they dwindle in the process. The
investors like the process because Shivia?s interest
rates at an average of 15% are nowhere near
as high as the usual 60-80% and they know the
relationships are at the grass roots ? hence there
is transparency in the process and investors can
visit the projects if they choose.
Shivia?s social goal is to empower some of the
poorest communities in the world to set up their
own businesses and become self sustainable
thereby improving their economic conditions.
It does this by lending money for specific
opportunities in deprived communities, in a similar
way to Microcredits, but with the interest recycled
into the fund for further loans. Shivia is looking
to initially raise a fund of $2.5 million and when
appropriate, a larger fund to support similar work
in other countries. The fund is currently being
raised by partnering with organizations whom
Sheetal and Olly have worked with over the last
ten years and they will select the projects they
want to support.
Shivia, in that it must attract investment, will have
economic as well as social goals and will measure
value in terms of repayment, time to repayment,
jobs created locally, interest generated and fees
resulting from consulting work conducted on
behalf of corporations. Returns currently are
essentially social. Investors know that their funds
have been placed in the hands of people who
are going to work to build their business and re-
invest into the fund and the communities they
support. However, Sheetal Mehta and Olly
Donnelly note somewhat wryly that many of the
investors ?already get? social entrepreneurship.
There will be a big campaign in the media to
educate ?the rest?!
Sheetal has three top-tips for social
entrepreneurs:
1. Run your vision as a business (you can be
passionate about a not for profit and make
money at the same time)
2. Make sure your intentions are aligned ? making
money and giving back is key
3. Realize that not everything that claims to be
social is in fact social.
CASE STUDY:
Big Issue Invest
Big Issue Invest is the leading provider of finance
to high-performing social enterprises delivering
business solutions that tackle social problems.
It is a member of The Big Issue Group of
Companies founded by John Bird MBE and
Gordon Roddick. It delivers both social and
financial returns to its investors and dividends
are reinvested in The Big Issue and Big Issue
Invest.
Big Issue Invest is led by social entrepreneurs
staffed by mission-driven financiers with a wealth
of experience from the World Bank, Shore Bank
(the oldest and largest community bank in the
US) and private retail and investment banking.
In the words of Nigel Kershaw, the Chief
Executive, it is this combination, along with the
first-hand experience gained through The Big
Issue, that gives the organisation unique trust
and understanding of the social enterprise sector.
Since February 2006, Big Issue Invest has lent
£5 million to 25 social enterprises with no defaults
or late payments. Investments span five core
mission areas: jobs, education and training;
health and social care; social and financial
exclusion; environment and disability.
Big Issue Invest acts as one entry point of
financing options for social enterprises, providing
a ?one stop finance solution, to social enterprises?
need for capital:
The Loan Fund provides tailored loan finance to
meet the needs of social enterprises wishing to
scale-up. It provides loans as well as innovative
financing products including royalty structures,
guarantees and loan conversions that allow it to
make investments and take risks that are normally
associated with equity financing.
The Venture Capital Trust offers social enterprises
bidding on public sector contracts a new source
of low-cost, flexible contract finance ? typically
6-7% per annum with no arrangement fees in
packages of up to £2 million. This initiative
primarily looks at the strength of the social
enterprise to deliver the contract rather than its
balance sheet.
The Social Enterprise Venture Fund, currently
being raised, will provide equity-like risk capital
for scaleable social enterprises. Venture
philanthropy has typically provided grants but
this fund will take an investment approach that
offers both financial and social returns to
investors. Funding may be used for acquisitions
by social enterprises of commercial companies
and backing them into established social
enterprises with strong management and proven
delivery records.
Big Issue Invest has also launched an initiative
to increase access to regulated credit among
low-income people ? the Alternative Credit
Ratings Index. Eight million people are refused
mainstream credit each year. They have no
alternative but to borrow at very high rates of
interest. Such people may not be poor credit
risks, rather there may be too little information
in their credit files to assess their creditworthiness.
Big Issue Invest is conducting a feasibility study
of adding in new sources of positive data, such
as rent payment data, to credit assessment
models so as to increase access to mainstream
credit and believe that they could bring up to
2.5 million people into mainstream regulated
credit and away from the predatory lenders.
The matrix of social entrepreneurship and social enterprise
The cases and discussion above highlight five reasons
why social entrepreneurship and social enterprise is of
growing importance for policy makers and businesses
alike:
1. Social entrepreneurs and social enterprises are very
similar in their characteristics and potential to mainstream
entrepreneurs and enterprises. However, their primary
motivations are to help people or the environment and, as
a result, use business models that allow profit to be reinvested
in the business itself rather than to be re-distributed to
shareholders. This requires a new way of thinking about
investment and financing of these entities.
2. Changes in the way that contracts are delivered in many
of the public services has increased the prevalence of
female self-employment in the ?caring? sectors such as
education, health and community work. These are likely to
be organised as social enterprises rather than as charities
or as mainstream businesses.
3. Data on the growth of the sector and of impact that such
businesses have is very limited both globally and across
the UK. However, established social enterprises are more
likely to be found in the most deprived wards of England
31
and this suggests that they are fulfilling an important social
need.
4. Since social entrepreneurs behave in a similar way to
mainstream entrepreneurs, they are as likely to be innovating.
Examples such as i-genius demonstrate the importance of
social networking to connect groups of like-minded social
entrepreneurs who are as reliant on building social and
intellectual capital as are their mainstream counterparts in
order to grow their businesses.
5. The growing number of for-profit but social or
environmentally focused businesses requires a new financing
model that marries the fact that profit is re-invested with
the need to provide a clear financial return to investors.
There is a growing academic and policy interest in the
role of social entrepreneurs in particular as the phenomenon
itself grows globally. Social entrepreneurs are seen as
?pragmatic, innovative and visionary? with a particular role
in creating social value
32
. They are vital in creating the
social innovations that drive positive change in delivery of
services and welfare
33
but equally important in defining a
new and sustainable business model that integrates the
desire for social or environmental sustainability by
addressing negative externalities with the need to make
revenue and profit simultaneously
34
.
31 Harding, R. (2007): Barclays Social Entrepreneurship Monitor,
forthcoming; DTI/SBS Survey of Social Enterprises across the UK found
that over half of social enterprises are located in the wards with higher
levels of multiple deprivation.
32 Nicholls, A. (2006, ed): ?Social Entrepreneurship: New models of
sustainable social change? Oxford University Press, Oxford
33 Mulgan, G ., with Tucker, S., Ali, R. and Sanders, B. (2006): ?Social
Innovation: What it is, why it matters and how it can be accelerated.?
Skoll Centre for Social Entrepreneurship Working Paper:http://www.youngfoundation.org.uk/files/images/SI-sp.pdf
34 Harding, R. (2007): ?Understanding social enterprise? Industry and
Higher Education, London, March 2007, pp74-86.
However, the most important aspect of the discussion
outlined above is the change in the definition of social
entrepreneurship that has taken place over the past five
years. In 2003 the social entrepreneurship sector itself
struggled with the word ?profit?, arguing that it ran counter
to achieving the social goals of the social entrepreneur or,
ultimately, the social enterprise. As a result, it was argued,
many projects would inevitably stay small, largely voluntary
and community-based and not all social entrepreneurs
would build social enterprises.
Increasingly, however, there is a new breed of social
entrepreneur that, like their mainstream counterpart,
absolutely acknowledges the need for professionalism,
adequate resourcing and ultimately growth, to be able
effectively to serve the double bottom-line. These
entrepreneurs have as a starting point the need to build
an entity based on values and value creation but are
sufficiently pragmatic to know that business principles of
wealth creation must also be followed.
This renders the definition of social entrepreneurship more
complex but not impossible: what is important is the
motivation of the entrepreneur or enterprise in the first
place and not the ultimate attitude towards profit. In the
words of one interviewee, ?You need money, i.e. a revenue
stream and ultimately profit, in order to make things
happen. But it?s the way in which that profit is distributed
that distinguishes between a social enterprise and a
mainstream enterprise.?
A note on philanthropy
Successful global entrepreneurs like Bill Gates, Warren
Buffet and Sir Tom Hunter have raised public awareness
around a new area, especially for the UK, of philanthropy.
The activity of these entrepreneurs is often confused in
the media with social entrepreneurship and it is worthwhile
dwelling for a moment on exactly how what they do differs
to social entrepreneurship and social enterprise.
