Venture capitalists and their backers look for unicorns, start-ups that hit a billion dollar valuation. The dream is scale, as fast and as big as possible. It was reported just this past week that tech initial public offerings have raised over $7bn dollars since the beginning of 2018.
In the social sector as well, philanthropists and impact investors seek the holy grail of scale, citing examples such as Teach for America, now expanded into Teach for All, or the Grameen Bank, which not only became a global organisation itself but also spawned an entire microfinance movement. A social enterprise that has an impact on thousands or even tens of thousands of people cannot solve a problem measured in millions or hundreds of millions.
Yet for all the excitement about building a system of social enterprise as a parallel to private enterprise, the analogy only holds so far. In the private sector, companies reap economies of scale. The more efficient an organisation is, the more profit it generates, the more competitors it beats out, the more market share it captures, and the more ability it has to invest in ever more efficiency, which starts the cycle all over again — at least until it becomes so big that it begins to distort competition and harvest monopoly rents.