What Is Impact Entrepreneurship? #2

Entrepreneurship is a form of activism

Increasing awareness of social and environmental challenges, a frustration with traditional approaches to social change and the emergence of new business models, enterprise design models and technologies have given rise to an emerging paradigm – impact entrepreneurship.

Defining impact entrepreneurship is challenging because of the vagueness of impact, but it is important for forming a collective identity among impact entrepreneurs. Wicked Helsinki defines impact entrepreneurship as a process of measurably improving upon social, environmental or cultural conditions through entrepreneurship.

Impact entrepreneurship challenges conventional ideas about doing business and ‘doing good’. Although mainstream business has adopted this notion, it may seem like a paradox to some people. Despite the promise of capitalism being that if a company is successful it is doing something socially valuable, it seems to be consensus now that building a business is not an effective approach to solving societal challenges. Could it? Many would argue that a non-profit could never be scalable enough to address wicked challenges. Could it?

Wicked Helsinki believes that discussing, debating, and doing impact entrepreneurship is a crucial part of creating a thriving world - one that guarantees social foundations for all within the living means of the planet. This should be the ultimate goal of business.

Impact entrepreneurship as a form of activism

Impact entrepreneurship is driven by the desire to create a positive change in the world, similarly to activism. That desire is often the driving purpose of the entrepreneur for taking on the risk of forming an organisation to serve as the vehicle for that positive change. Begs the question, would an entrepreneur developing a sustainable product, but who is driven by desire for profit, be considered an impact entrepreneur? Depends on who you ask.

Intuitively, impact entrepreneurship seems to be somewhere at the intersection of entrepreneurial spirit and activism and the above venn diagram seeks to explore the notion. I make a distinction between “entrepreneurial spirit” and “entrepreneurship” because it widens the scope of initiatives, for example social innovation, through which one can apply that spirit.

Impact Entrepreneurship Umbrella ⛱

The problems that the world is facing and that impact entrepreneurs want to find innovative solutions for are often massive. The scale at which one wants to solve this problem, the type and amount of risk they're willing to take, the abilities they have individually and the resources that can be mobilised will affect the type of organisation they will ultimately build.

Building an organisation is essentially to pool resources (people, capital, technology, etc.) to achieve a goal. Distinctions can be made between organisations based not only on their ownership structures (how they are incorporated legally), but also their operating agreements, articles of association and intentions of the founders – which can have significant implications on what is prioritised and how profits are distributed.

Below are examples of different ownership structures and forms of impact entrepreneurship:

(Note: this list is non-exhaustive, there can be significant overlaps and even debatable ideas)

🚀 Impact startup

A company aiming to create measurable social or environmental impact alongside a financial return. They seek external funding from venture capital firms, angel investors or other institutional investors to support its fast growth, scalability and development. Typically, these investors provide funding in exchange for an ownership stake in the company, with the expectation of earning a return on their investment when the company becomes profitable, exits to a public market or is sold to a larger company.

Some examples of impact startups:

🌱💰 Impact Investment Fund

A type of investment vehicle that aims to generate both financial returns and measurable positive social or environmental impact. Impact investment funds channel capital into businesses, organisations, or projects that have a mission to address social or environmental challenges while delivering financial performance. These funds will comply with SFDR (Sustainable Finance Disclosure Regulation) Article 8 or 9 in the EU taxonomy.

Some notable impact investment funds:

👥 Social enterprise

A company that seeks to generate social, environmental, and/or cultural impact while also earning revenue and making a profit. Social enterprises differ from traditional for-profit businesses in that they prioritise their social or environmental mission over maximising profits for shareholders. Social enterprises can take many different forms, including non-profits, cooperatives, and for-profit businesses. Often times, social enterprises will reinvest any excess profits into their mission.

Some notable social enterprises:

🫶 Steward-ownership

A type of business organisation in which the ownership and governance structures are designed to prioritise the long-term interests of the company and its stakeholders, including employees, customers, and the wider community, over short-term profits for shareholders. In a steward-owned company, the ownership is typically held by a trust or foundation, which is legally bound to ensure that the company operates in a socially responsible and sustainable manner.

Some notable steward-owned companies:

✊ Employee-owned enterprise

A type of business in which the employees have a significant degree of ownership (51% or more) and control over the company. In an employee-owned company, the ownership of the business is typically held by an employee stock ownership plan (ESOP) or a worker cooperative. Employee-owned companies can provide a range of benefits to both employees and the business.

Some notable employee-owned companies:

🦚 Non-profit org

A type of organisation that is formed for purposes other than making a profit. Non-profit companies are typically established to pursue a specific social, environmental, cultural, or charitable mission. Any profits or surpluses generated by the non-profit are reinvested back into the organisation to support its mission. Some non-profit companies also operate social enterprises or revenue-generating businesses that are aligned with their mission and provide a sustainable source of income to support their programs and activities.

Some notable non-profits:

🤝 Cooperative (co-op)

A type of business organisation that is owned and controlled by its members, who are typically customers, employees, or producers of the goods or services provided by the cooperative. The members pool their resources and share in the profits or benefits of the business, according to their participation and contribution. The primary purpose of a cooperative is to provide a democratic, member-controlled alternative to traditional business.

Some notable cooperatives:

🌐 Decentralised autonomous organisation (DAO)

An organisation that is governed by rules encoded as computer programs called smart contracts, rather than being controlled by a central authority or a group of individuals. DAOs operate on decentralised, blockchain-based platforms and are designed to be transparent, secure, and autonomous. DAOs are often used in the context of blockchain-based projects where a group of individuals may want to collaborate and make decisions collectively without relying on a traditional corporate or centralised structure. DAOs have also been used in a variety of other contexts, including social impact initiatives, art and music collectives, and community governance projects.

Some notable impact DAOs:

🍦Social Innovation

While social innovation is qualitatively different from the above items, it can be under the impact entrepreneurship umbrella – especially if we are speaking from the context of a new economic paradigm which doesn’t prioritise growth at the expense of impact. The development and implementation of new ideas, approaches, and strategies to address social challenges. It involves finding innovative solutions, whether through technology, business models, policy changes, or collaborative initiatives, to tackle societal problems effectively.

Some notable examples of social innovation:

🎨 Impact Art

While art activism can create impact and contribute to social change, it may not necessarily involve the application of traditional business principles and thus the addition of art is debatable. Art activists often focus on the expressive and transformative power of art itself rather than the business aspects of entrepreneurship. However, there can be instances where art activism and impact entrepreneurship converge.

Like other forms of impact entrepreneurship, impact art often requires strategic planning, resource mobilisation, and the ability to measure and communicate the impact of their work. Art activists may seek funding, partnerships, or collaborations to support their projects and sustain their artistic endeavours.

Some notable examples of impact art:

Signing off

I, along with the Wicked Helsinki community, would love to explore these topics together with you. Check out Wicked Helsinki Linktree to get connected on Telegram, Discord and other channels.

And find me on Twitter @vernerivalimaa, LinkedIn @vernerivalimaa or Instagram @vernerivv.