Why Australia’s start-up scene is getting social

The business world is littered with inspiring tales of entrepreneurs who, through their innovation and hard work, overcame humble beginnings to strike it rich.

The motivations for doing so are varied, from the desire to become comfortably well off to the sheer thrill of building a successful business from scratch that creates employment for others and satisfaction to customers.

Often, it’s a combination of things. But, increasingly, entrepreneurs are creating businesses driven by altruistic goals.

According to a recent report, rising prosperity has bred a generation of entrepreneurs who don’t class making money as the prime driver for going it alone.

The research, by Harvard economist Ignacio Mas and entrepreneur David del Ser, found that the global financial crisis has driven more people, especially in finance, to launch social enterprises – profit-making businesses with a social mission.

“As prosperity, money and happiness become more de-linked, and people search different avenues to give purpose to their talents and toil… Few now think that banking salaries, bonuses and investment returns correlate with socio-economic contribution in any meaningful way,” states the report.

“Many investors and finance professionals are therefore eager to bring back a sense of socio-economic contribution that is distinct to dollar-based measures of investment success.”

What is social entrepreneurship?

Social entrepreneurs come with fresh business ideas and innovative answers to social problems, producing business models that tackle everything from poverty to homelessness.

It’s a movement that has taken off around the world, from Melbourne to Mangalore.

One of the most famous examples is Muhammad Yunus, the Bangladeshi founder of microfinance bank Grameen, and winner of a Nobel peace prize.

But running a social enterprise is a challenge. It’s hard work and social enterprises typically don’t grow very quickly.

In the traditional business world, successful entrepreneurial firms build quickly with scalable management models and quality control systems.

They offer products and services that everyone wants. Social enterprises are on a tougher road.

Many are stuck in start-up mode. Social entrepreneurship has yet to produce an Apple or a Google.

How do social entrepreneurs reconcile the need to make a profit with their social mission? Which is more important?

Fundamentally, social enterprises have to be run as a business. They’re not charities. Otherwise, they won’t last.

Harsh business realities

Shane Thatcher, who owns Illumination Headquarters, says that having a worthy aim doesn’t shield a social enterprise from the harsh realities of running a business.

Illumination is a Melbourne-based social enterprise that sells cheap solar lights for people in Third World countries.

It has clients in Tanzania, Malawi, South Africa, Kenya, Uganda, Nigeria, Ghana, Senegal, Indonesia, Philippines, Pakistan, India and Cambodia.

The business was recently listed in the StartupSmart Awards top 50, with revenue of $372,000 last year, following its launch in 2010.

The business aims to provide people in these countries with an alternative to spending all their money on kerosene, which is expensive and often unaffordable.

“A lot of the mechanics of doing business are just the same as any other business,’’ Thatcher says.

“Once you get it rolling, it’s similar to any other business. A lot of those issues, like logistical issues, are just like what you get in a normal business.”

“Just because you have an altruistic goal, it doesn’t get rid of all the other junk that comes with it.”

On a mission

Thatcher, an economist, set up Illumination two years ago with Liz Aitken and Nick Barr.

He says the company board is committed to the program, which makes it easy to blend the social mission with the business purpose of selling solar lighting.

“To be honest, it’s so ingrained in the business that it’s not that difficult,’’ he says.

“We only bring products on that are actually going to help people.”

“So if someone came along and said you can go and make landmines and we’ll give you millions of dollars, none of the shareholders would approve it anyway and the board wouldn’t approve it.”

“Any product that we plan to bring on over the coming 12 months will have to have the same ethos. It has to be of economic benefit to people and it can’t be damaging to the environment.”