The Social Enterprise Life Cycle
Benjamin Means and Joseph W. Yockey
Cambridge University Press
The Social Enterprise Life Cycle – gaining legitimacy, pursuing growth, and achieving stability – unfolds both at the level of the individual firm and collectively across the social enterprise sector. Much of the work of social enterprise law to date has focused on legitimating the double bottom line through the development of specialized legal forms of organization. These efforts have been extraordinarily successful in making such forms available, even cracking the gold standard of Delaware law. Such advances not only provide individual entrepreneurs with vehicles perfectly suited to their double bottom-line ventures, but also broadcast an institutional embrace of social enterprise’s unconventional blend of profits and public benefit.
Now, the emphasis should begin to shift toward fueling the expansion of the sector. For social enterprise law to continue to catalyze the social enterprise sector, it must move beyond developing forms of organization to deploying tools for growth. Lawyers and legal scholars can and should turn to designing tools to help entrepreneurs and investors find and trust each other, and to persuade employees, consumers, and other key constituencies to have faith in the resolve of their counterparts. Success will allow individual firms to raise the capital they need to expand, nourishing the entire sector. Failure will leave social entrepreneurs without the resources they need to scale up a fledgling venture while preserving its double bottom line.
Finally, in order for the social enterprise sector to flourish over the long term, social enterprise law must help commitments to social missions survive over time. If each venture’s blend of private profit and public benefit can survive through successive owners and beyond the demise of any particular entity, social enterprise writ large will display the same stability. This chapter charts the challenges of the Social Enterprise Life Cycle and offers legal tools and technologies designed to help the social enterprise movement – and individual social enterprises – navigate its path.
Just as social enterprise writ large seeks legitimacy, growth, and, perhaps, a kind of immortality, so too do individual double bottom-line ventures. Those social enterprises are all for-profit firms that pursue profits for owners while achieving social good. But they are not all alike. Social enterprises fill every conceivable niche in terms of the products they sell and the services they provide. Over time, they also occupy very different positions in the Social Enterprise Life Cycle. While any venture matures through different stages, the hybrid nature of double bottom-line ventures lends the Social Enterprise Life Cycle particular significance. At distinct points in a social enterprise’s evolution, different threats to its chosen balance of profit and social mission wax and wane.
At inception, social enterprises need to ensure they have a safe space in which to pursue their dual missions and to differentiate themselves from other firms in the marketplace. Specialized legal forms can assist in both efforts, legitimizing the double bottom-line concept internally for fiduciaries and managers, and broadcasting it to investors, employees, suppliers, and consumers. As social enterprises seek to demonstrate proof of concept, grow, and scale, their needs for resources increase. To meet them, social entrepreneurs need to identify mission-committed investors, employees, and consumers, and persuade them their own mission commitments can be trusted. Here again, the law offers solutions: this time in the form of creative contracts – mission-protecting poison pills (MP3s) – that include reliable signals and enforcement mechanisms. Even as the shadow of senescence falls over social enterprises, deal structures and governance regimes can be designed to steward social missions through sale or dissolution.
Steven Dean & Dana Brakman Reiser,
The Social Enterprise Life Cycle
The Cambridge Handbook of Social Enterprise Law
(Benjamin Means and Joseph W. Yockey ed.,
Available at: https://scholarship.law.bu.edu/faculty_scholarship/3393