This is Part 1 of a two-part conversation with Chris O’Neill of Ākina Foundation. In Part 1, we explore with Ākina’s commitment to support social enterprise across New Zealand and the social enterprise climate in New Zealand.
Purpose driven companies and social enterprises are on the rise shifting the economic culture. One organisation, Ākina Foundation, based in Wellington, New Zealand, was founded 2008 to support New Zealand's people and organisations with ideas to drive positive social and environmental change through purpose driven organisations.
GINA: Today's guest on ‘No Ordinary Business’, Chris O'Neill is the General Manager of Programmes of Ākina Foundation is here to talk with us about Ākina and why he thinks social enterprises are the way forward for society. Welcome to No Ordinary Business Chris!
CHRIS: Hi, Gina
GINA: Before we get to Ākina, will you tell us a little bit about your own personal story and how you got to where you are today?
CHRIS: I used to work in an organisation that was called a not-for-profit but I learned was actually a social enterprise. When I met with other not-for-profits, I often heard the same conversations: “There was never enough money, there was never enough time, government should do more” and I felt like that was a conversation that I didn’t want to be a part of. I wanted to be part of a conversation where people were confident about the change they were making and confident about their abilities to drive that change themselves. Through my MBA, I spent time looking at social enterprises and why people invest in them and felt like this was the solution to the conversations I was hearing and a lot of the questions that I had. Through the MBA research process, I came into contact with the Ākina Foundation and learned about the great work that they were doing around building social enterprise across New Zealand. I felt like this was the place where I wanted to be. I wanted to be a part of the conversation that enabled other people to have that success.
GINA: How would you describe Ākina’s overall mission?
CHRIS: Our mission is to transform the New Zealand economy through the power of impact. We do that through a number of different ways following four pillars that we identified as necessary for social enterprise to be successful: i. building the ecosystem of social enterprise in New Zealand (working with government or local communities), ii. Providing capability development to individual social enterprises and entrepreneurs, iii. Offering an impact investment fund focused on growing impact businesses, and IV. Working in the area around social procurement to facilitate social enterprise access to markets.
We are working with corporates to connect them with social enterprises and show them how they can create impact through their procurement spend.
GINA: Before we go into detail about your individual programmes, can you illustrate for our readers what the social enterprise environment looks like in New Zealand?
CHRIS: There are different ways to approach your question. Maori, New Zealand’s indigenous population have traded in a way that is inherently social and environmental outcomes. On that basis, you could say that New Zealand has historically been a social enterprise country and that we lost our way a little. Second, in terms of government, we have a very supportive government that has invested significantly in growing social enterprise and we are actively engaged in conversation with them. We are also seeing consumers and corporates wanting to be a part of the conversation. We are seeing very strong growth in ‘ethical’ business, which is obviously very closely aligned with the concept of social enterprise. The conversation that is taking place in the media and around boardrooms is: “How do we have organisations that are creating more impact, moving away from a situation where the commercial driver is just one consideration rather than the whole conversation?”
GINA: That’s interesting. I am curious, do you have a sense of where New Zealand stands on social enterprise as compared with other international jurisdictions?
CHRIS: I think we are relatively early on in the journey but we are moving really fast. We’ve been learning from countries such as Scotland where a lot of work has already been done and their environment is similar to ours. Our own organisation has a very strong relationship with partners in Scotland. While theirs is a different environment with regional differences across the highlands, whereas we only have three main islands, we are still able to learn a lot from Scotland and are trying to take the best of what they've done in the past and adapt that for our own personal use and combine that with the best of what we already have here from our Indigenous culture.
GINA: What is the climate like in terms of capital availability? Are investors putting money into social enterprises or purpose-driven companies at a rate that meets market need?
