How to fund your social enterprise
FUNDING is a key issue for any start-up.
For social enterprises - which address problems faced by society - fund-raising poses a bigger challenge because traditional investors typically focus on financial return on investments, and may be less interested in social causes.
Some may even perceive the social mission as a stumbling block when it comes to maximising profits.
The good news is that, as social enterprises tackle key social problems around the world, they are gaining attention from a group of investors known as "impact investors".
In addition to receiving a reasonable financial return, these investors are interested in the social impact made.
The interest in social entrepreneurship is rising, in particular among young people, who are increasingly aware of pressing social and environmental issues, and wish to pursue greater meaning in life beyond material wealth alone.
Here are some tips for social entrepreneurs seeking funding:
In addition to funding from friends and family, social entrepreneurs can tap grant money to pilot their venture.
In Singapore, agencies like the Ministry of Social and Family Development, National Youth Council and National Volunteer & Philanthropy Centre provide seed grants to budding social entrepreneurs.
Another way to secure seed funding is through business-plan competitions.
Such competitions offer mentorship and networking opportunities. One example is the DBS-NUS Social Venture Challenge Asia (http://socialventurechallenge.asia), a start-up competition that supports new social ventures in Asia which have the potential to generate scalable and sustainable social impact.
Apart from the chance to win a total of about $60,000 in prize money, participants can benefit from workshops and boot camps, networking with like-minded individuals, and meeting mentors and judges - many of whom are impact investors.
FINDING THE RIGHT INVESTOR
For social enterprises, finding the right impact investor is even more critical, as the investor must understand and accept the primary social mission.
Aside from providing funding, investors can add value to the business through their networks, experience and knowledge of certain industries or geographic territories.
Having an investor who is behind the social enterprise's mission allows the founders to channel resources to expand their social impact, instead of paying out larger dividends to shareholders.
MEASURING SOCIAL IMPACT
Social entrepreneurs must understand and measure the social impact they are trying to make. Some choose to focus on the volume of impact, while others prefer to focus on the depth of impact.
In both cases, the right processes must be put in place to collect the necessary information. Social entrepreneurs must communicate this information to their impact investors and other financial sponsors, in order to demonstrate that they can deliver the social impact they have promised.
Like any other entrepreneur, a social entrepreneur will face challenges such as searching for the right financing partner, struggling with operational issues or balancing profit-versus-purpose issues.
The goal is to grow the business into one that is long term and sustainable, while achieving the organisation's objectives.
This article was contributed by NUS Enterprise (www.nus.edu.sg/enterprise), which offers start-ups - including social businesses - a holistic range of incubation services.