Growing a Social Enterprise with Mission-Aligned Fundraising

John Tapper was a classroom teacher for over 20 years before he founded All Learners Network — a professional learning organization focused on creating equitable access to quality math instruction for all students. Demand for ALN’s services has been growing exponentially each year and more funds were needed to extend its reach to more teachers and students. Because All Learners Network is a profitable, evergreen service business—not a high growth tech company—John was eager to find an alternative to VC funding.?

“VC investors generally want to run the show and prioritize growth over everything else,” says John. “Finding aligned impact investors was important to us and to our organization so that we could scale while staying focused on our mission.”?

John had read my book,?Raise Capital on Your Own Terms, and reached out to learn more about non-VC funding strategies. In this conversation, John and I discuss how ALN adopted a mission-driven fundraising strategy and describe the offer they designed to successfully attract values-based investors.

The Kassan Group (TKG): How did you two work together to determine the right kind of investors for ALN?

John Tapper (JT):?At All Learners Network (ALN), we’re trying to change opportunities for students through mathematics. Our mission comes first. We want to find investors who not only understand that, but support the idea.?

Jenny Kassan (JK):?Because of ALN’s skilled management, track record, niche, and business model, it’s making a positive impact while also generating significant profits, enabling it to offer generous annual returns to investors. But these returns will come from profit sharing, not from a “liquidity event.” Therefore, ALN needed to find investors who were happy to receive annual checks instead of waiting for that big exit VC-oriented investors want.??

TKG: Describe the process you used to design an investment offering to attract the right kind of investors for ALN.?

JK:?We worked with ALN to design an investment offering that fit the company’s goals and plans. We helped the team consider the interests of all stakeholders—customers, employees, and investors—to enable the company to attract investors without compromising on its commitments to any stakeholders. We eventually settled on preferred stock with an annual cumulative dividend and a redemption option at year five, as well as a debt offering for those investors that prefer the extra protections that come with a debt investment.?

TKG: How did you begin connecting with investors?

JT:?We started with our own network—it’s important to make sure the list of people who care about your mission is deep. Our board has several members who are connected to the same small (250-student) mission-driven college in Maine that I graduated from,?College of the Atlantic. They reached out to other people connected to the school and were able to interest some of investors.?

TKG: How have your conversations with investors gone? What have you learned??

JT:?I’ve learned the importance of being authentic in your communications with potential investors.?ALN’s biggest investor interviewed me three times before he gave us any money. During the second interview, he asked me to tell him the relative value of mission and profit. Without thinking, I told him 80% mission, 20% profit. Later I thought, “What a mistake! I told a potential investor that we prioritize our mission well above making lots of money!” I contacted him to try to clarify. He told me that was just the answer he was looking for. He is exactly the kind of investor we want to work with.

TKG: What’s your best advice for social entrepreneurs seeking investors??

JK:?There are so many bright shiny objects that cross your path when you’re raising money. Well-intentioned people share information about platforms you can list on, events you can pitch at, impact investors you can contact, etc. Unfortunately, a huge majority of those opportunities are designed for companies following the VC funding path. If you are not on that path, you need to be disciplined about discerning which opportunities fit your model and steadfastly avoid wasting time on those that don’t.

JT:?Change your thinking about investing in your company. If you’re a mission-driven organization, seeking investors can feel like asking for a donation. My investors are going to make a substantial return on their investment. I’m proud of that, even though it took me a while to really wrap my head around investment, rather than “donation” or “contribution.”

Our biggest investor said that, although he believes in our mission and organization, he expects to make a substantial return from his investment. Beyond “doing well by doing good,” investing in our company makes good financial sense. We’re almost halfway to our goal and continuing to hustle.