THE BLOG
06/26/2013 02:33 pm ET Updated Oct 24, 2013

Why We Need to Fund and Build Leadership Capacity for Start-up Social Entrepreneurs

After spending a year voluntarily living in transitional housing for homeless and day laborers in Charleston, South Carolina, Derek Snook had an idea that could guide the homeless in his community towards self-sufficiency by creating a better model of a temporary employment agency. The only problem was that he didn't have the resources or network to help him launch his idea. Working with a friend, they weren't sure where to start. "We didn't know what we were doing. We literally Googled how to start a non-profit temporary employment agency and nothing came up," Derek explained. "We were two 23-year-old guys with an idea and a dream, and it was about not giving up."

The challenges of social entrepreneurship were not lost on Derek, who started working on IES Labor Services in 2009. Four years later, he's raised money, employed staff, hired over 50 workers daily, and added more than $100,000 to workers' wages through the IES Hope Fund. While Derek was able to successfully build his non-profit, many aspiring social entrepreneurs fail to move beyond the critical initial idea phase.

Until recently, there has been a noticeable lack of support for start-up social entrepreneurs at the earliest stages. Now, several new initiatives, including Social Good Startup and UnLtd USA, are aiming to fill this gap by providing funding and mentorship while building leadership and business skills for aspiring social entrepreneurs.

The earliest stages of a start-up are the most critical. Not only do entrepreneurs face the highest chance of failure, but the initial phase of a for-profit social enterprise is also the beginning of the investment pipeline where investors fund growth to seek eventual returns. Although investors in social enterprises planned to commit $9 billion in 2013, impact investors have expressed difficulty in finding investment opportunities for which to invest the large amounts of capital necessary for their required rates of return. If social entrepreneurs find the support they need to build high-quality companies and receive funding through the start-up stage, there is greater potential for scalable social ventures to receive larger investments, and ultimately impact more communities.

This type of early-stage support already exists for the tech start-up space, which has witnessed such efforts as Startup Weekend, Lean Startup Machine, 500 Startups, Y Combinator, and First Round Capital. However, social entrepreneurs often must demonstrate a proven business model, customer base, and capacity to scale before seeking financial and mentoring support from foundations and investors. Popular social sector accelerator programs such as Unreasonable Institute tend to support ventures at this later stage as well. This leaves many start-up social entrepreneurs relying on Internet guides, their personal networks, and crowdfunding sites such as Indiegogo or Kickstarter to fill those gaps for initial funding and support.

But guidebooks and crowdfunding sites aren't enough to help social entrepreneurs succeed in launching their ideas, because the start-up journey is as much about the entrepreneur as it is about the idea and business model. Thus, initiatives like Social Good Startup and UnLtd USA support the entrepreneur professionally and personally, helping entrepreneurs to understand how to iterate their ideas and business models through the start-up phases while providing them with mentorship for their entrepreneurial journey.

Social Good Startup runs an eight-week workshop in New York City for individuals working on social good projects and businesses. The classes teach how to go from idea to launch by asking the right questions and building business models, but unlike other start-up workshops, this is designed for the social good space and provides mentorship from veterans of social good businesses. While participants begin with an idea, the workshop teaches aspiring social entrepreneurs the skills they need to evaluate and run any social business. "Building leadership capacity for individuals motivated to be in the space is important," explains Todd Schechter, co-founder of Social Good Startup and founder of The New American Tavern.

With a more long-term focus on business growth, UnLtd USA is a new incubator launching in early 2014 that seeks to identify, support, and fund start-up entrepreneurs working to solve social and environmental problems in the United States. UnLtd USA will provide funding, one-on-one coaching, and leadership development as social entrepreneurs go from designing their pilot to implementing it to validating a business model. It's launching with a series of start-up bootcamps across the U.S. to identify how the UnLtd USA model can best support social entrepreneurs in the U.S. context. UnLtd USA adopts it model from UnLtd in the United Kingdom and UnLtd India, where founder Zoe Schlag currently works as a coach and mentor to Indian social entrepreneurs.

"UnLtd works with social entrepreneurs at the earliest stages -- before most other organizations engage. Organizations like Ashoka do a phenomenal job working with social entrepreneurs who have already found a working model, and we want to see more social entrepreneurs making it to that point. Getting more social entrepreneurs through the start-up stage means that other accelerators and social investors will have high-quality clients to work with, but more importantly, that we have more people taking action to address the problems that resonate with them most," explained Zoe.

Many investors and award committees still evaluate the potential success of an idea rather than the entrepreneur's long-term potential. Therefore, incubators and guides tend to emphasize how to pitch an idea to get funded. What makes initiatives like Social Good Startup and UnLtd USA unique is their focus on supporting the social entrepreneur's development as a businessperson and leader; therefore, no matter what their business concept is, they are trained and supported for long-term success. "A lot of incubators in the U.S. are like public education. They are not teaching you how to run a business, they are teaching you how to pass a test. And the test is to get funded, not to get a customer," explains Martin Montero, who works with Social Capital Markets.

Beyond business and leadership skills, the personal journey of the entrepreneur is an often overlooked but vital element of their future success. "Before you have a team, partners, and funders behind you, it's a very lonely journey. You may not have people with knowledge or experience to help you confront major decisions. Maintaining that passion and drive throughout this period, building resilience in the face of setbacks, and being able to constantly examine your model with a critical eye is absolutely crucial to making it through the start-up stage" says Zoe, who plans to make personal support of the entrepreneur a central component of UnLtd USA's incubation model.

Derek was able to build his dream with IES Labor Services through the strong support of mentors from Charleston's business community. "Change is based around core relationships," says Derek. "What was most critical for us was mentorship, above and beyond." Most online resources and business plan competitions can't provide the on-going mentorship that lead social entrepreneurs like Derek through the challenging start-up phase, but initiatives like Social Good Startup and UnLtd USA can.

Other organizations looking to help start-up social entrepreneurs include Ignite Good, Makers Institute, Impact Engine, and to some degree Pave and Upstart, which have online platforms for investing in individuals. With a more robust support ecosystem for start-up social entrepreneurs, we can expect to find a better pipeline for incubation and investment, more social ventures launching, and most importantly, stronger leadership and business capacity for individuals looking to make a positive social difference in the world.

Learn more about UnLtd USA's launch and how to contribute here.

Subscribe to Must Reads.
The internet's best stories, and interviews with their authors.