NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, July 2, 2013

By Ned Breslin

A certain phrase has gained currency in my world lately: the notion that a social enterprise must have an “exit strategy.” Social enterprises, of course, are organizations designed primarily to yield social versus financial value. But here the community is borrowing a term from traditional venture capitalists, who know that a big part of maximizing returns is having a plan for when and how to end one’s involvement in a venture and invest resources elsewhere.

It’s much-needed advice. At least in my corner of the social enterprise world (the part that focuses on communities’ access to good water), I have yet to see a successful, strategic exit. To be sure, many international water agencies have left developing countries but those exits tend to reflect a loss of funding or end of a contract — or sometimes a convenient belief that a community water challenge has been solved by simply installing a water system and providing basic community management training.

Sadly, there are also the investors who don’t exit at all: the international NGOs who become a permanent feature in a country, seemingly doing little more than sustaining themselves for decades. You know them. These are the organizations that speak with conviction about how well they know a specific nation and its issues as they celebrate their 25th anniversary working there.

If we truly planned for return-maximizing exits — made that the explicit objective and kept our sights on it throughout — much about our programming and behavior would change. Because the road to exit is not already well trod in the water development sector, we at Water For People are attempting to map it for ourselves. Even more, we hope we can model it for others.

When your mission is social benefit, the “when” of the ideal exit is in a sense very simple. It isn’t when enough clean water has flowed that you think your efforts have paid off. It is when the problem that was preventing enough clean water from flowing has been solved. A venture capitalist can declare victory when he or she no longer needs a startup to produce more value. In our work, victory means that the districts where we work, comprising hundreds or even thousands of villages, no longer need our support to keep water systems operating.