We’ve looked at some of the various funding sources for typical growth-oriented start-up ventures. But what about funding for social ventures—companies and non-profit organizations whose primary mission involves social or environmental responsibility, or that benefit a community or cause?
For the last year or so I’ve been working with a not-for-profit organization in Seattle’s inner city. The group is opening a cafe that will provide employment, a community gathering space, vocational training, and cultural programs. So it’s a revenue-producing business, per se, but it is a non-profit entity with a much broader mission than the typical corporate mandates of making a profit and “maximizing shareholder value.”
Make no mistake, profitable operation is the goal here! “Non-profit” doesn’t mean non-revenue. In fact, many social ventures generate solid operating profits, but are committed to returning those profits to their constituency in the form of new programs or broadening their reach.
Some of the funding avenues for social ventures are the same as those for traditional companies, for example, small business loans or angel investment. Social ventures and non-profits, however, can often tap into sources such as grants (from the government or private foundations) and donations that are not accessible to for-profit ventures. (In a future post I’ll talk more about the grant proposal process and how to write grants.)
Typically, investors in social ventures use a different yardstick to measure company progress and return on investment. They will often take a longer view and don’t demand the same kind of aggressive returns they would from a profit-driven, high-growth venture.
Or they may not expect an ROI at all, but invest just because they believe in the cause or mission of the organization. This recent article in the Wall Street Journal outlines one social venture company’s experience with getting investors, and provides a good summary of the various social venture funding avenues available. In Seattle, one organization that is taking an interesting approach to social venture funding is Social Venture Partners.