VALERIE KHOO: What’s your definition of a social enterprise?
MICHAEL TRAILL: We like the definition of a social enterprise defined by the Non-profit Venture Network:
“a business activity started by a non-profit organisation that applies market-based solutions for the purposes of furthering the mission of the organisation, generating income and addressing social needs.” It’s practical and it catches the significance of building an enterprise that knits both the social outcomes it is trying to achieve, and the capacity to generate revenue.

VALERIE KHOO: Applying business skills to combat social problems makes a lot of sense.  Why is this only emerging now, why do you think it’s taken so long for people/organisations to come around to what seems so obvious?
MICHAEL TRAILL: There is increasing recognitionthat business skills, applied the right way, can be significantly helpful in developing social enterprises and helping them build more sustainable funding models. It is clear that there is a global trend where corporations and individuals are seeing that if they can use their commercial and strategic skills, they can help build social enterprises with the ability to leave a footprint that improves the communities we live in.

In the work we do at Social Ventures Australia (SVA), we see many examples of this as senior managers look for ways to connect their head and heart in what they do, applying their skills to organisations which can benefit from practical business expertise. In the process of doing so and in the relationships that develop, we see the power of two-way learning that flows from this.We have had a number of business people involved in mentor programs who talk about how powerful the experience and the opportunity has been for them, resulting in them having a different outlook on the community reflecting their deeper understanding of social issues. 

Most poignantly, they talk about how positively they feel about the opportunity to use their business skills in a way that generates social benefit rather than purely a commercial return.

Why has the idea of applying business skills to social problems developed such recent momentum?  I believe this reflects an increasing search for meaning on the part of many people who have been “successful” in the commercial world and are starting to question whether there is more to life than making money and climbing the corporate ladder. Effective engagement in the community sector, using their skills, does provide some answers to this. Equally, there is an increased openness on the part of the community sector to the idea that business skills, appropriately applied and in the context of a genuine two way relationship, can be extremely valuable.  The power and logic of such partnership between the sectors is obvious. Our experience is that there is a considerable duty of care required to ensure that the relationships are established and developed across the two sectors to ensure meaningful engagement.

VALERIE KHOO: SVA emphasises that social enterprises need to prove their performance, impact and outcomes. To do this requires organisations who have people with certain skills sets and experience. What’s the biggest challenge in making this happen?
MICHAEL TRAILL: SVA believes very strongly in the idea of measurement of performance, outcomes and impact in the non-profit sector. To us, this is pretty simple.We cannot go to our social investors with credibility unless we can demonstrate that their commitment is producing results. The biggest challenge in making this happens is about leadership – if a social entrepreneur understands, embraces and implements a culture of performance-reporting in their venture, it will invariably happen effectively. Our experience is where that leadership support does not exist, it won’t. 

There is no question that performance reporting is more difficult in the non-profit sector than in the commercial world. It requires a clarity and depth of analysis, particularly in regard to being specific about what it is that the social venture is trying to achieve, and what would define successful outcomes. It also requires a long term approach and commitment. Many of the social ventures supported by SVA are dealing with long term, tough problems to which overnight solutions do not apply. Discipline, patience and commitment are essential ingredients in building a culture of meaningful performance reporting that tracks what is happening in the short term, but never loses sight of long term goals.

VALERIE KHOO: What do you think companies find appealing about providing seed funding for social enterprises and do you believe this funding/partnership is essential for social enterprises to truly develop? That is, can they exist on their own?
MICHAEL TRAILL: Our experience is that many companies are attracted to the idea of supporting social enterprises. They can understand and contribute to the financial elements of these ventures and they like the idea of a skill fit between the skills of their key people and the opportunity to have constructive impact. The market is at too early a stage to generalise about the preparedness of companies to provide seed funding.We have not found great preparedness to provide financial support at the seed stage of such ventures and feel that as the market develops and matures, the opportunity for this to become a more significant component of funding will evolve. There is huge variability in the capacity of individual social enterprises to fund themselves.Many are still reliant on a component of grant funding and we do not see this is a problem, providing there is clarity around the measurement of social outcomes and impact.

VALERIE KHOO: On a personal level, what do you enjoy most about mentoring social enterprises?  What’s gets you out of bed in the morning?
MICHAEL TRAILL: The SVA team and network hasrecently invested a huge amount of time and energy in acquiring a wholesale nursery. It’s a small but good quality business that we think can make a great social venture. I joke sometimes that there has been more energy, time and resources spent on this transaction than the last deal I was involved in at Macquarie Bank –a A$20m investment in the management buyout of an industrial company. What motivates me, and I think all the team involved in the nursery deal is that this social venture can create real job opportunities for six or eight people with a mental disability who would otherwise be left on the scrap-heap. I feel better about that outcome than the 4x capital return we got on the buyout deal.

VALERIE KHOO: Fast forward 20 years.  Where do you see the social enterprise landscape in Australia?
MICHAEL TRAILL: What’s really exciting about the nursery deal is that it happened because of a model of partnership that accessed people with a commercial background and people with a deep understanding of the mental disability sector; and a funding partnership model between the government, commercial and individual philanthropic sectors. It’s unique. And if it works (and it will!) it can be replicated so that in 20 years, with like models of partnership, there will be hundreds of social enterprises around the country providing meaningful employment and changing lives.  And in the process of that happening, it will catalyse mainstream commercial businesses to look more seriously at what they can and should be doing to provide employment opportunities for the marginalised in Australian society.

Michael Traill became the founding Chief Executive Officer of Social Ventures Australia (SVA) in 2002, after 15 years as a co-founder and Executive Director of Macquarie Bank’s venture capital arm, Macquarie Direct Investment. Social Ventures Australia is “a not-for-profit organisation which uses relevant business principles and skills from the commercial sector to work in partnership with outstanding social entrepreneurs to help combat some of Australia’s social problems.”

www.socialventures.com.au