Theory: How do you construct a financial model for your social venture? Practice: What are the main cost drivers and revenue streams for your social venture? What are the various types of financing that social enterprises require, and how does this vary over the lifecycle of the business? http://www.socialentrepreneurship.ca/indev308

1. INDEV 308: Introduction to Social
Entrepreneurship
Class 5 (Part 2): Financing Considerations
for Social Enterprises
Monday, June 6, 2011
Instructors:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)
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2. © Norm Tasevski & Karim Harji
Agenda
• Before the break…Part 1 (Costing Analysis for Social
Enterprise – Separate Slide Deck)
• Financing Options Available to Social Enterprises
(for-profit and non-profit)
• What do investors care about?
• What did we learn – today?
• Next week
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3. Financing Options for Social
Enterprise…
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4. © Norm Tasevski & Karim Harji
Financing Options – Over the Social
Entrepreneurship “Life Cycle”
MORE EQUITY-LIKE
GRANTS
SOCIAL
VENTURE
CAPITAL
FUNDS
ANGEL
INVESTMENT
VENTURE
CAPITAL
PROGRAM-­‐RELATED
INVESTMENT/RECOVERABLE
GRANTS
FORGIVABLE
LOANS
SOCIALLY
RESPONSIBLE
INVESTMENT
FUNDS
BELOW-­‐MARKET
DEBT
MARKET-­‐RATE
DEBT
MORE DEBT-LIKE
IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT
Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, 4
http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

5. © Norm Tasevski & Karim Harji
Another Way to Think of Financing
Options…
Cash Fixed Income Public Equity Private Equity
Higher risk Lower risk
Guarantees Lower risk Higher risk
Grant Subordinated
Private Equity Senior Loans Cash
Support Loans
-100% -90% to -10% 0% 1% to 7% 8% +
Capital-protected Commercial-return
Grants “Soft” Investments
investments investments
Very soft debt Market-rate debt
“Blended return” equity
Social returns only Mix of grants and Equity
Soft debt
other capital Full commercial returns
Willing to take below-
Willing to lose Social benefit can be a
market return
some money requirement
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Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”

6. © Norm Tasevski & Karim Harji
Features of Different Funding Instruments
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7. © Norm Tasevski & Karim Harji
Aligning Supply and Demand…
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Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”,
http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

8. © Norm Tasevski & Karim Harji
Sources of Financing
Banks/Credit Unions!
Investment Management Firms!
Vancity!
Citizens Bank!
Ecotrust Canada
CAPE Fund! Capital!
Alterna Savings! Canadian Co-
operative
Association! Fonds de solidarité! Renewal2
Desjardins! Investment
Resilient Fund!
Capital!
Specialized Funds! Social Capital Partners!
Canadian Alternative
Investment Co-op! Community Loan Foundations!
Funds (various, in
Social Enterprise most major cities)! Edmonton Community JW McConnell Family
Fund (Edmonton)! Foundation! Foundation!
Ontario Trillium
Grantors! Maytree
Foundation!
Toronto Enterprise Foundation!
Enterprising Non- Fund!
Profits! Tides Canada! 8

9. © Norm Tasevski & Karim Harji
Sources of Financing
Organized by Stage in the Venture Life Cycle
Business Sources of ! Sources of Sources of
Development Grants/Technical Equity Debt !
Stage! Assistance! Financing! Financing!
• Centre for Sustainability (POD Grants)!
Building • Coast Capital Savings Community Fund Grants!
• Coast Capital Savings Foundation (youth)!
Organizational • Endsweel Foundation!
Capacity! • Tides Foundation!
• Vancity Savings Credit Union Grants!
• Vancity Community Foundation grants!
• Vancouver Foundation!
• BCT SVP!
Business Plan • CEDTAP grants!
Development! • Coast Capital Savings CED Department!
• Enterprising Non-Profits!
• Vancity Community Foundation grants!
• BCT SVP! • Renewal Partners! • CCEC!
Start Up! • Social Venture Partners! • Community Futures Development
• New Social Venture Fund! Corporations!
• Coast Capital Savings – Rising Tide 2
Fund!
• Ecotrust!
• Vancity Savings Credit Union!
• Vancity Community Foundation loans!
• Renewal Partners! • Vancity Capital Corporation!
• Social Venture Partners! • Ecotrust!
Operating! • New Social Venture Fund!

10. What do (social) investors care
about?…
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11. © Norm Tasevski & Karim Harji
Financing Considerations Used by the
Canadian Alternative Investment Co-Op (CAIC)
CAIC’s Criteria:
• What is the project?
• What is the social benefit?
• Provide a detailed
description of:
– i) how the project is
going to be financed;
and
– ii) how it is going to
operate on an
ongoing basis
What does CAIC care about? Your ability to tell your “story” in
a clear, simple & compelling fashion!!
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12. © Norm Tasevski & Karim Harji
CAIC Financing Considerations:
Management
CAIC’s Criteria:
• Staff and management
– Highlight relevant experience
• Board of Directors
– Highlight relevant expertise/experience
What do they care about?
– The caliber of the individuals undertaking the project
– Who is giving your guidance, what resources and
experience you are drawing on
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13. © Norm Tasevski & Karim Harji
CAIC Financing Considerations: Investment
Proposal (1)
CAIC’s Criteria:
• Amount of loan requested
• Terms of repayment: term, amortization, interest rate
• Collateral or potential guarantors
• Demonstrate sound and realistic business case
What do they care about? Whether you can present a
Sound, Realistic, Understandable business case
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14. © Norm Tasevski & Karim Harji
CAIC Financing Considerations: Investment
Proposal (2)
CAIC’s Criteria:
• Shared risk
• Multiple sources of capital
• Present sources of credit
• Potential sources of credit (inc. their response)
What do they care about?
• That you’ve considered ways to mitigate risk to
investor
• That you have multiple and sufficient sources of
capital
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15. © Norm Tasevski & Karim Harji
CAIC Financing Considerations:
Financial Organizational Capacity
CAIC’s Criteria:
– Most recent internal operating statement & balance sheet
– Budget & cash flow projections for the current and upcoming year
demonstrating how the CAIC loan would be repaid
– Financial Statements (audited or reviewed) for the last two years
– Organizational financial management practices (i.e. financial planning,
organizational resources, financial operating systems, & financial
soundness)
What do they care about?: That you’ve mapped out
all aspects of the business/operations, and that they
are getting the attention that they need
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16. © Norm Tasevski & Karim Harji
What did we learn?
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17. © Norm Tasevski & Karim Harji
Next Week
• Deliverable: Assessment of Business Potential (Part 5)
• Readings
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