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Social entrepreneurs in St. Louis lead the way in learning to do well while doing good

This article first appeared in the St. Louis Beacon, Nov. 20, 2012 - A house of worship seems an unlikely spot to host a bakery.

Yet at Sts. Teresa and Bridget in the 3600 block of North Market, half a dozen teenagers are spread throughout the kitchen pressing and forming wads of chocolate-studded cookie dough into flattened lumps ready to set in the freezer. A beehive of activity, the bottom floor of the ornate white brick Catholic church will produce about one hundred dozen cookies this Wednesday afternoon as the crew ramps up for the busy holiday season.

It’s a thought that gives a smiling Tiara Smith pause for a few moments to reflect on her time at Angel Baked, a cookie outlet that goes by the slogan “Our secret recipe is prayer.” Clearly, this is more than simply a job. A recent Friday saw a seminar on money management for the young employees and there is always a session for reflection, conversation and prayer before the daily shift begins.

“It’s not just work and cookies,” said Smith, a 17-year-old who aspires to pursue a career as an attorney. “It’s also something that will help benefit you.”

That’s because Angel Baked, a 2007 outgrowth of a larger nonprofit known as North Grand Neighborhood Services, is no ordinary cookie producer. It’s part of the emerging field of social entrepreneurship, a trend across the nation and the region, which harnesses market ventures to support socially beneficial ends.

Germinating under a multitude of different corporate structures, this sometimes unwieldy blend of altruism and free market innovation is still struggling to find its footing. But in a world where philanthropic dollars are limited, the model has become a viable option for groups to generate cash -- a creative way to do good by doing well. That’s brought about the birth of new charitable models in which the socially conscious mission isn’t sustained by appeals for donations but is itself a product to be sold.

Lauren Waters, a 23-year-old social work student at Washington University, has been interning at Angel Baked, which helps promote empowerment, training and employment among local youth, in hopes she might duplicate the idea in the Maryland suburbs of Washington, D.C.

“It’s important for social workers to start gravitating toward social entrepreneurship because if we’re trying to go into nonprofit sectors that are completely sustained on the federal government or corporate donations, that’s a flawed mission,” she said. “You really need to focus on entrepreneurship and creating ventures that will sustain our organization.”

‘Oh, really, that’s what we do?’

As with many who start down that path, Theresa Wilson found the winding road to becoming a social entrepreneur had a bumpy beginning. In fact, it was the bumps that made the road possible in the first place. It all started with a basket, one she’d filled with the various cards and notes of support that had come in from friends after the sudden breakup of her marriage.

“It would inspire me and I’d say, ‘I’ve got to go on because this person has invested this time to write this card,’” said the 45-year-old Kansas native. “They are counting on me to make it.”

What she made, however, exceeded even her own expectations. In 2002, she began selling “blessing baskets” to others. The reaction was overwhelming. People loved the idea with buyers responding that the baskets changed their lives.

But that success sparked a new impulse from Wilson who wondered if the process of changing lives could also work in reverse. By 2004, she was importing her baskets from weavers in developing countries from Ghana to Bangladesh where the proceeds from The Blessing Basket Project helped those who made the product with “prosperity wages” that ran higher than fair trade. She switched her status to a nonprofit and today, more than 30,000 baskets a year are being produced from about 2,500 weavers worldwide.

Including their families, Wilson said, her St. Louis-based entity helps some 15,000 people in poverty-stricken nations to enrich their lives.

“It was paramount to me that I absolutely, personally know who is making the baskets,” she said. “I have met each and every single one of our weavers. I know them by name… That is a very important part of our organization.”

It’s also a very important part of her consumer base. Patrons of a social enterprise aren’t just buying a basket or a cookie. They’re purchasing a personal connection.

“Our customers are savvy,” said Wilson. “They want to know ‘Who made my basket? How do they live? How is this impacting them?’ These are things that are different from nonprofit structures from years ago. Today, as a nonprofit that presents itself as a social entrepreneur, you have got a very tough constituency to deliver to. By God, you’d better be ready.”

That higher standard makes social entrepreneurship an endeavor not for the faint of heart.

“I call it unwavering faith,” she said. “To be a social entrepreneur, you have to have unwavering faith in the mission you are trying to accomplish. This is not an industry for sissies. You are going to work hard. And your customers are going to, and rightly should, have a lot of demands.”

Still, there have always been social entrepreneurs.

“It’s just been recently that there is an actual word to call people that,” Wilson said. “I didn’t even know I was a social entrepreneur until someone at Washington University told me I was. I’m like, ‘Oh, really, that’s what we do?’”