CHRIS: We are seeing a definite growth in that area and have been working in impact investment for several years. At the end of last year, we were able to raise NZ$8 million for our impact investment fund. That fund is a finance first fund rather than an impact-first fund. That difference reflects the fact that market rate returns to investors are still a major priority in New Zealand, as the understanding of impact is nascent. There is a lot of philanthropy in New Zealand, and a lot of financially motivated investment in New Zealand, but less understanding that the outcome of both of these actions can be achieved with the same dollar. We, therefore, decided to make a finance first fund to help the financially motivated people understand they can generate strong returns as well as impact. As these investors become more familiar with impact we hope that over time they show interest in investing in impact first funds.
GINA: So part of your offering as an organisation is to help young start-ups get to a point where they’re investment ready and can attract financing?
CHRIS: That’s one of the areas we work in. Sometimes we work directly with organisations on investment readiness or we collaborate with partners who can deliver that work. We work within an ecosystem recognising that there are other organisations that might be better suited to helping young enterprises get to investment readiness.
We work with them throughout the full lifespan right from getting them started, through to help them stabilise and grow, and then finally getting them investment ready. Without the whole pipeline working there is nothing there for investors.
GINA: How would you describe Ākina’s impact investment fund’s philosophy and the primary objectives of the fund?
CHRIS: The Impact Enterprise Fund invests in New Zealand businesses that deliver tangible societal and/or environmental returns, alongside attractive financial returns. We want to provide growth capital to enable impact-oriented kiwi businesses to scale.
GINA: What are your primary criteria for onboarding a company for your fund?
CHRIS: Market-rate financial returns, and measurable and meaningful social and/or impact. We are not restricted in any way by investment instrument, stage, or impact areas.
GINA: What are the sources of capital you are receiving for your investment fund?
CHRIS: We received investment from 35 different parties for this fund, including cornerstone investments from St Johns College Trust Board and The Tindall Foundation. Majority of investors were New Zealand based individuals.
GINA: Tell us a little about your capability-building programme.
CHRIS: We work across the lifespan of the social enterprise, so the first time we meet a lot of social enterprises is through public workshops. We give them tools on how to get started and educate them on what social enterprise is. Once they are past the idea stage, at a point where they are actually trying to get traction, we are there to provide one-on-one coaching.
What we are looking to do is identify the social enterprises specific needs around marketing, around the financial model, around customer acquisition strategy and either then deliver that support ourselves or find a partner who can deliver that specialised support. This is what we consider to be our capability building, which is one of the four pillars that we have as a key area to the development of the social enterprise environment.
GINA: How green are these enterprises when they come to you?
CHRIS: They all tend to be fairly early stage, so they would be less than one year old. Whereas with some of our more structured programmes, such as our Launchpad programme, which is designed for growth stage companies, we would expect them to be running for close to three years, have an established staff, and a plan for how they are going to scale.
GINA: For the capability-building programme, where you are working with the startups, can you describe the criteria that you have in place to determine whether you are going to take an organisation onboard?
CHRIS: Whenever we consider onboarding an organisation, we evaluate to what extent they are a social enterprise. We find that approach more productive than fitting them into a definition of social enterprise as we do not have a legal definition in New Zealand. The two things we focus on is whether the organisation has an impact model where they can say: “This is the change we want to see in the world” and do they have a viable business model where they are selling products or services in order to sustain the impact that they want to achieve?
GINA: Do you have any requirement around legal structure?
CHRIS: No, we don’t. In New Zealand we have two different legal structures used for social enterprises, a charitable/not-for-profit structure, and a company/for-profit structure. The legal framework for both charitable and company structures in New Zealand is quite flexible so charities can trade and companies can prioritise mission over return. We see social enterprises using both of these models.
GINA: For the for-profit companies, do you impose impact-first criteria for acceptance?
CHRIS: Our expectation is that they prioritise mission over shareholder return.
GINA: Do you find that there is a lot of interest in the community to establish companies in this way?
