In 1997, Nicole Etchart sensed a gap in existing resources for social enterprises and hoped that she could fill it. Over fifteen years later, as co-founder and CEO of NESsT, she’s well on her way to achieving her goal.
“We really feel that people need to focus on developing early-stage social enterprises, and we really need to get the financial services and capacity support services to allow these enterprises to grow,” said Etchart during the final lecture of the Spring Speaker Series. Etchart explained that although established social enterprises can find funding fairly easily, they often lack adequate startup capital.
This is where NESsT steps in. NESsT provids planning, incubation and scaling advisory services, in addition to venture grants, loans, and what Etchart calls “quasi-equity,” as some loans are only repaid if the enterprise meets its goals.
Their portfolio currently includes about 90 social enterprises, all of which are located in countries categorized as “emerging markets.” The enterprises tend to focus on three primary impact areas: labor inclusion, sustainable income, and affordable technologies, and each receives an average funding package of around $300,000. NESsT derives approximately 20 percent of its funding from returns from the enterprises themselves, while the rest comes from foundations, corporations and public sector donors.
Etchart sees a “beauty” in social enterprises, which she defines as “a business created to further a social purpose in a financially sustainable way.”
“Others can follow these models and integrate the strategies back into their own organizations,” explained Etchart. “The feeling is that if we don’t focus on creating the enabling environment for social enterprise … you’re not going to have that thriving sector that we want to have.”
Etchart believes social enterprises are important because “neither pure market-based nor pure public sector approaches have resolved [many social] problems, so a more hybrid method is needed.”
Etchart described two enterprises supported by NESsT that utilize this method. Templanza is an organization that provides psychological support counseling for victims of domestic violence and offers its services on a fee scale that depends on demonstrated need. Ingenimed, a Peruvian firm, was the first biotech company in the country and offers phototherapy equipment to treat jaundiced babies born in low-income and rural communities.
Despite NESsT’s relatively long history and plentiful success stories, Etchart took time to point out the remaining challenges and opportunities within the field.
Even though her original focus was to provide early-stage funding, Etchart feels it’s possible to go even further back in time. “There are very few programs training social entrepreneurs in emerging market countries … we really need to create those leaders and academic programs [to train them],” she said.
NESsT hopes that the industry will continue to focus on scaling social enterprises by helping them build their middle management teams. According to Etchart, social enterprises “tend to be run by visionaries who want to do everything themselves and aren’t very good at delegating.”
Finally, Etchart recognizes that social enterprise may not hold all the answers. “We need more philanthropy,” she said. “We need more foundations that are willing to support innovation. We need more corporations who are wiling to support social practices.
In acknowledging these challenges, Etchart concedes that industry growth won’t come without costs.
“There’s no free ride — it’s not easy — but we feel it’s worth going down the road.”