A return for society

The reason Washington University had the opportunity to tell Wilson that what she does has a name is because the institution has been ground zero for social entrepreneurship.

Ken Harrington, managing director of the Skandalaris Center said the university is the only one in the nation where the school of social work takes the lead in teaching the field. Meanwhile, Skandalaris acts as a nexus for the business and law schools to add expertise to the mix. The result is a unique, multifaceted approach to mission-based enterprises.

Harrington estimates some 1,200 social enterprise ideas have run through the center since its formation in 2003. The center will give out about $150,000 this year in grants. Winners for 2011 included Angel Baked Cookies. Wilson’s Blessing Basket Project also has a Wash U connection. Eight years ago, it netted $20,000 from the school’s Olin Cup contest.

No matter where they look for it, the most substantial hurdle for social enterprises remains the same – money.

“The big challenge comes when they are successful,” said Harrington. “If you are a commercial venture, you would raise more capital to grow the business and scale the business up so you could serve even more of your mission. But since they probably are not earning enough to pay back that money, it can be hard for them to get the resources to scale and grow.”

And that creates a conundrum for startups where the bottom line isn’t what it seems and where proceeds from a sale of the business often have to be dumped into a foundation rather than the pockets of one’s backers. Social enterprises simply can’t be valued the same way as others.

It’s all part of the social entrepreneur’s odd dilemma. Is my institution running on gifts or investments?

“The return is to society so society benefits. But it’s hard sometimes to give back to whomever put the money in,” Harrington said.

One answer has been “social impact funds,” a sort of venture capital pool for social enterprises.

“Some investors just want to put in the initial money and have the thing self-fund and get their money back in something that’s called an evergreen fund,” Harrington said. “They don’t care if they make any money, but they want the good to continue to go on. Some others want to actually achieve a return but maybe a lower return then they would get in a normal risky venture capital investment.”

Harrington said evergreen funds are still largely confined to the coasts.

A man on a mission

The need for cash has spawned a plethora of different corporate structures. Most are traditional nonprofits, but others venture into the for-profit realm while some explore hybrid structures. Some look to “certification” type models such as B corporation status, which isn’t a legal designation at all but a seal of approval issued by a private group called B Lab to advertise socially conscious outfits.

“It’s not an uncomplicated field,” says Chris Miller as he surveys a sparse lunch crowd at Plush St. Louis. “Changing the world requires a little bit of complexity.”

Miller lives only a block or so down Locust from the fashionable midtown nightspot. He resides atop the Mission Center, an entity he founded in 2010 to be a social enterprise for social enterprises. Dealing in everything from human resources to health coverage, the center works to fully outsource the back office functions of the budding social entrepreneur.

“The idea is to take things off their plate that are not related to their mission,” he said, “allowing them to concentrate on changing the world, not HR, accounting and health insurance.”

The Mission Center also acts as a social enterprise incubator that can help launch, scale and educate such ventures. Last year, the institution became the first social enterprise to win cash in the St. Louis Regional Business Plan Competition.

Miller agrees that raising capital continues to be a headache for social entrepreneurs since their companies simply can’t be valued the way other ventures can. Yet at the same time, social enterprises are bringing in sustainable revenue streams which means investors can get their money back or even pull in a profit.

The problem is that wealthy givers still draw a bright line between making a buck and making a donation. Doing good is still seen as separate from doing well.

“Most investors think, ‘I’ve made my money over here and I give my money away for free over here,’” he said. “The idea that you can actually combine those two has actually been very difficult for even some of the smartest, most successful businesspeople as well as the most generous philanthropists.”

One attempted answer at blurring the line has been the development of a new subset of the old LLC (limited liability ocrporation) label. Known as an L3C, the new designation is an effort to give social enterprises the flexibility of a for-profit status while retaining some of the qualities that give mission-based ventures their soul. The concept would allow for a blending of charitable and profit-oriented dollars.

“The L3C was designed for this weird space of expectation of return of principle plus 1 to 5 percent interest,” he said. "That is too low for a bank or most angel investors but for a social program that’s accustomed to losing all of its money and returning nothing but a social return, the idea that you can return all the money that was used plus 1 to 5 percent is a powerful value proposition.”

The original idea was to help spur investment from private foundations. Miller said that goal hasn’t really panned out and funding is still tough to crack. However, L3Cs, which were pioneered in Vermont in 2008 and now exist in 12 states, have had other beneficial effects. In addition to providing a branding component to the effort, it also provides the control and nimbleness of a for-profit structure while letting backers know that profit isn’t the bottom line. The fiduciary responsibility is to the mission.

