6. Activity
• Discussion in groups of 5, the life-cycle of a
social enterprise
– Idea
– Funding
– Incubation
– Growth
– Scale
– Innovation
– Buyout or death
9. How to fund Your Organization?
• Different ways to finance your project
– Crowd Funding
– Bank Finance
– Angel Investor
– Venture Capital (profitability and exit potential)
– Government backed finance
– Traditional Fund raising activities (charity events, cold
calling, door to door, celebrity endorsement etc)
– Social Enterprise competitions (Dell, Hult, Venture Cup)
– Startup Weekends??
– Social Investment fund
10. Bank Finance
• KFW and GIZ
• ADB
• Nabard India
• IFU in Denmark for Developing countries
• World bank and IFC
• Porparco and AFD
• OPIC US government
12. Government Ministry Funds
• https://www.youtube.com/watch?v=iV2ViNJF
ZC8
• (Monty Pythons’ Ministry of Silly Walks)
13. Social Enterprise Competitions
• Dell SoCent Competition
• Harvard SoCent Competition
• OxBridge SoCent Competition
• Hult SoCent Competition
• X-Prize foundation
• Startup Weekend Competition
https://www.youtube.com/watch?v=dPAOj40rr5
k
14. Social Investment Fund
• It is not microfinance !!
• It is not venture capital !!
• It is investing in businesses that create positive
social value in communities
18. Types of Social Investment Fund
• For profit social investment fund
– Bridges Ventures
– Legatum Ventures
– GrayGhost Ventures
– Aavishkaar
• Foundations
– Gates Foundation
– Dell Foundation
– Tryg Founden
– Ferd Social Entrepreneurship Fund
• Incubation Funds
– Villgro
– Unitus Seed
• Fellowships
– Ashoka
– Acumen
19. Indian Case
• Aavishkaar
(https://www.youtube.com/watch?v=r5vSbcxVGko)
– 2002 with 100 dollars
– Currently they have raise over $400 million
– Mandate
• For profit social enterprises
• Marginal markets and difficult to operation, remote markets
• Ethical business practices
• High level of innovation
• $ 200K to $2 Million
• Equity based investment: 10% to 30%
• Institutional investors
20. Indian Case
• Villgro
(https://www.youtube.com/watch?v=ZvblnKyJG2
8)
– Investor, Incubator and Mentor
– Invests in social enterprises where social mission is
integrated with the market
– $20K to $200K
– Equity 10%
– Based inside an engineering university, looks for high
degree of innovation
– Government grants
21. Due Diligence
• Type of Funding required (equity/loan/Grant)
• Social Mission Diligence
• Financial Return Diligence
• Social Network Diligence
• Political Diligence
• Mission Drift
• Exit Strategy
22. Type of Funding Required
• Equity Funding
– Buy a part of company (shares) based on certain
valuation
– Valuation based on expected returns over the next 5
years
– Valuation based on company capitalization in the next
5 years
– Valuation based on the entrepreneurs’
experience/age/current customer/ board
members/celebrity endorsement/novelty and
innovation
– Very high risk
23. Type of Funding Required
• Loan
– Based on collateral
– Low risk
– Interest rate
24. Type of Funding Required
• Grant
– Project proposal
– Project approval
– Very low risk
– Time consuming
– Lots of paper work
25. Social Mission Due Dilligence
• Baseline case and theory of change
• Qualitative and Quantitative
• Qualitative
– Peace and happiness
– Reduction in social inequality
• Quantitative
– Change in status quo as a function of intervention
26. Financial Return Due Diligence
• Market and industrial condition, Economic and
social indicators
• Revenue streams
– Costumers
– Turnover time
– Government grants
• Cost
– Inventory
– Customer acquisition cost
– Salaries of staff
– Office space
27. Social Network/Political Due Diligence
• Political climate of the local region and
national level
• Entrepreneurs’ History and social network
• Board members and their reputation
• Staff and their social network
30. Investment Decision
• Contractual Document
– Legal risk
– ESG risk
– Financial Risk
• Role of entrepreneur
• Management of the investment
31. Activity
• Put yourself in the shoes of the investor
• Critically study your projects and think what
will it take for an investor to invest in your
project or reject your project
• Critically think who could be the potential
investors and why
32. Crises of Legitimacy
• Lack of metrics
• Lack of standard practices
• Lack of standard valuation practices
• Role of social in valuation of the enterprises
• Managing financial returns
• Conflict of social vs commercial