What investors, philanthropists and mentors look for in your purpose-driven startup
We recently sat in on a panel discussion on Amplifying the Value of Your Enterprise, at the recent Social Enterprise Startup Bootcamp in Sydney, which was hosted by Allens Accelerate. The discussion focussed on courting backers, especially those with the kind of influence, networks, and financial means to help your startup get established and grow.
Four common themes emerged:
- The founders have people skills
- A tested idea
- Sustainable revenue streams
- Strong connection between social outcomes and revenue streams
Says who?
The panel was moderated by Valeska Bloch (Co-Head of Allens Accelerate), at the recent Social Enterprise Startup Bootcamp in Sydney. On the panel were Pete Horsley (Founder at Remarkable), Michelle Goldstone (Director at Patagonia Group and Investment Committee Member at Impact Investment Group), and Hannah Miller (Capacity Building Program Manager at SEFA Partnerships).
All of the panel members have a strong track-record borne of hands-on experience with purpose-driven startups, be they social enterprises, not for profits or profit for purpose and commercial organisations.
So, let’s unpack and expand on their wisdom.
1. People skills
Your supporters – in fact anyone – that works with or is vital to your startup’s success is there to make a contribution. They will be asking the question, ‘Are you going make it easy for me to help you deliver a social outcome?’ Your job is to make it easy for them to find a good answer, one that works well for them and your startup.
The following are things that your supporters will be looking for:
- You can articulate your purpose, cause and the social outcome you’re working towards.
- You have a clear ‘ask’ – don’t beat around the bush. The opportunity to make a contribution by helping you out somehow.
- You recognise that they have other commitments and priorities beyond your startup
- You’re open to their opinion and experience – even if you don’t follow their advice, at least consider it politely and if you decline, do so graciously.
If you’re asking for something significant, such as investment or ongoing time, recognise that you’re establishing a relationship. This means that you listen, respect people’s time (even to consider whether they’ll work with you), and are willing to share your personal story (and demonstrate interest in theirs, especially the connection to your cause). It also means that you’re prepared to go on a journey with them and that you won’t rush them.
2. A tested idea
They want to know that you have an idea that’s grounded in reality. This applies for the social need, the outcome you’re creating, and the social and commercial value that you’re creating.
What they’ll look for:
- Who else is doing ‘your idea here’ and where do you fit in – are you complimentary or competing and why?
- Evidence to demonstrate that this is (a) a problem worth solving (b) for the people you’re aiming to help. In other words, you have direct proof that those people have confirmed that they actually need whatever you’re doing.
- Proof of the social impact you’ll deliver. What difference will you make to people’s lives and to your community. Stories are nice for engagement. Add convincing numbers and they’re even better.
3. Sustainable revenue streams
This is especially important (and somewhat obvious) for investors. Philanthropists are also concerned that your venture will be around for the longer term.
What they’ll look for:
- Proof that there are enough people with the means to pay enough to provide a predictable revenue stream. This should not be desk research. You should have at least some directly relevant proof points that demonstrate intent on the part of your potential revenue sources, eg customer validation.
- You know the costs or investment required to set up and run your startup.
- Your long term financial model stacks up so that you can at least survive. Note that investors actually want a financial return, as well as a social return. In other words, you need to turn a profit and give part of that to them, in exchange for the money they’re giving you to help get started, grow, etc.
4. Strong connection between social outcomes and revenue streams
The social purpose must be central to the core business. In other words, you’re not just operating a viable commercial business that makes a donation to a social cause, or creating an intangible brand benefit through social causes. This doesn’t mean that you’re not making a profit – you can be a profit for purpose business and that can be very attractive to investors.
What they’ll look for:
- Clarity of purpose and how that influences business decision-making.
- Demonstrated relationship between the revenue streams and the social impact.
- Taking an industry leadership position on social and or environmental causes to influence mindsets and behaviour.
- Stakeholder acceptance or endorsement.
Does your story stack up?
Now that you’ve read this, how do you feel about your approach to attracting and winning supporters? Can you answer these questions? Maybe not?
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