RCA vs
Social Enterprise
Social enterprises try to balance profit and purpose. But what if the tension between them is structural, not solvable?
What Social Enterprise Got Right
Social enterprises recognized that traditional nonprofits are fragile—dependent on donors, vulnerable to funding cycles. By generating revenue, social enterprises could achieve financial independence. This was a genuine innovation: sustainability through the market.
Market Integration
Social enterprises operate within market systems, enabling rapid scaling and customer feedback loops that pure nonprofits lack.
Financial Sustainability
Revenue generation creates independence from donor cycles. A profitable social enterprise doesn't need annual fundraising.
Innovation Incentives
Competition and profit motive drive innovation. Social enterprises can iterate faster than traditional institutions.
The Structural Problem
The Profit-Purpose Tension
When profit and purpose conflict, profit usually wins. Investors have legal claims; beneficiaries don't. This isn't a failure of intention—it's structural.
Exit Pressure
Equity investors expect exits. The average VC-backed company aims for acquisition or IPO within 7-10 years. Social missions rarely align with this timeline.
Mission Drift
Studies show B-Corps and social enterprises drift toward conventional business behavior over time. The Danone-Emmanuel Faber case demonstrates how shareholder pressure can override purpose.
Mortality
Social enterprises die like regular businesses. When they do, their social mission dies with them. There's no structural mechanism for purpose to outlive the entity.
The insight: Social enterprises try to solve a structural problem with intention. But when equity holders have legal claims and beneficiaries don't, good intentions can't overcome structural pressure.
How RCA Solves This
Structure IS Purpose
RCA doesn't balance profit and purpose—it designs institutions where purpose is structural. The Dutch Water Boards don't 'choose' to manage water; that's what they ARE.
Perpetual Operation
RCA institutions are designed to operate forever. Community foundations, waqf endowments, and water boards have operated for centuries because their structure enables it.
Non-Extractive Capital
PSC funding means no equity holders demanding returns. Capital serves mission, not the reverse. This eliminates the structural tension at the heart of social enterprise.
Succession by Design
Leadership changes don't threaten purpose. RCA builds knowledge transfer and governance succession into the institutional architecture.
Feature Comparison
| Feature | Social Enterprise | RCA / PSC |
|---|---|---|
| Primary Structure | Hybrid business (profit + purpose) | Purpose-native institution |
| Capital Structure | Equity with expected returns | Non-extractive (PSC) |
| Time Horizon | Business lifecycle (10-30 years typical) | Multi-generational (perpetual) |
| Mission Drift Risk | High—profit pressure creates drift | Low—structure enforces purpose |
| Growth Model | Revenue growth required | Capability growth (not revenue) |
| Exit Pressure | Investors often expect exit | No exit—perpetual operation |
| Scalability | Scales through market growth | Scales through replication |
| Innovation Speed | Fast—market responsive | Slower—stability prioritized |
The Fundamental Difference
Social enterprise asks: "How do we balance profit and purpose?"
RCA asks: "How do we design institutions where purpose IS the structure?"
When purpose and profit are balanced, profit eventually wins—because that's how equity structures work. RCA doesn't balance competing interests; it designs institutions where there's nothing to balance. Purpose isn't a constraint on the institution—it's what the institution is.
When to Use Each
Social Enterprise Works When...
- • Mission can be achieved through market transactions
- • Speed and iteration matter more than permanence
- • Founders want personal financial returns
- • 10-20 year horizon is sufficient
RCA Works When...
- • Mission requires multi-generational operation
- • Purpose must outlive founders and funders
- • Stability matters more than rapid growth
- • Public good can't be captured by equity