Perhaps the quickest way of illustrating the difference is in
terms of the Entrepreneurial Life-Cycle model in Figure 1:
Start-up
A philanthropist will
start here: grows,
creates wealth and
then creates value
Create value
A social entrepreneur
starts here and develops
a structure to support
value creation
Grow up
Create wealth
Figure 1:
The Entrepreneurial Life Cycle
Source: © Delta Economics
The entrepreneur-philanthropist: begins their entrepreneurial
life by starting a company. While this company may be
a ?values driven? company like Microsoft, whose objective
is to ?maximise the opportunities for people to reach their
full potential?
35
their ultimate objective at the start-up
phase is to create wealth around the central business idea
or innovation that they are developing. Once their personal
wealth has amassed, this is then used to set up
Foundations and Trusts which have social, community or
research objectives. While this model is frequently
associated with the US
36
, examples also abound elsewhere
in the world such as the Glaxo-Wellcome Trust, the
Bertelsmann Foundation, the Rowntree Trust and the
Robert-Bosch Stiftung, all of which have emanated from
the personal resources of the founding entrepreneur.
A new breed of entrepreneur-philanthropist whose
business-model is profit oriented and whose activities are
commercial but who dedicate a proportion of their profits
from the outset is represented by the XL Results Foundation
and Roger Hamilton. This is a network of entrepreneurs
who are coached and mentored on how to grow their
businesses, irrespective of business goals, in the interests
of returning a percentage of their profit to social, welfare,
economic development or community causes. They regard
themselves as social entrepreneurs although their model
is actually philanthropic: their goals are to create a
commercial organisation that generates profit and that
hence can give back to communities. The communities
themselves are the beneficiaries but not the purpose of
the business operation.
The social entrepreneur building a social enterprise is
motivated by the desire to create value in the form of a
social, environmental or welfare return in the first instance.
Many social entrepreneurs may find it hard to get out of
the values box, as the example Sev Necati demonstrated:
her goal is to generate greater welfare for the women with
whom she was working but she finds the process of
raising resources to develop an appropriate organisational
structure with growth potential extremely difficult. In
contrast, the Art-Switch example at the other end of the
spectrum was motivated entirely by social objectives to
provide income directly to artists but uses a commercial
structure and has external investors in order to be able to
achieve this.
Understanding the sector
In the end, then, social entrepreneurship and social
enterprise are arguably linked in a matrix as shown in
Figure 2. On the vertical axis is the governance structure:
from ?charitable? or ?Foundation? status and thereby
?governed? ultimately by Trustees through to ?Social
Enterprises? structures such as Community Interest
Companies and even cooperatives with investors expecting
a social as well as a financial return. On the horizontal axis
is the profit motivation of the entity from ?not-for-profit? to
?for profit?.
35 Gordon Fraser, CEO, Microsoft UK at the Cass Business School,
?Hidden Innovators? report launch.
36 See for example Acs, Z and Phillips, R. (2002): ?Entrepreneurship
and philanthropy in American capitalism.? Small Business Economics.
2002. v. 19, p. 189-204.
Social Business
Grameen Danone
Operates commercially but
returns profit to business;
external investors do not
expect a financial return but
do expect a social return
Social Enterprise
Shivia and Art-Switch
Operate commercially and
make a profit; returns to
external financiers social
and economic
Charity or Foundation
Large-scale/global (Robert
Bosch Stiftung) through global
cause (Global Angels) to small-
scale community
Charity Law prohibits
development of commercial
trading revenue; funding from
public, foundation, philanthropic
or CSR sources
For profit charities
Small entities (Advance-Aid)
through charity trading arms
to global organisations like
Robert Bosch
Owned by the Charity or
Foundation and return all profit
to it to allow charitable
objectives to be met
Not for profit/ For profit
Philanthropy Enterprise
Profit motivation
P
r
o
f
i
t
d
i
s
t
r
i
b
u
t
i
o
n
a
n
d
g
o
v
e
r
n
a
n
c
e
C
h
a
r
i
t
y
o
r
F
o
u
n
d
a
t
i
o
n
C
o
m
p
a
n
y
:
e
x
t
e
r
n
a
l
i
n
v
e
s
t
m
e
n
t
Figure 2:
A matrix of socially motivated
organisational structures
Source: © Delta Economics
The matrix in Figure 2 summarises both the literature and
the cases covered in the report so far. No one model is
right: for example, more philanthropic structures serve a
purpose for providing aid and support to specific global
or community causes such as hunger, or welfare or health.
Similarly the social business model, as described by
Mohammud Yunus?s new book, requires a degree of
philanthropy simply because investors should expect only
social return and not economic return from their investment.
In contrast, investors in social enterprises can expect
both a social and an economic return as the entities are
similar in structure but not in motivation to their mainstream
counterparts.
The issue of measurement, both of scale and of impact,
remains, however, since the sector itself has only recently
started to understand the diversity of models that
co-exist. It is to this that the discussion now turns.
Measuring social entrepreneurship and
social enterprise in the UK
37
Attempts to measure the scale and scope of the social
entrepreneurship and social enterprise sector are in their
infancy and the only longitudinal study is that conducted
by the Global Entrepreneurship Monitor (GEM) UK project
between 2003 and 2007. The other study surveyed here
is that conducted by the Department for Business,
Enterprise and Regulatory Reform (BERR) Enterprise
Directorate in 2005. The methodological approaches of
each are examined.
The GEM Approach
GEM defines entrepreneurship as: ?Any attempt at new
business or new venture creation, such as self-employment,
a new business organization, or the expansion of an
existing business by individual, teams of individuals, or
established business.?
This is a sufficiently broad definition to include anyone
who is adding value to the work they do by acting
entrepreneurially, although too narrow to identify those
enterprise that fulfil a not-for-profit or specific social
purpose. Indeed, with the exception of the UK, GEM
globally does not consider social entrepreneurship.
How does GEM measure entrepreneurial activity?
Each of the countries in the study has a team of researchers
who use a standardised questionnaire survey of the adult
population to create the Total Entrepreneurial Activity (TEA)
index. This random adult population survey is conducted
by telephone during June and October of each year and,
on the basis of the 18-64 year olds within the population
it is used to identify:
1. Nascent ventures: these are the firms that would be
called start-ups by most analysts. Anyone in the survey
who said they were actively involved in creating a new
business that they would own all or part of and had not
paid any salaries or wages to anyone for more than three
months fell into this category.
2. Baby businesses: these are the more established,
owner-manager, businesses that have been running for
up to 42 months and have not paid salaries for longer
than that.
There will be some double counting between these two
groups ? serial entrepreneurs may be setting up and
running businesses simultaneously. This problem is
overcome by allocating these individuals either to nascent
or to baby businesses, but not to both. Adding together
the two categories of people makes the TEA index that
can then be used to illustrate differences and similarities
between countries, regions, types of people and types of
entrepreneurship.
37 Disclaimer: Any GEM data used in this report are compiled by the
GEM UK team as part of the annual adult population survey. Their
analysis and interpretation are entirely the responsibility of the author.
GEM UK
The level and importance of social entrepreneurship were
investigated for the first time by GEM UK in 2003. GEM?s
broad approach to defining entrepreneurship was adapted
to ask similar questions about social entrepreneurship.
The method is based on the approach taken in the rest
of GEM UK requires individuals to respond to the following
questions:
1. Are you alone, or with others, currently trying to start
any kind of social, voluntary or community service, activity
or initiative? This might include providing subsidised or
free training, advice or support to individual or organisations;
profit making activity, but where profits are used for socially
orientated purposes; or self-help groups for community
action.
2. Are you alone, or with others, currently trying to start
any kind of social, voluntary or community service, activity
or initiative as part of your job? This might include providing
subsidised or free training, advice or support to individual
or organisations; profit making activity, but where profits
are used for socially orientated purposes; or self-help
groups for community action.
3. Are you, alone or with others, currently managing any
such social activity, voluntary or community service, activity
or initiative?
Like Total Entrepreneurial Activity (TEA), Social
Entrepreneurial Activity (SEA) is the sum of our adult
population of those answering positively to one of the
above questions (minus double counting). Since the
questions make clear that the use of profit or revenues is
for community or social purposes, this is effectively
measuring the potential within the general adult population
to set up social enterprises.
