Hey Mayors, Why Aren’t You Wooing Social Entrepreneurs instead of Startups?
For a while now I have rolled startups, small business and social entrepreneurs all into the term “startup”. It kept things simple for blogs, reports. And, the word ‘startup’ also seemed to muster more attention.
But my discomfort has been growing. Unintentionally, we seem to settle in on a hierarchy. We risk putting startups above small business and leave social entrepreneurship out altogether. I wonder if this is what we want. They are all small businesses and definitionally, it really is only their mission that separates them:
- Entrepreneurship is the process of designing, launching and running a new business, which is often initially a small business.
- Startups refer to the new businesses that take larger risks with the intent to grow large.
- Social entrepreneurship is an approach by start-up companies and entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or environmental issues.
Like me, many city leaders have also been guilty of simplifying. When they say that they love startups, do they mean to exclude small businesses or social entrepreneurs?
Making “startups = good” has ripple-effects. It implies, for example, that a small business can forego revenue in the hope of later payoff — that’s, for example, the presumption of the Startup in Residence Program (it also poses a risk as residents rely on subsidized services).
The startup story glorifies that small businesses should work for free with government to prove themselves. Personally, in 20 years of working with over a hundred governments, I have not seen evidence that small business pose a bigger risk to cause project failure. Importantly, though, only a very small (and privileged) subset of small businesses, backed by capital, can afford to work in this way. Is that what our city leaders want?
“Startups”, “small business”, “social entrepreneur” — these labels aren’t mutually exclusive. But they aren’t interchangeable either — see for yourself: Would you rather show up as a sexy startup or a small business (meaning maybe without edge)? Would you rather talk to an entrepreneur, social entrepreneur, or founder? A business can easily be all three — and more.
Bear with me, for I am not splitting hairs here! Each label has its own socio-economic meaning. Founders of venture-backed startups are predominantly white, male, from privileged educational backgrounds. By contrast, 50% of the highest performing social enterprises are founded by women, have more diverse backgrounds and often experienced the problem they are solving first hand. And small businesses (in the US) are founded by roughly 40% women, 30% minorities and 60% persons with no tertiary education degree.
Shouldn’t we ask ourselves what government is trying to do by investing in these relationships?
- City halls everywhere are promoting the growth of small business and try to diversify spending toward small business, especially those historically disadvantaged. It is a matter of economic justice, but also because small businesses create more jobs and are very resilient. And a lot of innovation can happen here also.
- City halls are supporting startups by providing accelerators, access to decision-makers, funding and pilots of untested solutions. The motivations are less clear here, but broadly they hope to spark businesses with explosive growth that create a ton of local jobs. They also seem to have an eye on making the city look good to coveted talent and new investments. There also is an undertone: startups are willing to bear more risk.
- Yet, you will be hard pressed to try to find city halls that actively invest in and support social entrepreneurs, the most diverse group, who are innovating and creating jobs whilst also tackling urgent local needs. Their innovations tend to be evidence-based and rigorously proven. Almost no city hall has a strategy to woo social entrepreneurs — despite their high alignment with public goals. In fact, social entrepreneurs rated the support by local governments in Germany a failure.
I would like city leaders to consider this: Have you really developed your goals for tapping into the small businesses community? Do not fall into the trap of categorizing or glorifying one label over the other.
Look beyond economic development or innovation and set your goals for economic justice, job creation, innovation, participation and inclusion. Look at your current programs and see if they live up to your aspirations. Think about the pathways you want to create to each goal. Some cities are leading the way: Mayor Garcia of Long Beach invited entrepreneurs to his city hall to excite them to pitch to deliver better services to support: entrepreneurs. Barcelona allowed anyone with a good idea to bid for contracts to solve community challenges in its BCN Open Challenge program and rolled out preferential tax incentives to companies that solve city problems.
And in Chile, the Government chose to pay stipends to companies and teams that qualified for its procurement, accelerator and pilot programs to include those who might have no access to capital.
All Entrepreneurs are Equal. And Different.
My take-away here is that it is the tenacity, courage, skill, resilience, creativity, contribution and commitment of the entrepreneur we ought to celebrate. They defy simple categories and require nuanced understanding.
We should let go of simplistic concepts and narratives that glorify some and stigmatize others. Instead, we should invest in better understanding how entrepreneurs can help us do better on economic justice, job creation, tackling urgent social and environmental challenges, running our governments and serving our communities.
To do this, cities could invest in cross-departmental working groups to establish common goals and better practices. If social entrepreneurs are left out because you lack knowledge about them, fix that gap. You probably spend too much on procurement because it’s too hard for entrepreneurs, fix that. Are you investing in attracting startups but not social entrepreneurs to come to your city? Fix that!
So, here is to the entrepreneur!