social-entrepreneurship-funding-finance

Welcome to module Eight

Cash flow, Finance and Getting projects Off The Ground. 

Understand how to fund your project and learn from leading investors.

Get effective crowdfunding tips and learn how to become impact investment ready.


Contents

IMPACT INVESTMENT

CROWDFUNDING

GETTING GRANTS

RECOMMENDED BOOKS 

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Impact investment.

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“Once you’ve got a business model, start selling. Because people often say, ‘well, I’ve got to get grant funding, or I’ve got to get investment, or I’ve got to get all these things. The best way to get investment in your business is to sell stuff,” said Sandy Blackburn-Wright in a recent interview.

It’s true. Your best investors are the customers that buy directly from you.


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LISTEN TO IMPACT INVESTOR, KRISTIN HULL

“If you could have some clients or some sort of revenue before you take it to market, that’s always helpful.”

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Understanding your cash flow.

Revise your cash flow (or forecast your cash flow) and ensure that you have a clear understanding of your income and expenses. If you’re yet to complete one of these, you may like to draw from your business model canvas.

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LISTEN TO INVESTOR, JAMY GOEWIE

“Let me just say that what is really really key, is your story and your story line.”

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Isaac Jeffries on Episode 36

“I really enjoyed when Wouter Kersten said, ‘Cash Flow Is More Important Than Your Mother’. If an entrepreneur comes to us and start with that approach, it’s really easy for us to help them take that even further.

If you have an entrepreneur who doesn’t particularly care about the financials, they’re probably going to struggle when things get difficult.”


Alastair Davis on Episode 60, provided some excellent advice on getting finance as a social enterprise:

“I think the first thing that I would say to social enterprises trying to raise investment is not to forget that you actually are an enterprise, as much as the social part, and that some of the normal business metrics that regular businesses would use to attract finance are just as important to a social enterprise trying to raise investment as a regular business.”

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Alastair continued, “Social enterprises need to know their numbers, and so they need to know their plan. They need to own their business plan and understand the different variables that sit behind it, because that’s what we are going to focus on as investors.

The second thing is, quite often I don’t believe that social enterprises are bold enough with their ask of their investors. Raising investment is different to applying for a grant.

We would never scale somebody back, it’s not the case that with some grants you may apply for 50,000 pounds and they might only give you 20, so social enterprises need to be bold with their ask in terms of what they require in terms of their financing needs. It’s always better to build in some headroom at the point of application, rather than having to come back when things change. That would be my second piece of advice.

My third piece of advice to social enterprise is to recognise that it is not a grant, and an investment is a different type of relationship with a funder. It’s very much a partnership.

An investor will sit with you on the different stages of your journey, and that’s not about just making sure that the money gets repaid, but they will take an interest in your organisation right across the repayment period of the investment, to understand your performance, to understand the challenges that you’re facing, to understand the opportunities you may be seeing as a business, and how that might lead to the need for greater investment.

One of the key differences between social investment and more regular investment in that the investors are genuinely interested in seeing not just that financial return of course, but also the social impact that the organisation is creating.”


Impact investment.

Getting an investor/s on board would be a big step for your social enterprise and if you’re trading investment for equity, having an investor on board would mean having another team member and relationship to manage.

Making sure that your values and visions are aligned, as well as clearly understanding what your investor can bring to your social enterprise is paramount.

Is a particular investor a good fit for your social enterprise? Beyond money, do they bring other key pieces of the puzzle to give you a better chance of succeeding?


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Listen to Luke Terry.

It's about relationships with people. Change happens at the speed of trust, and for those people that are fundraising out there, I think the big learning for me is that you don't get money on the first meeting, you get money on meeting 18, 19, and 20.

When you go to ask for money, it's almost there and ready to come to you. They know that you're going to ask for it. They know that you need it and they're almost offering it to you.

My class tips are always, and everyone's heard this, is...

Don't ask for money, ask for advice.

It's like, "Hey, any advice on where I could go for this 600? I've got this problem." I always present it as a... For those people listening now going, "Oh, if Luke's presenting me a problem." It's like, help me problem solve together.

My fifth partner in Vanguard Laundry was a guy that doesn't want to be named, but he runs an ASX listed company. He said to me, "I'm going to support you." It was that early stage cash, so we had a block of land in principle if we could get the diggers on site. It would be signed off to us once we get diggers on site. Then we didn't have a DA on that site, and funders wouldn't give us any money because we needed $250,000 to get DA approval.

It was an incredible journey, because we needed money for something that might not happen.

Normal entrepreneurs do this all the time, but why would you fund? This particular ASX listed CEO guy helps me out, and he's like, "I really want to get you some proper business coaching." Here walks in partner number six, it's my business coach, who consults ASX listed companies.

He says to me, "What's your biggest problem?" I'm like, "I don't know. I've got this meeting with this lady, and I don't know whether I ask her for $20,000 or $50,000." He says, "How much do you need?" I'm like, "I need $4 million." He's like, "Well, why don't you just ask for $4 million and say, 'Anything you could do to contribute towards that?'" That was my game changer day as well.


Crowdfunding.

What are the top tips to consider when creating and launching a crowdfunding campaign?

Firstly, if you are yet to build a community which shares your purpose and is engaged, strongly consider whether this is the best option until you’ve achieved that.

1. Set a reachable funding target.

With Pozible it’s all or nothing. If you don’t reach the funding target, you will not receive any of the pledged money. It’s best to set a relatively low funding target and reach your goal, rather than set it very high the first time.

