Getting capital can be daunting, and this is no exception for those starting social enterprises. Young entrepreneurs worldwide face the greatest difficulty in finding funding, mostly because of a struggle to access formal banking services.
By EB Content Studio
A great social change idea and a bankable business plan are the two things you need to build and maintain a social enterprise. However, a lack of adequate funds to get up and running can be a major obstacle. This is why you need to figure out ways through which you can raise funds to help you get off the ground and actualize your vision. Because social enterprises are structured differently from a traditional charity or business, they may obtain funding from grants, investments or a combination of both. In recent years, a number of new, hybrid options for financing social impact organisations have also been developed, which attend both to profit motivation and to social impact.
Because social enterprises are structured differently from a traditional charity or business, they may obtain funding from grants, investments or a combination of both.
In recent years, a number of new, hybrid options for financing social impact organisations have also been developed, which attend both to profit motivation and to social impact.
Below, we outline a few outstanding ways any entrepreneur can use to efficiently raise funding for their social enterprise.
1. Look for an incubator or accelerator
Incubators play a vital role in the success of startups, including social enterprises. They accelerate growth through funding, mentoring, and so on. They also help you to link up with valuable social networks, which is very beneficial to a business.
It is crucial to note that incubators are very strict entities that conduct diligence on all applicants. This tells you that associating with such partners enhances the credibility of your enterprise.
When choosing the best incubator, make sure to pick one that aligns with your vision. Also, strive to stand out of the competition by tabling an irresistible idea.
Getting accepted into an incubator or accelerator program gives entrepreneurs a stipend, while they spend a specified time period (anywhere from five months to two years depending on the programme) formulating a more detailed plan for their business, meeting potential investors and receiving training from academics and industry leaders. By the time they leave, they’ll not only have specific access to funding thanks to the programme, but they’ll know exactly the kind of investors they’ll be best suited for.
2. Try Crowdfunding
Currently, crowdfunding is the most popular way of raising funds for both starting and established social enterprises. No matter your goal, your idea should be strong enough to attract other like-minded funders. That said, it is important to bring out your story to the public because it is through publicizing your enterprise that you get to bring the world on board.
It’s pretty straightforward – use GoFundMe, Indiegogo, KickStarter, or just any other reputable crowdfunding platforms out there. No matter the platform you opt for, the key is sharing a good story about your mission and making investors feel like they fit into your mission, notwithstanding how small their donation is. With the right campaign, you could end up with even more startup capital than imagined
3. Look for an angel investor
An angel is a wealthy individual interested in making investments. However, it is uncommon that a well-heeled backer who wants to invest in your great idea just splashes his cash. A resource for entrepreneurs is regional small business development offices, which are located in most major cities and can give information on fellow local businesses (and potentially the people who fund them).
4. Look for Corporate Funding
Almost all corporations are looking to sponsor viable ideas by availing funding to great thinkers. The good news is that having a corporate backing up your enterprise helps to boost your business’s reputation. It is even better to have the support of a large corporation that can connect you to the right networks. Note that the key to finding the right corporate backing is by pitching corporations that align with your mission.
5. Join Competitions
We still have many business plan competitions being organized across the world. Most of these competitions bring together major industry players like investors, corporates, scouts, incubators, and so on. The good thing with competitions is that you can easily win good no-strings-attached money. The bad news is that just as the name suggests, it is stiff competition. This means that you have to stand out from the crowd to win.
As you may have realised, fundraising for a new social enterprise is not an easy feat. It requires an actionable strategy, nuance, and of course, patience. Even though it is a bumpy ride, fundraising should keep you motivated to achieve social change. It is an experience that allows you to meet new like-minded people with whom you can work together to make the world a better place.
6. Seek out seed funding firms
These are companies that invest small amounts of early-stage capital in start-ups. These include such firms as TLcom Capital, Savannah Fund, Adullam Investors, African Technology Ventures, AFZA Capital, Angumi Global Capital and East Africa Capital Partners.
7. Apply to venture capital funds
These are companies that pool and invest large amounts of money in emerging businesses. These may include Novastar Ventures Ltd, Fanisi Capital Ltd, Spark Fund, ViKtoria Ventures, and Afvest Invest
8. Mobile Loans
Mobile financial services have revolutionized the way money is saved and transferred in Sub-Saharan Africa. But did you know many mobile money services also offer microloans? Take M-Pesa, the most popular mobile money service in Kenya and Tanzania. A partnership with local banks has led to the creation of M-Shwari, a mobile bank account where users can save money, no matter the size of their deposit. Youth can then access small loans at any time. It is a similar situation in Uganda, where telecom MTN Uganda and Commercial Bank of Africa recently announced a mobile money loan service called MoKash. On the other hand, the Kenyan government recently launched the Hustler Fund for onward lending to businesses. With loans from a minimum of Ksh.500 to as high as Ksh.50,000 at 8 per cent pro-rated basis or a daily rate of 0.002 per cent, the fund is expected to offer much-needed relief to millions of Kenyans who could not access credit after having been blacklisted by various credit rating agencies. The fund is accessible through the USSD code *254# and mobile application platforms of any of the mobile network operators in Kenya.
9. Seek professional assistance
Before you take venture capital money, look for an accountant. Many accounting firms, such as Ernest & Young, or Deloitte, have specialists dedicated to advising entrepreneurs on the right ways to raise capital in order to prepare for their exit strategy, whether it be an IPO or acquisition. Meet with them before you take any money, not afterwards.
