A stock exchange for Social Enterprises

Government interest in the Skoll proposal that there should be a stock market for social enterprises is laudable but for most social enterprises also laughable. In common with too many of his Westminster colleages Ed Milliband is focusing his attention on the vocal minority rather than the silent majority.

It has always been the case that business success in the Government’s eyes is rapid growth followed by flotation and then sale. Self made multi-millionaires such as Sir Richard Branson, Lord Bilamoria amongst others are regularly thrust in front of the budding entrepreneur who is encouraged to follow their lead. For the few, this is a dream they can realise, for most it would represent a nightmare.

British entrepreneurs of all flavours usually start their business to make a difference, not a fortune. They want to change their own lives and those of the others they care about. Freedom to follow their passion, freedom from the unpredictability of paid employment and freedom to choose when to work and when to play. They know deep down that extreme wealth is not for them. Their interests lie in their work and its impact on the world and most are unwilling to take the personal risk of entering the fast lane and pressing the business accelerator to the floor.

Few engage with business angels and fewer still seek listing, even on the alternative market. Social enterprises are really no different. They seek funding from families, friends, fools and their bank. They rarely aspire to achieve the size and scale where stock could be traded on any scale. The only traded stock they are likely to encounter are the Bisto cubes in Tescos.

But of course the young and growing social enterprise does need investment and too few individuals can see, let alone understand the opportunity. The CIC model creates a structure by which almost any social enterprise can combine a ‘limited by share’ dividend payment option with the overt wholesome mission of a true social enterprise.

Investors here are found in the same way as they are in the wholly for profit sector. That is by networking and referral. What is needed is a way of scoring a social enterprise’s potential for there is always more than one bottom line. The potential investor needs to consider success on two axes. Firstly the potential dividend income by which he or she derives their financial return, and secondly the impact the organisation has on an area of need that is as important to the investor as it is to the enterprise’s founders.

Of course Skoll and others should explore the big opportunities for traded social enterprise stock, but this should be undertaken only when a robust and simple methodology has been developed and established to help those smaller investors evaluate the risk and returns of putting their money (and usually their expertise) into the thousands of young emerging social enterprises from which in a very few cases, those major ‘stock market’ traded social enterprises will emerge.

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