Is it Okay for a Social Impact Startup to be Driven by Profits?
“Poverty is an artificial creation. It doesn’t belong to human civilization, and we can change that, we can make people come out of poverty. The only thing we have to do is to redesign our institutions and policies.” This was very rightly quoted by 2006 Nobel Prize winner Muhammad Yunus, the founder of Grameen Bank.
There are many social impact enterprises that primarily work towards a social cause with the intention of helping the underprivileged and empowering them to lead better lives. But while there are many social impact companies and NGO’s that thrive on OPM (other people’s money) to take their cause forward, there are many enterprises that drive their initiative on their own without any kind of dependence on anyone.
So if there is a startup that is driven by profits, but is working for a social cause in letter and in spirit, then it deserves all the credit for doing something that is in the larger interest of the society, regardless of the fact that it is profit-driven.
After all, no social cause can really be accomplished unless there is money to back the intent and efforts. Therefore, like any other startup, a profit-oriented social impact startup needs a sound business model to survive and serve its purpose. By doing so, it eliminates any dependence on other people or institutions to meet its end goal.
It has often been cited by social enterprises that funding is the greatest barrier to scaling up. So, if the startup becomes financially self-reliant and attains financial sustainability, the social purpose can also gain momentum. Also, the higher the profits, the higher the number of beneficiaries.
Self funding is the new mantra for many social impact startups. In the past also, many such enterprises were founded for a social objective but went on to become highly successful business models.
One such case is Amul; which helped India emerge as the largest milk producer in the world. It was founded with the objective to eradicate the gap between producers and consumers in the market and now has over 15 million milk producers selling milk through Amul and getting the right price for their dairy products, thus saving them from the clutches of middlemen.
Another example is that of e-commerce marketplace Craftsvilla that connects local artisans and designers directly to global customers and improves their livelihood by eliminating middlemen and helping them create and promote their brand. US-based investors – Nexus Venture Partners and Lightspeed Venture Partners, have funded the company.
Similarly, n-commerce players like Lazylad are working on an aggregator model and empowering smaller retailers in the neighborhood by putting them on an equal footing as larger and established retailers in the market. They are not just giving them a larger customer base, but a chance to survive in today’s Internet age and avoid becoming redundant.
Such companies help accomplish a social cause while working more or less like any other regular business that needs to get its revenue model right and work towards becoming self-reliant to sustain in the long run.
Therefore, it is very important for social impact ventures to keep a profit oriented vision. Apart from the funding and self dependence aspect, it works wonders for the beneficiaries as well.
The underprivileged that benefit from such enterprises feel more confidant and self-dependent if they are empowered to earn a better livelihood and fend for themselves. It doesn’t undermine the beneficiaries’ self esteem and create helplessness and dependence on any NGO.
So, if you’ve been thinking of launching a social impact venture, don’t hold back or feel guilty about keeping it profit oriented. Who knows, if you’re able to crack it and emerge successful, you could impact hundreds or millions of underprivileged people and transform their lives for the better. And there could be nothing more satisfying than that!
About the Author: This article has been contributed by Ashish Jhalani, Founder of eTailing India & Indian School of eBusiness (ISeB). He is also a Angel Investor, Mentor, Advisor