Social Start-ups and How They Can Grow at Lower Costs

By Anna Levy

There are endless ways to address social issues in our world, whether it be establishing government policies that promote equality or engaging in daily acts of kindness in one’s hometown. One of the ways that people in the business world are addressing social issues is by initiating and operating social startups. A social startup is a form of business that aims to promote a social cause, and measures its success not only in profit but also in social change. These social startups use a social entrepreneurship, or altruistic entrepreneurship, approach to promote solutions to social, environmental, and other world issues. One of the benefits of running a social startup is that they operate mainly with social media and other networking platforms, which provides an accessible outlet for connecting with like-minded social advocates from across the world. However, while these businesses can be either non-profit or for profit, many social startups are unable to receive high levels of revenue like other, more technologically driven, businesses due to their reliance on investors and external funding.

India is one of the leading nations in starting and promoting social startups to create sustainable and lasting change; while India is a country with many strengths, including its large population of youth and a growing economy, it is also a country with prevalent social issues like poverty and unequal distribution of resources among over 1 billion of its citizens. The innovation and dedication of social startups in India is essential to addressing and finding solutions to these economic problems that are often neglected by technology startups and other major businesses. Although the necessity and value of social startups in India has become more apparent to government organizations and larger businesses, one of the most pressing issues that these social startups face is receiving ample funding to support their projects and goals. One of the reasons that these social startups are failing to attract investors is that their numbers pale in comparison to those of technology startups; in fact, there were only around 400 social startups in India as of 2019 compared to almost 8,000 tech startups. Additionally, many of these startups may find themselves in debt if they begin projects but fail to receive proper funding.

In order to prevent social startups from lacking the proper funding to pursue their visions or falling into debt, these businesses must learn to operate at lower costs while still advertising their cause and networking through Internet platforms. “Social costs” is a term that refers to company expenditures that go beyond the ordinary business costs to pursue a social vision. These costs may include compensating for lower employee productivity, personal issues, material wastage, and job training from professionals. Due to the startup nature of these social businesses, these costs are often necessary to the growth and success of the business, especially if employees are passionate activists rather than trained professionals. However, the social costs of a social startup are sometimes neglected when calculating the overall cost of running a social startup, and many businesses find themselves over budget due to these additional costs. By running a full analysis to estimate social costs, startups can have a better idea of their true business costs and create effective strategies for budget management and contraction as they pursue their goals.

The need for social startups is only becoming more apparent in India as well as throughout the world; thus, social entrepreneurs must learn how to effectively advertise and network their startups to attract the attention of large-scale investors. Part of this effectiveness includes learning how to accurately measure impact and success in the company, and learning when to admit failure and make changes when necessary. Nobody is perfect, and every business has its successes and failures--especially in the early stages of development. Because of this, many social startups develop a strategy for quantitatively measuring the success of the program in promoting change. Without a clear goal, strategy, and measurable series of steps, companies are more susceptible to overspending and inaccurately evaluating costs and success-rates. Similarly, these companies will not have a clear means of advertising their causes and attracting investors if they do not have a clear sense of their mission and the funds they need to reach their goals.

Every social startup operates in its own unique way, and different strategies may work for different companies, but there are certain observable factors that can predict the success or failure of a startup, especially when funding is concerned. While it is no question that countries like India are in need of social advocacy to address pressing issues like poverty and inequality, it ultimately falls to the social entrepreneurs to establish effective cost and marketing strategies to help get their startups off the ground and obtain the resources necessary for qualitative social change.

Sources:

• https://startupanz.com/social-entrepreneurship-impact-us/

• https://socialenterprise.us/about/social-enterprise/

• https://www.financialexpress.com/industry/sme/heres-why-social-startups-in-india-fail-to-attract-vc-funds/1652511/

• https://redfworkshop.org/learn/what-are-social-costs/

• https://philanthropynewsdigest.org/off-the-shelf/social-startup-success-how-the-best-nonprofits-launch-scale-up-and-make-a-difference