4 Differences Between Social Entrepreneurship and Business Entrepreneurship
1. Emphasis on Team Vs. Individual
The "Stanford Social Innovation Review" notes that venture capitalists invest in private business on the basis of a new company's leadership team and the organization that supports it. Philanthropists -- individuals who raise and donate money for charitable causes -- rather than venture capitalists are often the primary investors in social entrepreneurs' projects. They're more likely to gauge the viability of a project based on the individual at the helm. The review challenges the focus on the individual in light of research showing that successful change depends on a range of competencies -- competencies that require strong leadership but that rarely can be undertaken by a sole individual.
2. Perceptions of Value
For the business entrepreneur, value lies in the profit the entrepreneur and investors expect to reap as the product establishes itself in a market that can afford to purchase it. The business entrepreneur is accountable to shareholders and other investors for generating these profits. To the social entrepreneur, there's also value in profits, as profits are necessary to support the cause. That said, value for the social entrepreneur lies in the social benefit to a community or transformation of a community that lacks the resources to fulfill its own needs.
3. Measure of Profitability
The ventures of business entrepreneurs are always designed to turn profits that benefit stakeholders, such as shareholders or private investors. Social entrepreneurs also may engage in for-profit activities. However, they often structure their organizations as nonprofits, or they donate their profits to the causes they support. NIKA Water, for example, is a for-profit company that sells bottled water. According to "Entrepreneur," 100 percent of the company's profits support clean-water projects in Uganda, Kenya, Sri Lanka and Nicaragua.
4. Approach to Wealth Creation
Although the business entrepreneur and the social entrepreneur are similarly motivated to change the status quo, their missions differ significantly. The business entrepreneur is driven to innovate within a commercial market, to the ultimate benefit of consumers. If successful, the innovation creates wealth. The venture's success is gauged by how much wealth it creates. To the social entrepreneur, wealth creation is necessary, but not for its own sake. Rather, wealth is simply a tool the entrepreneur uses to effect social change. The degree to which minds are changed, suffering is alleviated or injustice is reversed represents the organization's success.