Startup in the land of the Pegasus

Social enterprise spans the boundaries of commercial and social-impact logics, but we still understand very little of what this means for startup support. Here Libby Ward-Christie shares one of the key insights from the Swinburne Social Startup Studio’s foundational research.

Before launching the Swinburne Social Startup Studio, we undertook a piece of foundational work aimed at consolidating what is already known about early-stage social enterprise. This included research interviews with 11 social enterprise founders about their startup journey.

We have used the insights from this research to guide the studio principles and approach. 

Below is an excerpt from our findings, reflecting one of three key insights that centres around the importance of recognising that social enterprise spans the boundaries of commercial and social-impact logics.

Whilst the hybridity of social enterprise is well documented in the academic literature, we still understand very little of its implications for startup support. 

Published research has identified that, in addition to the opportunities presented by bringing together commercial and social logics, hybridity results in tensions and challenges for social enterprises that commercial enterprises, operating under a singular logic, don’t experience. 

These challenges include:

• the market failure contexts that many social enterprises operate in;
• the complexity of measuring performance when the organisation’s mission extends beyond profitability to social impact generation;
• accessing traditional capital markets due to the impact of social purpose on profitability and/or the non-distributive nature of not-for-profit legal structures; and
• human resourcing to achieve the commercial and social impact objectives of the enterprise.

A social enterprise is a Pegasus!

Our discussions with social enterprise founders revealed the importance of acknowledging the tensions created by hybridity when developing a new social enterprise.

“… just being able to understand that there’s going to be tension there. It’s going to be that tension between making money and profitability and impact, and just understanding – first you have to acknowledge it…Once you figure out that you’ve got to do those two things together, and there’s going to be tension, and then you try to slowly figure out where the tension has to sit.” (Social enterprise founder)

Our interviews also supported the research literature about how these tensions manifest at the operational level. 

This includes the expansiveness, diversity, and complexity of stakeholder relationships:

“…you’ve got a particular level of extra complexity in a social enterprise because you’ve got multiple stakeholder accountability. You’ve got so many magnitudes, more human relationships because you’re dealing with your beneficiaries. But often they’re part of a broader service system that comes attached to them so you’re dealing with just such large volumes of relationships.” (Social enterprise founder)

And, having the right human resources to simultaneously ride and fly the Pegasus:

“ … we are better to find very young graduates out of uni and grow our own social enterprise practitioners in a hybrid environment than often taking very highly experienced people who have been too enculturated in their industry.” (Social enterprise founder)

As well as accessing capital:

“ …we’ve found that there is a gap here, and there is a different approach that needs to be taken …And I’ve found there have been conversations where someone has looked at our finances and said ‘if there’s an investment going in here of this amount of money, I’d like to see, within 12 months, this kind of return’. I’m like so, financial return, yes, what about the social return? What’s that? Let’s take a step back now.” (Social enterprise founder)

Hybridity also impacts on who social enterprises turn to for help and advice:

“We’ve also had a lot of support offered where people are very good at being consultants…if they don’t have the experience in social enterprise, we spend more time explaining ourselves and front-loading than we do actually receiving any useful feedback and I’ve been in that situation quite a few times.” (Social enterprise founder)

So, what does this mean for the Social Startup Studio?

Rather than designing support and financing in the hope of creating the much sought-after unicorns of private, commercial entrepreneurship, we are committed to supporting, developing and celebrating the hybrid wonders that are social enterprise. Every day, social enterprises simultaneously canter and fly; it’s time that we acknowledge the challenge and skill in that feat. 

This insight has informed our principles and approach for the Swinburne Social Startup Studio. In particular, our principle of “hybridity is key”, which acknowledges the unique challenges and opportunities of social enterprise hybridity and drives us to develop approaches specifically designed for social enterprise.

The Swinburne Social Startup Studio is an initiative of the Centre for Social Impact Swinburne. The Social Startup Studio is grateful for the contributions of the 11 social enterprise founders interviewed for this research and would like to acknowledge and thank Equity Trustees for their financial support.

About the author: Libby Ward-Christie is the principal industry fellow of social impact at the Centre for Social Impact Swinburne and the director of the Swinburne Social Startup Studio.  Informed by many years working with social enterprises, particularly in the areas of business strategy and implementation, governance and social finance, Libby teaches into CSI Swinburne’s Master of Social Impact program. She also undertakes industry-engaged research, with a particular interest in bridging research-practice gaps in the areas of social enterprise and social finance.