I have decided to revisit the topic this month given it pops up in pretty much every single conversation that I have had. This (literally) million-dollar question has no definitive, consensus answer - so how do I, on behalf of OurConservatory, define & select projects?
1. Like all enterprises, the business should be commercially viable.
Even if the team/product/service is premised on a social mission, the business model itself should be sustainable. From a very basic standpoint, this means that they should be able to generate & sustain cashflow. Profit-making should be a goal, even if profit-maximisation is not - this separates a socent from an NGO.
2. Social principles underpin how they make and spend money.
There must be respect and responsibility towards all stakeholders, direct and indirect. It is not enough to donate part of your profits to charity - your core activity has to contribute to social good.
3. The social impact must be tangible & accountable.
In an alternate reality where your company does not exist, lives would be measurably worse off.
When I promote my vision to build a funding curve for the social sector, most people immediately focus on the possibility of getting new money into our world, and point to the mass of stagnant projects in Hong Kong that have struggled to find funding for years. Of course, this remains my mission, and I am confident that HK is ripe for change (that's why I'm devoting my life to it!). A critical determinant, however, is how fund inflows may change the social enterprise landscape in HK.
Here in the extremely prosperous HK, savvy social entrepreneurs actually have fair access to capital (just not necessarily "impact" capital). On the other hand of the spectrum, NGOs also get solid capital support; HK ranks 12th in the global giving index and we do have a generous and supportive local government. The disconnect - where the funding curve is broken - is in the murky area between. Within this group you have the majority of social enterprises, which lack at least 1 of the 3 factors listed above (usually the first).
In normal markets, companies that are not commercially viable go bankrupt. In the social sector, however, compelling social missions and passionate founders can still access a deep pool of philanthropic funding, even if they are still struggling to find the right business model. The lack of a universal pricing mechanism for impact means that it is impossible to define a "funding curve" for this group of companies.
Or can we?
This is still a work in progress, but as I am building OurConservatory I envision - and am implementing - an attempt to improve this mechanism. I am sifting through these projects one by one, and trying to identify the gaps. Why have they not been funded? What is missing? What went wrong? The whole process is interesting and challenging, simultaneously humbling and empowering.
We are not trying to create a funding curve out of the blue; we are finding our way back to it. We are trying to act as the crutches, the bridge, that gets the right social enterprises to the right investors, for sustainability and growth.
I hope that this works. I hope that you would agree there is value in this. I hope that, if so, you would reach out to me and say hi, let me know I should keep going. I hope you would join me in this quest.