As young people and university graduates are increasingly searching for professional experience with a purpose, social start-ups have emerged in significance in Germany and worldwide. This article takes a closer look at the meaning of social entrepreneurship, successful case studies and industry networks in Germany.
What is social entrepreneurship?
Social entrepreneurship stands for young companies with the aim of bringing positive change to today’s society. Social enterprises are trying to solve a social problem through entrepreneurial ideas, products and services while operating efficiently and profitably. This means they want to earn money through new innovation and do good in the process. Therefore, these companies and start-ups are thinking and acting in the long term while taking into account the importance of sustainability. Nevertheless, for them the added societal value has priority before personal profit. The main difference in contrast to conventional companies is that social start-ups do not accept the exploitation of resources as a means of achieving business goals and profit.
Social Entrepreneurship in Germany
In industrialised nations such as Germany, social enterprises are often active in the fields of education, migration, environmental protection, or fair trade. These companies are tackling current and relevant global challenges such as climate change, social division, the digital transformation of the ageing German society. According to the European Commission, one in four start-ups in Europe is a social enterprise.
The German Social Entrepreneurship Monitor of 2019 reports that more than 80% of social entrepreneurs value their impact on society higher than maximising their profits. Next to this, these companies further emphasise values like empathy, commitment and cooperation while fostering a family-oriented company culture. Even though the salaries are lower compared to other industries, the work climate is considered better in social start-ups. Around 85% of social start-ups claim that they actively involve their employees in strategic decisions.
Another important aspect of social start-ups is diversity and inclusion. Around 53% of all founders of social enterprises are female, compared to 16% in the traditional startup sector.
In addition, German social enterprises are particularly inclusive as 30% of their employees have physical or mental impairments. The national average share for private companies in this area is estimated at 4%.
Challenges of Social Entrepreneurship in Germany
As a recent study has shown, more than 50% of all social entrepreneurs in Germany complain that the most difficult challenges they are facing concern their legal form and suitable financing options. This difficulty relates to the seed-financing, follow-up financing as well as the overall access to the financial market for social start-ups. The majority of German social startups is financed through the founder’s own savings, government subsidies and through internal financing. In terms of legal form, the combination of the social aspect with the entrepreneurial factor proves to be challenging. Therefore, around 58% of social enterprises classify themselves as a more commercially oriented legal form, while 46%, operate from a more socially oriented legal form. The third challenge that entrepreneurs are facing is the lack of support and public awareness. According to the German association of social entrepreneurship, in 2020, 80% of social founders rated the support for social entrepreneurship from politics as low.
Successful Social Enterprises in Germany
The search engine Ecosia is a green start-up from Berlin, founded in 2009. The company donates 80% or more of its profits to non-profit organisations that focus on reforestation. It uses the generated money from advertisements to plant trees for the environment. So far, they have planted over 100 million trees and currently have around 7 million users. The majority of these users are under 30.
Enpal is based in Berlin, makes renewable energy accessible to everyone and thereby revolutionises the solar energy sector. The company was founded in 2017 and offers solar solutions for rent through innovative financing. The technology magazine TechEU has announced that the founders of the German E-Commerce giant Zalando have invested “millions of euros” in this green technology start-up.
The Berlin-based startup and software company, Planetly, offers digital tools supporting companies to analyse, reduce and offset their CO2 emissions and thereby enabling them to decrease their carbon footprint. In 2020, the social start-up has received an investment of €5.2 million.
Simpleclub is a German EdTech (Educational Technology) company that offers an online learning platform and app with thousands of learning videos, interactive exercises and summaries for students and teachers in Germany. During Covid-19 as a result of the closure of schools, Simpleclub offered a free month for students and teachers. The company has received Venture Capital investment of €2 million from HV Holtzbrinck Ventures and has currently more than 1 million monthly active users.
The neighbourhood network nebenan.de connects neighbours across all age groups to socialise, buy and sell goods, promote local businesses and offer support during Covid-19. The start-up has currently more than 1 million active users in Germany and plans to expand across Europe. So far, they have raised around €24 million of investment.
Resources and Events Supporting Social Entrepreneurship
- The Association Social Entrepreneurship Netzwerk Deutschland e.V. (Send e.V) is connecting social entrepreneurs with politicians, the public and the economic sector.
- Since 2009 the world renowned business school WHU has been hosting the social enterprise conference “SensAbility” with networking opportunities, panel discussions and career sessions.
- The Impact Hub in Berlin offers social entrepreneurs access to networking opportunities and workspaces. The Hub further publishes its annual global impact report about social entrepreneurship worldwide and offers consultancy services.
Are you interested in the German start-up scene and looking to invest in social entrepreneurship?
Do you consider founding a social enterprise and need support in the process of choosing the suitable legal form?
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