http://www.socialentrepreneurship.ca/entr4800/

1. ENTR 4800: Social Entrepreneurship
Class 5 (Part 2): Financing Considerations
for Social Enterprises
Monday, October 18, 2010
1
Instructors:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)

2. © Norm Tasevski & Karim Harji
Agenda
• Before the break…Part 1 (Costing Analysis for Social
Enterprise – Separate Slide Deck)
• Financing Options Available to Social Enterprises
(for-profit and non-profit)
• What do investors care about?
• What did we learn – today?
• Next week
2

3. Financing Options for Social
Enterprise…
3

4. © Norm Tasevski & Karim Harji
MORE DEBT-LIKE
4Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”,
http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx
Financing Options – Over the Social
Entrepreneurship “Life Cycle”
IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT
GRANTS
MORE EQUITY-LIKE
SOCIAL
VENTURE
CAPITAL
FUNDS
ANGEL
INVESTMENT
VENTURE
CAPITAL
PROGRAM-­‐RELATED
INVESTMENT/RECOVERABLE
GRANTS
FORGIVABLE
LOANS
SOCIALLY
RESPONSIBLE
INVESTMENT
FUNDS
BELOW-­‐MARKET
DEBT
MARKET-­‐RATE
DEBT

5. © Norm Tasevski & Karim Harji
Cash
5
Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”
Another Way to Think of Financing
Options…
Grant
Support
-100% -90% to -10% 0% 1% to 7% 8% +
Private Equity
Subordinated
Loans
Senior Loans Cash
Lower risk Higher risk
Higher risk Lower risk
Guarantees
Fixed Income Public Equity Private Equity
Grants “Soft” Investments
Capital-protected
investments
Commercial-return
investments
Social returns only
Very soft debt
Mix of grants and
other capital
Willing to lose
some money
“Blended return” equity
Soft debt
Willing to take below-
market return
Market-rate debt
Equity
Full commercial returns
Social benefit can be a
requirement

6. © Norm Tasevski & Karim Harji
6
Features of Different Funding Instruments

7. © Norm Tasevski & Karim Harji
7
Aligning Supply and Demand…
Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”,
http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

8. © Norm Tasevski & Karim Harji
8
Sources of Financing
Banks/Credit Unions!
Specialized Funds!
Grantors!
Investment Management Firms!
Foundations!
Vancity!
Alterna Savings! Canadian Co-
operative
Association!
Citizens Bank!
Desjardins!
Canadian Alternative
Investment Co-op! Community Loan
Funds (various, in
most major cities)!Social Enterprise
Fund (Edmonton)!
Enterprising Non-
Profits!
Toronto Enterprise
Fund!
CAPE Fund!
Ecotrust Canada
Capital!
Fonds de solidarité! Renewal2
Investment
Fund!Resilient
Capital!
Social Capital Partners!
Edmonton Community
Foundation!
JW McConnell Family
Foundation!
Maytree
Foundation!
Ontario Trillium
Foundation!
Tides Canada!

9. © Norm Tasevski & Karim Harji
Sources of Financing
Organized by Stage in the Venture Life Cycle
Business
Development
Stage!
Sources of !
Grants/Technical
Assistance!
Sources of
Equity
Financing!
Sources of
Debt !
Financing!
Building
Organizational
Capacity!
• Centre for Sustainability (POD Grants)!
• Coast Capital Savings Community Fund Grants!
• Coast Capital Savings Foundation (youth)!
• Endsweel Foundation!
• Tides Foundation!
• Vancity Savings Credit Union Grants!
• Vancity Community Foundation grants!
• Vancouver Foundation!
Business Plan
Development!
• BCT SVP!
• CEDTAP grants!
• Coast Capital Savings CED Department!
• Enterprising Non-Profits!
• Vancity Community Foundation grants!
Start Up!
• BCT SVP! • Renewal Partners!
• Social Venture Partners!
• New Social Venture Fund!
• CCEC!
• Community Futures Development
Corporations!
• Coast Capital Savings – Rising Tide 2
Fund!
• Ecotrust!
• Vancity Savings Credit Union!
• Vancity Community Foundation loans!
Operating!
• Renewal Partners!
• Social Venture Partners!
• New Social Venture Fund!
• Vancity Capital Corporation!
• Ecotrust!

10. What do (social) investors care
about?…
10

11. © Norm Tasevski & Karim Harji
Financing Considerations Used by the
Canadian Alternative Investment Co-Op (CAIC)
CAIC’s Criteria:
• What is the project?
• What is the social benefit?
• Provide a detailed
description of:
– i) how the project is
going to be financed;
and
– ii) how it is going to
operate on an
ongoing basis
11
What does CAIC care about? Your ability to tell your “story” in
a clear, simple & compelling fashion!!

12. © Norm Tasevski & Karim Harji
CAIC Financing Considerations:
Management
CAIC’s Criteria:
• Staff and management
– Highlight relevant experience
• Board of Directors
– Highlight relevant expertise/experience
12
What do they care about?
– The caliber of the individuals undertaking the project
– Who is giving your guidance, what resources and
experience you are drawing on

13. © Norm Tasevski & Karim Harji
CAIC Financing Considerations: Investment
Proposal (1)
CAIC’s Criteria:
• Amount of loan requested
• Terms of repayment: term, amortization, interest rate
• Collateral or potential guarantors
• Demonstrate sound and realistic business case
13
What do they care about? Whether you can present a
Sound, Realistic, Understandable business case

14. © Norm Tasevski & Karim Harji
CAIC Financing Considerations: Investment
Proposal (2)
CAIC’s Criteria:
• Shared risk
• Multiple sources of capital
• Present sources of credit
• Potential sources of credit (inc. their response)
14
What do they care about?
• That you’ve considered ways to mitigate risk to
investor
• That you have multiple and sufficient sources of
capital

15. © Norm Tasevski & Karim Harji
CAIC Financing Considerations:
Financial Organizational Capacity
15
CAIC’s Criteria:
– Most recent internal operating statement & balance sheet
– Budget & cash flow projections for the current and upcoming year
demonstrating how the CAIC loan would be repaid
– Financial Statements (audited or reviewed) for the last two years
– Organizational financial management practices (i.e. financial planning,
organizational resources, financial operating systems, & financial
soundness)
What do they care about?: That you’ve mapped out
all aspects of the business/operations, and that they
are getting the attention that they need

16. © Norm Tasevski & Karim Harji
What did we learn?
16

17. © Norm Tasevski & Karim Harji
Next Week
• Christine Ho (Well of Change)
• Deliverable: Have questions for Christine ready!
• Readings
17