This guest post was written by Ron Flavin, Growth and Funding Strategist, Angel Investor, Author and Speaker at Ron Flavin, Inc., and previous Co-Director of the San Francisco Founder Institute - and was originally published on LinkedIn.
Social entrepreneurs believe in making a positive impact on the world while creating livelihoods for themselves, equitable opportunities for others - all while building a sustainable, profitable company. Social entrepreneurs tend to focus on concepts that have a far-reaching effect when it comes to addressing cultural, environmental or social problems.
Start-ups may encounter struggles during the infancy of the company. But social entrepreneurs have a distinct advantage. Their positive advocacies enable them to find different funding sources for social enterprises.
Checking for Funding Eligibility
It will significantly help a social entrepreneur when they are clear about the particular discipline or objective of the company.
Each social entrepreneur funding source has different requirements. But overall, mission compatibility is very important. Determine your advocacy clearly and find groups with shared interests. If your organization is not on the same page with a funding group, you will not be a viable candidate for financial support.
Funding for Social Entrepreneurs
While their primary purpose may be to do good, social enterprises can also generate significant profit to make them targets for equity and debt investment funding. Funding sources for social enterprises comes in various forms. Here are 7 proven ways of funding and winning the suitable funding for your social enterprise.
7 Sources of Social Enterprise Funding:
1. Social Entrepreneur Investors
Social enterprises offer a business model that can help generate significant profit to make them targets for equity and debt investment funding while also doing good in the world. Funding sources for social enterprises include:
Angel investments are from wealthy people who are looking for social enterprise investment projects. Check out Angel.co, they have a list of social entrepreneur investors-also known as impact investors.
Seed funding invests in the early days of a social enterprise
There are a growing number of venture capital funds that are interested in social entrepreneur funding and impact investing. Crunchbase.com is a great place to start your search.
Platforms such as Kickstarter, Indiegogo and others are increasingly becoming more popular as a funding source for social enterprises. Securing funding for a social enterprise via a crowdfunding site works much the same way it does for an ordinary business. The key is to build lots of excitement and interest to motivate people to invest in your social enterprise. There are even a growing number of crowdfunding sites exclusively dedicated to social enterprise funding, such as:
3. Pitch Competitions
Pitch competitions targeted toward social enterprises were relatively unknown just a year ago but with the onset of the global COVID-19 pandemic, there are more and more pitch competitions targeted towards social entrepreneurs and social enterprises. But these opportunities arrive, with substantial money prizes to boot. This can be a good way for the social enterprise to get much needed funding. Once such pitch competition for social enterprises include the Great Social Enterprise Pitch.
Incubators focused on social enterprises offer a variety of technical assistance and funding for social entrepreneurs. These incubators believe in the sustainability of your advocacy and can be a sustainable business model. They typically provide guidance and a shared workspace for more than a year. The structure is typically fluid but the selective process is very stringent. Overall, the incubator asks for a 2% to 10% stake in the company for their support. Some of the incubators focused on supporting social entrepreneurs include:
Accelerators operate under a hybrid model for funding that focuses on the infancy of the social enterprise, providing resources such as mentorship and early support. In exchange for the resources to boost or accelerate the social enterprise, accelerators typically get a small portion equity in the organization. You can find a list of 10 top startup accelerators for social enterprises and social entrepreneurs on Unikorn.org.
Even more mainstream startup accelerators such as the Founder Institute are increasingly dedicating resources towards helping social entrepreneurs build enduring, profitable social enterprises. The Founder Institute FI for Good initiative is just one example how this global startup accelerator is supporting social entrepreneurs. Founder Institute also recently launched a joint Pledge for Responsible Innovation, inviting members from across the innovation ecosystem to commit to measuring and publicly displaying their own impact through a framework that uses the United Nations' 17 Sustainable Development Goals to clearly define social and environmental impact metrics.
Fellowships do not offer direct financial support to an enterprise. But they can fund the education of key personnel in the social enterprise that can help lead the growth of social entrepreneurship. You can find a list of fellowships for social entrepreneurs on the Ashoka blog.
7. Social Enterprise Grants
Social enterprise grants come from philanthropic organizations or government bodies that do not expect the typical financial returns that an investor would expect. But they are heavily banking on the social impact that the enterprise can contribute once it succeeds. The selective process can be very intensive and they are typically sector-based. You can search for social enterprise grants on websites such as grants.gov or the Foundation Directory Online.
Expert Recommendation for Funding Sources
If you deeply believe that your social enterprise can make a significant impact in your advocacy, the best sources of funding can be social enterprise grants, pitch competitions and crowdfunding.
If you convince people via crowdfunding or organizations that offer social enterprise grants or social enterprise-focused pitch competitions about the worth of your project, you can secure the funds you need to operate successfully -- without giving away a stake in your social enterprise.
These financial backers will not look for anything in return, just a belief that your social enterprise can deliver in its promise to create positive change in the world.
Interested in learning more about funding sources for social enterprises? Contact me today and let’s talk!
This post was written by Ron Flavin (Growth and Funding Strategist, Angel Investor, Author and Speaker at Ron Flavin, Inc., and previous Co-Director of the San Francisco Founder Institute), and was originally published on LinkedIn.
Ron Flavin is a growth and funding strategist who helps entrepreneurs and organizations to develop innovative growth strategies, identify new revenue sources or secure the funds they need to grow and prosper. Using his own unique methodology, he work with his clients to develop a step-by-step growth and funding action plan that builds a bridge between vision and financial goals. Using this model, he has obtained more than $200 million in funding for his clients, and been part of decision-making teams that have allocated more than $1 billion in funding. As a result, Ron knows first-hand what those who hold the purse strings look for when determining which proposals get funded and which ones get tossed aside.
Graduates of the Founder Institute are creating some of the world's fastest growing startups, having raised over $950M in funding, and building products people love across over 225 cities worldwide. See the most recent news from our Grads at FI.co/news, or learn more about their stories at FI.co/journey.