If you are a social entrepreneur, then you know well that funding is one of your greatest challenges. It isn't enough that you are a creative genius who has hit on a great way to solve a social problem, that you're rolling up your sleeves and getting the job done while sacrificing everything else in your life, and that you are able to show that your idea both solves the problem and brings in enough of a return to keep going. You still need to work an extra 40-hour week on the side figuring out how to lure investors so that your company can expand.
It doesn't help that the financing available to other small entrepreneurs isn't set up for impact investing. Most people have never heard of "value banks" or "social stock exchanges," which in fact are few and far between. But the Schwab Foundation for Social Entrepreneurship, based in Switzerland, provides a neat, if slightly dated, guide to the social investment landscape that is helpful for navigation.
First of all, the guide points out that for all the different kinds of financial institutions in the traditional capital markets, there are comparable institutions in the social capital markets. Instead of commercial banks there are value banks; instead of investment banks there are social investment advisers. Nascent social stock exchanges are beginning to emerge. Venture philanthropy funds take the place of venture capital funds in the social world, and social investment funds, as well as crowdfunding platforms, exist in place of the usual investment funds. Research and ratings agencies are beginning to emerge for impact investing, as well as funding consultancies for social enterprise.
The Schwab guide describes the basic financing instruments available: grants, debt capital, equity capital, mezzanine capital, and hybrid capital, and provides a flowchart to determine whether a given investor is the right fit. The right investor will obviously need to cover both your geographical area and your social sector, and should share your values. The guide also provides a link to information for drafting a business plan, as well as a due diligence preparation checklist, advice on working with investors, performance metrics, and considerations on how your investor will exit. Finally, it lists examples of social impact investors around the world.
Although it is clear that more and more individual and institutional investors are clamoring for impact investments to put their money into, matching entrepreneurs to investors is still very challenging. The two don't understand each other well, it is not always clear to investors how to measure impact, and companies are often too small to interest investors. A report from London's Social Stock Exchange, launched in 2013, makes some of the issues clear. The exchange still has only 12 companies listed, and although they go through a rigorous impact reporting process and have raised 200 million in equity, their share price performance has been mixed. The London-based exchange recently launched a separate crowd-funding platform, and has plans to launch a primary and secondary trading facility this year for more financing options.
You should also look at the Global Impact Investing Network (GIIN), which provides lots of resources for impact investors, and has launched a catalog of Impact Reporting and Investment Standards (IRIS) to measure social, environmental and financial success of impact investments.
B Lab, the non-profit responsible for B Corporation certification for sustainable companies, is also a useful resource. It has created a rating system, called GIIRS, for rigorous, comprehensive and comparable ratings of a company or a fund's social and environmental impact. In the US, B Corporation certification is a good place to start, since it is widely recognized and can help attract investors.
Finally, you should attend SOCAP, the big annual conference on social capital.
Still, it won't be easy. You may want to improve your chances of bringing in new funds by buying lottery tickets.