Questions

If you are starting a social business, where would you look for funds?

6answers

Family & friends. This is where all begins. If they don't trust and believe in you it will be difficult for others to follow.


Answered 6 years ago

Hi, having built multiple businesses, the first question should not be how do you raise funds, but what is it that needs funding, and over what period of time do you need funds. Related to this is how soon can you turn on.cash flow and how quickly can that become your funding resource. We have bootstrapped all of our business. Not always easy, but very rewarding. We exited our last business by selling to a public company, and had no investors to pay off in the end. Let me know if you would like to discuss further.


Answered 6 years ago

The answer isn't that much different from a regular business - you hope your customers can finance you.

But if you are looking for funding and you are a social business - and you are in the UK - I'd start with free courses like this one.

http://westminster.impacthub.net/impact-investment-ready/

It's not accepting applications at the moment but I believe they will have more courses soon.

As the answers to your question will be very location-specific, I'd approach this as a local challenge. Many social business investment funds are funded in part by governments and they probably don't want to fund a company outside of their jurisdiction.


Answered 6 years ago

If the social enterprise that I was starting was for a specific cause, I would get to know people who believe in the same cause and from them look for potential funders and talents. I would also try to find out which corporates have that cause for their CSR (corporate social responsibility) and try to talk to them as potential funder. But at the same time, I would try to bootstrap the business and try to get it funded by the customers that I was targeting.

Some times too much money may not be a good thing. You may lose focus and start doing the wrong things.


Answered 6 years ago

I wouldn't start with funding. If you haven't already started, I would begin by creating a basic function MVP product and introduce it to 35-50 or so potential buyers and get initial validation. They might give you the necessary feedback to improve and focus or pivot into a winner. By keeping them in the conversation you can draw them into funding the new business. That's how Quibb - and so many others - got started. If you already have your business up and running, I'd consider bringing in a respected industry co-founder (and ask that person to fund), or ask friends/family to help out with a reasonable rate loan.


Answered 6 years ago

Fundraising can be tricky unless you know where to find money. Being attached to an incubator also comes with a whole host of added benefits beyond just funding, like mentoring, access to networks, legal services, business expertise, among others. Incubators usually have strict diligence checks and being associated with an incubator increases the credibility of your organisation. Today, incubators are in high demand, and the application process to an incubator can be a highly competitive one. Each incubator has a different sector focus, company stage preference and offerings.
It is important to research this to ensure that you fit the incubator’s mandates. This will also ensure that their offerings will suit your needs and you get the best out of the incubator as their expertise will be rooted in these factors. Some incubators can have a year-long application process, while some have a cohort approach. As a social entrepreneur, it is useful to apply to social enterprise incubators as they will keep the return expectations in line with the impact focus.
For example, Villgro Innovations Foundation incubates, funds and mentors early-stage social enterprises in health, education, and agriculture sectors. CIIE, IIM Ahmedabad’s incubator, UnLtd India and Deshpande Foundation are some other social impact incubators. Corporates The good news is that thanks to Schedule VII of the Companies Act, corporates must mandatorily spend two percent of the average net profits over the last three years in corporate social responsibility. The bad news is that since social enterprises are for-profit entities, corporates cannot fund social enterprises directly.
But, it can be routed through a government-approved technology business incubator - currently, there are 130 of them in India. And that’s where the access to networks and other funding opportunities stem from an incubator. Corporate funding is a fantastic way to build credibility. The backing of a large corporate can really build your enterprise’s brand name and connect you with the right kind of networks.
But because social enterprises are such newer phenomenon, corporate takers to fund them are low. In 2016-17, of only one percent of the total CSR spend was towards social enterprises and TBIs, amounting to Rs 20 crore. The key to getting corporate funding is finding the right corporate match – one that aligns with your company’s mission and sector. While pitching to corporates, social enterprise funding can be touted as a strategic CSR investment to get scalable impact.

Similarly, Take Solutions funded Bodhi Health Education Systems, a CIIE incubatee, back in 2015. Funding from Bajaj Electrics enabled CIIE’s incubatee ONEnergy, an energy enterprise to scale up. A similar case is Mahindra Finance’s funding to FlyBird Innovations, an agri-tech enterprise, which was routed through Villgro. This funding source is ideal for enterprises in later stages of businesses, with a high growth trajectory and high impact achieved.

The risks of equity investments are well known, but they are more pronounced for social enterprises. Given that investors generally focus more on profits rather than impact, it is critical that you and your investor are mission-aligned and have the same expectations for the direction of the venture. With equity investments, it is more critical to pick an investor you are comfortable with as they directly control a part of your business and are most likely to hold a board position. They literally have the power to steer your business in a certain direction.

Build a strong business model to ensure the viability of the investment and the scalability of your business. There are many purpose-driven impacts investors in the field today. Menterra Venture Advisors is one that focuses on education, health, and agriculture. Competition There is a meteoric rise in the business plan competitions organised in India and outside.

These are organised by academic institutions like ISB, incubators, and investors. Think of winning a competition as a way of building the resume of your enterprise. In India, Villgro’s iPitch is a scouting competition for agriculture, health and education enterprises that promise up to Rs 1.5 crore in guaranteed funding and Rs 20 Cr in follow-on funding. Internationally, the DBS-NUS Social Venture Challenge is a renowned one applicable to enterprises working in Asia.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath


Answered 3 months ago

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