In November 2024, investors from around the world gathered in Monaco to attend SuperInvestor – one of the leading conferences for Venture and Private Equity. Once again, attendants were surprised by a rather unusual panel discussion on the agenda.
On stage was Alain Werner, a social entrepreneur who takes war criminals to court, alongside Alexander Brand, a seasoned investor who recently launched a new fund.
The question they asked was: How can we ensure that capital meets ideas that have the ambition and potential to solve some of the world’s most entrenched social and environmental challenges?
In answer to this question, Ashoka – the world’s largest network of social entrepreneurs and one of the top 10 most impactful non-governmental organization – launched the Carry4Good pledge.
This is a simple idea, by which general partners like Brand pledge a percentage of their carry (as well as their brain power) to the most innovative social entrepreneurs, thereby increasing their potential to solve society’s most urgent challenges.
Social entrepreneurship meets the world of investment
The idea behind Carry4Good actually comes from the industry. A handful of venture capitalists and private equity investors from Germany put their heads together with Ashoka to see how they could apply their resources and networks to have the biggest social impact.
The model resonates with many investors who believe in the power of entrepreneurship.
The founding pledgers, including serial entrepreneur and venture capitalist Klaus Hommels, were the first to commit, which has inspired nearly 50 funds and individual general partners to sign the pledge since.
The model resonates with many investors who believe in the power of entrepreneurship and understand that it takes time and experience to select the right and very best people to innovate, disrupt and improve failing systems.
The power of social entrepreneurship
Ashoka coined the term social entrepreneurship in the early 1980s, identifying individuals who solve social issues with an entrepreneurial mindset and the ambition to tackle the root cause of a problem, rather than the symptom.
Ashoka finds, selects and supports these leading social entrepreneurs, and many of these Ashoka Fellows have deeply transformed entire systems.
Ashoka finds, selects and supports these leading social entrepreneurs.
Jimmy Wales, the Founder of Wikipedia, proved that knowledge should indeed be free. Muhammad Yunus showed the world that the poor – and women in particular – are credit-worthy and can boost an economy through micro credits. Mark Koska introduced the world’s first auto-disabled syringe to prevent the avoidable tragedy of patient infections caused by dirty syringes.
These are just three examples of the nearly 4,000 social entrepreneurs who have gone through Ashoka’s rigorous selection process and who entered its Fellowship, receiving financial and lifelong strategic support.
What makes a social entrepreneur
Social entrepreneurs go beyond service delivery. While there is still a legitimate case for emergency response and provisions for those in need, a soup kitchen will not solve the root cause of a flawed system. Hence, social entrepreneurs carefully study the field they are trying to disrupt and address the root cause of a problem.
As Desmond Tutu put it: “There comes a point where we need to stop just pulling people out of the river. We need to go upstream and find out why they’re falling in.”
Social entrepreneurs also understand that growing their impact does not necessarily correlate with growing their organization. You wouldn’t want any charity to grow as big as the problem it’s trying to solve.
Social entrepreneurs scale their indirect impact. They change norms, policies and society’s mindset on a given subject.
Instead, social entrepreneurs scale their indirect impact. They change norms, policies and society’s mindset on a given subject; they build alliances and might even encourage others to copy their idea. Only by scaling in this way can they ensure that their impact can outgrow and outlast their reach and work.
When founding an organization, the guiding question for a social entrepreneur is which legal structure will allow them to make the biggest impact. Typically, they work in places and on issues where the market, in the traditional sense, may not be able or willing to solve problems.
Sometimes there is a revenue model, sometimes there isn’t. Sometimes social entrepreneurs could risk compromising their mission by pursuing a market opportunity.
Philanthropy for systemic change
We all know that ideas need capital. In the case of social entrepreneurs this might be philanthropic capital, but not in the traditional sense. Systems change requires funding that understands entrepreneurship, takes risks and invests in ideas, rather than programs.
And that is where investors from the private equity and venture capital industry are uniquely positioned to contribute. They work with founders and entrepreneurs day in, day out and have a feel for who is in it for the right reasons, with unwavering commitment.
They have a certain risk appetite and understand that any idea that disrupts an established system will run against walls and require resilience. They also understand that to stay on the cutting edge (in this case, of social innovation) you must invest in a proposition, a vision – not a delivery program.
Systems change requires funding that understands entrepreneurship, takes risks and invests in ideas, rather than programs.
It does not come as a surprise that a joint study from McKinsey and Ashoka has shown how many ideas pioneered by social entrepreneurs have, in fact, introduced whole new industries.
Couch surfing, founded by Ashoka Fellow Casey Fenton, for example, could be seen as the pioneer of the Airbnb model; the first car-sharing platform with a mission to reduce emissions, Green Wheels, inspired a plethora of mobility platforms.
And Ashoka Fellow Mark Campanale kick-started the global fossil fuel divestment movement by pointing out the existence of ‘stranded assets’ (that is, ‘unburnable’ oil reserves that can never be exploited due to treaties like the Paris Agreement), which had a sustained impact on how the financial markets evaluate the fossil fuel industry.
Win–win
With no exits or initial public offerings in sight for social entrepreneurs, and with limited ways to reach traditional financial markets, it is communities like the Carry4Good pledge that can provide the moral, financial and strategic support that social entrepreneurs need to scale.
Equally, it’s a format that allows philanthropists to leverage their giving. With time being the scarcest resource for many, they can rely on Ashoka’s rigorous due diligence process. Ashoka Fellows – the social entrepreneurs supported through the Carry4Good pledge – are strictly vetted and selected for their ability and probability to have the greatest impact possible in any given field.
As one Carry4Good pledger puts it: “Ultimately, I want my philanthropic efforts to be scalable, but I can’t do that on my own. I trust Ashoka and the Carry4Good pledge as the experts in scaling social innovation. I see it as my own asset allocation in terms of giving back.”
