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Four Starting Points for Social Business Founders

If your search landed you straight on this post, I’m guessing you’re a new social entrepreneur and trying to figure out your strategy for this whole “social venture thing.”

I can help you. I’ve started a social business, and lived to tell the tale. Here are some things you should be aware of early on in the process.

 

1 – On Incorporating a for-profit vs a non-profit 

Unless you have compelling reasons to establish a non-profit, establish a for-profit organisation instead. Establishing a non-profit comes with a boatload of bureaucracy and paperwork. Besides, while for-profit startups are generally seen as iterative business, this doesn’t apply to non-profits. Being a for-profit organization gives you, the founder, both the flexibility and credibility to build a viable business. It allows you to raise capital from private firms and investors. Having said that, if your intent is to heavily rely on grants and donations from individuals, foundations or corporations to fund your mission, then by all means, establish a non-profit.

 

2 – Who will you be able to raise capital from? 

Let’s assume you’ve established a for-profit. This means you’re not running a charity. You’re running a business. Unless you’re a bootstrapping miracle, you’re bound to need a cash infusion at some point during your starting-up-phase.

Are you targeting a larger market? Do you have proprietary technology? Unique assets that will make you a success? If the answer to any of these questions is YES, then don’t put yourself into a niche and just raise capital from mainstream investors – provided they will go along with your mission. Don’t put yourself into the tight niche of “social business” investment opportunities. Just build a scaleable organisation with a business offering that happens to have an insane positive environmental impact, but also appeals to a regular investor. Take Elon Musk as an inspiration. Few would describe Tesla or SolarCity as “social businesses” right off the bat – yet their core product has immense social value. He just didn’t put himself into a tiny niche, and went out to dominate entire markets instead.

If you’re targeting a niche market and are anticipating below-market returns, like we were with my former startup – a mobile application focused on the needs of immobilised people, then you need to figure out your fundraising strategy. Your case isn’t lost, but it’s going to be a little trickier. You have a bunch of options at hand: Impact investors, mission-driven angels and crowdfunding (including ICOs). Anticipating below-market returns isn’t all bad in itself, but you need to very clear about WHY you’re building this. The stronger your social mission, the easier it’ll be for you to crowd-fund your project on sites like Kickstarter, IndieGogo and others.

 

3 – Getting certified as a B-Corp

There are many reasons to become certified as a B-Corp, or “benefit corporation”. If you have a consumer-facing product and want to make “social” part of your company identity, this can make a huge difference for your business. Spend a few hours researching requirements for B-Corps early on in the process before things get too crazy. Then focus on getting your business off the ground and get yourself certified after the initial startup-phase – if at all. Why? Getting that B-Corp logo takes effort. Time that you could spend building your business instead.

 

4 – Checks and Balances – A great board of advisors is key

Put regular checks in place to make sure you are staying on course. Especially pivots in the early phases of building your business could affect your original mission and long term impact. Recruit a strong board of advisors early on in the process and enlist their help to stay on course. A great tool to get advisors involved and actively engaged in your business at an early stage is the FAST agreement by the Founder Institute. It’s used by tens of thousands of entrepreneurs every year, in order to establish strong working relationships for their startups.

 

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