Why it’s a good time to start up in the social sector

Date : Sep 24 , 2019 | Opinion

While a social sector start-up might appear daunting if one does not have a background in the space, support systems are now emerging to facilitate such transitions, says Sudha Srinivasan, CEO of N/Core. Here’s her four-step guide to help aspiring social entrepreneurs.

Here are some indisputable facts: In 2018, over 1200 new start-ups were founded in India with 10 new organisations achieving the coveted unicorn status. As much as USD 196 million was raised by 342 start-ups raised in pre-Series A funding.  Every sector of business is witnessing disruptive innovation the start-up way. 

The social sector at large and the non-profit sector, in particular, are not to be left behind. Triggered by spiralling inequality, this space too is catching up on entrepreneurial energy.  The number of professionals in various fields making mid-career transitions into the development sector is rising steadily.  An increasing number of millennials and post-millennials are also seeking purpose early in their careers and looking to apply their skills to meaningful problems.

The recent Deloitte Global Millennial Survey confirms that Indian millennials stand out from their global counterparts  in their aspiration to make a positive impact on society. Across the age spectrum, Indians, in their choice of careers or brands, are demonstrating high levels of social consciousness and choosing purposeful lives over purely economic prosperity in very visible ways.    

Starting up in the social sector

Given the immense opportunity to fast-track problem solving in a wide range of causes, starting up in the social sector is a very attractive proposition to a newcomer.

Given the immense opportunity to fast-track problem solving in a wide range of causes including poverty alleviation, gender, climate change and conservation, starting up in the social sector is a very attractive proposition to a newcomer. Starting up as a non-profit offers a very unique opportunity to work in areas that are not currently served by businesses or government. 

While starting up in the social sector might appear daunting to someone who does not have a background in the sector or first-hand experience of the problems, support systems are emerging to facilitate such transitions. There are bootcamps, programs and forums that can help individuals who are considering starting up in the social sector, gain exposure and deeper understanding of problem areas, solution gaps etc.  

The guide to “How to start a non-profit” is no different from the one for entrepreneurs of any other kind. Social entrepreneurs, need to- 

a) clearly identify the problem they wish to work on  

b) come up with an innovative or differentiated solution  

c) establish product-market fit, and

d) raise capital to effect the change at meaningful scale.  

The four-step start-up guide

Identify the problem 

Most founders are moved by a first-hand experience of a problem before they commit their lives to solving it. Some see lateral opportunities in applying solutions existing in other sectors to a developmental use case. Whatever be your founding motivation, it is important to deeply understand the problem, as experienced by your target customer base and the gaps in the existing solutions   

While some social development problems, such as education and livelihoods, are reasonably well understood and attract a fair amount of attention, others such as land rights and homelessness remain arcane and therefore under-served. Some problems are extremely complex with multidisciplinary variables. For instance, the agrarian crisis: A problem solver with low exposure to on-ground reality might likely start with an app for providing market linkage. But if you spend a few years with a community of marginal farmers, you might find that answers lie elsewhere.    

Every problem also has different layers in which it can solved. Look at education: you can teach a child (unit change) or improve the quality of teaching at a school or cluster level (leveraged change) or change the way the public education system delivers education in a state (systems change). The important question to ask yourself is this: Where are the gaps and white spaces, and where should you play? 

A differentiated solution

Are you really achieving the outcomes you set out to, and is your product worth scaling? You need to answer this question truthfully without any baggage….

Why be a start-up if you don’t have a differentiated model to solve a problem! Differentiation may come through radical business model innovation, or through a lateral application of known solutions in a different context, or through micro-innovations in how to shift the dial on cost, quality or speed. Irrespective of which of these make a case for starting up, you need to be very mindful in ensuring that you significantly move the needle on the problem, in a sustainable way.

A good solution is one where its customers co-opt into its design and take charge of sustaining the change, even after the change catalyst moves out.  

Establish product-market fit 

Product-market fit in the non-profit world is a little tricky.  A non-profit intervention has a primary customer (the community whose needs you serve) and a proxy customer (the donor/philanthropist who pays the bill). In the absence of a pure market test, where a delighted customer willingly pays for your product, the onus is on you to assess customer delight with brutal honesty.

Are you really achieving the outcomes you set out to, and is your product worth scaling? You need to answer this question truthfully without any baggage of sunk costs, emotional ties or getting carried away by vanity metrics. If it takes a few iterations, or strategic pivots, so be it.    

Raising capital 

A common myth in the social sector is that one needs to pay out of one’s own pockets to fund the work. While this may be the case for very early stage ideas, just like in the for-profit space, there is an increasing pool of capital available for start-ups in the social sector.

Beyond bootstrapping and dipping into wallets of friends and family, common support systems at this stage are incubators, contests / idea challenges and crowdfunding. These sources provide stage appropriate grants with small ticket sizes, but the grants are immensely valuable because they are unrestricted in nature and fund the start-up’s experiments and early pilots to establish credibility for the next round of funders. Additional sources of funding become available progressively, as the start-up starts to show viability of business model and demonstrates capability to solve a problem.    

At N/Core, we very firmly believe that now is the time for capable entrepreneurs to catalyse social change. Talented individuals will be able to unlock new streams of philanthropic capital and that capital and talent together will accelerate the pace of problem solving in the development sector.  When the current trickle of social entrepreneurs becomes a stream, we as a country will have a great shot at eradicating poverty in our generation. Now, isn’t that a goal worth reaching for?

Sudha Srinivasan leads N/Core, an impact stream of The/Nudge Foundation to attract and nurture top talent to solve India’s biggest challenges. Till date, N/Core has supported close to 50 non-profits through its incubator and accelerator programs, many of who have gone on to win international accolades for their pathbreaking work in poverty alleviation.

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