Financing for Good – Finding Sustainable Business Models for Social Enterprises

Financing is one of the biggest challenges to any entrepreneur. For social entrepreneurs – an industry which sees little investment, despite its high impact – this is an even bigger obstacle to success. To help get over this obstacle, empowering people. Network brought 19 entrepreneurs together in Johannesburg, South Africa, this August. These entrepreneurs, coming from Burkina Faso, Cameroon, Egypt, Italy, Kenya, Nigeria, South Africa, Tanzania, Uganda, UK and the US, went through a special epOnsite training focused on Social Finance.  

With a custom toolkit developed by adelphi/SEED in cooperation with the Siemens Stiftung serving as the basis for the week, the epOnsite training covered topics as “Revenue Models & Financial Calculations”, “Financial Management & Business Planning” and “Raising Finance”. The approach of the epOnsite trainings is always a very participatory one, focussing on peer-learning. Most of the sessions follow a similar process: Assessing the status-quo with the help of guiding questions and templates, sharing this with others, collecting feedback, and thinking of ways to improve.

Cross-sector information and meeting people from various sectors and countries was valuable for the participants. (Photo credit: epNetwork Team)

One of the key goals of the toolkit in combination with this epOnsite training is to clarify – for each organization individually – what kind of funding is the best fit for the organization: Is it debt? Grants? Equity through investment? And once a clear picture is formed of what the organization really needs, the next question is: how can one get there?

One of the key tensions that was discussed is ensuring the values of the organization do not contradict those of donors and funders. For social entrepreneurs sourcing the majority of their funding from grants, the danger is making business decisions based on whether these decisions will increase their chances of getting more grants. The same may be true of investors. That can put the social enterprise’s core values at risk.

“You may want to give people affordable glasses, for example,” said one participant, “but you may also have to increase their unit cost to satisfy your donor’s ideal of making your business more self-sustaining.” The need to stay true to the company’s values was essential to all participants, and it was clear that finding a model that fit their vision for their organisation was a continuous process. “Seeing the differences between for-profit and non-profit models, and debt versus investment funding sources, really helped us,” said another participant. “We’re a non-profit considering a hybrid model, or becoming a full for-profit company to fund our work, so the comparisons and insights are very useful.”

Common goals and social development on the African continent made members feel connected. (Photo credit: epNetwork Team)

Teams doing exercises in the workbooks. (Photo credit: epNetwork Team)

The entrepreneurs, who came from different countries and are also operating in sectors from healthcare and transportation to water or energy, represented profit-making organizations and non-profits. At times, this put them on unfamiliar ground during the training. But it also ensured even more learning.

This sort of diversity in experiences allowed for universal problems to be identified early on, with a whole range of solutions coming together. Many participants realised that their financial policies are almost entirely unwritten, making it difficult to stay on course, or share their business vision with their team. That which is formalised is often done according to a donor’s specifications for reports, or for tax compliance, meaning many didn’t create financial statements, policies or other financial documents unless required to do so; making it difficult to execute their business plans.

A solution which resonated with many was finding tasks which could be outsourced to experts, such as drafting letters of intent, advising when to use a non-disclosure agreement, and getting help creating policies that guide the team. Another recommendation was that entrepreneurs look at their organizational structure and ensure one or two employees have some form of legal background so that they’re able to assist with basic tasks – even if that is not their core job.

A final round of advice from lessons learnt by all in working with investors, loans and grants, included:

  • Treating investors with as much rigour, organization and respect as you do your customers
  • Being prepared to walk away from an investment or grant when it’s not a good fit
  • Never hiding anything from potential investors
  • Making yourself more visible to financial institutions and funders, because many small businesses don’t have someone dedicated to business development
  • Engage with experts whenever you can
  • Go to creditors that have hybrid funds combining grants and credit
  • Look beyond your borders! Some countries do not invest in start-ups, so see where else you can find funding
  • Don’t sign anything you don’t understand!

Members contributed by sharing knowledge, skills and inspiring each other. (Photo credit: epNetwork Team)

Almost unanimously, participants agreed that the most valuable part of the epOnsite workshops is the opportunity to network with its incredibly diverse members – learning from dedicated entrepreneurs who may work in entirely different business models, markets and industries, but often encounter very similar problems.

Members felt the connections and the knowledge shared create life long bonds that are win-win for everyone involved. (Photo credit: epNetwork Team)

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