Social Entrepreneurship in a Developed Country

The Impact Space in a Developed Country

As one of the few Frontier Market Scouts who is currently in a developed country, I was curious about the differences in the impact space and the types of social enterprises in a developed versus a developing country.  JP Morgan and Global Impact Investor Network conducted an Impact Investor Survey[1] which summarized 99 organizations in the impact space and their investment patterns in 2012.  Some key contrasts between Developed Markets (DM) and Emerging Markets (EM) are listed below.

i)                    Geography

Sub-Sahara Africa and Latin America & Carribean were the top two regions where impact investments were made.  Of the DM, US & Canada was the third most focused region of investments.  In contrast, Western, Northern & Southern Europe was the third lowest category.

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ii)                  Sector

The top three sectors of DM were Healthcare, Education and Food & Agriculture.  The two least focused sectors for DM were Microfinance and Information & Communication Technologies.  This compares to the top three sectors for EM which were Food & Agriculture, Financial Services and Microfinance.

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iii)                Impact and Financial Expectations

In DM, both impact and financial portfolio performance exceeded expectations at a higher percentage compared to EM.  DM financial performance was notably higher with over one-third of portfolio performance outperforming expectations.  This compares to an average of 21% financial expectation outperformance when pooling DM and EM together.  Interestingly, both DM and EM experienced the same level of financial expectation underperformance relative to expectation at 12%.

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Scouting in Practice

At relatively early stage of scouting in the Netherlands, I have already noticed interesting issues unique to searching for social enterprises in a developed economy that has quite a thriving entrepreneurial sector.  Firstly, there are many supportive mechanisms in place to support entrepreneurship in general – in my early research there are already over 40 incubators, hubs, support centers and platforms providing some combination of acceleration programs, capacity building, investment opportunities, work space and other assistance to start ups across different sectors.  In addition, many annual business plan competitions and start up competitions also exist. This is clearly a positive reinforcement to the growth and development of the entrepreneurial sphere, however also acts as competition when you offer an accelerator program alongside the many that are already available, despite operating with an inherently different model.

When looking at entrepreneurs with a social or environmental focus in any country, the issues that such entrepreneurs strive to solve are usually unique to challenges relevant to their country or region.  So whilst microfinance is a key issue in EM as we have seen above, enterprises in the Netherlands I have engaged with so far are more active in other sectors such as energy, clean tech and livelihoods.  Some are much more country-specific than others, such as Vrachtfiets which taps into the biking culture of the Netherlands and offers environmental friendly mobility solutions with the help of the newest bicycle technologies – one such product is a 2 person bike with a small cargo hold to transport IKEA purchases back home.  In contrast, a recent event I attended focusing on water issues garnered some reactions which essentially raised the question of how imminent of an issue water was when you can have easy access to clean drinking water by turning on a tap here.  When water and sanitation was already the second lowest sector focus in EM as we have seen above, it is understandably much harder to garner a large amount of mass public sympathy in a DM.

In many ways, the nature, presence and motivations of social enterprises in a developed country is uniquely different to those in developing countries.  Learning and understanding the dynamics of the ecosystem of the impact space in the Netherlands is a key part of continuing the search those social enterprises that do exist here.