A social entrepreneur, steering the next generation of impactful businesses
Podcast transcription - 21st November 2018
Alan Cowley: Welcome to The Investment Investor, I'm sat opposite Belinda Bell. Belinda is a social entrepreneur, she is also the director of Cambridge Social Ventures at Cambridge Judge Business School. So Belinda, can you give the listeners a bit about your background, and what you do here at The Judge.
Belinda Bell: Hi, my background is as a social entrepreneur, setting up and running businesses that have a social outcome as their purpose, so they're businesses that are trying to achieve a social aim, but are being run as businesses. I have set up and run a number of those, including fields of; finance, property, young people, music, technology, old people, all sorts of things. As a result of the experiences I had gone through those processes, my role here at The Judge is within our Centre for Social Innovation where we run programmes supporting social entrepreneurs, so now I run programmes that help other social entrepreneurs to start and scale their impactful businesses.
Alan Cowley: That's now, I know you were a social entrepreneur, what was your first entrepreneurial journey?
Belinda Bell: The first organisation I set up is called Foundation East and it still exists here in East Anglia, Foundation East lends money to businesses that are unable to access money from the bank. We set that up about 12 years ago now.
Alan Cowley: What type of businesses are we talking about here?
Belinda Bell: It's essentially people who don't have collateral, people who don't have security to secure alone. Back then, it was less known that it was a problem, whereas these days, it exists more, but pre-crash, people didn't realise, or the middle class didn't realise that if you didn't have some kind of asset, you couldn't borrow money to buy a van, to become a window cleaner, that sort of stuff. You also couldn't borrow money if you have a poor credit record, and that's quite a gendered thing, because very often women end up with a bad credit record that relates to their partner's behaviours, or their partner's debts.
There was loads of people who couldn't access money, small sums of money. Foundation East still now, only lends up to 100k, and the average loan size would be kind of low, somewhere near the teens I imagine. These people who have nowhere else to go, and because they have nowhere else to go, that's just a break on entrepreneurialism and on equality in our communities. I set that up from scratch and raised money from many sources, including investors, and as I say, I am no longer directly involved, I'm a director, but I'm not involved in day to day, and it continues to do that work around the east of England.
Alan Cowley: Brilliant, and what was the one after Foundation East?
Belinda Bell: I helped establish Noise Solution, which works with young people using music technology to engage with people who are hard to reach, and the customers, there are local authorities; the police service, schools, probation, that kind of thing. There's a bunch of different public sector customers, and Noise Solution that's run by Simon Glenister, which continues to go from strength to strength, and in fact, is just embarking on a scale-up process that's significant. Having spent a long time understanding his mission, his methodologies, and getting quantifiable evidence of its impact, which is unusual in that field, so until now, it hasn't used external finances, or (had) growth generated through revenue, but that's going to change in the next little while.
Alan Cowley: Okay good, so you then transitioned, and you came to this building to do a master's?
Belinda Bell: I did my masters at the business school back when I was running Foundation East at the same time, part-time. It was a master's in Community Enterprise at that time in the business school which no longer runs. In recent years at the Centre for Social Innovation we have started a new master's programme, and that's taken some of my own learning from when I did a master's here, but it's within now a new programme.
Alan Cowley: Tell us a little more about social enterprises, for people who don't know anything about social enterprises.
Belinda Bell: The first thing is that the term “social enterprise” does not mean anything, so we're in an undefined space here, and if somebody says they have a social enterprise, you can't really read much into that, it's not meaningful. What people tend to mean when they say that is that they're running a business with a social purpose, so the social purpose is embedded into what they're trying to do, and that for them, a social entrepreneur, they wouldn't be satisfied with just making money, because the purpose is to create social change. Social enterprises come in all shapes and sizes, so we have big social enterprises, and medium social enterprises, and small social enterprises. It's also not a new thing, ever since the beginnings of commerce, people have been trying to use business to do more than make money, particularly clever people, because just making money isn't very interesting, whereas “how do I make money within a constrict environment where I also can make the world a better place?", That's a more interesting challenge obviously.
Social entrepreneurs are very wide and varied, and we say it came to social ventures to say we work with people working in prisons, providing telecommunication solutions in prisons, providing prosthetics, and providing genomics, because this is Cambridge where we're based, so we get a bunch of science and data things, but we also work with businesses that employ young women that are not in education, employment, or training, to build their confidence to enable them to go on to get a job. Some things will work deeply with disadvantaged people, and they might work with quite small numbers of people, whereas some things will be massive where we're talking about impacts that will have world-wide scale. I think you've already interviewed Fiona from Repositive, a genomics dataset, they were on our first cohort in Cambridge Social Ventures, they are enabling genomic research as they search the world over to access genomic data to more rapidly cure genetic diseases.
It's a really broad tent that people identify as being social entrepreneur, and it's definitely a growing thing.
Alan Cowley: With that wide scope, do you get a lot of companies say they're a social enterprise, where in fact, I know you said whether the definition means anything, do you question a few that say they are social enterprises? Large corporations or anything like that.
