“Social business in Germany is actually nothing new.”
“Social business in Germany is not as prevalent as in other countries.”
Speak to people in the nonprofit sector with either charitable or political associations, and you are guaranteed to receive entirely different views on social business in Germany. In Germany, social business occupies a difficult position.
On the one hand, Germany is proud to boast a highly-functional social sector, consisting of six immense charitable organizations (the largest organization, Caritas, employs over 600,000 people in Germany - much more than any company in the private sector), as well as a comprehensive government-sponsored social support system comprised of daycare centres, nursing homes, inclusion projects and much more. Essentially, these organizations function as successful social enterprises: they are paid for the provision of services. However, they operate in a half-open market, receiving merely remote, performance-driven financing from the government. This situation is quite different from that faced by a social business operating in an open market.
On the other hand, there are certainly less market-abiding social businesses in Germany than in other Western countries (i.e. the U.S. and the UK). One explanation for this is that the German welfare state takes on many issues that would otherwise be addressed by social businesses, as is the case in the USA (and now also the UK). But, this means that the potential for social innovation is somewhat suppressed in Germany. As a result of the historical domination of the social sector by charitable organizations, there exists no real infrastructure for large risk investments. In addition, the German startup world, as well as the politics that surround it, remains predominantly profit-driven. Generally, intelligent individuals with business know-how depend primarily on profit-oriented enterprises. In the U.S., large startup incubators like Y Combinator provide a home for social enterprises… such possibilities allow these enterprises to grow quickly. Social businesses in Germany, however, must fight to stay alive from the outset.
Social Business in Germany: The key players
Despite these obstacles, there are some actors (charities have also gotten the ball rolling) that are working hard to facilitate the creation of a strong infrastructure for social business in Germany. Below we have summarized the key players.
Ashoka is the first and leading global organization for the promotion of social entrepreneurs. The non-profit organization was founded by Bill Drayton in the U.S. in 1980 and is now active in over 70 countries. In Germany, Ashoka has been a nonprofit organization since 2003, when it decided to take action in Western Europe after 20 years of activity in developing, emerging, and transitioning countries. Ashoka Fellows are the core of its worldwide network. Nearly 3,000 Ashoka Fellows in more than 80 countries are working to change society for the better and inspire others to take similar action. The first German Fellow was added to the network in 2005. Today there are 51 German Fellows, spread over various sectors. They work on a diverse range of social issues; strengthening the social skills of children, working against the decline of farmlands, bringing transparency in democracy, and much more. In addition, they have a program for young social entrepreneurs called PEP. Program Engagement with Perspective (PEP) is aimed at volunteers 16-27 years old who want to create sustainable and effective structures for their promising projects.
Social Impact is a consulting firm and incubator space for social enterprises in Germany. Many of the most famous social enterprises in Germany were at some point on their premises. The incubator program does not supply direct funding, but rather provides an excellent network, access to a mass of experience and knowledge, and 8 months worth of office space. There are currently incubators in Berlin, Leipzig, Hamburg, Frankfurt, and Munich.
BonVenture finances social enterprises in German-speaking social venture capitals. BonVenture is itself structured as a social business. In German-speaking countries BonVenture was the first investment company to have taken this approach, offering investors the opportunity to support such activities since 2003. It also contributes to capital with both know-how and contacts, provides guidance in the establishment and growth of their organization, and thus promotes the development and dissemination of innovative ideas. Investments start at 300,000 EUR.
Social Venture Fund
The Social Venture Fund invests in social enterprises that provide innovative solutions to pressing social and environmental problems. The objective of the Social Venture Fun is to recover invested capital and render it usable for re-investment. Thus, only the power of capital, not the capital itself, is employed for positive change.
The Ananda Ventures GmbH is the initiator of the first international investing Social Venture Capital Fund in Germany. It was founded in 2010 as a social enterprise. The company's objective is to enable investment in positive social change by utilizing entrepreneurial energy and a performance-oriented approach.
Tengelmann Social Ventures
Tengelmann Social Ventures GmbH is a Social Impact investor who focuses on financing social businesses and supporting social entrepreneurs. Their emphasis is on Internet startups and e-commerce, and some of their current companies are Dot.Hiv and Coffee Circle.
The priorities of the Vodafone Foundation are educational projects and social entrepreneurship. They have been very important in the scaling of projects such as Rock Your Life and are currently supporting the Quinoa School. The Quinoa School provides socially disadvantaged young people equal opportunity by way of training and educational advancement. The foundation’s middle school opened in August of 2014 in Berlin-Wedding, where currently about 68% of young people live in Hartz IV households and 85% of the students in grade 10 have no job prospects after graduation.
Bertelsmann operates primarily as a foundation, but exerts a huge influence in social business. The organization does a great deal of lobbying and advocacy in the field of social entrepreneurship and impact investing.
The BMW Herbert Quandt Foundation also operates primarily as a foundation, but plays a key role in social business and impact investing. Ryan Little, a social entrepreneur, is the most important partner in this area.
Social Entrepreneurship Academy
The Social Entrepreneurship Academy is an interdisciplinary project brought about as a collaboration among all the universities of Munich. They want students from all sectors - from engineering to medicine and business administration - to inspire awareness and enthusiasm for the subject of social entrepreneurship. They offer seminars and courses such as the TGIP: Compact
Impact Hub is a global network of co-working spaces for social entrepreneurs and professionals whose work has social value. Currently there is an Impact Hub in Berlin as well as in Munich. Membership starts at about EUR 20 per month. Access to exciting events and positive energy are some of the many advantages of such membership.
To start a social and sustainable business, and to successfully reinvest half the profits of this enterprise, is the promise of the signatories of the Entrepreneur's Pledge. The project was founded in Berlin by Waldemar Zeiler and Philip Siefer. It focuses on the social aspects and equitability of business production – but also produces scalable business. The current list of nearly 50 signatories includes some familiar faces. The Mymuesli founders Hubertus Bessau and Max Wittrock have signed the pledge, along with I-Potiential’s frontwoman Constanze Buchheim, the Helpling’s founders, Benedikt Franke and Philip Huffman, Lebenslauf.com founder Thomas Bachem, and Team Europe partner Kolja Hebenstreit.
Originally published July 1, 2015