Many Social Entrepreneurs start off with innovative solutions but are unable to see their ideas come into fruition due to the lack of start-up funding. Funding is without a doubt the biggest challenge facing social entrepreneurs and many social enterprises are underfunded and subsequently their self-sustainability and social impact are restricted.
It is important to look at creative funding solutions and social entrepreneurs are getting more resourceful in the way that they are going after funding. Social enterprises cannot expect to be carried by one source of funding anymore, and need to look at different ways of blending capital to create the largest social impact.
Some of the most successful entrepreneurs are those that are utilising a combination of different sources of capital.
Sources of capital:
1. Your own Seed capital – money has been saved up or developed from other projects. This is very important as social entrepreneurs need to have the means to support themselves during the process of establishing and building their social enterprise.
2. Grants – They typically came from governments, banks, philanthropic groups or individuals.
3. Investors, e.g. Angel investors are private investors (groups or individual) who are willing to put their money into high-risk ventures.
4. Venture capital firms – They fund your enterprise and in return receive a stake in the ownership. There are a number of venture capital funds geared toward social enterprises.
5. Crowdfunding through family and friends.
Many social enterprises want to reduce their dependency on funding. They aspire to becoming “self-sustaining”, or financed in a way that will allow them to continue operating if grants dry up. Self-sustaining” is a catch-all term that means finding ways to make money by selling products or services, or attracting investment to kick-start growth. Grants, meanwhile, are often perceived as a barrier to becoming investment-ready.
Some seasoned social enterprises have achieved the “holy grail” of a diverse income, with a mix of earned income, investment, and grants. But it takes time, investment, skills, and hard work , and they often started out as small concerns funded entirely by grants.
Tapping into the world of social enterprise funding is extremely important if you want to achieve great things for your cause. Success in this area of social entrepreneurship will bring you great rewards and help you make the greatest impact.