/Where Business Meets Social Impact: A Sit-Down With Lawyer, Professor And Entrepreneur David Bishop

Where Business Meets Social Impact: A Sit-Down With Lawyer, Professor And Entrepreneur David Bishop

Huge thanks to our partners from McGill Business Review (MSBR) for letting us publish the following interview.

David Bishop began his career as a lawyer before becoming a Principal Lecturer at the University of Hong Kong however, he is best known as a social entrepreneur. Mr. Bishop founded and runs several social businesses that combat some of Hong Kong’s most pressing social issues. SIPO (Social Impact Public Offering), one of Mr. Bishop’s newer ventures aims to solve what is often the biggest challenge faced by early-stage social businesses; accessing growth capital. SIPO provides a hybrid fundraising model for early-stage social businesses, like an investment bank for social enterprises. The McGill Students Business Review had the opportunity to speak with Mr. Bishop about SIPO, entrepreneurship, and get his advice for the growing number of millennials considering a career in social entrepreneurship. 

MSBR: What is the role of social entrepreneurship and businesses in our society?

Mr. Bishop: If you look at entrepreneurship conventions, meetings or events it almost only ever refers to tech entrepreneurs. You will never someone who just started a plumbing company go to a start-up weekend unless, there is some app and a robot associated with the business, but most entrepreneurs are plumbers, painters, cooks etc. We have had this word [entrepreneurship] hijacked by Silicon Valley to create really inconsequential businesses that are super scalable, but don’t do anything for society except distract it for the most part. Name a Silicon Valley company that has really benefited us from a productivity standpoint? You could argue Google is close, certainly not Facebook, definitely not Apple. There has not been any serious productivity increases out of Silicon Valley in the past 40 years. There is nothing comparing to the locomotive, steam engine or printing press. If Apple is our best example, then we’re screwed. I want people to understand what entrepreneurship truly is. When I teach ethics it’s more about the mindset of the entrepreneur than social versus non-social entrepreneurship. What is it that makes something an social enterprise and why don’t we hold all entrepreneurs to the same standard? As a business school why don’t we expect all business people to employ a stake holder model of corporate social responsibility where we are not just trying to make as much money as we can, but we are trying to provide some societal benefit?

I’m still not convinced that I believe in social entrepreneurship as a concept, which is funny because I teach it and I have all these so called “social businesses”. My perspective is that every entrepreneur should have a social component to what they are doing. So, I don’t like the designation of social entrepreneurship because that somehow creates a good and bad version of entrepreneurship. My experiences with so called social businesses is that their standards are usually sub-par. I don’t think society should necessarily subsidize these businesses. The way most governments use social entrepreneurship is via a WISE (Work Integration Social Enterprise) model which means you are trying to find employment for the difficult to employ. Now of course, I have no problem with providing employment for such people and I think it’s a great initiative. The question I have whenever I see those types of things is why are these people unemployable, and is the best thing society can do give that person a minimum wage job? So, I don’t see it as a solution I see it as evidence of a broader social problem.

MSBR: Could you provide some insight on why you created SIPO and why this new model of raising capital is necessary?

Mr. Bishop: Before the industrial revolution lots of wealth was concentrated in a few family conglomerates like the Rockefellers. With the industrial revolution and the expansion of technology greater access to capital was needed. As it became possible for anyone to create something, or start a business then this natural transition took place whereby very small concentrations of a lot of wealth were spread out. Financing was made available to the broader public allowing capital markets to really take off.

I think if you look at it conceptually the same thing will happen within the social enterprise space. You have the traditional for and not for profit companies, but social enterprises are by definition for impact. Legally, they may be for or not for profit, but it’s really all about the impact. So, just like you had the transition to the modern capital markets system the same transition will need to happen where you have a hybrid business model. Now to transition to these hybrid models of businesses we also need to transition into these hybrid models of capital fundraising – that’s where this concept came from in the first place. On the philanthropic side you have traditional grant giving but, the big issue is that social businesses are not set up as tax exempt entities and cannot be set-up as such if they are an operating entity.

