For most entrepreneurs, there’s a pretty standard hierarchy of outside funding. Who you approach depends on what stage your business is in. You start with friends and family, then maybe move on to angel investors and bank loans. Some companies will seek out venture capital or strategic partnerships.
Social entrepreneurs, on the other hand, bring in money from a whole other universe of funders: venture philanthropists, impact investors, and foundations. These investors are also beginning to look at private sector entrepreneurs – even those whose mission doesn’t necessarily scream “social entrepreneurship.” This means that companies like CouchSurfing, which uses social networking to match travelers with free accommodation, can seek money from unconventional sources. That frees them from immediately having to focus on maximizing profits above all else.
But pitching venture philanthropists, impact investors, and foundations is a whole other ballgame than the one you may be used to. The values may be different, the business models are different, and the language is different. Here’s how you can make sure nothing gets lost in translation.
"Theory of Change" is a bit of non-profit jargon used to describe, in simple but concrete terms, how an entrepreneur’s activities will achieve a social mission. The theory of change identifies the underlying assumptions about a social challenge, lays out what the entrepreneur intends to do about it, and says how success will be measured. Sometimes structured as an if-then statement, the theory of change demonstrates how social enterprises will change the world.
As an example, Ashoka Fellow Derek Ellerman had dreams of putting an end to human trafficking. How? Ellerman believed that if he was able to unite law enforcement, legislative, and community groups in a coordinated effort to flip traffickers’ primary incentives—high profits and a low risk of prosecution— then he would be able to put an end to modern-day slavery. Through his work, he has proved this theory of change. Today, his Polaris Project is the only multicultural grassroots agency that takes on this criminal industry in the streets as well as in the political arena.
A plan for action, even backed by a decent business model, isn't always enough to get social impact investors to open their wallets. Like other entrepreneurs, social entrepreneurs must show how they will acquire the other resources they need to be successful. If you’re pitching social investors, you need to show how you will scale your impact beyond your organization.
Andrew Maguire, Founder of InternMatch, has built a robust platform that connects college students with meaningful internships. From the beginning, Andrew and his team have supported leading social organizations such as Ashoka, Kiva, DonorsChoose, Wikimedia Foundation and Do Something, by connecting them with talented college students. They realized that there is an untapped talent pool for social organizations because students are often not even aware of career opportunities with these organizations, nor do they know what makes them unique.
The InternMatch solution, called Campus Hubs, provides social organizations with a platform to showcase their culture and mission through video, photos, and social media feeds. As students are increasingly motivated by concerns about social responsibility, Campus Hubs are changing the way that students evaluate professional opportunities. Maguire has a lasting vision: enabling mission-driven companies to compete for the best talent, alongside the Fortune 500.
What does success look like? What does it mean to measure social change? Investors in the social sector want to hear about your "Full Impact Potential"—about how your innovation, when scaled-up, will change the world.
The other basic tenets of a winning pitch are the same as in any sector: a great idea, domain expertise, and all-star leadership, to name a few. But prioritizing the three areas above will give you a competitive edge in the sweet spot where business meets social.