Speramus

It’s official! Speramus is a finalist in the Brown EP 2010 Entrepreneurship Competition. Selected from an outstanding field, Speramus was one of the six Business Plan track finalists competing for a piece of the $60,000 in cash and in-kind services. We’d love it if you’d come out and support us: at 1pm in MacMillan Hall on Saturday, May 1st, each of the finalists will give a 3 minute pitch to the public and answer three questions. This audience will get to vote on who their favorite team was, so make sure you come see us!

Also, for those of you who are social networking savvy: We’ve started up a blog (http://speramus.com), a twitter (@TalkToSperamus), an RSS feed, and a blog newsletter list. Plenty of ways to keep up on the latest Speramus news!

On a side note, we’ve written a few words of reflection on the competition. A few people have asked why we aren’t in the SII Social Venture track of the competition, so we’ve written up a few words below.

Brown EP is an interesting contest for us because it presents two different application options for entrants, allowing you to self designate as a for-profit business or a social venture. As many of you know, Speramus operates under a triple bottom line and is dedicated to bettering our communities while still making a profit. We’d were a natural fit for the social venture track.

Except that we weren’t. Surprisingly, the competition stipulates that a social venture can be non or for profit, but must limit returns to investors to a very low percentage to ‘keep management and investors focused on the social mission’. Unfortunately, this stipulation cripples what we believe is the strongest advantage of social ventures: allowing people to do good while doing well.

Yes, we are a business, and we try to make money. But the way Speramus makes money is to create value for the nonprofits we serve. Our business philosophy, and more concretely our revenue model, is tied to increasing the success of our clients; the better they do, the better we do. There’s an incentive on both sides to ensure the success of the other.

Contrast this with a situation where Speramus had to isolate our performance from our profits. Suddenly, there’s no incentive to improve the product, because no matter what our profits are capped at a certain, low percentage. Investors have no reason to invest in us as a risky start up that won’t provide any returns, and the platform never goes anywhere. Fundraisers lose the productivity of the Speramus platform, and everyone is worse off.

It is this exact mentality which we’ve seen fundraisers struggle to overcome. Studies have shown that organizations which invest in structural improvements (software, training, and other things which benefit the organization itself) are more efficient and have higher impact than those which strive to use all donations for program expenses. This all makes sense – a better run organization can better deploy the funds that it has. More funding gets better staff, better training, and better service.

But it is the rare donor who gives a gift with the intent of funding structural improvements; donors feel like their gift is being better used when it goes to the program rather than getting better administrators. Something just makes us feel uneasy when a gift goes towards paying a salary instead of the soup kitchen’s food, even if we know that the salary will improve the quality of the soup kitchen several times over.

The same fallacy comes into play by requiring a plan to limit returns to investors. It might feel like a better deal for nonprofits, but upon closer examination it does more harm than good.