How to Generate Revenue: Funding Your Social Enterprise or Nonprofit

by Hannah Jang, Chief Blogger

It takes more than just a great business idea to make a new company successful. Whether you're running a nonprofit organization or building your own start-up company, you will need to develop a solid financing strategy with the near future in mind. Finding seed and early stage funding may be a difficult task. Luckily, we had the opportunity to speak with Shana Dressler, Co-Founder of the Social Innovators Collective, before she wraps up for their 5-part workshop series. She shares with us the importance and challenges of finding funding sources.

With numerous funding opportunities available, how do you choose the best funding option?

Shana: It’s true that there are many channels to explore funding opportunities. The best options depend on several factors. First of all, where you’re going to look for funding for a nonprofit is different than where you’ll research opportunities for a social enterprise. [I’m defining a social enterprise as an entity with one of the following corporate structures – LLC, LC3, Benefit Corporation, not a 501(c)(3).] Then the second consideration is what stage of your business development are you– this goes for both nonprofits and social enterprises. Depending upon whether you’re a startup or at the emerging or mezzanine phase of your business development will determine where to look. The worst piece of advice that I’ve heard and continue to hear for startup/emerging nonprofits is, “Oh, you’re a nonprofit…you should apply for a grant.” Given the research we’ve done, getting money from individuals is many times more effective. Most foundations have little to no money earmarked for startup nonprofits. They are looking for proof of concept and a track record to know that you’ll be around for the long haul. They are also not interested in supporting work that replicates that which is already being done well in the space. Before you get too deep into what you are doing, research who’s getting the funding in the area you are seeking to make an impact. So why crowdfunding? Besides the fact that grants are so hard to come by these days, here’s the research: Of the $290 billion that was contributed in 2010 to ALL nonprofits nationwide, 73% came from individuals and only 14% came from grants.

For people who have founded a social enterprise, the word on the street is to go after VC funding. I often hear people say, “Hold out! Bootstrap in the beginning before you give your company away to early seed funders.” In other words, keep your day job until you can really figure out your long term financial plan.

What are some ways of increasing your chances in obtaining financing?

Shana: The short answer is: Be clear about what your mission is and know how to communicate it passionately and effectively. If you are inarticulate - whether that is in your written or spoken communications - you’ll have a very hard time getting funding. Next, your branding and visual communications need to really sing. Alastair Ong, Co-Founder and COO of GreenSoul Shoes and a member of the Social Innovators Collective, said the following in the 3^rd workshop we held “Pitch Your Idea: Persuasive Communication”: “A bad idea with a great pitch will get much further than a great idea with a bad pitch. The name of the game is presentation. I can't do anything about your idea, but I can do something about your presentation.” There’s so much competition for funding (and people’s attention) that if you’re not able to interest people and, more importantly, grab their attention, forget it. Finally what has always surprised me is that people don’t fund ideas as often as they do the people who are presenting them.

How can you avoid underestimating funding requests?

Shana: Do your research! Ask questions. For nonprofits go to Guidestar.org and find out what your competitors are getting by downloading their 990 tax returns – it’s one of the best kept secrets. Another fantastic resource is The Foundation Center. Either go to their office or visit their website and research the foundation you’re looking to apply to for funding. There’s a list of the grants they’ve made, to whom and how much they gave away. For social enterprises this is a bit trickier, but again, this is public information. We’ll be sharing this at our workshop on November 15^th.

However, the reality is that even with all the research you do, it can still be hard to get funding. Milena Arciszewski, the founder of Pando Project and a member of the Social Innovators Collective, is a perfect example.

Milena recently decided to put her venture on hold because she didn't have enough funding to keep her doors open. I was so moved by her story. She is truly a woman of great courage, integrity, heart and soul. Admitting failure is so important, because failure can only lead to further innovation. But unfortunately, many nonprofits have avoided letting their funders and donors know what hasn't worked, for fear of not receiving further support. I hope more Milenas come forward and share their stories when we begin our 2012 series on Lessons Learned. It will be a continuation of the blog that Danielle Lanyard, the founder of Green Breakfast Club, and I put together for General Assembly to support our classes.

