On social entrepreneurship and healthcare

I recently had the pleasure to listen to a presentation from one of the founders of Aravind Eye Care. Aravind is the largest and most productive eye care facility in the world. This company provides cataract surgery to blind people in the poorest regions of India (people that after the surgery become able to see again). Aravind treats every year more than 2.3 million people (yes, you read it right, 2.3m) and performs more than 250.000 surgeries. Their business model charges fees to the wealthy and provides free surgery to the poor, and it works.

Social entrepreneurs focus on health and social welfare issues unaddressable by the administration or market forces. They choose to take on society’s problems, and they face a great challenge not only in performing their work, but in finding the financial resources to grow the business. Whereas business entrepreneurs typically measure performance in profit and return, social entrepreneurs assess their success in terms of the impact they have on society. The big difference between social entrepreneurs and business entrepreneurs is that those who create a start up focusing on creating a social change are less motivated to make a lot of money since that usually isn’t the “upside”. For them the upside is not getting rich but to change the world.

Traditionally, for social entrepreneurs it has been difficult to raise money from venture capital. But this may change in the future. Some VC firms are beginning to recognise that some social businesses can be extremely profitable, because of being “social”, not in spite of it. In fact, there is nothing that prevents a social start-up from being profitable. Social entrepreneurship is not about giving away all the revenues to the poor and underserved. It is about building something sustainable, able to help more patients in the future.

We are seeing as well more and more venture philanthropists, often people with VC backgrounds, who want to invest their money and their skills to provide financial rigour, play a highly engaged role in building the business and who want to get their capital (+a bit) back to go out and do it again (see for example, the foundation for change).

A final thought: I think nonprofits should admit that they're businesses, not just causes. This would attract more brilliant entrepreneurs to solving “social problems”. There's probably a way to combine the very best of the philanthropic world with the very best of the enterprising world. We will see (and invest in) more and more of these companies in the coming years.