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An institute has issued a guide to developing a social enterprise, from conception to implementation
SAN FRANCISCO (Thomson Reuters Foundation) - A social enterprise seeks capital to grow its business, an impact investor is looking for deals; it sounds simple but there are several key questions both need to address for the relationship to be successful.
Tevis Howard, founder and chief executive of Komaza, a social enterprise that aims to create sustainable economic opportunities for farmers living in Africa’s semi-arid regions, said that as an entrepreneur he was investment-ready from day one.
The real question he had to answer was: "What kind of investment am I ready for?” he said during a panel discussion at SOCAP 14, an annual gathering that brings together social entrepreneurs, non-profits and investors to help accelerate the flow of capital to social good.
To be ready for investment can mean a variety of things, depending on where the enterprise is in its development, experts agreed.
At the earliest stage, most are only ready for investments from family and friends. The next stage is likely to look for seed funding before moving on to raising different kinds of capital.
Key is to understand where an entrepreneur is in the funding cycle, what each stage means for decision-making and when it is time to move on to the next stage, panellists agreed.
GSBI, the Global Social Benefit Institute at Santa Clara University, has been working on a “Social Enterprise Assessment Tool”, a guide to the development of a social enterprise from conception to full-scale implementation.
The social enterprise lifecycle is described by four key stages that help to assess the readiness of an investment, according to Andy Lieberman, new programs director at GSBI.
- Blueprint: Developing the blueprint for the future business
- Validate: Testing and refining the business mode
- Prepare: Enhancing the conditions required for scaling
- Scale: Rolling out the model to reach large numbers of customers and / or suppliers
From the investors’ perspective, here are some key questions social entrepreneurs should be asking themselves to ensure that they are investment-ready:
• A clear ask: know how much money you are trying to raise, what it would be used for and the type of capital you are seeking
• Ensure you know where you are in the life cycle of an enterprise so that you approach appropriate investors who are interested in investing in that stage
• Have you built the right team with the right dynamics to make your venture work?
• Make sure you understand your competition and your competitive advantage
• Metrics: Ensure that you can explain in depth how you measure your impact
(Editing by Tim Pearce; timothy.pearce@thomsonreuters.com)
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