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Toolkit

Key strategy for philanthropists, impact investors and corporates

Philanthropists

Impact investors

Corporates

 

Philanthropists

Funding

Why

Philanthropists can unlock much-needed grant capital to give early-stage social enterprises the freedom to experiment, refine their business model and become investment-ready.

Philanthropists can support social enterprises by funding and fortifying the sector’s ecosystem. Many ecosystem enablers are young and still rely on grant funding.

Philanthropists can initiate social entrepreneurship education when others have yet to see its value or lack the resources to implement it.

How

  • Offer grant funding to support social enterprises.

  • Consider whether to administer grants directly or outsource administration and due diligence costs to an intermediary working with social enterprises (such as an incubator).

  • Recognize that social startups are different from traditional nonprofits and adapt key performance indicators and reporting requirements accordingly.

  • Fund social incubators and accelerators to strengthen their capacity for serving social enterprises.

  • Fund research on social entrepreneurship and support platforms that encourage knowledge-sharing.

  • Fund entrepreneurship education initiatives and training programs.

  • Consider extending existing educational initiatives to include social entrepreneurship skills development.

Recognition

Why

Philanthropists can leverage their platforms and networks to enhance recognition of the social enterprise sector.

How

  • Give awards or sponsor prize competitions focused on raising the profile of social enterprises.

  • Lead by example. Encourage other business leaders and philanthropists to fund and support social enterprises.

Mentoring

Why

Philanthropists can leverage their business and leadership experience to offer non-financial support to social entrepreneurs.

How

  • Support social enterprises as mentors or board members.

 

Impact investors

Funding

Why

Impact investors can take a broader portfolio approach that allows them to better fulfill their social and financial goals while also meeting the capital needs of an array of social enterprises.

Impact investors can increase investments in social enterprises by lowering their overall investment risk and catalyzing others to invest.

How

  • Periodically review whether the total return on impact investment (composite social and financial return) accurately reflects the portfolio’s risk-return-impact appetite.

  • If not already done, determine the preferred total return on impact investment. The impact investment portfolio can then be built around the preferred balance between social and financial returns. For instance, a higher desire for social return may mean more latitude in financial return expectations, and vice versa.

  • Deploy investment capital through a range of financial instruments, including debt and equity.

  • Consider apportioning some investment as a de-risking mechanism, e.g., by offering catalytic first-loss capital.

  • Explore opportunities to work with other investors to create funding collaborations with greater risk tolerance.

Impact measurement

Why

Impact investors are uniquely positioned to assume a role in impact measurement. Investors want to measure the social and financial returns on investments and social enterprises want to measure their impact.

How

  • Work with investees to develop tailored impact measurement criteria, based on common goals and the capacity of the social enterprise.

Recognition

Why

Impact investors can help incentivize other investors to engage with the sector by showcasing different approaches to investment and celebrating success stories.

How

  • Showcase investment approaches and success stories by publishing them online or in print.

  • Share experiences at conferences and roundtables, or informally with personal investor networks.

  • Consider proactively connecting investees to other potential investors.

Mentoring

Why

Impact investors can leverage their knowledge of financial instruments and experience of past exits, which makes them well suited to mentor social enterprises.

How

  • Offer to mentor investee social enterprises. (High-touch guidance from an investor in their business was highly desired and valued by social enterprises in our study.)

 

Corporates

Funding

Mentoring

Why

Corporates can play a role in providing startup capital to social enterprises directly through corporate social responsibility (CSR) or indirectly through ecosystem enablers.

How

  • Expand grant funding deployed through CSR to include social enterprises.

  • Consider allocating CSR funding to social incubators or accelerators. Some corporates can also run an in-house incubator or accelerator, leveraging its expertise to offer non-financial support (e.g., technology services) in addition to funding.

Funding

Why

Corporates can expand corporate venture capital or impact funds to include social enterprises.

How

  • Consider using capital from a corporate venture fund or impact fund to invest in social enterprises.

Funding

Recognition

Why

Corporates can raise the profile of social enterprises by integrating them into supply chains or enlisting their services.

How

  • Actively seek social enterprises as suppliers that can be integrated into supply chains.

Mentoring

Why

Corporates can leverage the knowledge and skills of their employees to provide mentorship and lend talent to social enterprises. Support can range from general guidance to engagement that utilizes a mentor’s industry- or sector-specific expertise.

How

  • Facilitate mentorship opportunities through volunteering programs. Aim to broaden the pool of mentors to nurture a thriving social entrepreneurship ecosystem.

  • Seek to match mentors with the right social enterprise. Well-matched relationships are likely to be more fruitful, deeper and more sustained.

  • Lend talent as a form of targeted support through pro-bono professional services, e.g., accounting, legal and compliance, and human resources.

Recognition

Why

Corporates can leverage their brand recognition to help bring attention to social enterprises. Prizes with a corporate sponsor attached to them are especially valued because of the halo effect of being associated with a successful firm.

Corporates can help raise the profile of social enterprises within their own organization.

How

  • Give awards or sponsor prize competitions focused on social entrepreneurship.

  • Showcase social enterprises in internal communications to encourage staff to engage with them.

 

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