5 min read
Obtaining funding for your social venture requires some strategic planning and thorough research to understand the process and the resources available in your geographic area. One of the first few things a social innovator needs to know is what types of social funders exist. There are 5 types of social funders that social innovators need to know about: social angel investors, foundations, impact investment funds, government and development agencies, and banks. You can learn more about them in a previous blog post on our website.
Mapping Social Funders:
Now that you are aware of the different types of social funders, you can begin building a map of which ones might be suitable for your venture. We recommend making a ‘investor list’ which records different investors that you come across through networking opportunities, research, or by referral from your contacts. This list should categorise each investor according to several different characteristics.
These are the key features that you should try to identify about a potential social funder:
Type: which kind of social funder is this? (social angel, impact investment fund etc)
Sectors: what types of project or cause does this social funder invest in?
Geographies: which countries or regions does this social funder invest in?
Form of investment: does this social funder offer debt, equity or grants?
Investment amount: what is the typical investment size that this social funder will offer?
Preferred stage: how early in a venture’s life will the social funder invest? Will they fund ventures that are pre-revenue, or with less than  years of track record? Will they fund ventures that are only at pilot stage?
Financial Return: how much financial return does this social funder seek?
Time horizon: how long will this social funder typically expect to stay in this investment?
Exit: how does this social funder expect to ‘exit’ their investment? Will they ask you to sell your company in several years’ time?
Board seat: would this social funder require a board seat if they were to invest?
Active / Passive: how active would this social funder seek to be in your day-to-day management? Will they expect monthly calls with you? Will they expect to advise you on your business strategy?
Resources: what else can this social funder bring to the table other than money? For example, do they have technical expertise in your sector? Do they have a strong network or connections they could introduce you to? Can they open doors for you? It’s wise not to pick social funders solely for their money (especially active investors) but to see if they can bring more to the table in terms of connections, expertise and ability to help you grow.
For social angel investors, you will need to have a conversation in person early on in your interactions with them to find out this information. It’s important to do this early in your discussions to avoid future misunderstandings. When it comes to institutional investors this information can be gleaned from looking at the Investor’s website (most will tell you explicitly what they are looking for and how they invest) and also from looking at the kinds of ventures that the social funder has already invested in. Ventures that the social funder has invested in are often profiled on their website too.
Finding Social Funders:
Now that you have the social funders mapped you can match their features to what your venture has to offer and create a ‘target Investor profile’. You can use this to begin searching for the right social funder for you.
Here are some next steps that you can then do:
Prepare an Investment Teaser
We recommend that you write an ‘Investment Teaser’. This is a very short summary (maximum 4 pages, but a one pager would do) that summarises the key features of your venture, including the type of investment that you’re looking for. It might be the Executive Summary of your Business Plan.
The teaser should describe very succinctly what you do and the social impact that you create. It should also state how much funding you’re looking for, what kind of funding (debt, equity, grant) and some key terms of the deal (for shares, this would include your Valuation; for debt it would be the interest rate and loan maturity). The Investment Teaser is not intended to be a business plan or full investment pitch. It’s just a short summary which is designed to be sent to prospective investors to see if there might be initial interest.
Start with your immediate contacts
After you have prepared your Investment Teaser, you should start asking your immediate contacts for suggestions on potential investors that they might know or connect you to. Start by sending a copy of the Teaser to your Board members, your Advisory Board members, and any close contacts of your Senior Management team. Don’t forget to include your existing supporters, shareholders and investors in this group.
Perhaps you have contacts who are themselves social entrepreneurs who have already raised investment. Can you ask them for recommendations on social investors to contact? Ask your contacts not only to recommend potential investors but to ask their contacts to recommend investors. The advantages of seeking recommendations from your immediate circle is two-fold: firstly your contacts know you best, so should be able to match you with the right kind of investor. Secondly there is nothing that beats the power of personal introduction. Begin to pool suggestions on Investors that your contacts come up with. As suggestions come in, you can add them to your prospective ‘Investor List’. This list should be updated continuously. From this list you can identify those recommendations which most closely match your ‘Ideal Investor’ profile.
When ready, ask your contacts to make an introduction for you. They can send the Investment Teaser as part of their introduction. An introduction from someone who already knows the Investor personally is always more effective than writing to the Investor without an introduction. If this introduction elicits interest, you will be invited to have an introductory call with the Investor, or better still to meet to make an Investment Pitch. Before you approach any investor, remember to conduct some background research on them first.
As the founder or senior manager of a social venture, you will be networking continuously. Networking might be at public events such as conferences where you have the opportunity to present your social innovation or meet others. It might be at private events where you might be introduced to a potential investor, or learn details about a foundation or Impact Investment Fund. If you are actively looking for investment, you should be ready to follow up with any connections and send the investor your Teaser or Investment Slide Deck after your initial meeting. If not, you should still exchange contact details with the potential Investor and seek to stay in touch. It’s important to keep these contacts warm until such time as you are ready for investment.
Join Social Entrepreneur Networks
We also recommend that you connect with the Social Entrepreneur’s networks and organisations in your own country. These will have forums and events where you will be able to connect with social investors, meet like-minded social entrepreneurs and also receive help and support in how to raise investment. Social enterprise communities such as Impact Hub are also springing up in cities around the world and providing a flourishing support eco-system for social entrepreneurs, including access to training, peer-to-peer events and co-working spaces.
Inevitably, searching for investors through personal networks alone is not enough, and you will also need to conduct online research. You can do this by running an online search for foundations, Impact Investment Funds and other funders who provide social investment in your area and for your type of venture.
Reviewing the website of the following networks may be a helpful place to start:
- European Venture Philanthropy Association (EVPA)
- Asian Venture Philanthropy Network (AVPN)
- Investors’ Circle: for US based ventures looking for angel investors
- Toniic: a leading international social angel investment network
- Impact Assets: a US based organisation that publishes the ImpactAssets 50, an annual list of top 50 leading Impact Investment Funds. Many of these funds invest outside the US as well.
- Global Social Enterprise Network (GSEN): a global network of organisations supporting and advising social entrepreneurs