Why Education is the Engine of Social Investments

Financial tools and investments in the social sector are tested on educational projects, and all this is a market driver. Why? Andrey Andrusov, co-founder of SOL’ Social Innovation Support Center tells.Andrey AndrusovEducation — Business or Social Sphere?To begin with, for me almost any educational project is a socialprogram, that is (as we define it) an activity, aimed at solving a socialproblem. But as soon as education becomes fee paid, it is perceived as a businessand its social nature often forgotten. We cannot believe that the social natureof the project does not contradict its business nature. This contrast is mostvisible in education.The social nature of a school or a college, even private ones, isobvious, as they are directly involved in human development, and this alwayshas a social aspect. But how about the infrastructure of education, platforms,knowledge assessment systems, and so on? Are SmotriUchis or Webinar.ru platforms social projects? Whatabout Youtube and Skype? On the one hand, it is pure business. On the otherhand, through these platforms some people train others, create infrastructureand opportunities for further development, an opportunity to become a teacheror a student. And the further we are from the education itself, the more difficult itis to say “business is not of primary importance”, to show the social impact ofthe project on the education. Course aggregators, industry-specific media,interactive boards, ergonomic desks... It is also education, also the socialsector, is it not? And I believe if the project was created to change people'slives, it is a social project.Two StandpointsThat is why each educational project can always be viewed from twostandpoints; it can be seen not just as a business, but also as socialactivity, because it involves human development, human investments, they carryout social functions. This polarity is the specific feature of socialinvestments.But how is education fundamentally different from the production of, forexample, wheelchairs? In fact it is not very different, it is also aninfrastructure. Some may call it business, some may call it social activity.The contrast between social and commercial sides in healthcare is even sharper.On the one level, Ilya Check’s «Motorika» company produces prostheses forchildren, and the benefit for disadvantaged children is obvious (we help thepeople with disabilities!). But there are always those, who consider businessdone on people with disabilities to be the pinnacle of cynicism…The important thing is motivation and how exactly the project changespeople's lives, what social problem it solves. It is impossible to understandfrom an outside perspective. That is why, when cooperating with socialentrepreneurs, SOL’ Center pays great attention to how they communicate thesocial impact of their project. So, you can understand what social changes itbrings.What is the Aim of EducationalProjects?Whether education is social activity or not vastly depends on themotivation of the project’s initiator. After talking with hundreds ofentrepreneurs in the field of education, I have concluded that initially themajority of these people desired to change the situation in education, not tomake profit. There are two main reasons for starting a project in education. Either aperson understands that existing solutions are not suitable for their child andthey need to do something better, more interesting, more gratifying. Or aperson wants to share their experience and creates their own blog or course.Most often they start with only their enthusiasm, without a budget or astrategy. However, every reasonable person understands that the project will “die”without money. That is why after creating a project its authors look foropportunities to develop and earn money (however, for the majority of themprofit is secondary).Almost all educational centers for pre-school children appeared in Russiabecause of their founders’ care for their own children. Many online courses andplatforms, for example, Mathprofi math blog or Pythonworld blog were created on the basis of popularblogs.This situation is typical even for major (not private) companies. Theymake an educational course “for themselves”, then open it for the public andstart earning on it. For example, Yandex taught its employees in its School of Data Analysis, and now everyone can take thiscourse on Coursera. There are people creating large-scale projects in education thatoriginally were designed as free infrastructure. For example, Mikhail Lazarevcreated InternetUrok, and spent a lot of money to launchonline courses as well as digitized the whole school program, designed forgrades from 1 to 11 (all the textbooks in Russia). Now they are availableonline for everybody for free. And there are already many projects like this.Thanks to entrepreneurs, this infrastructure has already been created.And the impact of such people on society is very strong. The opportunity isthere, it just needs to be seized!But even small projects in education produce significant social impact.It is not limited by the audience, trained within the project. Direct impactcan be minor. For example, if we talk about private schools, less than 1% ofschoolchildren in Russia study there. But the indirect effect is, firstly, thatthey provide an opportunity toreceive alternative education forthose who did not have this opportunity before, and secondly, that they showother entrepreneurs the possibility of creating an economically attractivebusiness in this area.Where Does the Money Come From?At some point, the author of the project notices that their ownresources are running out. The project has not yet reached the budgeted profit,all the savings have been spent, and the team members want to receive normalsalary. At this moment additional financing is required. And people startlooking for investments. And I wouldlike to remind you that an investor is a person who provides money in exchangefor a share in business. He expects to return dividends or to sell his share3-4 times more expensive than he bought it. The bad news is that not eacheducation project exponential growth of capitalization or high profits can beexpected. And there is a stereotype among investors that social projects do notpay. Because of this it is difficult to attract them to such projects. But the good news is that not only investments are available for social projects, but also other sources and forms of financing: crowdfunding, grants (donations) and loans. The most advanced organizations are able to use all of them simultaneously. There are also many mixed forms of financing, for example, convertible loans, recoverable grants, payment for social benefits, pay for success models... Some of them already exist in Russia.So, as educational projects are so close to the commercial sector, theyare the first ones to test new financial instruments. I will give you the mostcommon example. If an organization teaches children in its supplementaryeducation centers, education is its main activity, and according to the law(article 22, paragraph 1 of law No. 273-FZ of 29.12.2012) it should benon-profit. It can also receive grants and benefits provided by thestate. Moreover, this organization may be managed by a commercial company, forexample, as an LLC. And this LLC can receive investments for its development,they will be spent on marketing and on founding new educational centers. Inthis way “commercial” activities exist in LLCs according to the laws ofcommercial organizations, and “non-profit” activities exist as in non-profitorganizations. This is a very relative distinction, but it is necessary toensure transparency for investors, sponsors and all kinds of auditors.It Concerns EveryoneThere is another reason why new financial instruments enter theeducation sector. Education affects everyone in this world. This fits both intothe new concept of lifelong education and the concept of evolvement. It lookslike the products produced by such entrepreneurs concern everyone, unlike, forexample, the medical products (they are more niche, as someone may just belucky with their health!). Each person can find something for themselves ineducation if they are interested. For some it will be languages, for some — thebasics of programming, design, art, cooking: anything you like! This is thereason why projects get a “response” from investors and patrons.At present investments into education are very popular. There are moreand more investors willing to invest in education. They do it not only to makea profit, but to influence the education sector, which has obvious problems. Atthe same time, the number of philanthropists who are willing to share money forsocial and educational projects, not only with traditional donations, but alsoin forms of loans, investments and mixed forms, grows. It changes the system ofrelations between the source of funds and the recipient, but it allows toincrease the social impact of each ruble spent. In order to increase the number of mixed financing transactions, it isnecessary to inform social entrepreneurs and investors/philanthropists aboutthe advantages of such transactions in comparison to traditional ones. We tryto talk about it at all events in which we participate and which we organizeourselves. In order for investors/sponsors and project leaders to learn about eachother, SOL’ Center makes a map of those who change the education system Map of Innovation Leaders inEducation, we alsomap innovative projects (Map of educational projects inRussia), wefollow the deals in education sector. Because through this sector we can changelife for better most effectively. Thanks to mapping, we have already seen a huge number of private (commercial and non-commercial) projects in education. Moreover, some of them become so ambitious that they begin to influence the traditional (school) system. We expect this trend to strengthen in the coming years; the boundary between primary and supplementary education will be diluted. So if there is aproblem, there is a solution. You just need to find the one who already hasthis solution and help him get to the system level. Prepared by Natasha Poletaeva