The 2007 dataset differs somewhat from previous datasets
thus the material presented here examines all those
individuals who are involved in some form of start-up
activity with social, environmental or community goals and
all those individuals who own and manage a socially,
environmentally or community oriented entities. It does
not allow us to provide comparative SEA results with
previous years but, as the level has remained static since
2004 at some 3.3% of the working aged population in
the UK, the data from 2007 can be used to provide
additional depth of understanding about social
entrepreneurs from a demographic, regional and
governance perspective.
The Department for Business, Enterprise and Regulatory
Reform?s (BERR) Survey of Social Enterprises
This study was a one-off survey of 8, 401 organisations
of which 1,480 fell into the BERR definition of social
enterprise (as outlined above). It is not a monitoring
exercise and does not claim to be representative of the
sector. However, it was an important first attempt to
improve understanding of social enterprises in terms of
their client base, sectors, governance structures, sources
of income and number of employees.
Since the 2005 study there have been regional and local
level surveys but systematic, UK-wide data collection for
the social enterprise sector has been limited. The BERR
2007 Annual Small Business Survey (reporting in 2008)
included filters for the sector to provide similar types of
data to the one off survey in 2005.
Summary
Each study measures different things: GEM measures the
propensity of people in the general adult population to set
up socially, community or environmentally motivated
businesses. Effectively it measures the number people in
the adult population of working age who set up or run
ventures or activities for such purposes. It does not
measure the businesses that they run nor does it aid our
understanding of the growth process since this falls outside
of the remit of an adult population survey.
The BERR study provides a baseline evidence base on
the sector itself and can therefore yield greater
understanding of the enterprises themselves. As a cross-
sectional analysis, however, it is limited in telling us how
the sector has changed or what the challenges and barriers
(especially in terms of access to finance) actually are.
Why measure social entrepreneurship?
With the social enterprise sector estimated to be as large
as it is in the UK, it is important to understand the cultural
and entrepreneurial base that supports it in the interests
of developing policies to support more social
entrepreneurship and, hence, more social enterprise.
Thinking around social enterprise has developed over the
past few years and it is worth mapping the development
of policy as it reflects the changes. The then Department
for Trade and Industry?s Small Business Service saw two
main areas in which social enterprises contribute to the
UK economy:
By providing an alternative business model for firms
to trade commercially in an environmentally and socially
sustainable way.
By providing an alternative delivery system for public
services such as health, education, housing and community
support.
To this end, it?s Strategy for Success (DTI 2002), focused
on defining the size of the sector and its value to the
economy, on creating an appropriate and enabling
regulatory and business support environment and on
improving the performance of social enterprises. By 2005
the government had:
Launched and established the Community Development
Finance Institutions (CDFIs).
Provided Community Investment Tax Relief to investors
in CDFIs.
Ensured that Business Links operatives and all major
government enterprise support schemes included support
for social entrepreneurs and social enterprises.
Extended the Small Firms Loan Guarantee Scheme
to include social enterprises.
Created Community Interest Companies (CICs) which
plugged an important legal gap in the corporate governance
of social enterprises by providing an ?asset lock? to ensure
that revenues remained within the firm and by requiring
companies applying for CIC status to pass a ?test of
community value?.
Built and developed the evidence base on social
enterprises.
Integrated social enterprise thinking into cross
governmental initiatives such as the Local Enterprise
Growth Initiatives (LEGI), DEFRA?s £1.5m ?Enterprise for
Inclusion? rural support programme and the
?FutureBuilders? £1.25m programme to assist the
community and voluntary (or Third) sector to win public
sector contracts.
The Strategy for Success is now five years old and was
reviewed during 2006. Of most relevance to this report, the
review process resulted in a move of the whole social
entrepreneurship and social enterprise agenda to the Cabinet
Office?s Office of the Third Sector and recommended:
that the specific support needs of mainstream and social
enterprises be investigated further,
that the needs of the Third Sector are better understood
and
that new entrants are encouraged into the social enterprise
market place while helping to establish social enterprise as a
viable business model and to open markets to social
entrepreneurs.
The resultant Action Plan published at the end of 2006 stresses
the enabling role of government through:
Fostering a culture of social enterprise: by raising awareness,
appointing social enterprise ambassadors, promoting social
entrepreneurship amongst young people, providing guidance
to schools on social enterprise and raising the profile in
secondary and tertiary education, developing a new research
programme to build the evidence base and a programme of
fostering links between the conventional private sector.
Ensuring that correct information and advice is available
to those running social enterprises: by providing additional
funding from April 2007 to Regional Development Agencies
(RDAs) to improve the capacity of Business Links to deliver
support, by improving information about social enterprise
through the business link network, working with partners to
identify national, regional sub-regional and local networks, and
by commissioning a review of the specific needs of social
enterprises
Enabling social enterprises to access appropriate finance:
by making available £10million for investment in social
enterprises, rolling out financial awareness programmes
including social enterprise within mainstream ?access to
finance? interventions and by conducting a review of the
Community Investment Tax Relief system and other incentives
by the Budget 2007.
Enabling social enterprises to work with government: by
publishing a third sector public service action plan, by tackling
barriers to the use of social clauses and by reducing the
barriers to social enterprise in public procurement.
These initiatives are supported by the appointment of a new
Council on Social Action, an award for Social Technology and
to look at mechanisms for establishing a new social Investment
Bank
39
. Further, the Enterprise Strategy published by HM
Treasury and BERR in March 2008 additionally recognises
the need for a dedicated venture fund for social enterprises
and signalled the intention to dedicated £12.5m for this
purpose
40
.
The profile that has recently been given to ?celebrity? social
entrepreneurs such as Liam Black or Tim Smit (founder and
CEO of the Eden Project), and the prominence in policy that
this whole area now has through the Office of the Third Sector
suggest that the sector is a large scale and important
phenomenon. The analysis of GEM in the next section allows
us to understand a little more about what is happening in the
sector generally.
39 Gordon Brown, Prime Minster, in speech at the launch of ?Britain?s
Everyday Heroes? www.pm.gov.uk/output/Page12600.asp
40 HM Treasury and BERR (2008): ?Enterprise ? Unlocking the UK?s
Talent?http://www.berr.gov.uk/files/file44992.pdf
How much social entrepreneurship is there
in the UK?
41
Overall in the UK, GEM estimates that some 3.3% of the
working age population is engaged in social entrepreneurial
activity. This represents nearly 1.3 million people and, as
Figure 1 shows, although the rate of engagement with
social entrepreneurial activity is not as high as for
mainstream entrepreneurial activity (at 5.8% of the working
population), this is still a substantial number of individuals.
Figure 3 does not give a figure for SEA for 2003 or for
2007. The SEA rate in 2003 was calculated then as 6.6%
of the population but was not directly comparable with
TEA as it included established businesses older than 42
months. As a result, it over-estimated the SEA-active
population which only measures the newest activity up to
42 months. It does, however, demonstrate that a
proportion of the SEA active social entrepreneurs will
continue to run more established social enterprises.
In 2007, the GEM survey did not allow for a calculation
of SEA as such but does allow us to look at all those
involved in some form socially, community or
environmentally oriented start-up activity and all those
who own and run a socially, environmentally or community
entity. The highlights from the data are as follows:
11.9% of all TEA active individuals (in other words the
nascents starting up but who have not been active for
more than three months and all those who have owned
or managed a firm for more than three months but less
than 42 months) are engaged in some form of socially
motivated start up.
35% of all nascent entrepreneurs are socially motivated.
5.5% of all established business owners (owning and
managing firms older than 42 months) are social
entrepreneurs.
41 Full methodological details, including sample sizes and weightings
are given in Appendix 3
Figure 4 compares social entrepreneurial start up and
owner-manager activity with mainstream start up and
owner-manager activity. It should be noted that the owner-
manager activity in the social enterprise population is
filtered in the survey questionnaire and excludes owner-
manager activity that has been covered by questions
elsewhere in the survey. The mainstream entrepreneurial
activity does not have this caveat thus the figures appear
substantially higher.
Immediately interesting from Figure 4 are two things:
Social entrepreneurial start-up and owner-managed
activity do not differ substantially in scale at some 4.2%
and 3.8% of the adult population respectively. The
comparative figure for mainstream entrepreneurial start-
ups is 3.9% and although some 11.6% of the adult
population are estimated to be owner-managers of
businesses, there may well be some overlap, both with
mainstream start-ups and with social enterprises.
Social entrepreneurship start-up and owner-manager
activity does not differ substantially by gender, but
mainstream activity does. For every three women?s social
enterprise start ups there are four male and there are five
male owner-managers for every four female social enterprise
owner-managers.
Figure 5 looks at the level of activity by UK region for social
and mainstream activity. Regional differences are generally
not statistically significant as the sample sizes between
regions differ.
Men
Women
Total
0
2
4
6
8
10
12
14
16
18
(
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
1
8
-
6
4
)
Category of activity
Social
entrepreneur
start-up
Social
entrepreneur
owner-manager
Mainstream
entrepreneur
start-up
Mainstream
entrepreneur
owner-manager
0
1
2
3
4
5
6
7
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
1
8
-
6
4
TEA
SEA
Figure 3:
Total Entrepreneurial Activity and Social
Entrepreneurial Activity Compared
Source: GEM UK Adult Population Survey 2003 - 2007
Year
2003 2004 2005 2006 2007
Figure 4:
Social and mainstream entrepreneurial start-up and
owner-manager activity compared, 2007
Source: GEM UK APS 2007
However, there are some interesting indicative findings in
Figure 5 as follows:
The region where there is the highest social
entrepreneurial start-up activity is the East of England at
5.1% of the adult population of working age. The region
where it is lowest is Northern Ireland at some 3.3%.
The range is narrower for social enterprise owner-
manager activity: the level is 4.3% of the adult population
in both the East of England and London and 3.2% in
Wales.
Again the levels of mainstream start-up activity (which
may include social enterprise) are not significantly different
to social enterprise activity. Indeed in some regions, such
as the North East, the North West, Yorkshire and
Humberside and the East of England, social entrepreneurial
start-ups appear higher.
The social entrepreneurial start-up and owner-manager
activity by urban and rural location in England only are
reported in Figure 6.
There is no significant difference in start-up activity between
urban and rural locations but social enterprise owner-
manager activity is signficantly higher in rural locations at
5.8% of the adult population compared to 3.5% in urban
locations
42
.
Figure 7 looks at the same results by index of multiple
deprivation, again for England only
43
, which measures the
level of deprivation across seven ?domains? in each super-
output area in the country: income deprivation, employment
deprivation, health deprivation and disability, barriers to
housing, education, skills and training, crime and the living
environment. The area ?1? is the most deprived while ?5?
is the least deprived.
Figure 7 suggests two things:
For the most deprived areas, the differences between
owner-manager and start-up activity are not statistically
significant. For example, in IMD 1 some 3.8% of the
population are engaged in social entrepreneurial start-up
activity compared to 4.8% who own or manage a social
enterprise. For IMD 5 the figures are 4.9% and 2.9%
respectively.
Social enterprise start-up activity is much higher in the
least deprived areas at some 4.9% of the population
compared to 3.8% in the most deprived areas. This is
reversed, however for owner-manager activity at 2.9%
and 4.8% respectively.
42 ?Urban? and ?Rural? are defined according to government statistical
procedures (seehttp://statistics.gov.uk/geography/nrudp.asp). 43http://www.communities.gov.uk/pub/443/Indicesofdeprivation2004su
mmaryrevisedPDF154Kb_id1128443.pdf
Figure 5:
Social entrepreneurial start-ups and owner-managers by
UK region, 2007
Source: GEM UK APS 2007
0
2
4
6
8
10
12
14
16
%
a
d
u
l
t
p
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p
u
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a
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i
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n
Social Enterprise start-up activity
General start-up activity
N
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U
K
UK region
Social enterprise owner-manager
General owner-manager
0
1
2
3
4
5
6
7
%
A
d
u
l
t
P
o
p
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a
t
i
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n
1
8
-
6
4
rural
urban
Figure 6:
Social entrepreneurial start-ups and owner-managers
in rural and urban locations
Source: GEM UK APS 2007
Type of activity
Social entrepreneurial start-up Social enterprise owner-manager
0
1
2
3
4
5
6
7
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
1
8
-
6
4
Social entrepreneurial start-up
Social enterprise owner-manager
Figure 7:
Social entrepreneurial start-ups and owner-managed
activities by index of multiple deprivation (England only)
Source: GEM UK APS 2007
IMD Quintile (most to least deprived)
IMD 1 IMD 2 IMD 3 IMD 4 IMD 5
Finally for this section, Figure 8 reports on the attitudes
of social entrepreneurs compared to mainstream
entrepreneurs.
There are several highlights that can be drawn out of this
table:
Social entrepreneurs are more positive than the general
UK population but not as positive as mainstream
entrepreneurs. There is one notable exception. Although
they are more likely than the UK population to think they
have the skills and experience, to see good business
opportunites and to know an entrepreneur, social
entrepreneurs starting up are not significantly less likely
than their mainstream counterparts to fear failure.
Fear of failure is lower amongst the more established
social enterprise owner-managers and is even lower
amongst mainstream entrepreneurs.
For both mainstream and social entrepreneurs,
perceptions seem to deteriorate with experience. Although
both mainstream and social owner-managers are more
likely to say that they have the skills to start a business,
they are less likely to know other people who have set up
businesses in the last two years, less likely to see good
opportunities in the next six months and more likely to
fear failure. They are also significantly less likely to be
thinking of starting another activity in the next three years.
44 Harding, R (2006): ?Stairways to growth: women?s enterprise
in the UK? Report for Prowess.
45 Harding, R and Cowling, M (2004); Harding, R. (2006) and Harding,
R. (2007).
Summary
The level of social entrepreneurial activity, at some 3.3%
of the adult population of working age in 2006, is
substantial. In 2007 complexities in the questionnaire
meant that the results were not directly comparable with
the previous years. However, the levels of social enterprise
start-up and owner-manager activity suggest that a
significant proportion of the population is engaged in this
type of activity and that therefore it cannot be ignored.
The locational differences by region are not statistically
significant but there are significantly more social enterprise
owner-manager in rural locations and most deprived wards
in England than in urban or least deprived wards. Combined
with anecdotal evidence and evidence from previous GEM
studies
44
the higher prevalence of social entrepreneurial
owner-managed entities in rural areas suggests that rural
responses to the decline in the rural economy are taking
the form of socially oriented activity. Similarly, the higher
levels of owner-manager activity in most deprived wards
in England also suggest that social enterprise responses
are more appropriate to problems of regeneration and
welfare than mainstream ones.
Finally, it is interesting that the attitudinal results reflect
those reported in GEM Social Enterprise Monitors in
previous years
45
. Social entrepreneurs develop more
negative attitudes towards entrepreneurship as they
become more established. This is also the case for
mainstream entrepreneurs and, combined with the fact
that fewer expect to start a business, it suggests that
coaching and mentoring through the growth process may
help social entrepreneurs to convert their visions in to
sustainable social enterprises.
I expect to start a business in the next three years
I have shut down a business in the last 12 months that has ceased to trade
I know someone who has started a business in the last 2 years
In the next six months there will be good start-up opportunities where I live
I have the skills to start a business
Fear of failure would prevent my starting a business
Figure 8:
Attitudes of social entrepreneurs compared with all
entrepreneurs and the UK population
Source: GEM UK APS 2007
S
o
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i
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l
s
t
a
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t
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p
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U
K
21.6 11.0 51.2 20.1 7.4
2.2 2.8 3.6 3.2 1.2
47.5 33.9 48.1 42.1 25.7
56.7 53.7 70.3 58.1 39.1
64.9 68.4 79.9 86.5 48.5
34.2 26.4 19.5 22.0 35.8
Who are the social entrepreneurs?
This section provides information on the demographic
profile of social entrepreneurs. It has already been
established that the ratio of women?s social start up and
owner-manager activity to male activity is higher than for
mainstream activity. Indeed, as illustrated in Figure 9, in
the East of England, female start up activity and owner-
manager activity is higher than male activity.
Again, the regional differences should be treated with
caution. However, the East of England is the region with
the highest level of female social entrepreneurial start-ups
at 5.7% compared with 2.6% in the North East. London
has the highest level of male start-up activity at 5.5% and
Wales the lowest at 3.7%.
Interestingly, there are two regions, the South West and
the East of England where female start up activity is higher
than male activity. In both regions there are four female
social entrepreneurs for every three male social
entrepreneurs. In Wales the ratio is nearly one-to-one. In
Wales and the East of England there appear to be more
female owner-managed social enterprises compared to
male.
