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What are the most effective ways to raise funds and attract investors for your social enterprise?

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What is social enterprise and how can you make a positive impact with your business idea? If you are passionate about solving a social or environmental problem, you might want to consider starting a social enterprise. A social enterprise is a business that has a clear social or environmental mission and generates revenue from selling goods or services. Unlike a charity, a social enterprise does not rely on donations or grants, but reinvests its profits to further its mission. In this article, we will explore some of the benefits and challenges of running a social enterprise, and share some tips on how to raise funds and attract investors for your venture.

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Lucy Findlay MBE

Multi award winning social entrepreneur and leader. Founding MD of Enterprise Mark CIC, social and political…
Stephen Waud

Chief Executive of the Business & Enterprise Finance Group
Yasmin Halai-Carter

?? Social & Environmental Impact I Dementia I Prison Reform I Homelessness I Jamila’s Ethical Coffee ??

1 Benefits of social enterprise

Running a social enterprise can be an incredibly rewarding and fulfilling experience, as it gives you the chance to make a positive difference in your community or the world. Social enterprise offers many advantages, such as the ability to fill a gap or need that is unmet by the public or private sector, while providing innovative solutions to complex problems. It can also empower beneficiaries, customers, employees, and stakeholders, and help build trust and loyalty with your audience. In addition, it can open up new markets and opportunities, and provide you with more diverse income streams.

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Stephen Waud

Chief Executive of the Business & Enterprise Finance Group
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The way to view a social enterprise is with the eyes of someone who is interested in and committed to delivering IMPACT. In a pure sense, social enterprises are about reinvesting profits to achieve some social aim, but things have moved on since those early days. True social enterprises, are a complete entity committed to delivering social outcomes through enterprise. Arguably social entrepreneurs are faced with greater challenges, because running a for profit business is one thing, but running a for profit but for distribution business that seeks to change communities or improve some social issue and have impact is whole lot more difficult.

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Yasmin Halai-Carter

?? Social & Environmental Impact I Dementia I Prison Reform I Homelessness I Jamila’s Ethical Coffee ??
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I believe the best way to raise investment for your social enterprise is to demonstrate that you have a robust business model without any investment first. Our CIC social enterprise is entirely self funded through the profit we make from business. Would we like funding and support? Absolutely. BUT, my personal opinion is your business needs to be strong without it, first. What happens when funding is pulled? What happens when we’re hit with difficult times like energy bill hikes and Covid? You build resilience and innovation into your model without any funding, so when the hard times come, the social and environmental impact is available. That’s why you exist in the first place right?

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2 Challenges of social enterprise

Running a social enterprise can present many challenges, such as the need to balance social and financial objectives without compromising your mission. You must also measure and communicate your social impact, comply with legal and regulatory requirements, and compete with other businesses. Furthermore, you must demonstrate your value to funders, investors, and customers, as well as navigate the complex landscape of tax, governance, and reporting. Lastly, you must cope with the market pressures and risks.

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Stephen Waud

Chief Executive of the Business & Enterprise Finance Group
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Mission drift - that's a social enterprises' biggest challenge. If you can't make ends meet, then you may be tempted to chase the money. Now of course you may have to alter your model to make it work, that's not the same as selling out on mission just so you can earn a living. By all means earn a living, but don't call your self a social enterprise if that's all you are interested in.

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3 How to raise funds for your social enterprise

Securing adequate funding to start and grow a social enterprise is a crucial aspect. Depending on the stage, size, and sector of your venture, there are different sources and methods of funding to explore. Bootstrapping, for example, is a low-cost and flexible option that uses one's own savings or income, but it may limit growth potential and expose you to personal risk. Alternatively, crowdfunding can be a fast and effective way to test an idea and build a community, but it can also be time-consuming and competitive. Grants from governments, foundations, or corporations can be valuable sources of support for early-stage or high-impact ventures, yet they may be restrictive and uncertain. Loans from banks or credit unions can be flexible and accessible ways to finance a venture, however they can also be costly and dependent on creditworthiness. Finally, selling a share of your business to an investor such as an angel or venture capitalist can be powerful for scaling and aligning interests with investors; yet it may also be dilutive, demanding, and difficult to find.

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Lucy Findlay MBE

Multi award winning social entrepreneur and leader. Founding MD of Enterprise Mark CIC, social and political activist, social enterprise advocate, influencer, speaker, blogger and colour addict.
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Selling shares to raise finance in a social enterprise is extremely problematic. I was once told by the owner of a family business that it's like 'selling the family silver'. It most likely changes the nature of the business and creates mission drift. This is why social enterprises have what's termed an 'asset lock' - to stop extraction of profit individual shareholders for financial gain. The overriding goal then becomes paying for the terms of the finance, not social impact. What we need are social impact led investors, not traditional venture capitalists and business angels that are led by quick financial gains.

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4 How to attract investors for your social enterprise

If you decide to pursue equity funding for your social enterprise, you need to prepare yourself for the process of finding and pitching to potential investors. This includes defining your value proposition, developing your business model, building your team, crafting a pitch deck, researching investors, networking, and presenting your pitch. Your value proposition should articulate the problem you are solving, who your target market is, what solution you are offering, how you are different from competitors, and what impact you are creating. Your business model should show how you generate revenue, cost structure, margins and projections, assumptions and risks. You also need to demonstrate that you have the right skills and experience to execute your vision and have a strong culture and governance structure. Your pitch deck should be concise and compelling; covering the key aspects of your venture such as the problem, solution, market, traction, impact, team, financials and ask. Additionally it is important to identify and target investors that are relevant, interested in your sector and mission with a track record of investing in social enterprises. Finally you need to reach out to contacts and referrals for events to present your pitch online or in person. You must also follow up with questions, negotiate terms and close the deal.

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5 Tips for success

Running a social enterprise can be both challenging and rewarding. To increase your chances of success, be clear about your mission and vision and communicate them to your stakeholders. Additionally, be flexible and adaptable to the changing needs in your environment. Setting SMART goals and milestones for your venture is also essential, as is being collaborative and inclusive, building partnerships with other social enterprises, organizations, and individuals. Finally, be innovative and creative and seek feedback from customers, beneficiaries, employees, and investors.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the most effective ways to raise funds and attract investors for your social enterprise?

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1 Benefits of social enterprise

2 Challenges of social enterprise

3 How to raise funds for your social enterprise

4 How to attract investors for your social enterprise

5 Tips for success

6 Here’s what else to consider

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