Why do some social startups succeed, and others do not?
Five principles on how the best non-profits launch, scale-up and make a difference.
Have you ever wanted to change the world but don’t know where to start?
In a recent presentation at Stanford Graduate School of Business, Kathleen Janus author of Social Startup Success: How the Best Non-profits Launch, Scale Up and Make a difference shared five best practices that differentiate successful from unsuccessful social startups.
Standing out in the crowd
1.56 million. This is the number of non-profits registered in the US as of 2015, an increase of 10.4 per cent from 2005. For context that is approximately 1 charity per 200 people in the US. The social sector is crowded. So, the question is, how do you stand out and succeed as a social startup?
So how do you stand out, and succeed?
1) Test your Idea
This one may sound simple, but it’s critical and will form the foundation for your success. Before launching into your social start-up, testing your idea is key. Social start-ups sit at the intersection between beneficiaries and donors. By testing your idea, you will be able to identify whether or not there is a need on the side of the beneficiary. Whilst confirming if there is a market on the side of the donors. You are trying to answer two fundamental questions. Is there a genuine problem, with a critical mass of people impacted? Is someone willing to pay to solve that problem?
To help people in need, we do not need more charities — we need more-efficient ones”
As you test your idea — I urge you to also ask yourself the third question. Is anyone else doing this? The charity sector is overcrowded. To help people in need, we do not need more charities — we need more-efficient ones. Before launching into your new feel-good venture — take a moment to check if you could support an already established cause.
2) Measuring Impact
You have identified a problem. You have a source of funding. You are underway. The second principle to set yourself apart — measure your impact.
As my consultant friends would say “Are you moving the dial”? As my finance friends would say — “are you demonstrating a return on investment”?
To differentiate yourself and build the resources you need to scale, you need to demonstrate you are more than just noise. You need to show you are making a positive impact on your beneficiaries.
Many organisations have good intentions but get trapped because they are unable to figure out how to make a real impact on the problem they are trying to solve. Measuring impact is easier said than done. Entire organisations have been built to try and solve this problem. It is tough. But it is vital to your success.
3) Funding Experimentation
Social startups like all organisations should follow the age-old advice and not “put all their eggs in one basket”. In a sector where funding is primarily allocated by human emotion — social startups need to leverage a combination of funding sources.
In the US 80% of nonprofit funding is restricted
This means both earned income and donations. In the US 80% of giving is restricted, limiting how social impact organisations can use their funds. Often, meaning they are not put to best use. Balancing the mix of your funding will mean you can inject capital to the areas that need it most. This balance will make you more secure when inevitably donors funding allocations change to follow their latest craze or newest emotional driver.
4) Leading collectively
It takes an entire team to change the world
Now I am sure you are a rockstar. Driven, passionate and an outstanding individual contributor. But sadly…it takes an entire team to change the world.
As Kathleen highlights in her book — to differentiate yourself you need to lead in a way that taps into the talent of the entire staff and board of your organisation. To go from passion project to world-changing organisation you need a team to follow you on that journey.
5) Storytelling purposefully
You have your idea, you can measure your impact, you have found some $ and are in the process of building that rockstar team. The final piece of the puzzle is one of the most important when it comes to scaling. Can you tell your story?
Telling your story is what sets a successful social startup apart. However, it is also often the aspect that is hardest to focus on when you are supporting your beneficiaries.
Luckily, Kathleen has developed a list of the key questions you should be asking yourself:
- Do you have a clear sense of the key message your organisation needs to convey?
- Have you developed a story of self that connects you to a cause and creates intimacy with the audience?
- Have you developed a story of us that connects the audience to the cause?
- Have you developed a story of now that conveys the urgency of the problem?
- Do you follow the news cycle intentionally to find ways to connect the problem you are addressing to current events?
- Do you create opportunities for your staff to practice their own stories?
- Do you create opportunities for your beneficiaries to tell stories on behalf of the organisation?
- When beneficiaries tell their stories on behalf of the organisation, do you work with them to help them practice in a way that is respectful and honours their story?
Feel good vs Real good work
There you have it. The secret sauce for changing the world.
With the world in crisis, now, more than ever — the social sector is feeling the strain. Over 2/3 of non-profits in the US generate revenue of $500,000 or less — meaning too many are focused on trying to make payroll, rather than focusing on the impact they hope to achieve.
The world needs the brightest minds, tackling the world’s biggest problems.
Follow these five best practices and turn feel-good work into real good work.
