Social investors measure more than the financial bottom line - they value the impact that social enterprises have in their communities, which is why they are willing to provide funding for these types of initiatives. This according to Allon Raiz, CEO of Raizcorp.
Raiz says whether the returns are measured in rands or in lives changed, investors will always seek out the best value for their investment. To get your foot in the door as the entrepreneur behind a social enterprise and approaching an investor for funding, make sure you have clear answers to the following five basic questions:
Using a phrase such as 'Helping the community' won't let you stand out from your competition. Be crystal clear on the service you provide or the product you supply, including what makes your product or service special. A clear product description like 'Using SMS technology to help TB sufferers manage taking their medication and monitor their progress' will certainly attract more attention.
Investors want to see that your product or service has been tested in the market (i.e. the community that you are serving). Your organisation's strategy must also reflect a realistic understanding of available growth opportunities, as well as possible challenges. In other words, investors will be very unwilling to back only an idea, even if it seems like a great one.
Unfortunately, in the incredibly difficult circumstances that many communities face, what might seem like a worthy idea at first glance may not be truly relevant or impactful enough to warrant investment. For example, a scheme to provide free energy-saving light bulbs in areas where the electricity supply is often disrupted would be unlikely to have a significant impact on the community.
Tied to the previous question, investors will be looking for your deep understanding of the community you are targeting and the real problems they face to ensure that the product or service can be delivered to the intended beneficiaries effectively. All too often, the delivery of a well-intentioned project will fail because it is imposed from the outside with little contextual understanding of local conditions.
More than just a catchphrase, sustainability in social enterprises is fundamental. If your product or service would make a significant impact on the lives of the poor, but your business model is clearly unsustainable, it would make more sense for an investor to back an enterprise that is more sustainable, even if it leads to a lesser impact. It could leave your community worse off than previously to create dependence on a service, only to withdraw it when it fails.
Entrepreneurs often do not have all of the entrepreneurial and business skills needed to create the compelling business case that investors look for. However, business support centres such as Raizcorp can assist social entrepreneurs in developing these skills. As a social entrepreneur and change agent, unleashing your business mind could be your next step in growing your impact in the community you serve.
If you do have answers to these questions, it may be time for you to test the social investment waters. There are numerous resources on the internet to help social entrepreneurs find the right kind of funding from the right kind of investor. A useful resource for entrepreneurs looking at investment for the first time is the Social Investment Manual: An Introduction for Social Entrepreneurs, published by the Schwab Foundation for Social Entrepreneurship, available for free download at www.weforum.org.
