the context
The pressing need for innovative solutions to social, environmental and economic challenges across the world is made evident by the continuing struggle that billions of human beings face every day. There is no dispute about the presence of such problems, but there is a constant debate about the most effective way to go about solving them.
The traditional response is to give handouts to charity in an effort to cope with the challenges facing humanity. The continuing escalation of these problems, however, demonstrates that giving away billions of dollars to charity each year has not produced sustainable solutions. Handouts are most often a temporary reprieve for cash-strapped charitable organisations struggling for survival. At the bottom of the pyramid handouts have proven to create dependency and distortion. Of greater concern is that the entire amount of capital available for grants and donations is only a small drop in a rising ocean of need facing the world.
the opportunity
General consensus is that neither free market economies nor charities alone are likely to solve the escalating social and environmental challenges on earth. heart’s answer is to invest into social enterprises, which are market-based solutions to social problems. heart defines a social enterprise as a nonprofit or for-profit organisation that addresses a specific social or environmental problem whilst earning income through trading products or services. These cause driven ventures bind the social and environmental goals of a conventional charity with the commercial rigor you would expect to find in a successful profit-making firm.
By generating income, social enterprises not only have the potential to be self-sustaining, but they can break through the capital barrier of grants and donations in order to access the expansive quantity of capital available in the global financial markets. In addition to their positive social and/or environmental impact, these ventures possess the ability to simultaneously provide investors with a financial return in the form of loan repayments and dividends. This combination of social, environmental and financial returns offers impact investors a blended value return.
the problem
The problem is twofold. On the one hand, Social Entrepreneurs have a tendency to be do-gooders who respond to human need. Driven by the immediate need to ease suffering, they seldom have the resources, knowledge or experience to manage businesses effectively. Their general limitations include: a lack of know-how to start-up, limited access to capital, short runways, inadequate infrastructure, weak governance structures and insufficient capital to afford competent management teams or professional business consulting services.
On the other hand, Social Investors are growing tired of giving handouts to charity, and with an increasing sense of urgency they are looking for new ways to give. In this global state of crisis they want their funds to work harder, better, faster and smarter. The challenges finding suitable social investment opportunities include: a lack of qualified deal flow, weak governance and accountability, effort intensive activities of monitoring, evaluation and reporting, lack of scale and poor return on investment, if any at all.
the need
The pervasive challenges facing our global society create the need for social enterprises that can achieve widespread impact through growth and replication. Social enterprises that are able to effectively scale to the point of generating global impact will provide very attractive blended value investment opportunities for social investors. heart, and its key stakeholders and partner organisations, recognize the opportunity and importance of identifying and supporting promising social enterprises by incubating them through their business development life cycle.
the solution
heart’s mission is to transform quality of life by creating, incubating and scaling up social enterprises that work long term. Our mandate is to incubate social enterprises that are sustainable, scalable and replicable. We achieve our mission through a hands-on incubation methodology that is designed to systematically transform promising concepts into thriving, sustainable social enterprises. The process is comprised of three phases of development: Seed, Venture and Capital.
The Incubator’s management team helps Social Entrepreneurs to build marketable business platforms by providing them with office facilities, consulting services, mentorship and training, as well as access to networks of experts and investors.
Understanding that start-up social enterprises, by their nature, simply don’t have access to traditional funding channels, such as banks, nor the resources to afford strategic and operational expertise, heart combines its business development services with access to affordable loan funding. This unique service offering enables Social Entrepreneurs to finance their operations, as well as the cost of heart’s incubation services. heart is therefore a nexus between Social Entrepreneurs needing financial and development support and Investors seeking social and financial returns.