Insights from the
Reverse-Engineering Successful Unicorns A ‘unicorn’, as referred to in the venture capital industry, describes privately held startups valued at over $1 billion that leverage disruptive innovation to reach massive scale in a short period of time.1 They are the key focus of water cooler talk and the textbook examples of market disruption – think Uber or AirBnB. While these organizations are changing the game in the private sector, unicorns remain scarce in the social sector. Based on the input from the panelists and participants at this year’s Impact Gathering, we’ve identified four common traits that can help identify social ventures with unicorn potential. Moreover, the discussion revealed potential actions for public, private, and social sector participants that can help foster more social unicorns in Canada and beyond.
context:
Structural barriers driving a fragmented social sector
The social sector is a major input into Canada’s economic engine, generating more than 7% of national GDP, and employing over 2 million people.2 At the same time, the sector is characterized by high fragmentation and limited scale. Last year, the Canadian Senate published its report ‘A Roadmap to a Stronger Charitable Sector’ that identified an estimated 86,000 registered charities and another 85,000 non-profit organizations engaging in public activities that span basically every aspect of Canadian life.3 At LEAP, we estimate that the broader social sector, including for profit social enterprise, is approximately 200,000 social ventures. The competitive market for funding in Canada is a key barrier to drive scale in the sector. While the top ten largest not-for-profits in Canada receive over 33% of charitable giving, the remaining 67% is divided among over the 170,000+ other not-for-profits.4 As a result, new social ventures either don’t receive the capital they need to grow or need to depend on multiple donors with competing priorities and restricted spending requirements. Meeting those disparate priorities and requirements discourages many social ventures from investing in what they do best, taking risks and developing disruptive innovation.
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CB Insights: https://www.cbinsights.com/research-unicorn-companies The Special Senate Committee on the Charitable Sector: https://sencanada.ca/media/364859/com_1pgr_es_cssbcatalystforchange_2019-07-10_e.pdf 3 Ibid 4 Charity Careers Canada: https://www.charitycareerscanada.ca/size-matters-biggest-nonprofits-canada/ 2
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