Seeking initial investment for your social enterprise places you in the “seed stage” of financing your company. At this point, you must seek equity capital from sources that can afford to lose it all. The best sources for funding are friends, family, and your own pocket. It is a waste of your time to look for a VC who “gets it” or pursue a loan from a bank. Depending on the legal structure you selected for your entity, offering a true “equity” share in your company may not be possible.
A good idea at this point in your financial strategy is to consider in-kind services. This means that you exchange goods and services instead of cash.
Another idea is crowdfunding. This is a strategy where you can use a funding platform like Kickstarter.com to name a funding goal, explain to the community what your plan is, and receive small investments from anyone interested in your project. Often the investors are rewarded in some way. Crowdfunding has become very popular recently. The crowdfunding strategy, however, has also caught the attention of the SEC and has been regulated by the 2012 JOBS Act. The JOBS Act aimed to assist small business in securing financing by relaxing some of the federal securities laws. The SEC is currently working to draft rules allowing equity-based crowdfunding.
Once your social enterprise has advanced beyond the “seed stage” and can offer a return to investors, you can seek investments from social impact investors who select investment opportunities based on a social goal. Some examples of social impact investors are: Good Capital, and the Global Impact Investing Network.