Social Innovation Forum
The Social Innovation Forum (SIF) launched its 4th annual Social Business Accelerator on January 19, kicking off 12 intense weeks of programming for the six social impact businesses in the cohort. Curious about what goes on in an accelerator? Interested in learning more about impact investing? We’ve launched this blog series, Insights into Impact Investing, to offer a glimpse inside our Social Business Accelerator and share some of our learnings from our work in the emerging field of impact investing.
Howard Wolk, co-president of the Cross Country Group, and Asheesh Advani, CEO of Junior Achievement Worldwide, two highly experienced professionals who have been on both the investor and investee side of the table, offered our Impact Entrepreneurs a wealth of insights at the March 15 session. Highlighted below are six key investor insights that entrepreneurs were encouraged to consider before taking their seat at the table with an ask in hand:
1. Remember that the best capital is patient capital
When a business is still in its early stages and especially when it’s unable to produce robust results, it is more beneficial to focus on patient capital rather than institutional capital. Individuals that are looking to invest $25,000 in a business are extremely patient, and it usually takes two to three meetings to close a deal. Entrepreneurs must keep in mind that the purpose of meeting number one is usually to ensure there will be a meeting number two. While an entrepreneur should certainly capitalize on a moment, he or she should push back on the philosophy of quick deal-making and tight deadlines. Understanding that angel investors cannot be rushed is key to cultivating an opportunity.
2. Think about the staging of capital
By examining the flow of pure venture money, it is evident that there is a two-year window in Series A funding when a business is not expected to precisely hit all of its numbers. Once this time period is up and the business is moving toward Series B funding, achieving its targets is absolutely key as well as articulating a clear plan for growth. Entrepreneurs must be sure to think about these phases, and intentionally stage their fundraising of patient and then institutional capital to match their proven results and propensity for success.
3. Merge profit and impact
More and more, consumers are looking for enterprises that focus on more than just dollars and cents. Simultaneously, more cases are being made in impact investing for profit-driven businesses that emphasize sustainability first and mission second. This tension has created a discipline for social impact entrepreneurs, and businesses are more likely to garner a greater amount and more substantial capital if they skillfully merge the two – impact and profit.
4. Keep in touch with your current and potential investors
It is critical for entrepreneurs to keep their investors up to date with their work and accomplishments, and it can even be as simple as a quarterly email update. The amount of trust built from this simple and transparent strategy is enormous. Communication from an entrepreneur to an investor is deeply underestimated, and it is a shame when entrepreneurs make the mistake of reaching out only during fundraising phases. Plus, a great deal of the investor’s motivation comes from really knowing and liking the product, feeling like they can contribute, thus building in continuous updates is key to maintaining this relationship.
5. Decide if you want to "Go Big or Go Home," or "Go Lean and Stay Around"
There are two different methods for managing a business and raising capital. The first is to “Go Big or Go Home,” meaning the business is focused on accelerated growth, raising substantial capital, and always maintaining a pipeline of investments. The second is to “Go Lean and Stay Around,” which reflects a much leaner business model where the entrepreneur practices capital efficiency. Each method has been proven to work in different circumstances, but an entrepreneur must decide which is best for his or her business goals and capacity. A sense of realism ends up being most important – so much about being successful is being pragmatic.
6. Demonstrate your potential even if it hasn’t been proven
Many early-stage businesses may be concerned that they cannot present detailed reports on progress, especially if they are still in the process of testing a product, refining their business model, or figuring out their revenue structure. To mitigate this discrepancy, entrepreneurs can present to an investor a growth slide with “hockey stick” predictions including pricing assumptions, quarterly sales assumptions, and forecasted improvements in product quality, adoption, and usability. By showing an investor the critical assumptions and offering to come back to them in two quarters with results, the entrepreneur gains accountability and commits to producing these proposed outcomes.
Perhaps the final and most valuable piece of wisdom given to entrepreneurs on Tuesday night from Wolk and Advani was, “Good luck, and do not give up.” A keen sense of awareness around investors’ tendencies is critical to raising capital and running a successful business, but surely without the passion and dedication of each entrepreneur, the buck stops there.
About The Speakers
Howard L. Wolk is Co-President of The Cross Country Group (CCG). Howard began his career at the New York City law firm of Simpson Thacher & Bartlett, and then joined the White House as Associate Counsel for the transition team during the Clinton Administration, also serving as a member of Vice President Gore’s Task Force on Reinventing Government. He received BA and BSEc (Wharton School) degrees from the University of Pennsylvania, a JD degree from Columbia Law School, and an MPA. degree from Harvard’s Kennedy School of Government. A member of the Massachusetts, New York and DC Bar Associations, Howard is active in a number of nonprofit and social entrepreneurship organizations.
Asheesh Advani is the President and CEO of Junior Achievement (JA) Worldwide, one of the largest youth services organizations in the world. With offices in over 100 countries, JA serves more than 10 million young people annually with programs designed to create pathways to employability. JA has over 110 million living alumni worldwide, including many successful job creators and business owners. Asheesh is an accomplished technology entrepreneur, having served as CEO of Covestor (acquired by Interactive Brokers) and CircleLending (acquired by Virgin Group). He began his career as a consultant at the Monitor Group and the World Bank. Born in India and raised in Canada, Asheesh is a JA alumnus first exposed to entrepreneurship as a teenager participating in JA programs. He is a graduate of the Wharton School and Oxford University, where he was a Commonwealth Scholar.
About the Author
Rachel Shaheen was the Social Innovation Forum’s Program Assistant from June 2014 to October 2015 before transitioning into the newly-created role of Development Coordinator. In this role, she served as the primary Salesforce administrator and data manager for the staff team, helping to drive fundraising and community building.