Challenges for young social entrepreneurs in Asia

Notes on young social entrepreneurs in Asia region:

1. Challenges facing young social entrepreneurs in Asia.

• Capital, there is a funding gap as they can’t really go to bank (these guys are not maximizing profit!) or traditional donors (whoops these guys make money!) Local scale-up funding is even more difficult although there are some facilities available abroad (but most of these guys don’t speak English!). Many of them took a very interesting approach, offering their core capacity as services and use retain surplus to advance their course.
• Talent acquisition, not only it’s hard to find young social entrepreneurs, it’s even more difficult to find local talents to work in a social enterprise. In Asia, the family is super influential in a young professional lives, social enterprise is unheard of , too risky for most of young professionals and don’t pay that well. This is a real problem when the social enterprise grows beyond its founders, it is very difficult for them to find additional staff who have enough talent.
• Expectations from customers/partners, most of young social entrepreneurs who are successfully raised fund, find customers and get their operation running quickly got into new problem, the startup’s external expectation problem. As they are facing constraints on both capital and staff, yet their customers / partners are expecting highly out of them. This is particularly true to service-based social enterprises such as providing design service or web development service to the non-profits, they customers/partners expected professional service quality, and for young social entrepreneurs, it’s their first time on their own, they don’t quite know how to provide a smooth customer / partner experience and so on. This could kill them by providing them with bad name and hence stuck before the scaling stage.

2. Challenges facing social enterprise supporters

• CAPITAL PROVIDER / BROKER
  • Investors’ awareness: There is little awareness of the concept and benefit of social enterprise in the region, therefore, it is very very hard to raise fund whether in grants, equity / debt capital to invest in social enterprises.
  • Risk sharing and mitigation mechanism: This is particularly crucial to those providing seed/startup capital to emerging social enterprise as it is the highest risk period, therefore, most of the useful funding clutter at scale-up funding (of course, there aren’t many to scale as there aren’t enough startups in the first place!). There are no broadly accept enterprise rating methods / indexes / peer rating / information sharing mechanism, so the investors are pretty much cruising uncharted water each pretty much on their own. The end of the chain is even more problematic, there is no clear mechanism for capital provider / broker to actually exit their investment except things like loan agreement, buy-back enforced equity option, etc. There is no real connection between startup/seeding capital group with scale-up capital group nor there is any social capital market in the region.
  • Investment readiness: There lack investment readiness among social enterprise startups, even those at a scaling-up level. A lot of basic works from business planning, due diligence, and all the way to accounting arrangement must be taken before there are ready for investment, therefore, there are high transaction cost to entry into any real investment opportunity.
• TALENT POOL RECRUITER / MATCH MAKER
  • Doesn’t exist beyond volunteer organizations or traditional young professional placement organization such as AISEC.
• CAPACITY BUILDER
  • Lack standard material focusing on social enterprise development such as business planning, team building and financing. Most of the stuff are from programme such as Know Your Business and other enterprise development courses which might be quite different and too traditional for social entrepreneurs.
  • Lack connection to send their trained young people to access capital and other resources to really start off their ventures.

SOME IDEAS TO SOLVE THESE PROBLEMS.
1. Global campaign on youth & social enterprise to inform young people and their potential financiers.
2. Global risk sharing / mitigation partnership.
3. Regional social enterprise stock/capital exchange (already are putting in places in many country).
4. Global talent pool for emerging social enterprises.
5. Shared social enterprise capacity building material.