What Creates an Environment for Social Innovation?

By Nell Edgington

I’ve been thinking about it a lot.  Indeed, the very reason I created Social Velocity was to spur, or grow the movement for social innovation here in Austin and the Southwest region.  There is a reason (or reasons) why our region has not yet caught the wave of social innovation that has been sweeping the two coasts of the country in the last 10 years or so.  We certainly have examples of social innovation (earned income enterprises, capacity-building grants) but we don’t have venture philanthropy funds, social investment vehicles, social enterprise incubators, or plentiful growth capital that other cities like San Francisco, Boston, Portland, Seattle, DC and others have.

I recently posed the question to my Tweeps (followers on Twitter).  And the initial response back was that those East and West coast cities that I mentioned all have an encouraging environment for tech startups.  That’s true, but so does Austin.  We are the third largest venture capital city in the country AND the vast majority of that money is invested in tech companies.  Aren’t we dubbed Silicon Hills?  So that’s not the answer.

I posed this question to the many people I’ve met with over the past 18 months as I was envisioning and refining what Social Velocity would later become.  And I got various answers, such as:

• Austin is basically a middle-class city with no real pressing social needs.  Innovation comes from necessity and without that necessity or deep need, social innovation cannot flourish.
• Austin’s philanthropy is young.  Other cities have had 70+ years of philanthropy to evolve and begin to look at newer models, like venture philanthropy and social investing.
• Texas, and Austin by extension, is very independent-minded.  The individual tends to be emphasized over the collective and therefore large investments in community-wide efforts are harder to come by.
• Our nonprofit sector is more grassroots.  60% of Austin’s nonprofits have a budget of $25K or less.  Some of these new models require a certain level of infrastructure in order to implement them.
• Austin is a very heterogeneous population in terms of viewpoints.  Coming to consensus on anything (from public transportation to urban development to creating an infrastructure that fosters social innovation) is difficult.

That’s just a sampling of responses I’ve received.  I’m sure there are many more reasons.  But where do we go from here?  How do we foster an environment for social innovation here?  How do we get people excited about investing capital in social enterprises?  How do we encourage social enterprise incubators to form?  How do we create a pool of social investment capital?  How do we pilot social entrepreneurial models and demonstrate and scale their success?

I think the answer lies in infrastructure.  We have to create an ecosystem that encourages and invests in social innovation.  Perhaps a breakdown of that infrastructure can be seen in my colleague Jessica Shortall’s earlier post about what created London’s social innovation environment.  She saw 5 elements:

• Public sector: A cabinet-level “Minister for the Third Sector” who focuses much of his time on social enterprise.
• Foundations: Make grants to test out ideas for social change, invest in social innovation-based businesses, talk as a group about innovations in social finance and share deal flow.
• Social Investors: Innovative funds provide new nonprofit and social enterprise finance tools such as loan guarantees for charities to access debt and quasi-equity deals to social enterprises, as well as providing networks, advice, and entrepreneurial knowledge.
• Academia: Centers for research on social entrepreneurship at several academic institutions in the area.
• Big and small ideas: Events, gatherings, workshops, think tanks and other activities that help social entrepreneurship and innovation bubble up.

I would say, broadly, that the infrastructure elements necessary include:  adequate funding, space (incubators), expertise, research, and buy in (both in words and in resources) from all three sectors (government, private, nonprofit).

As Jessica says, it’s the overall environment that creates social innovation:

It’s an ecosystem approach, where things swirl and evolve over time, with different players watching for patterns; making connections; providing physical, social, intellectual capital; and taking risks.

What can we do to create that ecosystem in Austin?

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Tags: Social Enterprise, social innovation, social investment capital, Twitter, Venture Philanthropy

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