I am an entrepreneur embedded in the world of social enterprise. I believe that you can do good for the world through a sustainable for-profit business model.
Over the last year I have been working on my social startup GreenChar, a clean cooking energy company in rural Kenya. I’ve experienced firsthand what it truly means to build a social enterprise from the ground up.
Though I am proud of the work that we have done at GreenChar, I am still learning and growing within the social space, adding the necessary tools to succeed as a social entrepreneur.
Every day I make tough decisions on strategy, fundraising, and the direction of the company. I have seen the team grow from two co-founders to a team of over 15 individuals working across two different locations.
Over the last twelve months, I have had the privilege of travelling around the world working on and raising money for GreenChar. From Geneva to Seattle, New York to Johannesburg, San Francisco to New Delhi, I have participated in incubators, accelerators and fellowships. From Fledge, the conscious company accelerator, to Echoing Green, the social startup seed funder; from Anzisha Fellowship, the premier fellowship for young African entrepreneurs, to Innovate Kenya, a teenage entrepreneurs incubator. I have met with mentors, investors, angels and advisors. I have talked to venture fund firms, angel groups, philanthropists and donors.
Through my experiences and my interactions I have come to terms with the realities of fundraising for a social enterprise. While I don’t claim to be an expert in fundraising, my experiences have taught me that fundraising for social good is still as hectic and difficult as traditional startup fundraising.
There are startups all over the world, on every corner and every street. It is the phenomenon of our age. We are more and more disgruntled by the status quo. Now more than ever, we can take risks, bold risks that decades ago were unfathomable. People can now start enterprises for different reasons: some for the thrill, some for the money, and some for a social purpose.
While startups are growing at an exponential rate, funding for these startups is not growing as fast. Social enterprises, just like traditional startups, are competing for the same funding and the same limited resources. Every year, the competition gets stiffer and more difficult. More startups get started, few get funded, and many fail. It’s hard and brutal out there.
The reality of fundraising is cold and vicious. The majority of social companies will never get funded. The majority of them will close up shop, to the heartbreak of their founders. They were competing against traditional companies and other social startups for a limited pool of funding. They were not exemplary, well-presented or competitive enough. As in every system based on survival of the fittest, they had to fold.
The good news is that there are angel and impact investors, social venture firms and fellowship programs that are ready to invest in social startups. While most of these groups have social impact close to their heart, more often than not they still require a well-crafted and foolproof business and financial model. They will weed out social companies that, even though they address crucial social problems, are not sustainable. However their focus on social startups makes them the easiest and most accessible for early stage entrepreneurs.
Social enterprises need to put themselves in a position where they can raise traditional venture capital (equity and debt) as they grow. They need to prove traction and meet metrics. They need to rake in revenues. They need a strong. sustainable business model. An enterprise that does not make money is a non-profit. Once a social enterprise has these in place, they can be in a better position to recruit traditional investors, and scale up their ventures.
Though difficult, raising money for social enterprises is possible. More people are getting into the space: investors, funders and philanthropists. However, at the heart of any successful social enterprise is a strong business model and financial plan that allows them to not only affect social change but also get enough financial return from the venture.
That is the true purpose of a social enterprise, to prove that you can do good with a sustainable for-profit model. Entrepreneurs in the space need to embrace and live with that fact. Then and only then will they be able to build and raise capital for a thriving social enterprise.