Essentially, what SIPO tries to do is ease the transition or start the process like what happened with the capital markets, but for social businesses. What did capital markets do for these for profit businesses in the turn of the 20th century? They diffused risk across investors, increased transparency and governance and included some level of shareholder involvement.

MSBR: Why would someone choose to provide capital to SIPO over another organization or investment opportunity?

Mr. Bishop: To clarify the question slightly, the contribution would be charitable in nature. SIPO is just a better form of charity because it is more transparent, more impactful and gives the contributor shareholder like rights. SIPO is focused on market based solutions to social problems which most philanthropy is not. This should mean better long term sustainability where theoretically, you are giving to a company once to bridge that pre-revenue stage. It shifts the incentives so that people are giving at an earlier stage.

There is this thing called venture philanthropy or impact investing – it is very new and effective to a certain extent, but it’s not really working the way people had expected. The problem is the people going into this space tend to be former bankers, Type A people, very successful people who don’t want to fail. Venture philanthropy needs to be treated more like venture capital because it is currently being treated like private equity where you have these existing companies that are doing relatively well and you are giving these companies additional capital to do better. Whereas the model and incentive structure for venture capital is very different; you invest in 20 companies and you hope that one lands. Venture capital is much earlier stage, much higher risk, but the reward is also significantly higher.

So, now imagine that in a philanthropic sense. Normally, the riskier the problem, the bigger the impact can be, but those [social businesses] are the least likely to get funding. The ones that are really the game changers are the ones that are struggling because no one wants to take the risk on those ideas. We need to adjust the risk profile so that instead of having one individual, company or foundation giving a million dollars to one early stage business we’re saying how about ten thousand people give a hundred dollars so, that just like the capital markets you’re shifting the risk profile. You’re going to have failures, but the ones that stick will provide huge social return.

The interesting thing though is I think the SIPO process will increase the likely hood of success in these businesses. The reason why is that most people don’t have the time or ability to really vet a charity properly especially, if it’s an early stage one. SIPO is like an investment bank for social businesses. An investment bank goes out there and they find early stage deals, vets them and prepares them for a potential IPO.

MSBR: What motivates you to continue to start and operate social businesses?

Mr. Bishop: I didn’t go to business school, I never wanted to be an entrepreneur. I don’t view myself as an entrepreneur, I view myself as a problem solver. Asia is increasingly important and will stay that way for the next hundred years. You have what I believe is the most important generation of young people in the world right now, simply, because it is the largest. If you take just the people aged 0-20 in India and China, you’re talking almost a third of the world’s population.

Now here is the issue, when I started teaching here (HKU) I was not comfortable with the leadership skills students were getting from their education. If this is going to be the Asian century we have to commit to developing that next generation of leadership. The issue is we are going to increase the population by 20-30% in the next 50 years and there is not sufficient food supply for that, there are climate change issues, so many issues that are big issues. People are good at dealing with small or personal things but, our brains are not equipped to deal with systemic issues. We have a cognitive dissonance to diffuse responsibility – it’s a defense mechanism. From my perspective these social businesses are important not only because of the social impact they can have but, also as an educator I view these as teaching and leadership empowerment tools.

MSBR: What insights would you share with your 20-year old self?

Mr. Bishop: I’ll be honest I don’t have a lot of regrets. When I was 18 years old and I was trying to figure out what to study I realized I was a relatively smart person but, I didn’t know anyone that spoke Chinese. I could see in the mid 90s China was going to be important so, I decided to learn Chinese – one of the best decisions I ever made because it shifted my perspective.

I do have one piece of advice; I think Conan O’Brien was the first person I heard say it, basically, you need to work really hard and be nice to people.

Also, I would invest in Yahoo and sell out before 2001.