A New Type of Hybrid – Social Entrepreneurship + Business Equity

Social entrepreneurs have taken the hybrid model to a new level, crafting it into what is in effect a single structure that can operate as both a for-profit and a nonprofit.

“Much to the chagrin of social entrepreneurs, U.S. law does not currently recognize any single legal entity that can simultaneously accept tax-deductible donated capital (charitable contributions and grants); invested capital (equity investment for which investors seek a market rate of return); and quasi-invested capital (such as loans or program-related investments [PRI] from foundations that are structured as investments but in which the funder has a strong philanthropic motive and neither expects nor demands a market rate of return). As a consequence, social entrepreneurs are typically forced to choose between for-profit and nonprofit models that require them to compromise their social vision and restrict their ability to finance and operate their ventures in a way that meets the founders’ own needs as well as those of their investors, customers, employees, and other stakeholders.

Website:

Publisher:

Stanford Social Innovation Review

Author:

Allen R. Bromberger

Date:

April 7, 2011

Media Type:

Website

Category:

Social Entrepreneurship