Startup Nation must promote ‘social businesses,’ entrepreneur says

Startup Nation must promote ‘social businesses,’ entrepreneur says

Eric Benhamou’s Israel Venture Network fosters socially conscious for-profit ventures to help the disenfranchised in Israeli society

Eric Benhamou, the chairman of Israel Venture Network (IVN) (Courtesy)
Eric Benhamou, the chairman of Israel Venture Network (IVN) (Courtesy)

Eric Benhamou, a Califonia-based Jewish entrepreneur who has headed the digital  electronics manufacturer 3Com Corporation and Palm Pilot, the most successful handheld computer in the late 1990s, has turned his sights to Israel, seeking to transform Startup Nation into Social Startup Nation.

Together with Israeli entrepreneurs Benny Levin and Itsik Danziger and other veterans of the Israeli and international tech scene, Benhamou has set up the Israel Venture Network (IVN), a nonprofit that fosters startups that not only make money but also benefit society.

IVN brings together “successful mentors of the US and Israeli tech community with the common goal of using their talent of professional careers to help Israeli society,” Benhamou said in an interview with The Times of Israel last month,  during a brief visit to Israel from California, where he resides.

Benhamou, who has served on the US Presidential Information Technology Advisory Council, appointed by president Bill Clinton, and has also taught entrepreneurship at INSEAD, the graduate business school, set up IVN in 2001.

Over the years, the organization has gradually increased awareness in Israel of the need to set up socially conscious for-profit ventures. It aims to steer regulation for social businesses in Israel and help social startups grow, by mentoring them and helping them find investors and funding.

Michal Simler, the CEO of the Israel Venture Network (Courtesy)

Social businesses are “hybrid entities,” a mix between NGOs and businesses, explained Michal Simler, the CEO of IVN. NGOs seek only social impact; regular businesses seek financial impact; and social businesses first seek social impact and then seek financial returns. Social impact is measured by how many lives are affected by the business, she said.

Traditional philanthropy does not speak to millennials, said Simler. They are socially aware: they were on the streets protesting income inequality and the high cost of living in the summer of 2011 in Israel, and they want to do something impactful and innovative for society.

IVN manages three funds which run a portfolio of 40 companies that are active in a number of fields, including youth at risk, promoting employment and reducing poverty in the ultra-Orthodox sector, and addressing special needs communities. These 40 businesses have created 80,000 jobs to date.

Teenagers at work at Susan’s House, which employs at risk youth and trains them in arts and crafts that are sold (Courtesy)
  • Susan’s House, in Jerusalem, employs severely at-risk teens who are disconnected from their communities, many of them out of school or work or in other high-risk situations. The venture has set out a vocational rehab program that gives the youngsters jobs creating and selling glass, jewelry and ceramic arts and crafts objects. The venture has been so successful that a second house has been set up in Eilat, and a third branch is in the works.
  • Ravtech has set out to train ultra-Orthodox men in software programming skills, enabling them to work while studying part-time.
  • Nany is an early stage, family-owned enterprise that produces natural food products and employs workers from a wide range of populations, helping them integrate into the job market in a supportive way.
  • The Tandif Cleaning Cooperative, based in the Arab city of Baqa al-Gharbiyye, is owned by the cleaning workers themselves. It provides cleaning services to corporations and institutions while integrating women and giving them job security and income growth potential.
  • Pizza People, in south Tel Aviv, is a social business venture that employs up to 15 boys and girls at risk and trains them in business skills, like money management and marketing.
Ultra-Orthodox men at work at Ravtech (Courtesy)

“We help make these businesses sustainable. They don’t need continued funding for the rest of their lives,” said Benhamou. “We help them get that initial capital to help them set up and learn how to do things. We don’t just loan the money, we provide them with mentorships, coaching, and volunteer our time.”

The companies get loans from IVN which they repay with modest interest which is passed on to the business investors in the ventures, he explained. “These businesses would not get loans otherwise,” he said. “We manage the risk and help them improve their performance.”

The businesses fostered by IVN generate 75% of their own income and their default rate for loan repayment is less than 2%, the NGO says. They have generated NIS 77 million in income, with IVN investing more than 75,000 mentor and staff hours and some $7 million in the social businesses.

IVN has an active network of 50 to 75 mentors and others who are available upon request.

Israel is a leader as Startup Nation, but not in social innovation.

“Israel is known around the globe for its ability to build successful tech businesses,” Benhamou said. Over the years Israelis have developed skills to tackle the most unlikely problems. “A new culture has emerged,” he said, referring to the culture behind entrepreneurship in Israel. “You won’t find these on the balance sheet but these assets exist, and we should use these assets to address problems of Israeli society that governments and traditional businesses cannot address.”

Traditional philanthropy, he said, “generates interesting stories” that make you feel good, but do not address issues in a “systematic manner. Money helps. But did we address the problem at the root?”

Venture philanthropy got a boost in the early 90s in the US and the UK, but IVN introduced the concept to Israel, Benhamou said.

“The gaps in society today are more striking than ever,” he said. “Ideas like ours are now better understood by the world and Israel. These approaches work. They require patience. Israel is a leader as Startup Nation, but not in social innovation. We are trying to make Israel catch up to these new concepts. It is happening, all of the data is pointing to the right direction.”

Israel can use its renowned tech prowess to create products that can have a social impact by curing illnesses, such as ALS, or by creating apps that enable the financial inclusion of those who are left on the sidelines by banks and other financial institutions, or through creating environmentally friendly products, he said, while employing people who would otherwise be left behind.

IVN has also helped draft a new law, which was approved in a preliminary Knesset vote, that will create a specific business sector definition for social businesses and set out regulation regarding the registration of such businesses, their taxation policies and the government assistance these ventures will be eligible for.

This legislation, when passed, will help Israel align with foreign countries regarding social impact businesses, Simler explained. After a similar law passed in the UK the number of social businesses grew quickly, in terms of number of ventures, their employees and the amount of income they generated, she said.

read more: