By Sankalp Forum | March 27, 2012
Mission-driven businesses that improve the lives of the poor and generate a profit have only recently swept across the world stage. Within their short lifespans social enterprise has captured the attention of many who are looking for solutions to the greatest development challenges of today. In India, they have become a national phenomenon in less than a decade, with a growing robust ecosystem of supporting players. Yet despite this impressive growth, little is known about these “social enterprises” (socents) collectively: their geographic and sector distribution, business structure, and stage of their development, financial viability and funding sources. As the industry moves from its infancy to its youth, we believe that the time is ripe to deepen the understanding of the social enterprise landscape and use these findings to further refine the industry’s infrastructure of support.
With this goal in mind, Intellecap’s Research Team set out to learn more about the landscape of these double-bottom-line businesses in India last November. The Intellecap Research Team launched a survey that resulted in 101 unique responses from social entrepreneurs and their senior leadership teams. In-depth interviews were conducted with a representative sample of enterprises to supplement the survey data with qualitative findings.
The findings from Intellecap’s research along with a series of recommendations will be released at the Sankalp Summit next month(April 12-13) in a report entitled “On the Path to Sustainability and Scale: A Study of India’s Social Enterprise Landscape.” The following findings are a sampling of what the study will address:
India’s social enterprises are a young but ambitious industry. Nearly half of the enterprises have been operational for less than two years, and just over three-quarters are less than five years old, yet their aspirations for growth are apparent in their legal structure, team make-up, and hunger for capital. By a ratio of four to one, they overwhelming choose a Private Limited Company (PLC) structure– a legal form that involves much more red tape than partnerships or proprietorships, but that better positions socents to raise capital and transition smoothly from the founder to professional management. Socents are also investing early in building leadership teams to create a strong foundation for growth. Among enterprises that are 0-2 years in operations, three-quarters have added at least one new member to the leadership team, while over 20% have added three or more. Beyond building the human capital needed for growth, socents are also hungry for financial capital. Equity is in the highest demand, wanted by 78% of survey respondents, followed by grant funding and then debt.
Socents base theirheadquarters in India’s metropolises but operate across the entire country. Over half of surveyedsocents locate their home base in one of five urban centers in the South and West: Mumbai, Bangalore, Hyderabad, Delhi and Chennai. The large metros generally provide better access to human and financial capital, infrastructure and networks than can be found elsewhere. They are also often the entrepreneur’s hometown. But despite this metro bias for headquarters, socents are not limiting their activity to these localities or even these states. Driven by social and economic reasons, they are operating in regions with high levels of poverty and challenging business environments.Reflecting the concentration of India’s poor in rural areas, 41% of surveyed enterprises target rural markets and another 35% target both rural and urban. Furthermore, nearly 60% of enterprises have operations in at least one of the following low-income states: Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan and Uttar Pradesh.
Despite their youth, socents are already making a major impact in India. More than 28% of enterprises are serving over 50,000 BoP beneficiaries annually, including consumers and small-scale producers. Of the six critical-needs sectors included in the survey, education, health and water had the greatest proportion of enterprises serving more than 50,000 beneficiaries. Nearly one-third of enterprises are also operating in more than 100 locations. The vast majority of these socents were in the energy and agriculture sectors while at least half of surveyed health enterprises work in 10 or fewer locations. While socents are still operating on a relatively small scale compared to successful growth-stage businesses in India, this coverage is significant given industry’s youth and holds the potential for even greater impact in the future as the industry matures.
Learn more about the social enterprise landscape and other trending topics at the Sankalp Summit at Taj Land’s End from April 12-13 in Mumbai. Register here for more information email: [email protected]
This article originally appeared on the Sankalp Forum site.