Why we need Social Investors

The latest Time Magazine has a great article about social entrepreneur Reed Paget and his startup Belu that has grown from $13,000 in 2004 to nearly $4 million in 2008 while providing water in corn based bottles that can be composted and redeploying its profits to projects that bring clean water to deserving regions of the world.

In the article Paget says it was important “to remove the ‘We must maximize profit’ from our management system.” His objective is to provide maximal social and environmental benefit, like social businesses defined by Yunus. However the challenge for him is finding socially motivated investors. Over the past several years he has managed to raise $2.5 Million in 32 painstaking rounds of funding. Even environmental charities like Greenpeace do not see it in their purview to fund startups like his.

This is a classic example of the type of opportunity that makes business and social sense but is left hanging as there are not enough socially motivated investors willing to take this early stage risk. As we mentioned in earlier posts, this new market segment badly needs socially conscious investors who are willing to support early stage companies and to take a lower economic rate of return in exchange for greater social/environmental impact. Like Belu, many socially motivated businesses struggle with fundraising expending precious resources in multiple rounds of incremental funding instead of focusing on building and scaling their businesses.

2 responses to “Why we need Social Investors

  1. I couldn’t agree with you more Raj. The need for early stage and startup stage social investors is incredible. I’m excited to learn more of your thoughts to this regard as setting up such a fund is of primary interest of Unreasonable. Thank you for your well thought out and well articulated posts!

  2. Great post, although I’m not sure that there necessarily has to be a trade-off between economic rate of return and social/environmental impact – ideally the two can co-exist quite happily. ClearlySo has set up investor speed dating evenings to stimulate just this sort of early-stage social investment (http://www.clearlyso.com/sbblog/?p=422) – we’ve another one coming up in Sept.

    I agree that the market does need socially-conscious investors to get more involved (or maybe just more investors to become socially-conscious?) – but entrepreneurs also have a responsibility to be ‘the best they can’ when it comes to communicating their proposition to investors. To that end we’re running ‘investment readiness workshops’ so that social entrepreneurs can learn how to pitch more effectively. It’s all about fostering excellence in the social business sector.
    If we can bring the good ideas and the good capital together and help them communicate, that will be a job well done.

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