By social start-up, we don’t mean a workplace meant to help you make friends! A social start-up is an organisation that aims to make a difference or solve a particular societal issue.
The EWOR team had the pleasure of speaking to Clarissa Heidenreich, Business and Law student at the University of Mannheim, about why her future is in social impact start-ups. A 2020 EWOR Fellow, Clarissa is currently working on her own impact start-up, after having built up one during her studies.
Read on to discover her inspiring insights!
What Is the Difference Between a Traditional Start-Up and a Social Start-Up?
Clarissa started by acknowledging that for-profit companies are more and more aware of their responsibility. They note how their products and services affect other stakeholders, which is a step in the right direction. However, she was quick to explain how that environment is still very different from a social start-up.
“For a social start-up, the question is ‘How can we make it even more impactful?’ whereas for a traditional business, it’s ‘How can we make it more attractive to investors?'” she summarised. In a social start-up, impact comes before anything else.
In addition to finding a problem or societal issue to solve, social start-ups aim to educate people. Not to mention raise awareness for the cause they are trying to help. It’s really important that people know why it’s important to solve the problem at hand, explained Clarissa.
The Importance of Entrepreneurship in a Social Start-Up
“The second priority in a social start-up is seeing how numbers and financial models can support this impact to be scaled,” Clarissa continued. As profits aren’t the priority, investors and funding bodies are often put off by social impact start-ups.
This is where the entrepreneurship tools come in handy. This is because you can use them to create value for the highest number of people. While they don’t value profit as a measure of success, social start-ups still need to operate like a business. This way they use their profit to scale their impact.
According to Clarissa, social start-ups are a middle ground between traditional businesses and not-for profit organisations, which reinvest every single penny into the cause. “If you want to have a really scalable business, at some point you have to factor in wages and paying people – that’s what a sustainable business model should be able to do”, she summarised.
Social Start-Ups: The Middle Ground
As such, according to Clarissa, social start-ups are a sort of middle ground between traditional businesses and not-for profit organisations, which reinvest every single penny into the cause. “If you want to have a really scalable business, at some point you have to factor in wages and paying people – that’s what a sustainable business model should be able to do”, she summarised.
How Motivation in Entrepreneurship Leads to a Positive Impact
We asked Clarissa why she chose the path of entrepreneurship as a career, and why she applies it to social impact. “We have a broad variety of initiatives at the university, you can do basically anything you want,” she explained. One of those initiatives helped students found social start-ups that tackle the world’s biggest problems.
“At first, I thought: how in the world can students that I meet and talk to actually build something that makes a difference alongside their studies?,” she laughed. She spoke to project managers and felt inspired by them and the initiatives they support. “How amazing is dedicating your time to something that makes a difference to people’s lives? Not only creating something that means you have to click one less button to achieve something, but making an actual positive impact.”
Clarissa explained that she has two sides: one that likes to structure, strategise and plan, and one that’s more creative. “These combine perfectly into entrepreneurship. Entrepreneurship is the way you can put something out of your head into reality in a structured way,” she realised.
“For me, entrepreneurship is a way to enable society to progress,” Clarissa continued. She has come to the conclusion that she can create a lot of value by dedicating her time and skills to a cause she believes in.
The Challenges Faced by a Social Impact Organisation
Apart from the difficulty of getting funding and investments, social impact organisations can find challenges in areas others may not.
Management of the Organisation
Clarissa explained that social start-ups can be difficult to manage. This is due to often relying on voluntary and pro bono work. This means that the workforce is highly fluctuating, as people might move on to study or to a paid opportunity.
“The problem is, social start-ups are not as attractive as a huge corporate company on a CV,” she lamented. “As a society, we need to move from profit as a metric of valuation and success to a more diversified metric.” We need to acknowledge that the progress made by social start-ups is a different kind of success than making lots of money, but that it’s on the same level. When this happens, social impact organisations will become a more interesting opportunity for the top graduate students, explained Clarissa.
Another recurring issue in social start-ups is impact measurement. “There’s no standard for impact tracking, and there are a lot of things influencing the outcome,” explained Clarissa. “To this day, it’s a huge problem for social organisations and start-ups.”
The main problem is that the theory of social impact measurement often varies from the practice. Indeed, developing internal key metrics such as the number of products dispensed, the amount fundraised or the number of people approached does not necessarily equal a certain level of impact made.
Additionally, it is often difficult to track the metrics needed to assess the social impact of an organisation. For example, measuring levels of malnutrition in some remote communities poses many logistical challenges.
The Positives of a Social Start-Up
While there are challenges, Clarissa quickly pointed out that there is an upside of having a positive societal impact. That is, it is often easier to source free advice or consulting from law firm and business mentors. Firms are usually more eager to help a social start-up than a company focused on turning really high profits. Not to mention, when you join a social start-up, you are able to commit to a cause you’re passionate about.
Why Should You Join a Social Start-Up
Traditionally, social impact organisations are not the most lucrative opportunities. People don’t join these companies for the money.
We asked Clarissa why she thought joining a social start-up was a worthwhile career path. She started off by recognising that while she was free to pursue such a career, not everyone can afford to. “I could get a student job, but I’m in the very privileged position that I don’t necessarily have to. I’m really grateful that I get to study and pursue my ideas,” she explained. “In this light, it is also a question of respect and responsibility for me to use the resources that are given to me to do my part in creating a more just society where more people are able to live freely and reach the potential that is within them.”
She then went on to explain the value of getting human-to-human feedback. Seeing the impact of your work concretely, every day, “…is worth way more than money,” she beamed. Working with inspired, like-minded people who want to create something bigger than themselves is another benefit of joining a social impact organisation.