"Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry."
― Bill Drayton, Leading Social Entrepreneurs Changing the Worlds

Social Enterprise Terms & Definitions

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Angel Investor An Angel Investor is an affluent individual who often has an interest in or passion for assisting a particular type of business and who is willing to invest capital financing in startups and in return, usually takes a share of ownership.

Angel Investors often pool their capital in networks such as the First Angel Network.

B-Corp Corporations which use business to solve a social/environmental problem may apply for B-Corp certification, which requires a rigorous assessment to ensure that the business is meeting robust implementation, performance and transparency standards.

According to MaRS Centre for Impact Investing,  “B-Lab, a nonprofit organization, certifies B Corporations, in much the same way TransFair certifies Fair Trade coffee.”

Benefit Corporation Benefit Corporations are a type of corporation regulated at the state level in the US.

According to the Benefit Corporation Information Centre, Benefit Corporations:” 1) have a corporate purpose to create a material positive impact on society and the environment; 2) are required to consider the impact of their decisions not only on shareholders but also on workers, community, and the environment; and 3) are required to make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard.”

Benefit Corporations, while they involve at similar standards to qualify as this kind of legal structure, differ from a B-Corp which is a Certification by the non-profit B-Lab.

Blended Value Refers to the total value of an organization (whether profit or not-for-profit) which includes the financial and social return.

blendedvalue.org         Enterprising Non-Profits, BC on BV

Community Economic Development Interest Funds (CEDIFs)
In order to encourage local people investing in their own communities; these particular investment funds have been created in various jurisdictions such as Nova Scotia.

“A CEDIF is a pool of capital, formed through the sale of shares (or units), to persons within a defined community, created to operate or invest in local business. It cannot be charitable, non-taxable, or not-for-profit, and must have at least six directors elected from their defined community.” CEDIFs are strictly regulated by securities commissions. Government of NS background.

According to Tim Nash, Social Economist, members of the public may invest RRSPs and obtain a substantial tax credit 35% (NS); however, there are some drawbacks including that investments are locked in for several years.

Community Interest Company CICs are set up to trade in goods and services in the interest of the community. They are enabled by legislation, governed by securites’ regulators/registrars of joint stock companies and have a certification process.  They must show that their mandate is serving the community and not taking part in political activity.

CICs may raise capital through issuance of shares, thus allowing “investment of private wealth in community projects-a very powerful combination that has not been adequately tapped in Canada”. (Richard Bridge, LL.B.)

There are caps on dividends and interest caps on loans. There are strict regulations in place to ensure that the assets are used for the benefit of the community and are therefore subject to a “asset lock” that prevents transfer of assets outside of another charity or CIC.

There have been over 7000 CICs formed in the UK since it’s inception on 2005.  Currently in Canada, British Columbia has amended the BC Corporations in May 2012 act to enable the new “Community Contribution Companies” business model, and as of December 2012, Nova Scotia’s “Community Interest Company” legislation received Royal Assent.

Corporate Social Responsibility A traditional business basically has two responsibilities, firstly economic, in order to make profit and secondly legal responsibility.  Corporate Social Responsibility refers to the voluntary actions of an organization which goes a step beyond the traditional practices and to involve themselves in social/ moral responsibilities such as community and social development, sustainable and environmental friendly practices.
Crowdfunding  A method by which capital is raised by entrepreneurs by small amounts donated by many individuals usually through various specialized Internet platforms such as Indiegogo.   Entrepreneurs using this platform may give gifts/rewards for donations at different levels of funding.

Crowfunding became popular after the US passed the Jobs Act in 2012 which allowed early-stage entrepreneurs to raise up to $1Million in capital.

The funds that are given on-line in Canada are considered to be donations rather than investments. Equity-based crowdfunding is legal in some countries. The rules are evolving throughout the world and although the rules can be somewhat murky, there are legal and tax regulations which must be taken into consideration with all types of financing.
National Crowdfunding Association of Canada

Impact Investors Investors who direct their capital investments toward enterprises which deliver a social return on investment and thus strive to make a positive impact on the community, society and environment.

