How to raise funds for a social enterprise

December 26, 2018

 

You may have thought of an idea for your social enterprise, but how do you get started? One way is to start small, prove the strength of your idea, and seek funding. As in any other form of enterprise, a social enterprise requires funding to scale up. In some cases, even starting up requires an infusion of funds. Luckily, over the past decade, many investors have entered this field, and have both the funds and the expertise to help.

 

These investors are often termed ‘Social Impact Investors’. These investors invest“into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return." In other words, they want to benefit others, and also see a return on investment. The outlook of such an investor can vary. Some treat them like any other investment, and therefore prefer enterprises which generate profit. Many prefer to invest in micro-finance schemes for this reason, because such projects generate quick cash flows and rapid returns.

 

However, in the last few years, there has been a change in attitudes, and even these investors are more willing to look at projects where returns may take longer to come. Such investors also invest in the energy, housing, and healthcare sectors.

 

Foundations are another source of funds, and they are often less demanding regarding returns. They may also invest in your project if they see strong social benefits. The Bill and Melinda Gates Foundation is the most famous example. Some entities, such as the Omidyar Network, use a hybrid model, where some projects are profit driven, while others are purely charitable.

 

Who are some of the entities you can approach. In India, the biggest and best network is the Impact Investors Council (http://www.iic.in). Membership of the Council provides an entry point to industry events, provides information and reports, and helps you to connect with others, including potential investors. The Sankalp Forum (www.sankalpforum.com) is another platform for learning and for showcasing ideas. Through the efforts of forums like this, impact investing in India has already crossed $1 billion per year. For a good idea, and for individuals of vision, funding is becoming more easily available.

 

There are several international foundations and funds with a strong focus on India. The Bill and Melinda Gates Foundation, the largest private foundation in the US, is very active in health, especially nutrition, AIDS awareness and sanitation, and agricultural development.

 

Ashoka, founded in the US, but inspired by Mahatma Gandhi, searches for “individuals who have vision, creativity, and determination and are motivated by public gain rather than personal gain.” They provide fellowships, and provide the support and encouragement to these fellows to become full-fledged social entrepreneurs.

 

The HCL Grants are for those who have already made an effective start, and wish to scale up. Grants of Rs 5 crores are provided to the winning entries in three different categories – Environment, Health and Education.

 

There is plenty of support available for committed individuals with good ideas. More and more funds are coming in. Once you do some more research, you will find many more possibilities.

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