I think we're all in agreement that we want to alleviate suffering in various ways, shapes and forms whether that be locally, nationally or globally. The people I know in this space are motivated and passionate about using their talents, resources and professional skills to create a world where we can all live peacefully with dignity, love and a sense of fulfillment. But, if we don't have the funding in place to support the long-term efforts ahead of us, we eliminate the chance of succeeding in any significant way. There are so many projects that belly up because of the lack of foresight as far as funding goes. When one fails to actualize a personal project, it can be very disappointing, but it is not dire. Mistakes are great learning tools. At the Social Innovators Collective, we want to encourage you to share mistakes so we can all learn from each other. High impact work isn't easy and so the more we know what doesn't work, the more we can focus our energies on innovating until we find solutions that do. For that reason, we will be producing a conference in late 2012 on failure. If anyone wants to sign up for our brainstorming session on Wednesday, November 30th at "We Create NYC," we'd love to have you: http://bit.ly/t7wmq8.

Can you provide us with a sneak preview of what to expect for the last workshop?

Shana: First of alI, I don’t know of any other organization in New York that’s talking about financial literacy for nonprofits and social enterprises the way we are. We’ve started to find other resources out there, but it’s taken a lot of digging. For nonprofits we see that founders are in denial that they are running businesses and this is why so many fail. We’ve spoken to people who have NO idea what a trademark is or does and why they need one. I’ve had people look at me, as if I were talking in a foreign language, when I asked if they have a business plan in place. Here’s the only thing to say about this. A business plan is ESSENTIAL. It’s a roadmap to secure an organization’s long-term success. There’s no way you are going to secure any type of major funding, whether that be from angel investors, venture capitalists, program officers from foundations or philanthropists, if you don’t have a clearly articulated business plan or something that closely mirrors one. Sure you might get lucky once or twice, but then the word gets out when you have little to nothing to show for the work you’ve done because you squandered the money. Investors and funders need to feel confident that you will spend the money you receive wisely. With your plan in hand and a polished pitch, you’ll be ready to approach investors and major donors. The money is out there. The question is, “Are you prepared to receive it?”

Bottom line: Come to our class. We will make sure that everyone leaves equipped with the information to succeed wildly!

For more information: http://bit.ly/uICnFP

To purchase tickets: http://financialsustainability.eventbrite.com

 

About Shana Dressler:

For fifteen years Shana Dressler worked as a multimedia producer and photojournalist on projects spanning several disciplines and continents while consulting for nonprofit arts and media organizations. Inspired by her consultant work with the Peabody award-winning satellite TV station, Link TV, which broadcasts eye-opening documentaries about the problems facing humanity and efforts to address them, Shana sought ways to contribute to featured causes in a meaningful way.

Since February 2009, Shana has concentrated on building unique giving communities focused on raising funds and awareness around such issues as human rights, the global water crisis, youth education, women’s leadership and social entrepreneurship. Through her nonprofit organization, the Global Giving Circle, she created opportunities for people of all income levels to support hybrid grassroots social enterprise and philanthropic initiatives focused on poverty alleviation. In December 2009, Shana launched Global Gifts That Matter, an online gift emporium supporting high-impact nonprofits and social enterprises through the sale of gifts and gift donations. In February 2010, she began work on the Global Cocoa Project. Its mission is to support cocoa farmers around the globe by supplying them with not only tools to improve the quality of their cocoa production, but also basic needs for their daily lives.

Shana is also the Co-Founder of the Social Innovators Collective, a dynamic, energetic network of emerging founders, leaders and individuals who work in the social enterprise and nonprofit spaces.

 

 

 

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It is not necessary to be amazing in public speaking. The important thing is to be able to clearly explain why investors should invest in you. You should be able to sell your product or services.

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Great advice, particularly about the importance of clarifying and being able to communicate the mission of your organization, and doing it with passion & confidence. So important.

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