VA
Insights

Ten years ago, in Chengdu, Venture Avenue started the journey of discovery and incubation of Chinese social enterprises.

The previous speakers mentioned that in Shenzhen, Chengdu, Beijing, the three most developed cities in China, the total number of certified social enterprises is about 200. In fact, this number should be at least 200,000. This thousand-fold gap reminds us that as a supporter of Chinese social enterprises, where are the potentials and challenges?

First, let’s take a look at two cases of social enterprise incubation related to Chengdu.

One is the Qiang Embroidery that has special significance in the history of the development of Chinese social enterprises. It is a typical example of early social enterprises in China. It is a disaster relief project born during the Wenchuan earthquake. Qiang Embroidery encourages and helps the Qiang women to obtain labor income with traditional crafts that they are good at, rather than relying on donations. We have been in a good cooperation with them for a year, and provided comprehensive support from strategic planning to pricing, warehouse management, and even the development of key acounts. Within a year, the earned income of Qiang Embroidery reached 10 million, and the net profit was 10%, which helped more than 8500 Qiang women to increase their income by at least 20%.

Here is another case. d.light is an international social enterprise originating from Stanford University in the United States. It was founded by two MBA students to design and produce affordable solar lights for low-income people in areas without access to electricity. We helped this social enterprise with strategic planning, pilot management and evaluation, and also partner development including Shenzhen One Foundation and the Liangshan State Government. Within two years d.light successfully covered all of the 23,000 households who had no electricity in Meigu County of Liangshan.

Qiang Embroidery and d.light are just two examples of the over 100 social enterprises that we have supported and cooperated in the past decade. We basically support them from four aspects:

The first is pairing assistance like the way we supported the Qiang Embroidery and d.light. We call it the ‘Phoenix Project’, where we worked with British Embassy Cultural and Education Department, corporate representatives like Diageo, Social Innovation Star and Asian Development Bank to provide social enterprises with incubation services from strategy to operation.

The second is the implementation of a business plan. We helps social entrepreneurs to organize and implement their original ideas. In Tsinghua University, our incubator for social innovation has supported hundreds of outstanding young entrepreneurs.

The third is quick appraisal service. We can assess social enterprises in just two hours, sort out their weaknesses in strategy and operation, and discuss the future direction of development with them, as well as the most urgently needed resources.

The last is to provide investment. Our Yu Venture Philanthropy Fund has invested in seven social enterprises since its establishment in 2012. Together with the Asian Development Bank, we also provided loans to small and medium-sized agricultural enterprises in Shanxi, Heilongjiang and Inner Mongolia. We provided technical support, including due diligence, impact assessment, and one-on-one coaching.

After 10 years, we feel that the result of social enterprise incubation is often unintentional. As a pioneer in the sector, we must think about two practical questions:

The first question is, how are the social enterprises we supported in the past? Do they manage better than others nowadays?

The second question is, to what extent can we help as an external supporter? After all, social enterprise incubation is a serious and intense activity, not a hot party where everyone just comes and goes.

To answer these questions, let us firstly take a look at the changes of Chinese social enterprises taking place in the past 10 years. We believe that the mainstream of China’s social enterprises has changed from the 0-1 stage to the 1-10 stage. This astonishing improvement reminds us that the needs of social entrepreneurs for external supporters are also changing rapidly.

• Ten years ago, Chinese social enterprises needed ideas and start-up funds. But today they need resources for scaling-up.
• Ten years ago, Chinese social enterprises needed someone to tell them what social enterprise is. Today they need a professional team of incubation and investment.
• Ten years ago, Chinese social enterprises needed recognition from the public and the government. Today they struggle to make their products and services be accepted by the market and embrace the market.

So, as a social enterprise incubator, what can we help?

First of all, it must be money undoubtedly, providing the required start-up funds for the 0-1 stage social enterprises, impact investment for the 1-10 stage, and commercial for good fund for the 10-100 stage. Providing money is the easiest way, but it’s also likely to make things too simple. A company we met in Heilongjiang last year, they needed a loan of 60 million RMB. I asked them why they needed the money. They said they needed the money to transform from a stand-alone factory to an integrated factory. I reminded them that would turn their original customers into competitors. They fell into silence. This story once again tells us that we should always watch out for the reasons behind the need for money in social enterprises. They better have a reasonable and mature strategy. Otherwise it will be extremely irresponsible for social resources. 

Therefore, strategy is the second rigid demand of social enterprises. In the 0-1 stage, social enterprises need a socially-driven strategy to help plan impact indicator system and use them to drive the blueprint for future development. In the 1-10 stage, they need to know how to face the market, an enterprise-driven strategy to achieve preliminary scale. From 10 to 100, social enterprises need more expert resources, such as an AI expert, to help them stand out and increase market share. 

Finally, we can help social enterprise leaders, telling them what a real social enterprise is and helping them map out a blueprint. I think that this person is not just a normal leader, but one with an open mind and fast learning ability.

Besides, what we cannot help?

First of all, we can connect resources, but we cannot help social enterprises manage resources. We can help social enterprises to start, but to go far, social entrepreneurs themselves need to grow up independently. Second, we can help with a leader, but not too much with his team. Building a strong and productive team is a leader’s duty, not the incubator. Finally, when standing in front of a social entrepreneur, we often ask ourselves a question: Can this person take the social enterprise to million level of scale, billion level, or even a unicorn company? We think that the ceiling of one’s ability is almost fixed and mostly given naturally which we cannot change.

Thank you.