Belinda Bell: Unilever are probably the closest to claiming they're a social enterprise, and some of their subsidiaries, Ben & Jerry's being the obvious one, would fit somewhat within some people's definitions, and in fact Ben & Jerry's is registered as a B-Corp, which is one of the marks that some people regard as social enterprise. For my purposes, I know exactly when I am talking to a social entrepreneur. People rarely knock on our door when they're not interested in social change, because we're called Cambridge Social Ventures right, occasionally we get a social media business that has misunderstood, but generally, there's lots of other places you could go where people will be talking about "Oh God it's all about investment raising", it's all about “exit”, it's all about, you know, “ten multiples of scale, and exponential growth", and all that kind of stuff. So, it's not that our businesses don't do that, it's just that's not what motivates us.
For me, I don't really have difficulty identifying social entrepreneurs, and they tend to be working on really, tricky things, because if it was easy to make a difference in the world and make money somebody else would already be doing it.
Alan Cowley: (laugh)
Belinda Bell: ...so we know, by definition, that this, is tricky stuff, which is also why there's a clear justification for having specialist business support, and investment raising support programmes, because there's things about these businesses that make them different to regular businesses in my view.
Alan Cowley: So, do they raise funds differently?
Belinda Bell: Across the whole social enterprise space, some of the legal structures employed are non-equity baring, so you can't issue shares, so that's a problem for share-based investment. Leaving aside those for a moment, yes social enterprises do raise investment, and ones that we work with would always approach that investment raise having already embedded their social mission into their legal documents. That puts them in a position of strength from which to negotiate with investors. What we know is that if you don't have your mission really clear, it is surprisingly possible that people don't realise that's your motivation. We have seen deals go wrong at the last minute, and post-investment, because investors haven't appreciated that if there was a super profitable path that involved paying minimum wage, then an entrepreneur wasn't going to take that path. That's not through our enterprise but through the social enterprise space in general, we've seen these things happen.
In the investment raising journey, we help our entrepreneurs to make sure they're clear on what they care about in terms of their impact, and what they care about in terms of their legacy and stuff that matters to them. Suppose one of the stories in this space would be about Anita Roddick in the body shop, and because of the way in which she raised investment in the beginning of her business, ending up having to lose all of its social impact. She did have two attempts to buy back, but unsuccessfully, and would of course been turning over in her own grave at what's happened in the body shop subsequently. I don't want the entrepreneurs that we work with or social entrepreneurs in general to put their heart and soul into a thing which they see subsequently being developed in a way that is not in keeping with their values, so we help on this piece before we start. The great thing is there are loads of investors who are also interested in this, because loads of people are interested in “How can I create social change with my money?”.
So both individual angels that specialise in impact investing and funds, and there is no shortage in impact seeking capital in the world, it's more that there's a shortage of investible ventures of the type, because it's an emerging market, so understanding the nuances of it, understanding what we mean by impact, understanding that how we adjust our risk-return or how we don't adjust our risk-return ratios, all of that is emerging.
Alan Cowley: What about ventures that, aren't able, to raise equity?
Belinda Bell: Some ventures don't have an equity-based structure, so they can only use debt. Also, some social entrepreneurs are very wary about raising social equity, because of the power and control issue, the fact that when you raise equity you give up some of your power and control, which might matter a lot if it relates to your social mission.
There is an interesting thing in this space which is a tax relief that's been around about four years now, called Social Investment Tax Relief, which mimics EIS, and it's just as regular in the UK, a regular tax release, interestingly, it can be used for debt-based investment. This can be used by particular types of social enterprising, including charities, so charities can raise loans, because they can't sell equities because they don't have equity, but they can raise loans using Social investment Tax Relief, SITR, which has the same returns effect of EIS.
This is a new development, and the recognition that for some organisations, debt is important, is crucial relief for some people within this space. I was really pleased to see that, and we think it holds a lot of potential as well because it recognises by using a tax relief in this way, it recognises social ventures are actual businesses. Because we have this big spectrum, and I'm not wanting to dismiss micro and small businesses any more than I would want to dismiss large businesses, there's a tendency in the investment space to be only interested in exponential growth and all that talk, which incidentally is extremely gendered in the way that it is done, and the words that it uses, but because of this tendency to think about the big, when Social includes, because we are warm and lovely and include everybody, that doesn't mean the small things which are never going to scale, which are part of our sector, they're not part of this conversation.
So, how do we say that we're all in this same space, without people thinking this space isn't an investment space, because it absolutely is.
Alan Cowley: Obviously, there are social enterprises that have scaled hugely, and there will continue to be, because the space is getting bigger, that will….
Belinda Bell: Yes!
Alan Cowley: ...only increase?
Belinda Bell: For a time in memorial, housing associations are classic examples of social enterprises, and they use a very special legal structure, which is terrifically good for philanthropic investment raising, but housing associations are a great example as they house hundreds of thousands, millions of people all around the country, and they operate a social business model, and they raise loads of money in different ways.