Figure 10 shows start-up and owner-manager activity by
age grouping.
0
1
2
3
4
5
6
7
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
Figure 10:
Social Entrepreneurial Activity by age
Source: GEM UK APS 2007
Age Catergory
18-24 25-34 35-44 45-64 55+
Social entrepreneurial start-up
Social enterprise owner-manager
Figure 9:
Social entrepreneurial activity by gender in UK regions
Source: GEM UK APS 2007
Male SE starts
Female SE starts
Male SE OM
Feale SE OM
0
1
2
3
4
5
6
7
8
%
a
d
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p
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p
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a
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i
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a
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d
1
8
-
6
4
N
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N
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d
U
K
UK region
Again the results are not statistically significant but are
interesting indicatively as they reflect the findings of previous
social entrepreneurship monitors. The widest gap between
start-up and owner-manager activity is amongst the
youngest age group where 4.4% are social entrepreneurs.
The lowest level of start-up activity is in the oldest age
group at 3.8%. However, it is the oldest two groups, 45-
54 and 55+ who are most likely to be the owner-managers
of social ventures, activities or enterprises.
Figure 11 breaks the age differences down by gender.
The widest gap is at the start-up stage where young men
are substantially more likely to be starting social
entrepreneurial ventures at 5.6% of the total male population
aged 18-24 compared to a level of 3.1% in the female
group.
Figure 12 shows the ethnic breakdown of social
entrepreneurship by broad ethnic grouping. The least
socially entrepreneurial group appears to be the white
ethnic grouping. However, the attrition between start-up
and owner-managed activity is negligible amongst this
group while it is more substantial amongst other ethnic
groupings.
The ethnic grouping most likely to be starting a social
venture, activity or initiative is the Black African and
Caribbean group at 10.5%. This is two and half times
the level of white British people at 3.8%. The mixed ethnic
grouping are the most likely to own-manage a social
enterprise at 5.0% while the Black African and Caribbean
group are the least likely at 2.5%.
Gender differences should be treated with caution but the
gap between male and female activity is narrowest in the
White ethnic grouping, as illustrated in Figure 13.
0
1
2
3
4
5
6
7
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
1
8
-
6
4
Social entrepreneurial start-ups men
Social entrepreneurial start-ups women
Social enterprise owner-manager men
Social enterprise owner-manager women
Figure 11:
Social entrepreneurial activity by age and gender
Source: GEM UK APS 2007
Age group
18-24 25-34 35-44 45-54 55+
0
2
4
6
8
10
12
14
%
A
d
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l
t
P
o
p
u
l
a
t
i
o
n
a
g
e
d
1
8
-
6
4
Figure 12:
Social Entrepreneurial Activity by Ethnic Grouping
Source: GEM UK APS 2007
Ethnic grouping
White Mixed
ethnic origin
Indian sub-
continent
Other Asian Black
African or
Caribbean
Social entrepreneurial start-up
Social enterprise owner-manager
%
A
d
u
l
t
P
o
p
u
l
a
t
i
o
n
1
8
-
6
4
Social entrepreneurial start-ups men
Social entrepreneurial start-ups women
Social enterprise owner-manager men
Social enterprise owner-manager women
Figure 13:
Social entrepreneurial activity by ethnic grouping and
gender
Source: GEM UK APS 2007
Age group
White Mixed
ethnic origin
Indian sub-
continent
Other Asian Black
African or
Caribbean
0
2
4
6
8
10
12
14
Figure 14 illustrates the differences by occupational status
and demonstrates that the ?other? grouping is most likely
to be starting up and owning and managing a business.
This could include individuals who are not classified in the
mainstream labour market or who are self employed.
Interestingly, the level of social entrepreneurial start-ups
in the student grouping is also high at 7.2%.
Figure 14:
Social entrepreneurial activity by occupational status
Source: GEM UK APS 2007
Social entrepreneurial start-ups
Social enterprise owner-managers
0
2
4
6
8
10
12
14
%
a
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p
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r
Occupational status
Figure 15:
Social entrepreneurial activity by occupational status and gender
Source: GEM UK APS 2007
Social entrepreneurial start-ups men
Social entrepreneurial start-ups women
0
2
4
6
8
10
12
14
%
a
d
u
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p
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p
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a
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f
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O
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r
Occupational status
Social enterprise owner-managers men
Social enterprise owner-managers women
16
Figure 15 shows that entrepreneurial owner-manager
activity in the ?other? group is predominantly amongst
women at 15.8%. 6.0% of women in full time education
are engaged in social entrepreneurial start up activity while
8.7% of men who are in part time employment are starting
up social entities. This is also the group most likely to be
owning/managing a social enterprise.
As with mainstream entrepreneurship and as reported in
previous Social Entrepreneurship Monitors, the likelihood
of being involved with either social start-up or owner-
manager activity increases with level of qualification. This
is illustrated in Figure 16. For example, start up activity
amongst those with Doctorates is 9.5% and with Masters
qualifications is 8.6%. This drops to 5.9% for Bachelors
level qualification.
Levels of social enterprise owner-manager activity are
8.7% in the two post graduate groups and 5.6% in the
Bachelors group.
Summary
The differences between men and women in terms of
levels of social entrepreneurial activity have been shown
over the last five years to be insignificant in contrast to
mainstream activity where men are twice as likely as
women to be starting a business. Indeed there are some
regions and groupings where social entrepreneurship
amongst women is higher than it is amongst men. This
corroborates a general picture that has emerged over the
last few years that policy should focus on encouraging
socially motivated business activity amongst women as
this might encourage more women into labour market
engagement through enterprise. Similar arguments have
been made for other under-represented groups such as
ethnic minorities.
The results of this section, however, do suggest that social
entrepreneurial activity is higher amongst those with higher
qualifications and, particularly amongst men, some form
of income through part time employment. The fact that
attrition is also lower amongst white social entrepreneurs
also suggests that a pattern similar to that of mainstream
entrepreneurship is emerging. Except by necessity, social
entrepreneurial activity is focused in groups where education
and income are higher, especially at the start-up stage.
Finally, though, there is an interesting pattern of young,
male social entrepreneurs evident in the data. Here there
are three female social entrepreneurs for every five male.
Our case studies reflect this pattern and further anecdotal
and interview evidence for this report suggest that young
men are taking a more philanthropic approach to their
entrepreneurial activity, as outlined above but are classifying
themselves as ?social entrepreneurs?.
Figure 16:
Social entrepreneurial activity by occupational status
Source: GEM UK APS 2007
Social entrepreneurial start-ups
Social enterprise owner-managers
0
2
4
6
8
10
12
14
%
a
d
u
l
t
p
o
p
u
l
a
t
i
o
n
a
g
e
d
1
8
-
6
4
D
o
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t
o
r
a
t
e
M
a
s
t
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r
s
B
a
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l
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s
A
-
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G
C
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t
V
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q
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a
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n
s
Educational qualification
Social entrepreneurship structure and funding
Focus on social entrepreneurial start-ups
It is important to understand where on the matrix the
social entrepreneurs covered by GEM appear in order
to assess its usefulness in the evidence base. This
section focuses on socially motivated start-up activity
while the next focuses on the social enterprise owner-
managers.
Figure 17 shows the ownership structure of the social
venture anticipated by the respondent once it is
established. It suggests that the majority of social
entrepreneurs will own part of the entity once it is
established at nearly 65%. Of the remainder, 16.5%
will own all of the entity with no statistically significant
differences by gender and 18.1% likely to own none of
the entity (20.1% amongst men and 15.5% amongst
women).
Women are more likely to be working in education or
support and care services than men, as illustrated in
Figure 18 but the most common sector is the recreation
sector for both men and women. This includes youth
clubs run through churches and community centres.
Accordingly the greatest number of social entrepreneurs
will be working away from their home in separate
premises. Women are slightly more likely to be working
in other premises than men. This is shown in Figure 19.
