Open letter to philanthropists

Dear Philanthropists,

I am a 32-old entrepreneur who has started up some digital companies. However, like the majority of founders still striving to build a unicorn business, I decided for my next try to build a unicorn venture, to build it as a social entrepreneur. First of all, I’m not happy with many developments in the world, like climate change, pollution, water shortage, hunger, industrial livestock farming, destruction of biodiversity & inequality — just to name a few. I am sure you are not happy with these developments either, otherwise you wouldn’t consider yourself a philanthropist who donates significant amounts of money to help solve these problems.

Since I’m the new kid on the block in the social sphere, I attended several conferences for social entrepreneurs where I spoke to philanthropists. I got feedback from social venture funds and family office representatives, which made me a bit confused.

Even though the cause for most of the above mentioned problems is quite obvious – global economy mostly striving to optimize shareholder value without considering other social and environmental stakeholders– the majority of social entrepreneurs & philanthropists are merely tackling the symptoms.

It seems that social entrepreneurs are the waste disposal professionals of the global economy, many even name some of their fields of action upcycling & recycling. That’s like Don Quixote tilting at windmills. More than 99% of the global GDP is producing all kinds of social and environmental waste. And some brave knights are trying to solve the problems with handcrafted ashtrays made from trash?

If we want to change something in this world, we need to tackle the actual cause: mainstream business. Social entrepreneurship needs to tackle global GDP and gain market share in big industries as quickly as possible. Everyday consumer products & services should be first social startups. We can start by simply offering alternative products that are, traceable and transparent and treat all stakeholders fairly by paying a fair price. Generation Y, as the early adopters, and the soon to be largest generation, is waiting for these products. But we need to be fast, time is ticking. We can’t wait 50 years to build another Coca-Cola or General Electric, it might be too late. We need exponential growth!

Being part of the digital start up community, I have seen many examples of how technology can speed up growth and destroy inefficiencies simultaneously. Just think of the time that amazon, google, facebook, airbnb, uber and etc. need to gain significant market share and revenues. The recipe for exponential growth is pretty simple:

  • Experienced entrepreneurs
  • Disruptive technology
  • Significant funding for scaling

Let’s analyze every ingredient briefly in regard to social entrepreneurship.

First of all, you need experienced entrepreneurs who are willing to become social entrepreneurs. As a test, we have started the entrepreneur’s pledge which asks digital founders with a track record to sign a pledge committing to start a social venture within their lifetime. So far almost 50 great founders have signed. I can tell that most young founders are not working for a Ferrari and a yacht, but for building something great and meaningful.

The second ingredient is disruptive technology: By now, everyone should have realized that technology will drive our future and the pace of technological progress will be faster than ever and technology is already unbelievably affordable for entrepreneurs and customers. According to Moore’s, law technology is going to become even cheaper every year.

Significant Funding for scaling: This last and very important ingredient-and that’s where you come in dear philanthropists – is missing. It’s not like there’s not enough money out there. The Giving Pledge, with 155 pledgers alone who have pledged to dedicate the majority of their wealth to philanthropy, provides more than 240 Billion for philanthropic causes. $ (the average billionaire is worth $ 3,1 Billion according to UBS). Last year’s overall VC-Capital provided was just 30 Billion $.

So what’s the problem, if it isn’t the money? I think it’s your perception of what causes the biggest problems and the tools needed to solve them.

Let me explain from my experience. I am trying to raise money for a social venture providing an everyday product, a condom. However, we will make sure that the rubber is sustainably farmed, the farmers are well paid and that every other stakeholder will be treated fairly. We guarantee traceability and will provide complete transparency for the whole value chain. We want the condom to be cool again and as a side-effect promote safer sex globally in a sexy way using smart digital marketing. To have an ongoing impact in order to be independent from donations, we will also invest 50% of the profits from each condom back into the both the stakeholders and causes — like sexual education for kids. We have an experienced team of two founders with a track record in digital startups. In contrast to most condom-company CEO’s & managers, we are still part of the target group representing Generation Y. Important stakeholder and processes, like sourcing & production are secured. We have great, experienced advisors and a global and growing market worth several billions. Further we have a sound marketing strategy for online & offline distribution. Sounds cool, right?

Usually raising $ 1 Million for Seed-Funding would not be a problem. However, our “greed-filter” of 50% investing profits back into business related causes, had an interesting effect:

For conventional investors, we are too social because we “give away 50%”, and for philanthropists we are not social enough. Philanthropists would rather have us give away 100% and anyway while claiming that we don’t seem to have a clear focus on a single cause!?

Preferably they would rather fund a project, which focuses on HIV protection by the means of a social condom brand that needs to beg for money every year since it’s not self-sustainable. However this means that this brand can’t even play with the big guys and gain significant market share because the lion share of funding needs to go directly into the cause instead of marketing.

We all agree that 100% of the money needs to go into the cause. However for me, the cause of the bigger problems is the global economy which is measured by GDP, which needs to be tackled.

The entrepreneurs are ready, the technology is available. Let’s have a massive impact together by establishing a more effective model of philanthropy through impact investing.

 

Yours sincerely,

Waldemar Zeiler

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