One’s Company, Two’s a Crowd and Three’s a Party

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Written by Aya Sadder

Adopting the principle that nine out of ten startups fail after three years of operations, it is essential to have an advisory arm in place that minimises risk and maximises the potential to succeed; for credibility to investors and as a benefit to entrepreneurs. If the business is going to fail, an advisory arm can help pivot to avoid that, and learn quickly from the mistakes that doom 90% of startups. Team dynamics, board-building, planning operations, marketing the business and finding more talent can be a huge burden on startups and are crucial to be resolved early on as the company is trying to grow. As we enter an era that is progressively entrepreneurial, with alternative funding mechanisms being in high demand, crowd-investing with an advisory arm will be one of the best solutions. The Economist released a report earlier this year stating a “320% increase in funding in Asia, with $3.4 billion raised, propelling the continent past Europe to become the second-largest crowd funding region.” (The Economist, April 4, 2015) ref 1 With that growth in mind, do social businesses stand a chance? Mohamed Yunus popularly defines social businesses as “a cause-driven business” with expectations that the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point.” In the context of yield, how can social businesses then become investable, and how many investors out there are willing to participate without any financial gain? This type of social enterprise does exist. Let’s have a look at companies like Aspirefg, who continue to scale their business, re-invest their profits and continue to operate with by constantly innovating their product and accessing new markets. Their mission is to “provide economically challenged, malnourished populations with high protein and micronutrient-rich food solutions derived from the supply and development of insects and insect-based products”. As a company operating with a brand philosophy to make a change, they are still able to operate as a profitable social business by diversifying their value proposition. With the advisory of the 2013 Hult Prize, this winning team not only became successful, but integrated their activities and business plan into the local communities. Potentially, the next step for these winners is to crowd-invest to genuinely validate the community’s support. In this social business’ scenario, stakeholders who are end-users have a great opportunity to become shareholders as well, ensuring everyone benefits in the end. We validated this further by interviewing the winner of the Middle East Dubai Acumen Social Business Plan 2013 Competition and founder of Green truck, Mr. Diya Khalil, mentioned that “after winning he never considered crowd-investing because he wanted there to be a marriage in the vision of his company with the investor who chose to be a part of his impact… but heard time and time again feedback from his customers that the whole community should be pitching in to his business to make sure it thrives.” (August 30, 2015) Crowd investing is the way forward for social businesses that want to grow and impact communities at large in a sustainable way with the help and support of advisors to direct and nurture the building blocks that will turn that dream into a reality. Thus, to Yunus’ definition of social business, if we add scalability and revenue generation foundations into their business models early on, adopting a profitable status for these companies will make them more investable and will ensure a high return, both socially and financially; for it is the community who benefits in the end. The most important aspects for a social business to be profitable is scale and replicability under different cultural, economic and demographic settings. The best way to reach that scale is getting large communities across the globe to be stakeholders in the truest form. References: http://www.muhammadyunus.org/index.php/social-business/social-business http://www.forbes.com/2010/06/15/forbes-india-muhammad-yunus-social-business-opinions-ideas-10-yunus.html http://www.entrepreneur.com/article/235378 http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/gender+at+ifc http://www.economist.com/news/economic-and-financial-indicators/21647603-global-crowdfunding http://www.aspirefg.com/

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