First impressions of the master’s thesis interviews
During a few intense weeks in January and February this year, we had the privilege of interviewing eight devoted business people in Stockholm and Vienna for our master’s thesis concerning factors that facilitate a successful business relationship between social entrepreneurs and business angels.
As a result of the interviews we have gathered more than 20 hours of recorded material, which we will analyse during spring. We will focus especially on factors related to communication to explore what promotes or prevents them from doing business together.
A must - social entrepreneurship at an economic sustainable level When designing our study we deliberately chose participants whom we identified as change agents. Something that turned out to be easy among the social entrepreneurs but was very difficult when choosing business angels. So far there seem to be only few investors interested in topics such as social or environmental impact.
The selected social entrepreneurs all have in common that they are active in the business sphere rather than in an NGO or a charity; another important selection criteria for us since we see that this group has the most apparent connection to external investment – and since, what was confirmed over and over again in the interviews, social entrepreneurial business has to be conducted at an economic sustainable level. Some of the social entrepreneurs mentioned that choosing whether to start a for-profit, an NGO or a charity however can be very complex due to the lack of knowledge – what social entrepreneurship actually is – of governmental institutions, other businesses, or other potential partners and clients.
“Being a social entrepreneur myself I found a discussion on innovation especially important. As a group we may struggle with the definitions of social entrepreneurship and eagerly feel that everyone must understand what this new way of doing and defining business is. But the most important element of innovation must lie in our business ideas. If we are capable of clearly defining and communicating our business ideas and if we can survive the development phase before proof of concept, perhaps with crowd sourcing and crowd funding – then we will be successful.” Evelina Lundqvist
Diverse group with common denominators On our journey through Sweden and Austria we have had the pleasure of meeting four business angels and four social entrepreneurs, each one of them representing experiences from different industries, stages of business, and personal backgrounds. Half of the group consisted of women, the other half of men, half we met in Sweden, the other half in Austria. We wanted to gather a group of participants as diverse as possible in order to seize multiple perspectives – and we sure got what we asked for. But, despite this diversity, it turned out that the participants have many things in common.
Trust above everything The issue of trust was explicitly present in all interviews. Without trust there is simply no business relationship – however promising the business idea may be. The business idea and the numbers can be processed, fine-tuned, or even changed completely – but if the trust and even personal chemistry between the investor and the entrepreneur is not there – you can forget about chances of doing business together.
“One common trait all participants seem to share, irrespective of being a business angel or a social entrepreneur, is some kind of event causing enlightenment that let them rethink what they had been doing so far. This could have been a minor thing like a dream, or something severe like a burnout, or even the death of a family member. But all of them felt afterwards that they had to change something. Apparently one needs to be exposed to some kind of shock to be able to transcend one's prevailing conduct in life and/or business." Michael Bauer-Leeb
Bootstrapping, a bank loan, or equity capital Another notion raised in the interviews was that you have to find your own path in financing your business. Some of the business angels emphasized that it is important not to think that getting external financing is the ultimate goal. You have to seek the solution that is fitting best to your business idea – be it bootstrapping, a bank loan, or private equity. Another danger of an external investor is that you may hook up with the best business angel ever but that this person could sell his or her share and you end up with someone you really do not want onboard.
What social entrepreneurs and business angels need to improve One question we asked all participants is what they reckon is the true potential of business angels and social entrepreneurs doing business together. “What couldn’t we achieve together!?” was one memorable reflection. We also believe there is great potential, after all that is the reason why we initiated the study. But we also recognize the many things, which need yet to be done before more ventures can embark on this exciting endeavor.
In ours, as well as in the participants’ thoughts we recognize some measures that seem to be fundamental for the two parties to improve their communication. We think there is much room to improve the business skills of the social entrepreneurs. They have to be in charge of their business idea and the numbers – otherwise they are simply not interesting for investors. The business angels on the other hand need to recognize the importance of social and environmental impact alongside with profits as means of measuring the real success of a business. In order to reach this improvement we see great needs for inspiration, education, mentorship, and even matchmaking and business speed dating between social entrepreneurs and business angels or other investors.
Evelina Lundqvist and Michael Bauer-Leeb
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Thanks – again – to all business angels and social entrepreneurs for taking your time to meet with us! Thanks also to Sprout Park, Stockholm, and The Hub, Vienna for providing space for our discussion meetings.