“The L3C protects me as an owner bringing in new investors since they fundamentally have to understand that they are buying a social enterprise that is governed first and foremost by a charitable purpose,” he said. “And there is no other for-profit structure out there that provides that same level of responsibility to owners and prospective investors.”

Miller said L3C legislation has not yet passed in Missouri. The St. Louis-based Mission Center is chartered in Michigan.

‘Spitting into the ocean’

Sometimes the drive to social entrepreneurship can be born of frustration. Dr. Patricia Wolff, a professor emeritus of clinical pediatrics at Washington University, went on repeated trips to Haiti to provide medical care for children. Yet making a difference remained elusive.

“After 15 years of doing that, it seemed like it was going nowhere,” she said, “kind of like spitting into the ocean.”

So, she found a way to tame the rough seas. Her organization, Meds & Foods for Kids, now feeds thousands of Haitian children with a peanut-based “therapeutic food” that prevents malnutrition. Based in part on the work of fellow Wash U pediatrics professor Dr. Mark Manary, the St. Louis-headquartered effort started with a hand grinder in 2003 that cranked out about 100 kilograms a month. Today, the enterprise produces some 80,000 kilograms with a new factory coming online.

“In 2007, the World Health Organization came out with a statement that said that this new recipe is now the gold standard for treating malnutrition in the world,” she said.

The operation is commercial as well. Groups like UNICEF and the World Food Programme buy the therapeutic food which the organization hopes will make its factory sustainable by 2015.

“What makes us social entrepreneurs is that we sell something,” she said. “We sell our therapeutic products, but we are otherwise a typical NGO or nonprofit. We have agricultural programs, which help the farmers grow more and better peanuts which we can then buy.”

They also leave their mark in another way. Haiti has very little infrastructure and Wolff’s outfit often has to supply such basic needs as electricity and clean water simply to operate. Sometimes they even build their own roads.

“Our mission just keeps getting larger and larger as we try to do what our core vision is,” she said.

Making a difference by candlelight

Like Wilson’s Blessing Basket Project, other social entrepreneurs often build out of tough times that breed passionate commitment. For Julie Lawson, it was a sexual assault 14 years ago that wound up eventually leading to Consolare, a candle-making venture designed to support victims of crime. Candles are made by volunteers, victims and even paroled ex-offenders and sold with proceeds helping the Crime Victim Advocacy Center, a preexisting entity which Lawson heads.

Lawson said the idea arose from her own craftwork, which took on a new meaning after she was raped.

“I went to therapy like you are supposed to but it didn’t seem as effective as just getting in there with my hands and healing that way,” she said. “The catalyst in my mind was ‘How do I tie that to something that would actually be a social enterprise?’”

She said for her, the toughest part was conceiving of how the candles and the cause were connected.

“It’s understanding conceptually where your story comes into it,” she said. “When you have a social enterprise, the story and purpose have to matter as much as the product.”

The bottom line is that the reason for Consolare’s existence adds value to the item itself, something she frequently sees demonstrated at craft fairs where the enterprise has a booth.

“Everybody else is selling candles so [customers] go over there and smell and then they’ll come back and see this sign that says ‘This is to benefit victims of crime’ and that cinches the sale,” she said. “Adding the social side to it is a marketing advantage.”

It’s the essence of doing good by doing well.

‘Ours to lose’

Back at the Angel Baked kitchen, program manager Carla Jones talks about the various benefits of the bakery, which runs four days a week at the church with Fridays reserved for those important workshops covering subjects from photography to financial literacy.

“Everything we do is to give our teens an opportunity that they might not have,” she said. “We’re trying to change the world based on giving kids from our neighborhood an opportunity.”

Over at Plush in midtown, Miller thinks the opportunity social enterprises give can be a boon to the struggling economy as much as anything else. He said the Mission Center created eight full time jobs over the last year, each of them having an impact on others in the community.

“The most important message to get out about social entrepreneurship is that it is economic development,” he said. “In fact, it is economic development on steroids.”

Miller would like to see St. Louis, with its solid philanthropic base, burgeoning entrepreneurial culture and proximity to Wash U’s work in both areas, become a powerhouse in a field that is still so new it hasn’t yet developed a national hub.

“It’s ours to lose,” he said. “We can be the center of social entrepreneurship in the country.”

Skandalaris’ Harrington notes that social entrepreneurs are really much like any other entrepreneurs: innovative minds looking for solutions.

“It’s an interesting thing,” he said. “Some people think that [society] deploys a lot of capital but we’re not fixing any of the problems. They’re not content with the status quo and that’s where the entrepreneurial mindset begins to come into play. We’ve got to do this better.”