Pozible highlighted the Gayby Baby campaign which phased their project into two campaigns. Their first campaign asked for $10k and whilst being successful, it also built a following and helped them build momentum towards their larger goal. Their second $100k campaign was successfully funded a year later. Phasing your long term goal into smaller action steps could help you arrive there more quickly.

2. The recommended campaign timeframe is one month.

When you first launch your campaign you may receive an injection of funds from your core supporters (see Step 6), but typically, pledges will drop during the middle of the campaign and rise again towards the end as people see the deadline approaching. One month is considered to be the best timeframe for crowdfunding campaigns.

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3. Provide a range of rewards at different prices.

Rewards can come in three forms:

Recognition rewards - This type of rewards provide your supporters with the chance to receive recognition for funding your project. This could mean they receive a thank you postcard, a mention on your social media/ website or perhaps their name is printed on the inside of your forthcoming book or mentioned in the film credits.

Tangible rewards - This provides you with a strong opportunity to build pre-sales for your product before its launch or maybe there are other tangible rewards which would combine well with your product offering.

For example, if you’re trying to fund the next self-watering planter, perhaps you could offer vegetable seeds as a more accessible pledge for some supporters.

Experience rewards - These rewards could offer an experience that supporters can’t get elsewhere. If you were trying to get a new food truck funded, perhaps you could offer the chance for your supporters to host a party and get an exclusive cooking class. Maybe you could offer a workshop or studio tour to show where your idea was conceived?

Make sure your rewards come at a variety of different prices at both the cheap and expensive ranges of the spectrum.

4. Tell a personal story and be visual.

In telling a personal story you create the chance for people to connect. How can you communicate a ‘shared purpose’ with your supporters which spurs action on their behalf? Use strong visuals to communicate key points about your campaign. Remember that a picture tells a thousand words.

5. Craft an interesting video under 2 minutes in length.

Pozible advised that the average time spent on a campaign page is 1 minute and 45 seconds. With so much distraction from social media, news feeds, phone calls and latest cat videos on YouTube, it’s highly important your video shows the most important content in the first 30 seconds. Your video should conclude with a strong ‘call to action’ which directs possible supporters to the best ways they can pledge or share.

6. Once the campaign is ready, build early momentum.

People like to support something popular. Imagine this scenario; two crowdfunding campaigns of the same product have been launched simultaneously on two different websites. You arrive to the first website and no-one has pledged money yet. When you arrive to the second website, there is a hive of activity and $5k has already been pledged. Which campaign would you feel compelled to pledge and support?

Similar to Roger’s diffusion of innovation theory, it’s important to build momentum early on. Before announcing your campaign to the world, seek support from your core supporters; mum, dad, family and friends. Once the ball is rolling, you are then much more likely to get support from other potential supporters and the general public. Use your network to spread the word via social media, press releases etc. Campaigns typically fail because either the funding target is too high or the network is too small.

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LISTEN TO TOM DAWKINS ON THE FUNDAMENTALS OF CROWDFUNDING

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LISTEN TO ANNA GUENTHER

“I think anyone thinking about crowdfunding should think about three different parts of the campaign:

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One is you need to have a good crowd.

We don’t decide if they’re good. It’s up to you to see if they’re engaged with what you’re doing.

The second C is that you have to be good at communication.

You have to be able to communicate to that crowd that you have what you’re doing, and why it’d be great if they got on board, and what they’re getting in return.

The final C is if you’re doing an equity campaign you need to have a good company.

I mean it doesn’t mean you’re doing good, but it means you really understand how your company operates, what your revenue model is, what your growth plans are or impact plans, and how that money coming in is going to help you achieve that.

I think often we in social enterprise focus so much more on the first two, but not so much on the last one, and you still need to be a sustainable business. You need to know that you can cover your costs through revenue.”


CHECK OUT SETH GODIN’S PODCAST

Skip to 7 minutes and 15 seconds where he shares his insights into crowdfunding).


Getting grants.

WANT GRANT FUNDING?

Clearly respond to each selection criteria.

Selection criteria is very clearly laid out for each grant you may apply for. Use the criteria as a checklist and make sure that you have concisely nailed each criteria. A point system will commonly be used when selectors are going through your application, so give them reasons to score you highly!

Empathise with the funder.

Why is the funder offering this grant? Step into their shoes and try to find the core reasons they may be offering assistance. Have they partnered with another organisation? What do they want to achieve and what do they want this to say about them? Often you are a ‘good news story’ for them to share, so what narrative do you tell that they will want to stand behind and spread?

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Don’t ramble.

Clearly and concisely answer the questions and criteria. If you’re on a selection panel reading through 100’s of applications, you don’t have time to read essays.

Make it easy for the selector to quickly understand how you are going to provide value, tell them your story, but importantly, make sure it comes back to the criteria. Selectors are looking to minimise risk and if they can easily share your story and benefits to a selection panel, you’re improving you chances!


“I personally make very careful choices about what I invest in and it's all about the people.”

- Ruth Drinkwater


Recommended books

If you spend time commuting, audiobooks are a great way to continue learning and challenging your perspectives. Have you read any of these yet?


Good luck Elevators!

What do you really need to take your social enterprise to the next level?

Do you have the systems, processes and contacts in place to make the most of finance if you were to get it? Do you even need it at this stage of your startup journey? If funds are necessary for you to move forward, now’s a good time to plan the type of funds and specific steps you’re going to take to get it.

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