Dusseldorf More than just financial return: Social enterprises are increasingly relying on start-up methods in order to have the greatest possible impact on society. The balance between doing good and making money remains the biggest challenge.
More than simply “higher, faster, further”: so-called social start-ups are in competition with this assertion. Behind this are young companies that often rely on technology and rapid growth – but don’t just want to maximize profits for founders and investors. They are concerned with having the greatest possible impact on society. In the wake of the general start-up boom, this sector is also growing: “Social entrepreneurship is still on the rise in Germany”, reports the association Social Entrepreneurship Network Germany (SEND), which has just published its annual report .
Many of these founders are at home in NRW: 125 of SEND’s approximately 800 members are based in this federal state. The range is wide: for example, Gdexa from Recklinghausen, whose software is intended to simplify access to educational offers. But also the Good24 insurance broker from Meerbusch, which redirects commissions to sustainable development projects. Or Wildling Shoes from Engelskirchen – the young company has its shoes manufactured in Europe and is involved in renaturation projects.
Start-ups as drivers of social innovation
What social start-ups usually have in common is that they focus on one of the 17 United Nations sustainability goals, for example fighting for better quality education, less inequality or a commitment for better health care. “Community-oriented start-ups are an important driver of social innovations,” says Sven Giegold (Greens), State Secretary at the Federal Ministry for Economic Affairs and Climate Protection since December, in the foreword to this study.
In recent years, more and more contact points have emerged that promote the exchange of these social start-ups. In North Rhine-Westphalia, for example, this is the “Impact Factory” in Duisburg, which was initiated by the Beisheim Foundation and the Haniel family group, among others. The application for an acceleration program ends these days: young green and social start-ups from all over Germany will be supported for a few months. The “Impact Hub Ruhr” is based in Essen and sees itself as part of a global network of social entrepreneurs. “More and more companies and foundations in NRW understand that social enterprise is about founding an impact-oriented business – whether non-profit or not,” says Daniel Bartel, one of the two regional SEND spokespersons in NRW.
Difficult financing phase not only at the beginning
An important step forward. But social start-ups have even more difficulty explaining their business model: they do not want to work on a donation basis – but often target public budgets, for example in the fields of education or health. Many social entrepreneurs hope that the state as a client could become even more important in the future. One adjustment screw in particular should be turned, says NRW spokesman Bartel: “It would be important for social and ecological action to become a decisive criterion in tenders.” As long as a low price is the deciding factor, many start-up social ups cannot keep up.
Until then, funding for social start-ups remains the most pressing issue. On the one hand, it is the absolute beginning. Certain federal states such as Hesse, Bremen or Schleswig-Holstein are highlighted positively in the SEND Monitor because they have their own social entrepreneurship programs. In NRW, this role falls to the public development institute NRW-Bank. According to its own statements, it offers special information for social start-ups – but does not offer any explicit funding for this type of start-up. Among the NRW participants in the current monitor, 60% use their own savings and 50% state grants, these proportions are significantly higher than for purely for-profit start-ups.
It also becomes difficult for social start-ups in later phases. Foundations usually only provide their funds for a limited period, after which the business model must sustain itself. In recent years, a number of venture capitalists have emerged in Germany who want to focus on impact-driven start-ups. But in comparison, there is still much less capital available.
Social start-ups must master this balance. On the one hand, they want to grow to spread their models. There is still a lot of catching up to do here: according to an analysis by the Social Entrepreneurship Monitor, only just under half of NRW participants generate annual sales of more than 50,000 euros, and only a tenth of start-ups have more than ten employees. On the other hand, the effort for your own organization increases with the business – and the focus on the original mission may disappear. “The company has more than 1,000 initiatives with ten employees each than a large company with 10,000 employees,” explains Bartel.