I will own all of the entity once established
I will own part of the entity once established
I will own none of the entity once established
Figure 17:
Ownership status of social entrepreneurs once entity is
established (% all respondents)
Source: GEM UK APS 2007
16.4 16.7 16.5
63.3 67.7 64.8
20.1 15.5 18.1
M
e
n
W
o
m
e
n
T
o
t
a
l
Activity will be run from home
Activity will be run from separate premises
Mobile service or activity
Other
Figure 19:
Location of social entrepreneurial start-ups
Source: GEM UK APS 2007
21.5 19.8 20.7
65.4 68.7 66.9
9.8 10.9 10.3
2.7 0.3 1.6
M
e
n
W
o
m
e
n
T
o
t
a
l
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
s
t
a
r
t
-
u
p
s
Sector
Education Environment Health Recreation Support and care Other Regeneration
Figure 18:
Social entrepreneurial start-ups by primary sector of activity
Source: GEM UK APS 2007
Some 30% of the social entrepreneurs responding to this
question have some form of for-profit capability in that
they are socially motivated companies or cooperatives.
There are a substantial number of unincorporated and
trust-based companies and the ?other? group, which
includes charities, is the most significant in terms of size.
This is corroborated by Figure 20 which suggests that
more than half of social entrepreneurs expect their entities
to have charitable status once established.
Roughly a third of revenue for the social enterprise start-
ups will come from public sources and 53% expect to get
revenue from sales of goods or services. Of these, some
26% of all respondents expect more than 90% of their
revenue to come from sales (33.1% of men and 16.9%
of women).
Figure 22 presents the numbers of jobs that social
entrepreneurs expect to create, both for start-ups and
owner-managers. The difference between the two stages
of development is really quite marked. 54.4% of social
start-ups expect to create 1-5 jobs with a median of 4
jobs for the whole sample. However, for the owner-
managers, with a higher proportion of established social
enterprises the median job creation is zero while 52% do
not create any jobs.
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
s
t
a
r
t
-
u
p
s
Legal status
Unincorporated Trust Company (eg
Community
Interest
Company)
Cooperative,
community
benefit society
or credit union
Partnership Other Sole trader
Figure 20:
Legal status of social entrepreneurial start-ups
Source: GEM UK APS 2007
No Jobs
1-5 Jobs
6-10 Jobs
> 10 Jobs
Median Jobs
Figure 22:
Job creation by social entrepreneurs (start ups and
owner-managers compared)
Source: GEM UK APS 2007
7.9 52.0
54.4 21.6
18.8 7.0
12.1 13.4
4.0 0.0
Social
start-up
Social
owner
manager
My activity will have charitable status once established
Greater than half of the funding for the social start-up comes from public sources
My activity will generate revenue through sales or charging for goods or services:
Of these
> 90% revenue from sales
>75% revenue from sales
> 50% revenue from sales
>25% revenue from sales
>10% revenue from sales
0-10% revenue from sales
Figure 21:
Charitable and funding status of entity once established
Source: GEM UK APS 2007
55.0 55.2 55.1
34.6 33.1 33.9
53.9 51.9 53.0
33.1 16.9 26.0
7.7 7.7 7.7
16.5 17.9 17.2
13.3 16.9 14.9
7.7 11.8 9.5
1.6 4.6 2.9
M
e
n
W
o
m
e
n
T
o
t
a
l
Focus on social enterprise owner-managers
The patterns of owner-managed social enterprise are
similar to start-ups. Predominantly owner-managed activity
is in the ?recreation? sector and women are more likely
than men to be working in education and support and
care services. This is illustrated in Figure 23.
Figure 24 shows where the social entrepreneurial activity
is located and here there are differences. The number of
enterprises run from home has fallen and 72% are run
from separate premises. Similarly there are marginally
fewer mobile activities at 7.9% compared to 10.3% of
start-ups.
Figure 25 shows the ownership structure. Again, it is the
?other? sector, which includes charities which dominates
at 35.1% overall. This compares to 15% which have a
cooperative or mutual/benefit structure.
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
o
w
n
e
r
-
m
a
n
a
g
e
r
s
Sector
Education Environment Health Recreation Support and care Other Regeneration
Figure 23:
Social entrepreneurial owner-managers by primary sector of activity
Source: GEM UK APS 2007
50
Activity will be run from home
Activity will be run from separate premises
Mobile service or activity
Other
Figure 24:
Location of social entrepreneurial owner-managers
Source: GEM UK APS 2007
16.9 17.5 17.2
69.1 75.4 72.0
10.5 4.9 7.9
2.5 0.6 1.6
M
e
n
W
o
m
e
n
T
o
t
a
l
Men
Women
Total
0
5
10
15
20
25
30
35
40
45
%
o
f
a
l
l
s
o
c
i
a
l
e
n
t
r
e
p
r
e
n
e
u
r
i
a
l
s
t
a
r
t
-
u
p
s
Legal status
Unincorporated Trust Company (eg
Community
Interest
Company)
Cooperative,
community
benefit society
or credit union
Partnership Other Sole trader
Figure 25:
Legal status of social enterprise owner-managed entities
Source: GEM UK APS 2007
The funding and status of the entity are illustrated in Figure
26. As Figure 26 would suggest, 50% of all owner-managed
entities have charitable status (with women more likely to
take this structure) and substantially fewer get more than
half of their funding from charitable sources (23.7%
compared to 33.9%).
There are similarly fewer social enterprise owner-manager
respondents who expect revenue to come from sales of
goods or services at 42.7% compared to 55% of start-
ups. Accordingly 32.8% of these get more than 90% of
their revenue from sales.
Focus on funding
Figure 27 illustrates the sources of external finance other
than sales revenue and private donations.
The dominant form of finance is bank overdraft for social
start-ups and owner-managers and this is the same in
the UK as a whole. Friends and family are also important
for all categories.
Public sector grants are twice as important as funding
mechanisms for social entrepreneurs compared to the
whole UK and individual investors are also a substantial
part of the overall funding portfolio compared to UK-wide
mainstream busineses.
My activity has charitable status
Greater than half of the funding for the social start-up comes from public sources
My activity will generate revenue through sales or charging for goods or services:
> 90% revenue from sales
>75% revenue from sales
> 50% revenue from sales
>25% revenue from sales
>10% revenue from sales
0-10% revenue from sales
Figure 26:
Charitable and funding status of owner-managed entity
Source: GEM UK APS 2007
47.4 53.9 50.4
22.3 25.4 23.7
44.8 40.3 42.7
33.7 31.5 32.8
14.7 9.8 12.6
11.0 13.4 12.1
8.6 8.7 8.6
5.5 7.1 6.2
9.2 7.9 8.6
M
e
n
W
o
m
e
n
T
o
t
a
l
Overdraft
Friends and family
Unsecured bank loan
Mortgage or other secured loan
Credit cards
Government grants
Individual investor (not related or known)
Non bank unsecured loan
Equity finance
Figure 27:
Finance sources accessed social start-ups and owner-managers compared to all UK owner-managers
Source: GEM UK APS 2007
27.2 28.2 29.4
26.6 27.8 21.7
16.8 14.6 14.7
11.1 12.8 15.5
16.0 17.8 16.4
20.2 14.9 10.4
19.9 18.9 7.7
16.8 14.6 6.0
5.9 6.4 3.6
Social start-ups Social
owner-managers
UK
Finally, Figure 28 reports on the reasons why social and
UK-wide mainstream entrepreneurs have failed to gain
finance. The ?nature of the business? at 41.2% for start-
ups and 43.4% for owner-managed social enterprises are
the dominant factor. Other factors that suggest community
based projects at the start-up phase include the costs of
finance, the smallness of the business and fear of debt.
Summary
The evidence presented in this section suggests that an
adult population survey such as GEM is picking up social
enterprise start-up activity and owner-managed activity
that falls into the charity quadrant of the matrix. Both start-
up and owner-managers either expect their entities or are
managing entities that have charitable status. The funding
structures reflect a reliance on donations that increases
as the entities become more established and the reasons
for not being able to access finance are around the nature
of the business and business planning. The more
established, owner-managed entities are more likely to be
charities and their median job creation is zero.
Cost of finance too high
Business too small
Nature of business
Fear of debt
Not investor ready
Unwilling to share ownership
Inadequate business plan
Weak management team
Figure 28:
Comparison of the reasons for not accessing particular sources of finance amongst social entrepreneurs and all UK
Source: GEM UK APS 2007
35.1 11.8 29.2
30.6 19.7 32.7
41.2 43.4 35.4
27.8 33.3 26.0
14.8 18.7 20.6
18.6 19.7 18.7
35.1 11.8 22.7
19.6 9.3 7.5
Social start-ups Social
owner-managers
UK
Concluding Comments:
Developing the Social Enterprise Agenda
The report started with a statement that interest in social
entrepreneurship has grown significantly in the five years
since the first attempts at measurement in the UK were
made. The definition has become more complex and two
points of clarification have been made by way of case
studies and a summary literature review that may help to
develop the research, policy and business agendas:
A distinction was made between social entrepreneurship
leading to social enterprise and entrepreneurial philanthropy.
