8 ‘needs’ of social ventures to attract funding
What early-stage social innovators need to get funding to grow – and 5 ways to choose the right incubator or accelerator programme to make it happen
It’s tough starting a business and even harder if you’re trying to marry social impact with business success.
In researching Good Incubation, we found that there are eight key ‘needs’ mentioned by early-stage social innovators. These are the things that they require to get to the point where they have the traction, evidence, resources and systems in place to attract further investment and grow.
1. People to work with
Finding co–founders and early employees with complementary skills is perhaps the most important thing you can do as a very early stage social venture founder. Most later–stage investors will say “It’s all about the team” and having the right people working in the venture will be a big part of their decision to back a venture. Proving that the right management team is in place is especially important for first time founders.
2. A proposition to test
All social ventures should start from a clear understanding of an important social or environmental problem and then an idea about how your idea can improve the situation. It’s got to be something you care about – big enough to motivate the team but small enough that you can make a difference. Showing later–stage investors the evidence from these tests will be one of the most compelling pieces of information you have, when trying to secure backing.
3. Potential (and actual) customers
Even before your venture has been built, before you have a name or a business plan, you should find somebody who wants to pay for what you want to offer – entrepreneur and academic Steve Blank calls it ‘customer development’ and the problem of not being able to find a paying customer is an important risk to eliminate.
4. A source of advice about the basics
There are a huge number of tasks that every new organisation has to do and first time founders can save a lot of time by finding a person or organisation that you can ask basic questions. How do you set up a bank account? How do you register for taxes? How do you best set up email? Later-stage investors will want to know that there are no surprises lurking because the venture has been set up incorrectly.
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5. A source of trusted strategic advice
Beyond these administrative basics, a new venture doesn’t come with its own strategy guide, so a trusted strategic adviser can be a huge help in navigating all of the possibilities and opportunities. This could be a long–term mentor, an angel investor or a non–executive board member. Later–stage investors will be more comfortable when a venture has access to someone who’s done it before, who can help them think through choices.
It’s easy to get fixated on the funding before you’ve actually got the other basics right, but early–stage finance is a vital step for most founders. Some may have the resources to support themselves but others will require external finance. With some early–stage ventures it’s unlikely that they will have large capital requirements for anything other than founder salaries, whereas others may be more capital intensive from the very minute they need to trial something.
7. Somewhere to work
You can start a social venture anywhere but it can be exhausting after a while if you don’t have a dedicated space to work together or meet. It might not be your own dedicated office but somewhere you identify as ‘the place you work’ definitely seems to help early–stage ventures.
8. Emotional support and mentorship
The emotional strain of starting something new is incredibly important, but often underestimated. Too many founders feel the weight of the world on their shoulders and don’t find a way of sharing it around. Start-ups that have a supportive network reduce the risks of burn-out and making simple mistakes for later–stage investors.
These days social incubators and accelerator programmes can help provide solutions to many of these needs so, if you’re just starting out, there’s no need to do it without support.
There are many programmes to choose from – including 10 backed by the government’s Social Incubator Fund – so how do you choose? It’s worth doing as much due diligence on them as they’ll do on you.
Here’s my advice:
- Meet the team behind the programme. You’ll be working very closely with these people so it’s important that you get on and that you trust them.
- Talk to ventures that have been supported before. Ask them what was good and bad about the programme and what advice they would give you about applying and getting the most out of the opportunity.
- Be clear about what you need most help with. Different incubators and accelerators offer different things. If you need help shaping your idea a programme that works with very early stage ventures might be best. If you’re looking for larger amounts of investment, check out which investors they’ve worked with before.
- Know the deal inside out. There’s no such thing as a free lunch so be sure you know what you’re giving up for the support you might get. Make sure you know all the terms and understand them.
- Check the practicalities. Most (but not all) incubators and accelerators require you to either move to their offices or spend quite a bit of time there. Make sure all your team members are available and willing to be present. There’s no point joining a programme if you won’t be able to get the most out of it.
Paul Miller is co-author of ‘Good Incubation’ published by Nesta, the UK’s innovation foundation. He’s also a partner at Bethnal Green Ventures, the accelerator programme for technology-based social ventures