5 Lessons Between Tech and Social Entrepreneurship

Mar 12, 2013

Today's blog is another in the series from Huffington Post's blog posts featuring thoughts and ideas from Civic Accelerator participants, a program that helps civic startups successfully launch and scale solutions to our nation's social challenges by providing mentorship, education and investment. This is written by Jay Lee co-founder and CEO of Smallknot, republished from the Huffington Post Social Entrepreneurship section Feb. 28, 2013.

My company, Smallknot, is propelled by a dash of rage and a spoonful of optimism. We are angry about how the financial system works for real people. And we believe we can make it better. This is what drives us.

But between the tech and social enterprise spaces, it's not always easy to know where we fit. As a business, our product is a community crowdfunding platform for local businesses. We help neighbors fund small businesses in exchange for premium goods, services and experiences. Our mission is to empower communities to cultivate local economies through social finance. But even though our goal is to replace bankers with a nurturing neighborhood, let's be honest: tilting your head and squinting just so could make our pre-sale model resemble a saintly nonprofit lender like Kiva or the not-so-saintly Groupon.

Fortunately, we've been behind the curtain in both the tech and social enterprise worlds. After immersing ourselves in tech as part of TechStars NYC, we had a rare chance to peek into the impact and social enterprise world by joining the Civic Accelerator. Here we are surrounded by a group of ambitious people setting out to improve the world. It was like cracking open a can of crazy — the good kind. For you social entrepreneurs out there, here's what the team at Smallknot thinks we've figured out so far:

1. Talk dirty. If you're building a business, then build a business. Use all of the dirty words: sales, marketing, monetization, exit strategy, and, god forbid, profits. You will live or die by these concepts so don't run away — lean into them. (Unless you have an endless supply of money that people will happily plow into your bank account. That also works.)

2. Impact ≠ Soft. You likely will spend hours wondering why money seems to be split between investors seeking a return and philanthropists who just gave away $300 billion last year. Especially when, obviously, your world-changing idea will do both and you only need a measly half million. But the reality is crystal clear: Impact investors still need to see a strong business case. Do not expect breathing room on a soft business case because you might produce positive social outcomes. Focus on your business case. Be ruthless. Pitch investors with your vision for change, but I promise you — the second meeting will not be about that vision.

3. Don't overthink it. Social entrepreneurship is red hot — #socent is the new black. You will find any number of conferences and write-ups about social innovation, social entrepreneurship, venture philanthropy and impact investing. You might feel bewildered by it – I certainly am. Next to traditional nonprofits self-styled as social entrepreneurs, you'll find massive company bureaucrats in charge of social innovation, giving lessons to nonprofit microfinanciers. Someday I hope the wind companies that monetize tax credits will no longer be lumped into the same category as voter engagement software – but for now, don't overthink the categories. Just do what you do

4. Keep your mission out of your product. Be passionate about your product, but don't inject your mission into the product itself. Mission-driven startups have a hard time bridging the gap between fixing a social problem in the world and building a successful product that people want. Just because your mission is to empower at-risk youth through educational games doesn't mean any kid is ever going to play them. There is tension between validating customer feedback on your product and the social outcome you want to see. For most of us, our customers shouldn't have to care about our social mission for us to succeed. Let your passion drive you and let it drive your company. But not your product.

5. Above all … Persist. I love what I do and you should too, but entrepreneurship is not sexy — it's hard. That's okay. Don't get discouraged. This is a chance to be something new in the world. Whether consumer preferences change to the extent that high-impact products will feed a growing demand (and, thus, profitability), or the tax code changes to make it easier for foundations to fund for-profit startups, something is happening. A transformation is coming – a new generation demands more from their business sector. Get started. Keep going.

Interested in participating in the next round of the Civic Accelerator? Applications will be accepted from February 11-March 15. To learn more and apply, please visit www.pointsoflight.org/civic-accelerator.