Raising Capital for the Social Venture
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From a workshop given at the Columbia Startup Lab by Professor John Walker
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Raising Capital for the Social Venture
- 1. Raising Capital for the Social Venture Columbia Startup Lab August 21st, 2014
- 2. Workshop Plan 1. Introductions 2. Entities & Hybrids 3. External Financing 4. Internal Financing
- 4. Group Discussion Org Type What is it? Intention? Pros/Cons Non-Profit (501c3) L3C B Corp Benefit Corp Community Interest Company
- 7. Embrace Global & Embrace Innovations
- 9. Investors
- 10. Investors II VENTURE CAPITAL SOURCE USE SOURCE USE SOCIAL INVESTORS
- 13. Brad Feld on Preferred
- 14. Convertible Debt
- 15. Scale & Conflict in Impact Sustainable Scalable DECREASING SUBSIDY SIZE EARNED REVENUE BUSINESS MODELS
- 16. Groups 1. SOCIAL IMPACT 2. SCALABILITY 3. RELEVANT FINANCING APPROACH
- 18. Partnerships • Bypass direct capital investment • Adapt strategy in response to opportunities • Find the win-win solution, where partner covers the downside
- 22. Reading • HARVARD BUSINESS REVIEW ARTICLE • Use Customer Cash to Finance Your Start-Up • by John Mullins • Source: Harvard Business Review
- 23. Groups 1. OPPORTUNITIES FOR PARTNERSHIP 2. OPPORTUNITIES FOR REVENUE & CASH GENERATION
Editor's Notes
- First thing 5 mins group discussion on the entity types listed
- Comparison between grant funding and investment raising Grant funders’ involvement tails off after Just as much pre-assessment, for fulfilment of purpose etc. They are NOT free Grants can require significant post grant management – expense reporting – overhead is high
- SPECTRUM OF CAPITAL SOURCE – SELLING PROPOSITION TO INVESTORS PENSION FUNDS THROUGH TO CAPITAL PLACEMENT – JUST BASIC RETURNS ONLY ANGELS AND SOCIAL INVESTORS – MUCH CLOSER INTERACTION – APPEAL TO THE INDIVIDUAL NOT MANY INSTITUTIONAL INVESTORS IN SOCIAL ENTERPRISES OUT THERE – NO MEASURE YET OF SOCIAL IMPACT RIGOROUSLY ENOUGH TO STRUCTURE A FUND Have a spectrum with sources through to uses SOCIAL INVESTORS VERY MUCH ATTACHED TO THE SOCIAL IMPACT PRINCIPLE -
- PRIs – bit specific Private foundations – 5% of their assets to be dispensed per year PRIs designed to increase impact potential – investments count toward the 5%
- Q: What is preferred stock? Q: Why preferred? Why secure the preference? (downside protection & upside incentive) Institutional investors need to protect IRR
- Brad Feld – “Foundry VC” – Colorado based – one of the best writers on VC tactics
- Who can define convertible debt What benefit does it have – VALUATION CONVERSATION DELAYED
- Non-profits – what is the purpose? Success criteria? Replication to solve social need Conflict with principle of scale through market/value capture
- HBK – talk about capital raise NYCEDC – needed partner to run a kitchen incubator, $1m to spend – HBK agreed, on condition of fitting out bakery
- Airbnb Recognized limited capacity of hotels for conference – offer up “more personal” option Sold cereal to help cover expenses MATCH-MAKING
- Flash sales ZARA like – JIT inventory Sale to customer is well in advance of Zara’s 60 day vendor terms Lot 18 – emails with 48 hour offers – Unwanted inventory – vendor payment terms are flexible SCARCITY BASED MODELS
- MapmyIndia Maps were forbidden in India until 1960s Verma bros licensed US software Coke was initial customer – had bought company in India but no maps CellularOne was next – where to put cell towers Providing a service – builds the product IP SERVICE-TO-PRODUCT