Kate Emery wants to build a social enterprise economy in Connecticut, and the initial launching pad will likely be in downtown Hartford.
Emery’s nonprofit organization the Social Enterprise Trust, or reSET, is planning to open an incubator in downtown Hartford that will allow social entrepreneurs to set up shop, plan and grow their company and collaborate with like minded individuals.
The organization is looking at downtown Hartford office locations including the vacant Capitol Center building on Asylum Street, which is slated to be turned into a mixed use apartment complex, realty sources say.
Emery, who is also CEO of Farmington information-technology vendor The Walker Group, confirmed that her organization is looking at downtown Hartford office space. A deal could be announced in early October.
She did not provide further details on the plans, other than saying the incubator would allow companies to rent space on a part-time or full-time basis.
“We are looking to create space and provide services for social entrepreneurs,” Emery said.
Social enterprise businesses are a relatively new concept but are starting to gain traction especially among younger, more socially conscious entrepreneurs.
Their mission is essentially to apply free market principals to businesses that put doing social good ahead of maximizing profits for shareholders. The notion may seem farfetched, but more than a dozen states have already passed legislation recognizing social enterprise businesses as a legal corporate entity.
In Connecticut, a bill legalizing a social enterprise business structure passed out of three committees during the 2012 legislative session, but died in the House on the last day of the session.
Emery, whose group was the main proponent of the bill, said the proposal will come up again in 2013, and she is optimistic it will become law.
The business structure allows an organization to combine non-profit motives, like pursing social or environmental goals, as part of its mission, alongside turning a profit. It also shields a firm’s executive management from shareholder lawsuits if they put pursuing a social cause ahead of maximizing profits.
Emery has been pushing for a social enterprise hub in Connecticut for years and even transformed her own company to meet the social enterprise business model. The biggest change for The Walker Group — which provides IT security and management, Web interactive services, and cloud hosting — is in how it distributes its profits. Instead of enriching shareholders only, The Walker Group splits its profits evenly among the community, employees and investors.
The company also shifted toward a more transparent and participative governance structure, said Emery, who is the sole shareholder of The Walker Group.
To help push her cause, Emery formed the Social Enterprise Trust, or reSET, a nonprofit organization in Farmington that has been working on several fronts to lay the ground work for a social enterprise hub in Connecticut. That includes pushing legislation in the General Assembly to establish the social enterprise corporate entity.
ReSET is also working with colleges to get them to introduce social enterprise into their curriculums. Several schools, including Yale and Wesleyan University, are already on board.
Still, there are questions about whether or not social enterprise is a viable business concept, or, more importantly, if there is an investment base in Connecticut that would support the industry.
Without access to capital, social enterprise businesses won’t get far, and Emery said it’s not the goal of such companies to depend on foundation grants, which tend to dry up in economic downturns.
Emery said “impact” investing is a fast growing market, but it hasn’t taken hold in Connecticut yet. That is why reSET is working with the investment community and Connecticut Innovations to try to build a social enterprise investment fund for the state.
According to some estimates, social responsibility investing is a $50 billion industry that is projected to grow to $500 billion over the next 10 years. Advocates say tapping into that market could lead to job growth in Connecticut and help increasingly cash strapped nonprofits.
Emery said she recently had a meeting with a group of Fairfield investors who are looking to start an impact investment fund. But no deal has been reached yet.
“It’s not just about financial returns,” Emery said. “As an investor you have to be willing to measure other types of impact.”
There have also been some critics of the social enterprise concept in other states, particularly from the legal community, which has raised concerns that the corporate structure would lower standards of fiduciary oversight.
Others have said the model can be used by companies as a marketing ploy, because operators could register as a social benefit enterprise and tout it as a selling point, but then eventually convert back to a regular for-profit entity.
Emery said having The Walker Group as a social enterprise company has helped market her company, and she has no plans to change its structure.
Regardless, a social enterprise incubator would be a boost for downtown Hartford, potentially bringing young entrepreneurs to the city. Emery said she has gotten a lot of interest about the concept and how it can help entrepreneurs smooth out business plans and connect with investors.
“Business is a powerful force that can be used for positive things,” Emery said. “That includes creating jobs that solve community problems.”