The first starts with the goal of creating value in the first
instance with the development of an enterprise structure
subsequently. Entrepreneurial philanthropy, in contrast,
starts with a business idea or concept that will create
wealth which then allows value to be ?put back?
subsequently.
A matrix of social enterprises was established linking
governance and profit distribution with profit motivation
(from not-for-profit to for-profit). No one quadrant in the
matrix is ?better? than another as each serves a specific
market and purpose.
A review of attempts to quantify the sector was undertaken
using GEM data for the UK. Although there is one other
attempt to benchmark the sector conducted by BERR in
2005 for the UK, it was argued that attempts to measure
the scale, size and impact of the sector in the UK or even
on a comparative basis are relatively under-developed.
GEM finds that levels of social entrepreneurial activity were
stable at around 3.3% between 2004 and 2006. The
data in 2007 was not directly comparable but nevertheless
suggested that:
5.8% of the UK adult population of working age is
engaged in early stage entrepreneurial activity. This is
some 2 million people and 11.9% (or 238,000 people) of
these are trying to start a social venture.
35% of all nascent early stage entrepreneurs, those
who have been involved with start-up activity for up to
three months, are social entrepreneurs
5.5% of all established business owners in the UK are
social owner-managers.
There are no significant differences generally between
men and women in terms of either social entrepreneurial
start-up activity or owner-manager activity. This contrasts
with mainstream activity where men are twice as likely to
be entrepreneurs as women.
However, men in the youngest age group (18-24) are
substantially more likely to be starting some form of social
enterprise activity compared to women (5.6% compared
to 3.1% respectively).
Social entrepreneurial start-ups amongst the Black
and Minority Ethnic (BAME) communities are higher than
for the white community. For example, 3.8% of White
respondents were engaged in some form of start up social
entrepreneurial activity compared to 8.9% of those from
mixed ethnic origins, 6.7% of those from the Indian sub-
continent and 10.5% of those from the Black African and
Caribbean communities.
Recreation, Education and Support and Care Services
dominate social entrepreneurial start-up and owner-
manager activity.
Social entrepreneurs have very positive attitudes
towards entrepreneurship and are more positive than the
UK population as a whole. They are not as confident as
their mainstream counterparts, however, and do appear
to be less confident as their activity becomes more
established.
55% of start-ups expect their entity to have charitable
status, although some 13% are set up as companies
(such as community interest companies).
34% of social start-ups and 24% of social owner-
managers receive greater than 50% of their funding from
public sources. Some 43% of social owner-managed
entities have a commercial revenue stream.
However, it is argued that GEM, being an adult
population/household survey, picks up predominantly
entities in the bottom left-hand corner of the matrix: those
with charitable status and who return any revenue to the
venture itself. Since over 50% of the population of social
entrepreneurial sector in the survey fall into this category,
it suggests that this is the most prevalent form of activity
in the UK. From a policy perspective, then, given this
profile, the UK policy focus on the ?Third Sector? (that is
voluntary and community work) appears appropriate.
Nevertheless, there is growing interest in the social
enterprises that are set up with their social, environmental
or community goals rather than profit at their heart, and
the development of the fund will support these entities.
Such entities have growth potential and wealth creation
potential in the same way as mainstream enterprises and
their founding entrepreneurs behave in a similar way even
if they are motivated by different objectives.
The evidence base for this group of enterprises is less
systematic in that it is neither longitudinal nor comparative
across regions of the UK or between countries. The paucity
of quantitative data that looks at the turnover, employee
and growth profile of the sector nationally and internationally
supported by survey-based data that identifies gaps in
provision both from a policy perspective, an investment
perspective and from the enterprise perspective would
surely help us understand how to suppor this sector which
has so much potential simultaneously to create wealth
and to create value.
Key implications
The research in 2007 has summarised the results of the
past five years, incorporated a literature review and cases
and lays out the foundations for further research in the
area given the substantial policy interest in building the
evidence base. It is argued that:
Over the five years the definition of social
entrepreneurship and social enterprise has become less
clear: it is now important for both policy makers and
investors to understand that ?for profit? social businesses
deliver value financially and socially as well as not-for-profit
entities. This requires a more inclusive approach to public
policy to ensure that all types of social enterprise are
catered for through adequate access to finance and
coaching and mentoring.
Research has focused on social policy and case
studies. GEM UK is the only attempt over the past five
years to measure the scale and size of activity in the UK.
It is now important to build a more robust evidence base
of social enterprises themselves to establish the challenges
they face as they grow in terms of finance, markets and
perceptions. This should be gender and regionally
disaggregated across the UK.
Although attrition between social start-ups and levels
of social owner-management, levels of business closure
amongst the social entrepreneurial community are nearly
twice those in the general UK population. This suggests
that mentoring and coaching as well as access to finance
through the growth process are important.
Finally, social entrepreneurs use similar patterns of
finance to mainstream entrepreneurs to fund their
businesses and interestingly are nearly twice as likely at
the owner-manager stage to attempt to access equity
finance. Indeed, the proportion of social entrepreneurs
that use charitable or public sector sources for financing
their activity appears relatively low. This suggests a need
to recognise that social enterprises have similar financial
needs to their mainstream counterparts.
However, even though social owner managers are less
likely than their mainstream counterparts to fail to gain
access to finance because of business planning or
management team issues, they are far more likely to fail
to gain access to finance because of the nature of the
business. This suggests that the sector needs to improve
how it communicates the investable diversity of the sector
to investment audiences.
Appendix 1: Chart data
Figure 3: TEA and SEA compared, 2004-2006
TEA
2003 6.4 -
2004 6.3 2.5
2005 6.2 3.2
2006 5.8 3.3
2007 5.6 -
SEA
Figure 4: Start-up and owner-manager activity
Men Women Total
Social entrepreneur start-up 4.7 3.6 4.2
Social entrepreneur owner-manager 4.1 3.6 3.8
Mainstream entrepreneur start up 5.2 2.6 3.9
Mainstream entrepreneur owner-manager 16.0 7.2 11.6
Figure 5: Start-up and owner-manager activity by region
Social enterprise start-up activity General Start up activity Social enterprise owner-manager General Owner-Managers
North East
North West
Wales
Yorks and Humber
East Midlands
West Midlands
South West
East of England
London
South East
Scotland
Northern Ireland
UK
3.6 3.2 3.6 8.7
4.1 3.6 3.8 11.1
3.6 4.0 3.2 11.8
4.1 3.4 3.2 11.0
4.2 3.7 4.0 11.2
3.6 4.5 3.4 11.2
3.9 4.9 3.5 13.5
5.1 3.3 4.3 14.5
4.7 5.3 4.3 11.6
4.3 3.5 4.2 11.9
4.0 2.7 3.9 8.6
3.3 3.4 3.8 12.6
4.2 3.9 3.8 11.6
