Social Enterprise Funding: Advice from the Experts
Next month will mark ONE WORLD’s 5th Impact Summit, bringing together early stage investors and social enterprises. As we prepare the 10 social entrepreneurs who will present as part of the program, we are often providing our council on how to present to the audience.
One World team members and founders selected to pitch at the 2018 Bay Area Impact Summit.
And while there is a ton of advice for traditional high-tech start ups on fundraising, what about for social entrepreneurs who are using the for profit business model to address social and environmental challenges? How might they approach the process?
I REACHED OUT TO SEVERAL OF THE TOP INVESTORS AND EXPERTS IN THE FIELD, HERE IS WHAT THEY OFFERED:
Know your audience. Allow the investors to speak early in the meeting so you can determine what is of most importance to them (financial returns, social mission, etc.), and then tailor your pitch. — Wes Selke, Better Ventures
***
Your early funding may come from mission-aligned investors, but your success and greatest impact at scale will be when generalist investors find your business attractive. Be able to articulate that future state from the start. — Paul Straub, Wireframe Ventures
***
Stay true to your values and mission throughout the process. Be open to feedback and new ideas but be grounded in your values and beliefs that are the fundamental of your enterprise. — Kristin Siegel, Toniic
***
Social entrepreneurs should be confident in their pitch, since investing with them is an offer, an invitation to be part of a better, more sustainable and/or inclusive world, and an opportunity for the investor to experience more meaning in their work. — Kristin Hull, Nia Impact Capital
***
Build a contact list and send monthly updates to that group on company progress, or progress on raising capital. This is a low lift approach that entrepreneurs can use to keep investors engaged and also demonstrates to investors the type of clear/transparent communication they might expect if they invest. — Lisa Molinaro, Tara Health Foundation
***
Work with someone astute about the psycho-spiritual dimensions of your own clarity of integrity and depth of purpose. Lifelong practice of self understanding, ongoing commitment for self reflection, and feedback from wise and loving trusted advisors, will embed wisdom of human relations and self knowledge that can enable authentic connection and confidence building in others. — Joel Solomon, Renewal Funds
***
Validate your value proposition (through earned revenues) and the ability to create social impact for your customers and stakeholders as early as possible, then raising capital will be much easier. — Dario Parziale, Toniic
***
“People invest in people — even more so in the impact space. Lead with your human capital! — Tim Freundich, Impact Assets
***
The more you can validate your early assumptions or hypothesis around scale, the better. We believe that impact truly happens when a company can get to scale, thus we want to hear about TAM, go-to-market strategy, distribution and growth channels, and unit economics. — Ha Nguyen, Spero Ventures
***
First, “strip out” from your presentation any notion of “impact”, and self assess your business plan purely on financial basis. Once you have the best business plan and can compete with any purely commercial competitor, then add back in the social impact, and lead with those impact statistics. It is crucial to quantify the impact, and also have the foundation of a commercially competitive business plan. — Valerie Red-Horse Mohl, Social Venture Circle
***
Look for the question behind the question. For example, if someone asks you about your team, they don’t want to just see a slide with some faces, job titles, and schools or companies where they’ve worked; they want to know whether they have the skills to execute on the business plan, whether they are committed, whether there are any gaps and when you plan to fill those. — Tony Stayner, Excelsior Impact Fund
***
When thinking about cash, operations and other aspects of the business, try to plan for the unexpected. — Alan Kelley, SJF Ventures
***
ANY THEMES EMERGING HERE? PERHAPS A FEW:
Know yourself — Ensure you self-reflect, and include your inner circle of employees and Advisors as the team grows, to continually connect with the core reason you do what you do, and who you are working to benefit via your work. As businesses grow, mission drift is a real concern, it is important to continually ensure you are staying true to your values, and bring that conviction and passion into investor meetings, as it is infectious and will differentiate you from a purely a commercial driven founder.
Know the landscape — Social Entrepreneurs don’t get a “hall pass” to have less defensible business plans than purely commercial entrepreneurs; if anything they have to hustle even more to prove they are not unrealistic about their social mission being a “silver bullet” differentiator. Entrepreneurs need to keep in mind that investors will evaluate their company against peer companies, some with impact, some without, and must still rise to the top.
Know the audience — Sometimes social entrepreneurs make the mistake of thinking that any impact investor will want to fund their company. Impact investors have their target verticals, stage of company, and other criteria just as traditional investors. Some are “impact first”, some are “financial first” in approach. Many traditional investors don’t care at all about impact. Know ahead of time what your investors care about.
Here’s to great success for all the social entrepreneurs raising capital, building companies, and creating positive impact for us all!