A profit-making business – that’s the way to grow

An example of a socially conscious business student is Social Edge blogger Sam Goldman, who wanted to start his own social business and became founder of d.Light – a company selling $10-25 solar-powered lamps in more than a dozen countries where people lack electricity.

 

Goldman spent four years in the Peace Corps in Benin before earning his master’s degree in business at Stanford Graduate School of Business. During his stay in the West African republic Goldman learned first-hand of the problems of using kerosene lamps: it is expensive, provides poor light and is extremely dangerous. And when his neighbour’s son nearly died after suffering severe burns from spilled kerosene, Goldman realized that he wanted to create a venture to solve both the social and economic problems caused by these lamps.

 

Like Goldman, many social business entrepreneurs are pragmatic idealists who want to make money – they just don’t want to make it at any price. This is also the reasoning behind Sam Goldman’s pursuit of finding ways of lowering the costs of d.Light’s lamps: ‘I’m not satisfied with $10,’ he explained to TIME a couple of years ago. ‘The real customers that we started this business for can’t afford that.’

 

For the social entrepreneur, the choice of business model depends on the social venture’s value-adding proposition as well as growth ambitions in the short and long term. And because social entrepreneurs are in business to create social value and change, they put effectiveness before scale.

 

Some, for example, focus on scaling the social solution rather than scaling the actual business. Others operate with concepts that are not even suitable for upscaling or replication because they may depend on rare conditions, scarce skills or business models that are neither transferable nor cost-effective if repeated elsewhere.

 

With an ambition of driving down the price of d.Light’s lamps, economies of scale make sense in Sam Goldman’s case, because the bigger you get, the cheaper your product can be. So it was clear to Goldman that a project of this kind would only become large enough to reach the great number of people who use these lamps as their primary source of light if it were organized as a profit-making business. ‘We could have done it as a nonprofit over a hundred years, but if we wanted to do it in five or 10 years, then we believed it needed to be fueled by profit. That’s the way to grow.’ In May 2007 d.Light raised $6.5 million from a combination of investors.