I recently asked you to complete a survey about your social enterprise's funding needs. (If you haven't taken the survey yet, please do so here.)
As promised, I'd like to share some high-level takeaways from those who responded so far (eleven responses), and also provide information on where to find funding to start and grow your social enterprise.
Everyone who completed the survey is either currently looking for funding, or will be in the near future, and wants to find funding to start or grow their social enterprise. Most want to find funding in order to hire new staff, or purchase equipment and supplies. Most are seeking gifts (philanthropic, donations, grants) and some are seeking impact investing dollars. Most have not sought funding before at all. The amount of funding sought ranged from $1 to $100,000+. Most of the challenges in the past with finding funding related to finding the right person or right funding stream for the right stage of the social enterprise business. Most of the anticipated challenges in finding funding in the future are related to building trust, making the case, and establishing rapport with funders.
In addition to the Quick Guide to Social Enterprise Funding, which describes ten funding sources and how to find that funding, I'd like to lay out the funding options for starting and growing your social enterprise.
Start-Up Funding for your Social Enterprise
If your social enterprise is in the idea, start-up or pre-launch phase, you may find it difficult to secure funding from sources who are looking for "proof" that your idea actually works. To find funding when starting your social enterprise, you may want to consider:
- Crowdfunding: Crowdfunding can be a great way to show "proof of concept" by testing your product or service with potential customers. This pre-selling technique allows you to gather funding up front, before investing heavily in equipment, supplies, or staffing.
- Business Plan Competitions: Some social enterprise business plan competitions allow you to submit your plan BEFORE launching, but others may require some level of proof of concept.
- Grants: There are a number of philanthropic organizations that are looking for early stage social enterprises to invest in. Although this is usually not a loan but rather a gift, be cautious about the amount of time spent finding, applying for, and reporting on grants for your social enterprise. Seek grants that directly relate to your social enterprise's business plan and the impact you want to create.
- Friends and family: Friends and family can often help bridge a small funding gap, especially in early stage development of your social enterprise. But remember to be clear with friends and family about expectations, so you don't ruin any relationships.
- Savings/Self-Funded/Bootstrapped: One of the most popular ways to fund a start-up social enterprise is through bootstrapping, or using your own savings or funding to fund the initial equipment, supplies, staffing, and launch.
Growth Funding for your Social Enterprise
As your social enterprise grows, you will have the proof of concept to show new funding sources that your social enterprise idea has customers and is sustainable. In addition to the funding sources listed above in the start-up section, you may also want to consider:
- Fellowships and Accelerators: Fellowships and accelerators will often require your social enterprise has a measurable history of results to qualify, but not always. These kinds of programs can be a great way to find financial support as well as advisors, board members, customers, donors, and other supporters of your mission.
- CDFI or Bank Loans: Loans or credit from financial institutions will often require some proof of measurable results, as well as some type of collateral to back the investment. I recommend a loan or line of credit from a credit union or CDFI organization like Propel Nonprofits.
- Impact Investing and Venture Capital: Depending on the agreement and expectations, most impact investing or venture capital will expect a financial return as well as social return for their investment. This type of funding is great to use for a specific purpose that you know will generate revenue and impact in the time specified.
ABOUT THE AUTHOR: BETH PALM, MBA
Hi there! I'm Beth. I'm here to equip social entrepreneurs and change makers like you with the tools to change the world. As a jack-of-all-trades nonprofiteer and recognized social enterprise expert, I've walked the talk in this emerging industry. With over a decade of experience launching and managing social enterprises, I want to share my best tools, resources and knowledge with you.