Alan Cowley: Over the years as a social entrepreneur, and now director of Cambridge Social Ventures, and working with so many different entrepreneurs, what lessons have you learned and tipped entrepreneurs?
Belinda Bell: For years, I worked specifically with socially motivated entrepreneurs, and potentially there were elements, we're doing some study of this at the university, that make them different to regular entrepreneurs.
Alan Cowley: Is the study available?
Belinda Bell: No, we haven't released it yet, we're collecting and gathering the data and thinking about it. I think with entrepreneurs in general, the public discourse has this image of entrepreneurs that doesn't in any sense replicate what actual entrepreneurs look like, because it's all about young, white, middle-class men. What we know is that businesses are much more likely to succeed if they're started by older people for example. The discourse of our entrepreneurs, entrepreneurship, doesn't respect or recognise what actually goes on in this space in my view. Entrepreneurs come from different motivations, very few are motivated just by making money. People are motivated because they've created this bit of IP and they want to get out to the world. They're motivated, because, they want to solve a particular problem, or this is the most interesting thing, they want to spend their time working on. With social entrepreneurs, we also have this chunk of people who are motivated by some personal experience, so "My child has this illness” or "My father died in a drunk-driving” crash.
Those entrepreneurs have an exponential version of a regular entrepreneur problem. That problem is that entrepreneurs struggle to get good feedback, because when they tell people about their thing, they tell their mates, they tell their mom and dad, and everyone says it's great, and it's really hard to get people to be honest with you. If your thing relates to solving some illness that killed your child, then it's almost impossible to get good feedback. Some challenges for social entrepreneurs are in acquiring sensible feedback rather than people being nice to them.
The risk of course like all entrepreneurs, social entrepreneurs can be like a dog with a bone and not want to give up. That's a good characteristic, but my sense is that if you have a personal motivation, that might be even more extreme, and you might not know when to draw a line, and it matters more, because if you're trying to solve a social problem, I don't want you wasting time doing a thing that's not going to work, I want you to stop that dead-end, and come back and come up with a thing that is going to work. Whereas if you're building a meaningless shopping app, I don't care how much time you spend doing it. It really matters. I think entrepreneurs are a much more complex and nuance group of people than the main-stream discourse would imply, but that's some of the stuff that's different about social entrepreneurs. We're always battling this idea that if you're social, you're not hard-headed or something, but you can't make change in the world if you go bust, and people who are absolutely motivated to solve a social problem, the ones who are good at it, are really good at not going bust, they're good at all the business stuff, because you have to be good at all the business stuff before you even worry about social stuff.
We look at our social entrepreneurs and social entrepreneurs I've come across, the successful ones are far, far more impressive at business than regular business people. They're working in marginal markets, doing a thing that's by definition tricky, so if they're succeeding it's because they're exceptional.
Alan Cowley: Here in Cambridge we obviously have Cambridge Social Ventures, what advice would you give to social entrepreneurs that weren't in a city that are lucky enough to have the mentoring we have here?
Belinda Bell: Elsewhere in the United Kingdom, the first thing to do is to get in touch with an organisation called Unlimited, the foundation for social entrepreneurs, it's spelled UNLTD. They are the biggest supporter of social entrepreneurs in the UK, and they work across the regions, and do all sorts of different things, that's the first port of call-a great bunch of people. They also are the host of GSEN, Global Social Entrepreneur Network, and GSEN is the place where internationally, organisations that give support to social entrepreneurs will be members of, so that's a really great international resource. There are definitely a growing number of programmes that focus on this type of entrepreneur, and some of the specialist issues they present with.
Alan Cowley: Where would you like to see the social enterprise space in 5 to 10 years’ time?
Belinda Bell: Since I've been working in this field it's become more and more mainstream, and that is going to continue, that's inevitable. What we see are commercial businesses moving to be more social if you will, and being more having to report on their impacts, and being more concerned about this, because it's a good way of selling stuff, and it's a good way of retaining staff, as well as it just being a good thing.
We're going see more big corporates being more interested in this space, and we're going to see more, already the rates of start up’s, in those spaces just goes up and up and up. The question I suppose is, at what point do these two merge, and in some places, you might argue they already have. You could say that potentially in the Ben & Jerry's' of this world. My thinking about this is that I don't really like to have silo's. I don't really want to keep social in a silo, I just want this to be business. The truth of the matter is that at the moment, there's an awful lot of meaningless business start up’s in the world. There are people who say “You need to be meaningful these days to have a business.”, that's just not true, we see a lot of meaningless stuff coming through networks I'm involved with.
I think for the time being, we have to keep using social, and give it a name, and call it a thing, because otherwise it will get consumed, and potentially white-washed, or social-washed by regular capitalism, and that's something we have, for now, to keep separate. I like to think, in 20 years’ time, that this would just be business, but not in 5.
Alan Cowley: Belinda it's been absolutely, fascinating. I know our listeners will have learned a lot about social enterprises and what you do, so thank you very much.
Belinda Bell: It's an absolute pleasure. If anybody wants to know more, there's lots on the internet.
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