Scaling a Social Enterprise: How to Get Ready for Take-Off (And Landing)
“Thinking small can be more difficult than thinking big,” said Arne Bleckwenn in his recent keynote speech on the imperative of scaling. At the kick-off event in Berlin for Scalerator, a one-year scaling support program initiated by Roots of Impact, Social Impact and Impact Collective, the serial entrepreneur and founder of e-learning startup EIDU explored why “bigger is better” when creating impact, and made the case that scaling is easier than aspiring high-flyers may assume.
He certainly has a point: Thinking big can help social entrepreneurs better address global impact challenges, face less competition, access growth capital more easily, and seek fast failures for quick learning. A Miller Center analysis of more than 100 social enterprises came to a similar conclusion: “Go fast and make things – speed has tremendous value when you are scaling.” Yet is this the right flight schedule and destination for every social entrepreneur out there?
Bright Simons, the founder and president of social enterprise mPedigree, begs to differ. In his highly interesting NextBillion blog, he recently identified a strange paradox: Letting the scaling genie out of the lamp can backfire by reducing the power of innovation. Bold social interventions, he argues, lead to concrete, visible impact and are thus simpler to scale. But they are also prone to being penalized for negative side effects. As a result, some social entrepreneurs instead choose to be risk-averse and less experimental, sacrificing innovation for scale. So could more growth paradoxically mean less systems change?
the scalerator challenge
The winning finalist for Scalerator has no problem with the belief that “big is beautiful.” Frederic Goldkorn, founder and CEO of Querfeld, made a conscious decision to attack an entrenched system that massively wastes food. “For us, the drive to scale is to expand our impact across Europe as quickly as possible,” he says. The German social enterprise is saving fruits and vegetables rejected as substandard quality by traditional wholesalers. They collect the produce directly from farmers who would otherwise throw it away, and deliver it to big canteen kitchens that buy the fresh, organic food at lower prices. A major scaling challenge Querfeld faces is to efficiently manage logistics and assure the quality of short-life produce. “To scale, it is crucial to create a standardized service that works in every region,” Goldkorn explains. “We are still figuring out how to implement a technology that will achieve this to 100%.”
For the kick-off in Berlin, the Scalerator partners had chosen three social enterprise finalists to compete. Each received targeted mentoring sessions, co-developed solutions with peers, and pitched in front of a jury at the event to win Scalerator’s one-year support program worth EUR 50,000. The finalists’ sentiment was definitely upbeat. “We received fantastic advice from very different angles and had several lightbulb moments. Now we know much better how to tackle the next steps,” said Matthias Gilch, co-founder of Linguedo. Anna Dremel from Climb was specifically grateful for critical questions from mentors that helped her to “leave the usual bubble and create new ideas.” As for the mentors and jury experts themselves: After countless experiences with their own scaling adventures, they are more than aware of the pitfalls. So what are their biggest takeaways in the flight menu of do’s and don’ts?
1. Be careful what you wish for
Sana Kapadia, impact investment manager at Roots of Impact, has witnessed many scaling journeys across the globe: “As a social enterprise, it is key to ensure that all the best practices, procedures and impact frameworks that you have created continue to be in place and that you mitigate any mission drift,” she says. In her second role as Chief Impact Advisor at Vancouver-based accelerator Spring Activator, she has seen social entrepreneurs struggle with this specific type of growth. “Scaling is not for everyone,” she argues. “It needs a robust model with strong product market fit, solid traction and a clear sense of how unit economics will evolve in different growth scenarios.”
Dirk Mueller-Remus, the founder of Auticon, joined the event as another expert and mentor. The ICT consulting firm that he started in 2011 and headed until 2013 exclusively employs adult consultants on the autism spectrum. It has become a beacon of impact at scale, with more than 200 employees in seven countries, including the U.S. Dirk had high praise, but also valuable advice for the finalists: “The probability of failure is much lower once you clearly focus on your core brand, have a unique business model, bring passion, and master business requirements such as financial and cash flow planning.” The decision to scale is the moment when founders have to show courage, creativity and negotiation skills, he adds. In his experience, social entrepreneurs need to think big, but also be realistic about the consequences of growth.
2. Choose your Mentors wisely
Not every social entrepreneur seems to be a natural born scaler, and for those who aren’t, it’s often essential to choose the right co-pilots. However, this advice comes with a caveat, as Sébastien Martin offers with a bit of a wink: “Don’t trust too much in the experts, trust yourself,” he says. The founder of German accelerator Impact Collective shares his ideas about a good mentoring session: “It’s all about opening up the minds of the social entrepreneur to different perspectives and creating options for concrete action, not about telling him or her what to do. Also, mentees often don’t know what they don’t know. They have blind spots. A good mentor is able to find the right question for the right time.”
Christian Schellenberger, a seasoned tech entrepreneur and mentor, is equally convinced that this kind of support can be very helpful in achieving success in scaling. But he also highlights both sides of the equation: “The social entrepreneur has to be willing to think outside of the box and put his ego aside. In my experience, a crucial entrepreneurial skill is the ability to test your business model as early as possible with your target group(s), and to change it quickly if necessary.”
3. Reflect on your need for speed
On top of the right skills, support and spirit, when it comes to scale, timing seems to be king. As Miller Center summed up its findings: “Premature scaling — the attempt to grow aggressively before your business model is robust enough to stand up to the rigors of massive growth — is one of the major causes of failure.” Only less than 10% of social enterprises successfully manage to scale, according to the Center. This is why Frederic Goldkorn is keenly aware of the right speed of growth for his food saving enterprise. “If we are too quick, this can cost us credibility. If we move too slowly, we can’t create the impact we want.”
And the moral of the story? Better think twice before you enter the plane and decide to take off. Good preparation is key when you’re aiming for impact at scale.
The Scalerator program is part of the Interreg project Social(i)Makers.
Christina Moehrle is an advisor at Roots of Impact.
Photos courtesy of Melanie Akerboom.