How to Use Social Impact to Succeed in Fundraising for Your Business

Women hands clasped in handshake - Social Impact Fundraising
 

Getting access to the right kind of capital for your business at the right time is critical for business growth and success.

Learning about all the different financing options and pursuing the right type of capital is one of the top reasons business owners decide its time to engage a CFO. And let’s be real, raising money for a small or early-stage company is tough. For women or under-estimated founders, it is even tougher.

In a highly competitive funding environment, some business advisors recommend that entrepreneurs seeking outside investment should focus only on the business fundamentals. They see social impact and mission as a distraction that is inappropriate for a start-up or small company. 

This argument assumes that you have enough to talk about when pitching your business, why muddy things by sharing social impact goals when meeting with potential investors, right?

Wrong. 

If you're company is dedicated to social impact, you need to find the right partners. You need investors and advisors that live your mission with you and help make it happen.

Being clear about your social impact goals and strategies is a magnet that will attract investors who also care about the social impact of your business and understand the complexities you’ll face as you build for both profit and impact. 

BTW: We love to help our clients access the right kind of loans and investments to fuel growth. If you’re thinking about a raise get started with a free 30 minute meeting with one of our CFOs.

4 Steps to make social impact a key part of your funding strategy. 

#1: Be explicit about your company’s social impact goals.

To find the best possible investors for your business, your potential partners need to fully understand what you’re about. In your pitch deck and business description, you MUST include the social issue you are targeting in your description of the problem you are solving.  Anchor your business model, product, or service to the importance and urgency of the issue. 

Here are some examples:

  • Solar power provides renewable energy which is better for the planet, provides local jobs, AND reduces our economic dependence on imported fossil fuels.

  • Consumer Packaged Goods: If you’re selling a food product to a consumer audience, you have to make sure that not only does your product taste good, it also has to appeal to your customers based on how it's packaged, how the ingredients are sourced, and what effect it could have on your health.

These elements may not come first in a purely financial business model, but companies offering clear environmental and social value perform better in the market.

According to Investopedia, “Socially responsible companies cultivate positive brand recognition, increase customer loyalty, and attract top-tier employees. These elements are among the keys to achieving increased profitability and long-term financial success.” 

Research from the World Economic Forum supports this and shows that in the last decade in the US, consumers’ preference for brands with an aligned purpose went up from 50% to 66%. 

Every investor wants to know that your business is solving a problem that people (ie customers) actually care about. If social impact is part of what your customers care about, your investors must also understand and value that.

The right investors don’t just care about your bottom line. They care about the social impact of the company, and are EXCITED about it!

#2: Find and Meet Investors Focused on Social Impact

Investors who are pursuing both social and financial returns are called Impact Investors.  Like mainstream investors; most impact investors are focused on specific industries or types of impact. This means that companies looking for a good match between their company and investors can start by identifying funds and people who share your outlook and are interested in the business and growth trajectory as well as your impact. 

Here are a few places for you to get started on this search. 

  • Social Venture Circle is an angel network operating as part of the American Sustainable Business Council. SVC has regional groups that meet throughout the year in New York Area, Pennsylvania, Colorado, North Carolina, New England, and the SF Bay Area and also hosts a national pitch competition. 

  • Look for accelerator or incubator programs in your field.  Food Future Co is an accelerator program for companies in food, agriculture, social and environmental entrepreneurship. I’ve been a mentor in their program for several years and am always excited to meet the latest group of innovators they work with. 

  • Get exposure for your company and meet potential investors at pitch competitions and other industry gatherings. Two good examples are:

Note: many of the investor networks I know are from my work with food and beverage companies, and so my examples reflect this. With a little searching, you can find Impact Investors in almost every industry.

#3 Document Your Social Impact

Once you’ve begun more serious talks with potential investors you’ll soon reach the due diligence phase.  This is when potential investors complete a financial and business assessment of your company to double-check that the company actually lives up to the promises and meets the investor’s requirements. If you are building for social impact you’ll need to prove effectiveness in this arena as well. 

You need to be able to show not just your desire for social impact, but how you actually implement it. So start now to map out the specific outcomes that you can prove as the result of your business model, purchasing decisions and hiring practices and maintain detailed and accurate records of all that you do to effect change. 

The worst possible thing a business owner could do is present their company to potential investors claiming social impact only for those people to discover that you can't actually prove it. 

This is when you get into the murky waters of greenwashing, whitewashing, or social justice washing. And this is when you lose credibility (and investors) FAST. 

Get more tips on How and Why to Produce a Social Impact Report!

#4: Prove You’re Profitable

Okay, you didn’t think we were wrapping up without a nod to profitability, did you?

Of course not. Financial success fuels social impact. 

In addition to shining a light on your impact-driven mission and story AND your well-thought-out plan for documenting your impact (aka proving you can put your money where your mouth is), you also need to show investors that your business is and/or will be profitable.

Even the most impact-focused partners need to see that your business can make a profit, because, without this necessary profit margin, there’s no money to use for impact anyway.

My suggestion for creating profitability for entrepreneurs is always to implement Profit First as an integral part of your small business. And yes, you can use Profit First to increase social impact.

Fundraising support for Companies with Social Impact

Getting access to the right kind of capital for your business at the right time is critical for business growth and success. Learning about all the different options, and pursuing the right type of capital is one of the top reasons business owners decide its time to engage a CFO.

That’s why we offer support for getting loans and investments with every client we work with. 

If you’re not sure what the right first step is for you business I recommend that you Start with free 30-minute conversation with one of our CFOs.  

The focus of the conversation will be on your business, the challenges that are top of mind for you, and the actions you could take to get the capital you need.

Social Impact, Business ModelsChristine Ricocfo tips, Fundraising, social impact