In a year where we have already seen Uber, Lyft, and Zoom go public, as well as African e-commerce platform Jumia, it’s clear that 2019 is shaping up to be the year of the tech IPO. These tech IPOs are going to mint hundreds of new millionaires and the occasional billionaire. Many of these newly rich will end up starting their own companies, joining countless thousands of other aspiring entrepreneurs with stars in their eyes, inspired to try to start the “next big thing.” We are already seeing story after story about VCs jostling to invest in this new wave of entrepreneurs.
One thing all of these businesses have in common, however, is that they mostly serve the interests of higher-income customers, helping them order taxis, book accommodations, and hold business meetings more efficiently. This does little to help billions of the world’s poorest escape poverty or improve their lives.
Social enterprise offers a way to address this, but I worry that the world’s big social problems are a long way from attracting as much entrepreneurial and investor enthusiasm as the next Airbnb or Uber, even though the world’s poor and underserved desperately need social enterprises serving them to see some of the same success.
THE IMPORTANCE OF SOCIAL ENTERPRISE
Social enterprise is the use of business to solve social problems. This may mean selling solar home systems in African villages to replace expensive, polluting fuels, or aggregating smallholder farmers in Latin America to improve their buying power and increase income from the sale of their produce, or providing small businesses in rural Asia a reasonably priced working capital alternative to local loan sharks. Social enterprise takes a broken ecosystem, often where money is already inefficiently exchanging hands, and tries to make it better—with the ultimate goal of improving the life of the target population in a financially sustainable way.
A lot of these social ills are so big, and so challenging, that the only way for a social enterprise to make a real dent in them is to reach a massive scale, on the order of serving tens or hundreds of millions of people.
Take energy in Africa for example, which is the focus of my business, PEG Africa. There are more than 600 million people in Sub-Saharan Africa with no access to electricity. Most earn just a few dollars a day and spend up to 30% of their income on energy, often on polluting fuels like kerosene for lighting. PEG sells them a solar home system that is 40 times brighter than kerosene and allows them to pay it off in small amounts over a period of up to three years. This repayment approach is designed to mimic the way they currently spend money on kerosene, making it affordable for them. After paying off the solar system, the family then has access to free energy. The impact on each family is groundbreaking.