This white paper was prepared by MaRS and Ogilvy Renault LLP with the primary objective to increase capital directed at the community for delivering social and/or environmental benefits and two secondary objectives, to simplify and clarify the legal structures and permitted activities by creating a new form of legal vehicle and to provide a brand for social enterprise, social finance and community benefit, thus providing legitimacy and enhanced profile for such activities.
Ontario
MaRS has recently launched a White Paper on Legislative Innovation that is proposing that Ontario create a new legal form to hold activities that would be undertaken by what we would call a social enterprise or perhaps a social purpose business. They are using the term Community Enterprise. This is builds on Stacey Corriveau and Richard Bridge's piece on Legislative Innovation for Canada.
These are both important contributions to a conversation that continues to emerge in this country. However, before we come up with a new legal form, I think that it is worth looking at the forces at play that would make one want to put so much time into this space. I guess that there is a part of me that would love to see all of this energy actually put into creating social enterprises. Perhaps this is an enabling condition. I guess that this is the question.
About 18 months ago after winding up activities with a technology venture capital fund, I had that “AH-HA!” moment that so many of my friends and colleagues have described, but I had yet to experience. What was it?
I met the SiG@MaRS team and a number of the passionate and talented social entrepreneurs they support. I learned about the challenges entrepreneurs in this field face and was intrigued by fact that while most social ventures require less capital than technology businesses and generally have a lower risk profile, capital is in very short supply. This is particularly true in Canada where most of us, including me before I was enlightened, assume that the government or charitable donors provide adequate funding for this sector.
The financing problems of social enterprise in Canada are well-known. Banks have difficulty extending commercial loans to social enterprises because they lack the security of hard assets, and private investors can't take ownership positions in businesses that -- as non-profits -- have no owners.
Yet there are fledgling models in Canada that have overcome these barriers. The Candian Alternative Investment Cooperative (CAIC), Access Toronto, Jubilee Fund in Winnipeg, and community loan funds in Montreal and Ottawa are some of the innovations that have successfully brought together socially responsible investors with local volunteers and publicly-funded agencies. The result is jobs and economic opportunity for low-income people in these communities.
The challenge now is to scale up. Is there a way to create an investment product that would attract not just thousands of dollars, but tens of millions of dollars to the social enterprise sector? As communities across Canada struggle with the effects of the current recession compounded by years of economic and social neglect, the need for such an investment vehicle has never been greater.
Where should non-profits and social enterprises begin when considering their financial options?
First stop is right at home: Is this the right time in the organization’s evolution to be making these considerations at all? It’s worth setting a filter to screen timing on making these considerations at all, and avoid wasting valuable time/energy/resources spinning wheels down the road.
Here are a few suggestions for filter questions: Who is making these considerations? Are they the right person/group to champion this assessment, and do they have the resources to do it properly? Do they have a keen understanding of the organization’s mission, direction & ground level operations? What is the organization’s fitness level in terms of taking on a big new challenge that will affect mission, direction & operations in often unforeseen ways?
Michael Lewkowitz on A Community Enterprise Corp for Ontario? A Response
Mar 09, 2010