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Understand The Field Jargon

These are basic definitions found within the field of social entrepreneurship. As this is a relatively new field, you will see many different variations, but this is the general idea:

The Field

  • social entrepreneurship: An emerging field focused on formation and growth of ventures (nonprofit, for-profit or hybrid) that have at their core a mission to have a positive social or environmental impact on the world. The field includes founders, funders, intermediaries, academics, board members and more.
  • social innovation: A novel solution to a social problem that is more effective, efficient, sustainable, or just than present solutions and for which the value created accrues primarily to society as a whole rather than private individuals. See examples of social innovation here.
 

Organizational Models

  • nonprofit venture: An organization set up to address a market or government failure that does not have a profit motive. Often nonprofits depend largely or solely on outside philanthropic funding; although they can have earned revenue streams.
  • social enterprise: An organization that applies commercial strategies and leverages markets to generate revenues that support improvements in human and environmental well-being, rather than maximizing profits for external shareholders.
 

Legal Structures

  • 501c3: The most common form of tax-exempt nonprofit organizations in the United States (although there are also 501c4, c5, etc.).
  • benefits corporation: A relatively new legal corporate structure in a number of U.S. states that allows for a corporation to have a double bottom line of profits and social impact. Directors must consider the impact on a variety of constituents and on public purposes, and don’t have to maximize profit if in conflict with their other purposes.
  • flexible purpose corporation: A similar structure to Benefits Corporation, legal only in California as of 2013.
  • fiscal sponsorship: A relatively low cost way to launch a social venture, where the new venture becomes a “project” of an already established organization. That larger organization manages the legal status and operations side of the venture in return for a percentage of the revenues/donations.
 

Certification

  • b-corp: Different from Benefits Corporation, a B-Corp is a for-profit that is certified by the nonprofit organization B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. This is a branding, like “Fair Trade” or “Good Housekeeping” and not a legal structure.
 

Funding

  • grants: Non-repayable funds disbursed by one party (grant makers), often a government department, corporation, foundation or trust, to a recipient, often (but not always) a nonprofit entity, educational institution, business or an individual. In order to receive a grant, some form of "grant writing" often referred to as either a proposal or an application is usually required. (from Wikipedia)
  • loans: Debt evidenced by a note that specifies the principal amount, interest rate, and date of repayment. (from Wikipedia)
  • impact investing: Investing that aims to solve social or environmental challenges while generating financial profit. Impact investing includes investments that range from producing a return of principal capital (capital preservation) to offering market-rate or even market-beating financial returns. Although impact investing could be categorized as a type of "socially responsible investing," it contrasts with negative screening, which focuses primarily on avoiding investments in "bad" or "harmful" companies - impact investors actively seek to place capital in businesses and funds that can harness the positive power of enterprise. (from The Global Impact Investing Network)
  • patient capital: A term used to indicate that an investor is willing to make a financial investment in a business with no expectation of turning a quick profit. It is often mentioned in impacting investing where investors are interested in supporting the growth and sustainability of particular social enterprises and do not expect a quick payback or exit strategy.
 

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