Yesterday I spoke at the Miami Philanthropy Forum. Very nice event with about 100 attendees. Thanks to Colleen Post for inviting me.
I spoke about what I call the "social venture checklist". Many socially oriented founders default to non-profit status, but I cautioned them to understand the tradeoffs before accepting this choice. When I asked the audience of non-profit managers why they chose non-profit nobody had an answer except to reference tax free contributions. See the Powerpoint below for better reasons. When I explained that non-profits are like stock brokers I had everyone's attention. Both organizations provide trustee services for low margin income.
Then I took them through a discussion of the for-profit choices:
- Social entrepreneurship
- "Capitalist Dog" entrepreneurship
The difference between the two types of entrepreneurship is that in social entrepreneurship one maximizes value creation and in traditional entrepreneurship one maximizes value capture (just the way Milton Friedman taught us). I also stressed that many social ventures assume that they have some higher normative status compared with for-profits. The lines that define "social" are actually quite unclear and any organization is better off to focus on economic consequences.