Lawrence D. Lenihan is Founder, CEO and Managing Director of Firstmark Capital, and the Professor of a widely renowned NYU class known as Entrepreneurship for the New Economy. He has occasionally denigrated “social entrepreneurship” in class as little more than charity under a new guise, which I countered as stemming from ignorance of the social enterprise industry rather than a valid analysis. My belief is that Professor Lenihan’s primary issue with social entrepreneurship is more emotional than intellectual. He believes that the rise of social entrepreneurs tarnishes the reputation of his flock—the so-called “regular” entrepreneurs. I disagree.
Entrepreneurship is the vanguard of civilizational progress—it is an industry built upon titans willing to take on personal risk that we all benefit from, and our children, and theirs. The gift of systemic innovative aside, as Prof. Lenihan rightly mentioned in class, successful entrepreneurs also generate employment, thus putting food on tables and offering the means for families to reach their aspirations.
Such an entrepreneur has directly touched my own life. Dr. James H. Clark founded Silicon Graphics in 1982 in California—halfway across the world from Singapore where my father was hired in 1987. This is the company my father built his career on, joining for twelve years in 1987 as a young professional, and eventually being pegged to bring the organization to India. Silicon Graphics has given my family opportunity for social mobility, and ultimately allowed me to attend Prof. Lenihan’s class.
So how can entrepreneurship be any more social than that?
Here’s just one answer. According to a recent Beyond Profit article on social enterprises looking to remove the barriers to education for girls, “females in the developing world miss up to 50 days of work or school per year because they do not have access to sanitary pads.” Sustainable Health Enterprises—SHE—founded by entrepreneur and Echoing Green fellow Elizabeth Scharpf is addressing this issue.
Herein lies the key differentiating premise of social entrepreneurship versus regular entrepreneurship—this startup was created to solve not just any problem, but a developmental problem that is traditionally the purview of charities and NGOs. The reason why Scharpf chose, then, to create a startup instead of a nonprofit is because a startup has proven time and again to be the most efficient methodology to disrupt bloated industries—and none is as bloated as aid.
As SHE mentions on its website, “donations don’t work long-term. Market-based approaches do, so why leave them just for the business world?” While I would counter that “the business world” is far more meta and all-encompassing than SHE’s rhetoric suggests—everything is business—the sentiment holds true.
The startup methodology emphasizes creativity and resourcefulness; it permits flexibility and innovative solutions. It involves rapidly pivoting assets to more adequately satisfy a market need until a financially sustainable tipping point is reached—and then it is scaled out. There is no hubristic master plan, only an idea that oxygenates into a new creation as it makes market contact. This is the mindset that individuals interested in disrupting the development industry are keen to soak up from the startup-VC universe.
Entrepreneurs choose to disrupt communication, or fashion, or movie rental—anything really. Startup is a mindset. It is a testament to the resilience and effectiveness of startup wisdom that it is now being applied to most pressing problems. I understand why it may be seen as unfair that those disrupting development as opposed to grocery delivery have been assigned some special distinction. But blame for this can only be assigned only to a world ready to beatify those willing to tackle humanity’s most ancient market needs.
The social entrepreneur sees not victims or aid-recipients, but potential customers—all 6,775,235,741 of them regardless of location, demographic, and especially spending power. A social entrepreneur’s desire to generate social profit is not a positive externality or an afterthought but an integrated part of the corporate DNA.
An example in New York is Rubicon Properties, which has made a meteoric rise in the boutique real estate broker rankings due not only to the quality of their work, but the market differentiation they achieve by donating a percentage of every deal to water projects. Social value generation is a primary reasons Rubicon exists. Its founder, Jason Haber, is a social entrepreneur. He is choosing to apply to those left behind the same market mechanisms harnessed by regular entrepreneurs.
The world of startup has taught me a lot of principles that are applicable to whatever venture I intend to start in the future—whether a social enterprise, an NGO, or a political movement. I hope that after reading this editorial, Professor Lenihan will begin thinking about how his deep well of venture-starting experience could potentially be repurposed towards ventures that are braving some of the most challenging market conditions in the world.