For social entrepreneurs out there in the field, whether they’re just getting started or looking to increase the size of their organisation, the question of funding is extremely important. An individual with an idea may want to make their idea a reality, but they lack the funds to get started. A established social entrepreneur may have reached 5,000 customers, but lacks the funds to scale to 50,000. At these crucial junction points, funding plays a large role.
The funding available depends on your legal structure: for-profit or non-profit. (In some countries, such as the US, ‘hybrid’ legal structures exist, but not in Pakistan.)
Funding your for-profit social venture
In the case where profits generated from operations are not sufficient for growth, a for-profit social enterprise has the advantage of being able to take on capital investments, in return for profits or stock in the business. While the concept of “impact investing” is relatively new, the traditional venture capital market is mature and has many funds investing into all types of businesses. Recent years have seen the emergence of a number of funds designed for social enterprises. As social ventures continue to increase as a viable alternative, this will surely increase.
Let’s look at options for entrepreneurs at different stages of business growth:
Starting Out
- Private investors
- Family and friends
- Crowd-funding (e.g. ProFounder, though it’s US-only)
- Seed/angel funding (through organisations like Echoing Green and Village Capital, as well as the newly launched P@SHA Fund for Social Innovation)
- Social business competitions (run at universities, as well as through organisations like Ashoka Changemakers)
Scaling Up
- Private investors
- Social venture capital (e.g. Acumen Fund)
- Social business competitions (see above)
For detailed lists of investment funds, look at this list or ImpactBase.
Funding your non-profit venture
Funding for non-profits can pose a more difficult challenge, as funds contributed to the non-profit cannot be paid out again (and hence no profit can be made).
Starting Out
- Donations (family, friends, networks, fundraising)
- Donor-funded grants (although typically difficult, as donors require recipients to show their past impact)
- Social business competitions (see above)
Scaling Up
- Donor-funded grants (e.g. Aman Foundation, P@SHA Fund for Social Innovation, also see Funds For NGOs for listings)
- Social business competitions (see above)
Two other useful resources on building social enterprises are:
- Wall Street Journal: Funding your social venture
- Inc.com: How to become a social entrepreneur
Have we missed something? Have you funded your venture in some other way? Let us know!
ThinkChange Pakistan 