Figure 6: urban and rural social entrepreneurship
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
Figure 7: index of multiple deprivation
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
IMD 1 3.8 4.8
IMD 2 4.1 4.7
IMD 3 4.4 4.0
IMD 4 4.4 3.1
IMD 5 4.9 2.0
Social entrepreneurial start up Social enterprise owner-manager
Figure 9: regional differences by gender
Male SE starts Female SE starts Male SE OM Female SE OM SE ratio OM ration
North East
North West
Wales
Yorks and Humber
East Midlands
West Midlands
South West
East of England
London
South East
Scotland
Northern Ireland
UK
4.6 2.6 4.5 2.7 0.6 0.6
5.1 3.1 4.6 2.9 0.6 0.6
3.7 3.6 3.7 2.8 1.0 0.8
4.6 3.5 3.1 3.3 0.8 1.1
5.2 3.3 4.1 3.9 0.6 1.0
3.9 3.1 3.8 3.1 0.8 0.8
3.4 4.3 3.7 3.2 1.3 0.9
4.4 5.7 3.7 4.3 1.3 1.2
5.5 3.9 4.5 4.1 0.7 0.9
5.2 3.5 4.4 4.1 0.7 0.9
4.8 3.3 3.8 3.9 0.7 1.0
3.8 2.9 4.4 3.2 0.8 0.7
4.7 3.6 4.2 3.6 0.8 0.9
Figure 10: social entrepreneurial start-up and owner-manager activity by age
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
18-24 4.4 2.2
25-34 4.0 3.3
35-44 4.5 3.9
45-54 4.1 4.9
55+ 3.8 4.6
Social entrepreneurial start up Social enterprise owner-manager
Figure 11: social entrepreneurial and general entrepreneurial activity by age and gender
Men Women Men Women
North East
North West
Wales
Yorks and Humber
East Midlands
5.6 3.1 2.9 1.5
4.6 3.4 3.5 3.0
5.0 4.1 3.8 3.9
4.2 3.9 5.4 4.5
3.9 3.5 4.9 4.3
Social entrepreneurial start up Social enterprise owner-manager
Figure 12: social entrepreneurial activity by ethnic grouping
rural 4.1 5.8
urban 4.2 3.5
Social entrepreneurial start up Social enterprise owner-manager
White 3.8 3.8
Mixed ethnic origin 8.9 5.0
Indian sub-continent 6.7 4.2
Other Asian 5.9 4.1
Black African/Caribbean 10.5 2.5
Social entrepreneurial start up Social enterprise owner-manager
Figure 13: social entrepreneurial activity by ethnic grouping and gender
Men Women Men Women
White
Mixed ethnic origin
Indian sub-continent
Other Asian
Black African/Caribbean
4.2 3.4 4.1 3.5
13.2 6.1 6.2 4.2
8.6 4.2 4.7 3.6
6.7 5.1 5.2 3.1
10.9 10.1 0.3 4.4
Social entrepreneurial start up Social enterprise owner-manager
Figure 14: Social entrepreneurial activity by employment status
Social entrepreneurial start up Social enterprise owner-manager
Full time
Part-time
Homemaker
Retired
Full time education
Long term sick or disabled
Out of work and claiming benefit
Out of work but not claiming benefit
Other
4.0 4.0
4.9 4.1
4.3 3.4
2.7 4.8
7.2 2.5
2.8 2.8
3.7 1.1
3.2 1.5
7.2 11.6
Figure 15: Social entrepreneurial activity by employment status and gender
Men Women Men Women
Full time
Part-time
Homemaker
Retired
Full time education
Long term sick or disabled
Out of work and claiming benefit
Out of work but not claiming benefit
Other
4.3 3.3 4.3 3.5
8.7 3.9 5.3 3.8
6.0 4.2 2.2 3.5
2.6 2.8 5.1 4.5
8.4 6.0 3.6 1.5
2.4 3.2 2.6 3.0
4.1 3.1 1.0 1.2
5.6 0.8 1.1 1.9
9.9 7.2 1.6 15.8
Social entrepreneurial start up Social enterprise owner-manager
Figure 16: Social entrepreneurial activity by educational qualification
Social entrepreneurial start up Social enterprise owner-manager
Doctorate
Masters
Bachelors
A levels or equivalent
GCSE/'O' levels or equivalent
Vocational qualifications
Other
No formal qualifications
9.5 8.7
8.6 8.7
5.9 5.6
4.0 3.1
2.5 2.5
3.3 3.5
6.2 1.5
1.3 1.2
Figure 18: Social entrepreneurial start-ups by sector and gender
Men Women Total
Education 11.4 17.1 14.0
Environment 1.7 2.1 1.9
Health 5.4 4.1 4.8
Recreation 42.3 29.5 36.5
Regeneration 2.4 1.8 2.1
Support and Care 15.3 23.9 19.2
Other 12.7 13.6 13.1
Figure 20: social entrepreneurial start-up governance structure
Men Women Total
Unincorporated 12.2 5.3 9.1
Trust 17.8 14.2 16.2
Company (eg Community Interest Company) 15.4 10.0 13.0
Cooperative, com. benefit society/credit union 15.2 18.0 16.4
Sole trader 2.0 5.6 3.6
Partnership 9.8 5.3 7.8
Other 21.0 28.0 24.2
Figure 22: Social enterprise owner-managers by sector and gender
Men Women Total
Education 9.8 16.0 12.7
Environment 1.5 1.6 1.5
Health 2.6 4.1 3.3
Recreation 46.4 32.9 40.1
Regeneration 1.7 1.1 1.4
Support and Care 14.2 24.2 18.9
Other 12.1 10.3 11.3
Figure 24: social enterprise owner-manager governance structure
Men Women Total
Unincorporated 10.7 9.1 10.0
Trust 12.0 11.1 11.6
Company (eg Community Interest Company) 10.0 8.1 9.1
Cooperative, com. benefit society/credit union 14.9 15.1 15.0
Sole trader 5.9 4.6 5.3
Partnership 2.9 3.8 3.3
Other 35.1 35.8 35.4
Appendix 2: Case Study contacts
Anna Fiorentini: Theatre and Film School
www.annafiorentini.co.uk
+44 (0)207 682 1403
David Dickie: Advance Aid
www.advanceaid.org
102 Pembroke Road, London N10 2JB
[email protected]
+44 (0)7818 420977
Liam Black: Wavelength
www.wavelength100.com
[email protected]
+ 44 (0)7714 521 061
Amy Carter: NEMA at Bespoke Experience
www.bespokeexperience.com
[email protected]
+44 (0)1323 766655
Molly Bedingfield: Global Angels
www.globalangels.org
Nigel Kershaw: Big Issue Invest
www.biginvest.co.uk
16/19 Southampton Place, London WC1A 2AJ
+44-(0)207 1736027
Parag Shah: Art-Switch
www.art-switch.com
Unit 3, Stratford Workshops, Burford Road, London E15 2SP
Tel: +44-(0)208-555 0037
Sev Necati: Women?s Self Protection Network
[email protected]
+44-(0)7050 614116 +44-(0)7828152837
Olly Donnelly and Sheetal Mehta: Shivia
www.shivia.com
162-168 Regent Street, Suite 446 Linen Hall, London W1B 5TE
+44 (0)7957 564921
[email protected] [email protected]
Tommy Hutchinson: i-genius
www.i-genius.org
10 Colthurst Crescent, London N4 2DS
+44 (0) 7947 881474
Appendix 3: GEM UK Sampling and
Weighting Methodology
GEM UK is the largest national study of entrepreneurial
activity in the world. It has grown from a survey of 1,000
adults in 1998 to 42,713 adults aged 16-64 in 2007. The
distribution of respondents is not even across the UK as
some Regional Development Agencies (RDAs) and the
Government Agencies in Wales and Northern Ireland
choose to boost their sample in order to have more detail
about entrepreneurship in their region
46
. Every attempt is
made to ensure that the results reported are as reliable
and robust as possible. To do this, four sets of weights
are calculated for the UK data:
Weights for the whole UK that take the UK area sub-
samples and the age, gender and ethnic minority proportion
of the population of the UK (aged 18-64) into account,
based on the latest available area estimates from the UK
Office of National Statistics, typically mid-year estimates
for the previous year.
Sub-sample area weights that take into account the
population distributions within GEM UK sub-sample areas
by age, gender and ethnicity. These are used when we
report comparisons between GEM UK sub-sample areas.
Government Official Region (GOR) weights that create
representative samples at the GOR level from all sub-
samples within the same GOR. Nine out of twelve GORs
were not sub-sampled in 2007; London had three sub-
samples and Northern Ireland and Yorkshire & Humberside
had two sub-samples
47
.
In addition, separate weights were constructed for
England, based on balanced GOR samples for each
English region, as some variables (e.g. urbanity, deprivation)
are only available for English regions.
46 The raw sample of 42,713 was distributed across 16 geographic
areas within which representative sub-samples of the population aged
16-64 were taken. These areas and the sample sizes are: South West
England (2997); South East England: (3003); East of England (1000);
West Midlands (3000); East Midlands (3023); North East: 3003; North
West England (3008); Wales (7989); Scotland (1998); Inner London
(370); Dagenham & Barking (2006); Outer London excluding Dagenham
& Barking (630); Doncaster (2987); Yorkshire and Humberside excluding
Doncaster (2817); Belfast (1330); Northern Ireland excluding Belfast
(3552).
47 In order to minimise the effect of over-samples in sub-regions within
a GOR, random samples were created from these areas to produce
representative samples of GORs
Notes
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