MaRS on Impact Investing.

Microfinancing Traditionally microfinancing was a way of providing financial assistance in terms of small loans to help individuals in developing countries create or sustain small businesses to earn a living. The 2006 Nobel Peace Prize was awarded to Muhammad Yunus, founder …of Grameen Bank, (who said) that if an institution could make financial resources available to the poorest people in Bangladesh, then “these millions of small people with their millions of small pursuits can add up to create the biggest development wonder.” Link to Grameen Bank

Microfinancing has expanded throughout the globe as a way to provide small loans to entrepreneurs but who have creative business ideas that will help solve community problems but who would likely not otherwise qualify for a loan and do not have collateral.

As an example, the Saint John Community Loan Fund (NB) “uses invested capital to help individuals create income, build assets, and attain greater self-reliance” by providing microfinancing to assist business, employment, affordable housing, non-profits, community leadership, enterprise development and youth entrepreneurship.

Microfinancing is an investment in the community and helps promote the entrepreneurial mindset. It is made possible by investment capital and donations raised by the community.

Minimal Viable Product (MVP)
MVP is the very smallest version/iteration of a product that can be used for market testing and validation. The term originated with the Lean Startup model.

Desh Despande compares MVP to half-baked bread and says that it shows when your business is valuable enough that the customers still want it even when it’s still in development.

Pivot To take an initial business idea into a different and better direction when it appears that the initial idea was not viable.

Desh Deshpande:”Managing change in a startup is like steering a boat, in that in order to shift (or pivot) toward a better idea, it’s much easier to do so when you’re moving than when you’re sitting still. Likewise on a boat, speed and momentum make turning considerably easier.” (Merrimack Valley Sandbox Blog)

Social Enterprise Mark (UK)
Obtaining the Social Enterprise Mark certification involves a rigorous process whereby an independent body determines whether a business/organization is a social enterprise and requires that at least 50% of the profits be directed at addressing community, environment, social needs. With the Procurement Act (2013-UK) requiring purchasing decisions to take social value of enterprises into consideration,  this certification is essential for those who want to do business with the government. Social Enterprise Mark-UK.
Social Financing An approach whereby Social Entrepreneurs/Enterprises are able to get access to capital in order to take their idea from the conception phase to development phase or to grow their enterprise further.

Investors who place value a social return on investment which may also include a financial return on investment, use various different  tools & options to provide financing to social entrepreneurs/ social enterprises. It is a way of mobilizing capital for enterprises in order to facilitate a positive impact on the community and on the common good.

MaRS on Social Financing  Tim Nash-Sustainable Investing

Human Resources & Skills Development Canada

Social Return on Investment (SROI) Return on investment, is a measure of value received in terms of financial return in ratio with the investment made. SROI is a tool for measuring more than just the financial return; it also takes into account the value of the social, community and environmental impact.

SROI Canada-From Cost to Value

Triple Bottom Line Known as the 3 Ps. Approach to the bottom line in which People, Profit and Planet are taken into consideration.

“What you measure is what you get, because what you measure is what you are likely to pay attention to. Only when companies measure their social and environmental impact will we have socially and environmentally responsible organisations.”  The Economist.

Example: Better World Books

Venture Capitalist An investor who may direct investment into various kinds of higher-risk early-stage enterprises demonstrating growth potential  with the purpose of making a significant return on investment (usually 25% or higher) and taking an ownership stake. Often as part of the financing agreement, the VCs require their ability to influence the direction of the enterprise.

*Please Note:
The definitions and explanations provided on this site are for general information only and vary among jurisdictions and countries. Entrepreneurs and investors are advised to consult with legal, tax, accounting and other appropriate professionals for information and advice.

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