CHRIS: The choice between a charitable or company structure often hinges on where they think capital will come from. For many organisations, if they are a place-based or community-based organisation it is simpler for them to be a charity and access grant funding to get them through the first year or two. If they think that they are going to be a longer term, scalable, national or international business, they’ll take the company route so that they have the option of bringing in capital down the road. We also see a lot of hybrid options so we have social enterprises where there is a charitable trust that owns a for-profit company for example. That approach gives them the option to attract capital at the company level, which would not be possible through the charity.
GINA: And presumably the charity vehicle would permit them to also receive grants that would be eligible for tax incentives to the donors.
CHRIS: Yes, exactly.
GINA: Is there anything else about your capability building goals that you would like to share?
CHRIS: When we consider the journey Ākina is on for the long run, our focus is: how we can enable other people to do the work that we do? Capability building is one of those key areas. We recognise that as an organisation we cannot be everywhere and we cannot understand every cultural context, so for us across-the-board and especially with capability building, our focus is on how do we partner so that we can effectively combine our knowledge with that of other organisations, recognising that many of these community organisations and many of these communities already have really strong existing knowledge and skills.
GINA: Are there any specific sectors that you are seeing a lot more activity?
CHRIS: I would say a significant proportion of New Zealand social enterprises are focused on employment generation or training, focused on segments of the population who would traditionally struggle to get access to employment or training. In terms of industries that people might work in, it is pretty broad, we see everything from catering to blockchain payments to waste minimisation, so I wouldn't say one industry predominates over any other.
GINA: Have you observed any patterns on the profile of founders of these social enterprises?
CHRIS: We haven’t conducted any formal analysis on that but if I were to think about my gut feeling, I would say that the majority of founders that we work with are probably under 40. I would also say there are two age groups where I see most of the activity. First, there are the younger, early-twenties, relatively fresh out of university or other vocational programmes or early in their work career. Second, another cohort that is common is people who have worked in the not-for-profit sector or corporate sector deciding that they want to make a change in their life and think that the social enterprise is a way to bring more meaning to their work.
GINA: I can imagine that trend is going to continue to grow.
What about your market connect programme – what is your objective there?
CHRIS: That is the platform that gives social enterprises access to markets, a necessary component to success. We are working to connect corporate and government with social enterprise so that they can procure social enterprise goods and services. We are launching that platform in September and are in the process of onboarding all of the suppliers and buyers into the marketplace.
The more that we can grow demand for social enterprise goods and services, the more we can grow the impact that those social enterprises have. By accessing corporate and government supply chains we allow the social enterprises to grow but also enable the buyers to have a greater impact through their procurement spend.
GINA: I am curious to see how this programme plays out. It brings to mind the Patagonia venture capital model where part of the company’s profits are allocated to their VC instead of being donated to charities and the VC identifies and invests in companies doing things better or more responsibly than they are. For instance, if a smaller company has a better technique in place or technology that uses less water or less energy in fabric creation, the VC may purchase the company and then integrate the process into Patagonia’s operations. Do you think that could evolve as a consequence of your programme as well?
CHRIS: The concern I have with that model is that if one organisation procures that technology it limits the impact that it could have rather than making an investment to enable that company to continue to operate and service other companies; you are bringing it exclusively into your own supply chain to the loss of other organisations that could use it and be more sustainable.
Also, New Zealand doesn't have the same kind of mergers and acquisitions that you might see in the United States, for example, so the amount of VC is comparatively limited and there are not a lot of larger organisations that are out there looking to absorb or completely buy out another company. It does happen within New Zealand, but I would think most startups here with an exit goal (such as the tech startups) would be looking for an international buyer but most social enterprises here would not be looking to be exclusively bought out.
GINA: There is a trend in the startup world to focus on an exit strategy. However, having said that, when I speak with the founders of social enterprises and ask them about an exit, it is really interesting to see the different reactions that I get. Some people get quite put off by that question because they say: “I like what I'm doing - we’re tackling a really complicated issue and it is hard work, why do I want to sell it in five years?” It is a different focus, however, I think that on the tech side, even if it were ‘tech for good’ you would see a greater appetite for an exit in the short-term rather than maintaining a lifestyle company.
