- Explain how social entrepreneurs can use capital markets to fund their ventures - Identify the primary attributes of stakeholders and how stakeholders can help or hinder a social entrepreneur [SLIDE 1] Social Venture Capitalists are funders that look both for a return on investment and for businesses that make a specific social environmental impact. They are also known as impact-investment funds. They may be private equity funds or fund managers that invest in activities in developing or developed countries. What is important is that the outcome of the activities are measurable in terms of social or environmental impact and that the opportunity has the potential to generate a return. It has been estimated that the SVC market could grow to $3 trillion in the near future because of the rise of socially-conscious enterpreneurs. [SLIDE 2] An alternative type of investor is the community fund. Community funds are those that invest in economic development and job creation in impoverished areas. They may be locally-based and have a specific interest in developing the local community. [SLIDE 3] Microfinance institutions extend short-term loans known as microloans to entrepreneurs. The loans can be as little as a few dollars. Although the concept of microfinance originally stemmed from the developing world and was intended to eliminate the exploitation of the poor by moneylenders, as well as to provide access to finance by those excluded from traditional finance structures, these days, the concept has been extended to entrepreneurship and is available throughout the world. [SLIDE 4] What is a stakeholder? Stakeholders are the groups affected by or involved with the achievements of the social enterprise’s objectives. This may include employees, volunteers, investors, customers, suppliers, manufacturers, leaders in nonprofit orgs, and so on. [SLIDE 5] A key activity for social entrepreneurs is to identify who their stakeholders are from an early stage. A good way to do this is through a stakeholder map. By identifying your stakeholders, you will be better able to understand the impact of your enterprises’ activities on others. You may also be able to obtain feedback, advice and direction. Providing stakeholders with a platform to provide feedback also reduces the possibility of stakeholders acting as hindrances to the business. Building relationships with key stakeholders is an important way to gain support, but you must also prove to your stakeholders how you intend to generate value for them in order to boost their support for you, and to eliminate obstacles. [SLIDE 6] When you create a social innovation it is unlikely that all your stakeholders will be in immediate agreement. Instead, it your responsibility to communicate to stakeholders not only the value derived but also the potential loss or consequences of your activities. The most important questions to ask after you identify stakeholders are: What is at stake for your stakeholders and for whom? [SLIDE 7] How do entrepreneurs decide which stakeholders are the most important? Who should be prioritized and what level of attention should you give them? The salience model helps social entrepreneurs select the most suitable communication approach for each group of stakeholders by classifying stakeholders on the basis of their salience or significance to the enterprise. There are three factors that impact salience: power, legitimacy and urgency. Although the salience model of stakeholder analysis emphasizes the importance of these three characteristics, it is important to understand that they may not be independent of one another. [SLIDE 8] We can distinguish between seven different types of stakeholders based on the three main characteristics of power, legitimacy and urgency. Note that each type of stakeholder occupies a distinct position relative to these three overlapping circles.
  1. Dormant Stakeholders are sleepers. They hold power but do not tend to use that power unless they are given a reason to do so. However, they may become significant when they begin to utilize their power. For example, a disgruntled stakeholder might complain about the company on social media. Just because they are sleeping, it does not mean they will never wake up.
  2. Discretionary Stakeholders have no power to influence and no urgent claims, but they do have legitimacy. For example, a social enterprise might provide visitors to the website with a way to make donations online.
  3. Demanding Stakeholders possess the urgency attribute. They have no power or legitimacy and may be the only dissenting voice in the room. For example, protestors may be loud, but have no real influence. For this reason, little time and energy should be devoted to them.
  4. Dominant Stakeholders have both power and legitimacy which gives them strong influence in the organization. Communicating with them regularly will help the organization to maintain a good relationship with this group.
  5. Dependent Stakeholders have both urgency and legitimacy but lack the power to influence. The most passionate group of stakeholders, their passion is likely to attract dominant stakeholders.
  6. Dangerous Stakeholders posses both power and urgency, but may use this power to coerce or even resort to violence. Social issues can be emotive, and power and urgency exercised against your objectives can be a significant hindrance.
  7. Definitive Stakeholders are the only group that hold all three attributes of power, legitimacy, and urgency. They have a significant role to play in your organization and must be given priority when it comes to handling their claims.
It is important to remember that stakeholders are not static; they can evolve, and through that evolution, they may either gain or lose attributes. For this reason, social entrepreneurs must continuously monitor their stakeholder environment to maintain relationships with stakeholders and ensure support for their social mission.