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Social entrepreneurship in Toronto is hot and may be a future direction for capital markets

In front of a crowd of eighty people at the MaRS Discovery District, Jam Johnson is passionately pitching his business. "Be your brother's keeper, because times are getting steeper," he says, promising to put the slogan on a T-Shirt with the help of a $1,000 loan from Social Asset Measurements (SAM).

Johnson is presenting at the second annual pitch competition hosted by the Young Social Entrepreneurs of Canada (YSEC). There are six groups in total vying for the funds, ranging from more traditional community groups looking for a boost in operational funding, to socially-minded businesses that need some seed capital. 

Social ventures are exploding in popularity amongst the youth of Toronto, a generation that doesn't buy the split their parents identified between for-profit companies that makes money and not-for-profit charities that perform social good. Social entrepreneurs are convinced you can do both at the same time.

The two $1,000 loans being given out are not just gifts from seasoned capitalists looking to humour young idealists: the loans must be paid back within four months at an interest rate (9%) that would make even the most hardened venture capitalist blush.
SAM wants to collect some data through the YSEC winners to see if their loans create a rate of return that might appeal to more traditional venture capitalists or angel investors.

Last year the $1,000 loan was won by Mike Edwards with tree-plating group Preparing the Trail. He managed to quadruple the investment within four months, paying back the loan and funneling the profit back into his social enterprise. Those are numbers that surely make sense to investors.

Johnson's initiative, the Neighbourhood Basketball Association (NBA), is "free or low-cost basketball programs" for  youth in the underserved Kingston-Galloway neighbourhood. He charges a $100 registration fee which is sometimes waived if the kids can't pay, and keeps them off the street in a structured, peer-lead environment, organizing homework help and basketball drills.

He plans to invest the money in his kids, allowing them to design and manufacture 100 T-shirts for sale door-to-door.  The profit from the shirts would be re-invested in future projects.  The value is not just to get some money to keep the program going, but to turn the kids into entrepreneurs, getting them to handle the finances, design, marketing and manufacturing.

Other entrepreneurs hit the podium with great ideas, including the Civic Series, which seeks to create a salon-like discussion group for thorny public policy issues such as the war in Afghanistan. With a wide variety of experts and interested citizens at the table, such discussions could yield valuable insights into public policy that traditional media can't reach. 

26parknews.com is a project that grew out of campaigning during the recent mayoral election. "Ward 26 is really divided," says Munira Ravji, showing a map of the ward, consisting of the wealthy Leaside to the South and Flemingdon Park to the East. It was designated as one of 13 priority neighbourhoods by Mayor Miller's office.

Ravji's team wants to set up a community web-site portal that would allow for conversations between ward members on important policy issues. Revenue would come in from hyper-local advertising from businesses in the neighbourhood. 

Romesh Hettiarachchi and Dylan Fernando took to the stage with nothing less than the lofty goal of ending the unrest in Sri Lanka. "We're in a post-war, but not post-conflict situation in Sri Lanka," says Hettiarachchi when I catch up with him later. "We're providing a platform for people to discuss the issues. We're using events to create a common ground."

They put on social events like book readings and tree plantings where Sinhalese and Tamil Sri Lankans can air their grievances and talk through concerns in a safe environment. "Even from the first event, people start talking amongst themselves." Says Fernando. "The community has a panoply of views, so it's very important for people to sit down and talk to one another."

Hettiarachchi is a family lawyer by day, and Fernando is an accountant. They need the money for a Sri Lankan-themed calendar, which they'd sell to bootstrap their way to self-sufficiency.

Another hopeful group, Collective Footprints, is a social enterprise advisory service for local community groups. They seek to empower green and socially responsible businesses across Toronto from their base in Riverdale.

Young Urban Farmers: Community Shared Agriculture (CSA), are a pair of eager young foodies who want to allow Torontonians to embrace the "100 metre diet."  They recruit volunteers to farm backyards across the city, selling the food at farmers markets and splitting the profit with the homeowner. They plan on using the $1,000 to build a rough-and-ready greenhouse so they can get a head-start on the growing season by planting seeds in the winter.

After the pitches, with people swapping business cards at the bar, the announcements were made. The winners of the two $1,000 loans were announced as the Young Urban Farmers and Jam Johnson's NBA.

"What I love about both the winners is that they did their math," says Tonya Surman, Executive Director for the Centre for Social Innovation (CSI). "Because non-profits rely on government funding they are great at itemizing their expenses, but don't think about making money. We need the values to create social change but we also need to do our homework, which is making sure you've got a solid business case and cash flow forecasts."

She emphasizes the point that successful social ventures should seek to bridge the divide between a traditional not-for-profit and a business. "Community Shared Agriculture captures the difference between the two models," she says. "There's something about the interaction of the social purpose with their ability to make money.  It's a hybrid that will create a new market. They're creating a new market that a traditional business would never enter."

I catch up with Christopher Wong and Ronald Ha, the two winners from CSA after the announcement, and ask them about their plans. "We're interested in perfecting on a small scale and then growing to scale," says Wong "There's a lot of growth potential. We can transplant this model to other cities."

 Aware that not much can be done with only $1,000, they're quick to point to the other benefits of pitching in a competition like this. "It's not just the money," says Wong, who has a degree in gardening and agriculture. "It's the networking and the people you meet." 

Jam Johnson is ecstatic after his win. "My goal is to teach the kids to run a business, learning how to carry themselves on a professional level," he says.  "I want to reduce the level of temptation of selling drugs on the corner. Seeing a shirt they made and they sold, on someone else's back makes them look good, makes their family look good."

YSEC, SAM and CSI are in good company looking to social investing as the future of capital markets. Recently, a report was released entitled Mobilizing Private Capital for Public Good from the Canadian Task Force on Social Finance, including such heavyweights as Social Capital Partner's Bill Young (see Yonge Street's September story) and ex-Prime Minister Paul Martin. The report calls for increased partnership between investors, corporations, philanthropists, foundations and governments to build a solid "impact investing" marketplace in Canada.

Combine that with enthusiastic advocates like Jam Johnson and the rest of YSEC's network, the future of social entrepreneurship seems secure.

Joseph Wilson is a freelance writer on issues of science, technology and culture.
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