Would you agree then that in New Zealand most social enterprises are lifestyle organisations rather than seeking quick exits except for perhaps within the tech sector?
CHRIS: I think that would be a fair representation. We work more with the ‘lifestyle organisations’ with the exception perhaps of the companies within our impact investment fund where we are looking for exits to give investor return. Obviously, when you are working with charitable organisations, exiting is never a consideration and for those established as companies, they are more likely to see that they can trade their way to the scale of impact that they want rather than bring on investments to achieve that level of scale.
GINA: Let’s explore the concept of scalability for a minute. How much of an objective is it with the organisations that you work with?
CHRIS: It varies greatly. We have some organisations that have consumer brands that obviously need to get to scale in order to get their business models effective. We’ve also got very place-based organisations, which we might call ‘community enterprises’ like community recycling for example where they are trading commercially and bidding for waste contracts. Those organisations recognise that the context for them is very important and would not want to scale or expand but they might want to share their knowledge and experience to help others.
GINA: Let’s explore your paid consultancy services now. At Ākina, you’re offering consulting services for corporates, government, and not-for-profit organisations on a bespoke basis, right?
CHRIS: Yes, it’s basically the spread of all of the different work we do that doesn’t fit neatly into one of our other programmes and can range from a feasibility study to helping a government department understand how to do results-based contracting for example. This work might be designed around a specific region or specific challenge, building a programme, or capability development, or conducting research. It’s designed on a bespoke basis to support the work that the client wants us to do.
GINA: I’d be interested in learning more about your own model. How is Ākina structured and funded? How do you achieve sustainability as an organisation?
CHRIS: Our legal structure is a hybrid model - we have a charity that owns a company. The reason we have to do that is that as a charity we would be restricted in the type of organisations we could support.
Almost every dollar that we get is linked to a contract rather than a pure grant. We are delivering outcomes and essentially trading for that revenue. That revenue might come from a regional philanthropic organisation who wants to grow social enterprise in that region or it might come from a corporation who wants to enable social enterprise in their procurement or grow an area of impact for themselves or it might come from a government who might want to get certain outcomes from us.
GINA: Is academia in New Zealand involved in social enterprise or social innovation at all?
CHRIS: I think the interest is growing. We have people approach us that examined social enterprise or innovation during their studies. We have partnered with a couple of local universities to help them deliver social enterprise courses to their students. There’s an appetite but there isn’t really a home for it yet – we’re not seeing business schools forming social innovation programmes. For instance, the course that we developed with one of the universities was offered through the School of Government, rather than the School of Business and was centred around policy. In Christchurch, however, there are social innovation programmes through the School of Entrepreneurship. It does vary.
GINA: So the business programmes have not yet been tailored to include social innovation.
CHRIS: No, they have not.
GINA: I suspect that will change.
CHRIS: Yes. I’m definitely seeing an interest. When we held the Social Enterprise World Forum in Christchurch last year, we had a day dedicated to academic engagement with social enterprise and we definitely see that there is an appetite there, but as is the case within the traditional university, their processes may be slower than what you would find in other sectors.
GINA: That’s great, Chris. Thanks! Let’s pick up our conversation on government support of social enterprise tomorrow and what it means to be a social enterprise.
Stay tuned tomorrow for Part 2 of our two-part conversation with Chris O’Neill, General Manager of Programmes at the Ākina Foundation. In Part 2, Chris talks about the New Zealand government’s support for social enterprise, what’s required to create an enabling ecosystem, and we explore what it means to be a social enterprise and the risks and benefits of creating a legal definition.
Chris O'Neill is the General Manager of Programmes at the Ākina Foundation, based in Wellington, New Zealand.