Beyond Fundraising


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Many entrepreneurs – social, triple bottom line or otherwise – do not avail themselves of all potential capital sources when seeking funding to grow or scale, limiting prospects to cash flow their initiatives. This seminar explores a range of options for funding: external in the marketplace, internal within an organization, new ideas and classics not to overlook.

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Beyond Fundraising

  1. 1. Beyond Fundraising Drew Tulchin November 20, 2013 Twitter Hashtag - #4Glearn Part Of: Sponsored by:
  2. 2. INTEGRATED PLANNING Advising nonprofits in: • Strategy • Planning • Organizational Development Part Of: (617) 969-1881 Sponsored by:
  3. 3. Coming Soon Part Of: Sponsored by:
  4. 4. Today’s Speakers Drew Tulchin Managing Partner Social Enterprise Associates Jamie Maloney Community Developer, 4Good Part Of: Founding Director of Nonprofit Webinars and Host: Sam Frank, Synthesis Partnership Sponsored by:
  5. 5. Webinar Beyond Fundraising Drew Tulchin Managing Partner Social Enterprise Associates 4Good Nov. 20, 2013
  6. 6. Training Objectives • How to leverage new capital, manage cash flow • How to work with vendors, bankers and other providers of capital • How to get more money from sources you already have • Have fun, learn and share
  7. 7. About Social Enterprise Associates Consulting firm - Registered ‘B Corp’ Network of experts offering consulting & capital raising to triple bottom line efforts- for people, profits, planet. Registered ‘B Corporation’, recognized: 2011 'One of the Best for the World' small businesses 2012 Honoree NM Sustainable Business of the Year Drew Tulchin, Managing Partner, MBA • • • • Written >100 business / strategic plans Efforts raised >$100 mil. in capital Biz plan winner, Global Social Venture Comp; raised $1.2 mil. in social investment Judge in national social enterprise & social business competitions
  8. 8. Consulting Examples Solar Energy Loan Fund: Wrote business plan, financial projections and located investors that led to $400 K in funding SW Native Green Loan Fund: Structured term sheet that recruited $1 million in impact investment World Food Program: Devised five year plan for $400 million private sector engagement strategy Sea to Table: Coached entrepreneurs and orchestrated $1 million funding package from multiple sources Restore the Earth Foundation: Developed investor pitch that quantified social value of 10,000 acre wetland reforestation Nemours Health Services: Assessed impact, measured SROI, cost / benefit, to diversify funding; create new funding proposal
  9. 9. Resources Free publications: Topic Examples: • Surfing the Crowdfunding Wave • Nonprofit Earned Income Strategies • New Sources of Capital • Integrating Social and Environmental Metrics
  10. 10. Getting Started Group Brainstorm List financial vehicles/channels open to NGOs, small businesses
  11. 11. Framework & Structure
  12. 12. Definition of Terms Financial Self-Sufficiency • Measures degree which operating income covers adjusted operating exp Project Profitability • When operating income is greater than adjusted operating expenses Capital • Cash or assets used to generate income Sustainability • Present needs met without compromising ability for needs met in future Earned Income • Compensation from participation in a business, including wages, salary, tips, commissions, and bonuses 12
  13. 13. More Terms Risk capital The wealth that a person allocates for investment in new or speculative securities with high risk. Loan The act of giving money, property or other material goods to a another party in exchange for future repayment of the principal amount along with interest or other finance charges. Savings The amount left over when the cost of a person's consumer expenditure is subtracted from the amount of disposable income that he or she earns in a given period of time. Venture capital The money provided by investors to startup firms and small businesses with perceived, long-term growth potential. It typically entails high risk for the investor, but it has the potential for aboveaverage returns.
  14. 14. & Finally – Terms Socially Responsible Investment (SRI) An investment strategy which integrates social, environmental and/or ethical criteria into the processes of analysis, selection, and choice of investment except for the financial criteria. Socially motivated capital The money provided by investors to fund businesses or programs that actively achieve social or environmental impact. Mission related investment The investment of a foundation's endowment assets in opportunities that align with its program goals. Triple bottom line A business oriented solution generates returns of financial performance, social impact, and environmental sustainability entrepreneurs, their organizations, and the industries in which they operate. And, now, the Quadruple Bottom Line – the 4th Dimension.
  15. 15. Quadruple Bottom Line Source:
  16. 16. Why go Beyond Fundraising?
  17. 17. Volume of Capital Philanthropy Investment ANNUAL giving of all US Foundations DAILY transactions of the financial markets (“Wall St.”) $ 1 Trillion $ 30 Billion Which pot of money would you rather be drawing from?
  18. 18. Benefits of Beyond Fundraising Do more with less Less government $$ Twice as many NGOs as 10 years ago Don’t leave money on the table Build self-sufficiency Be the dog or the tail?
  19. 19. Continuum of Financial / Social Expectations High Philanthropy donation No expectation of return Social Value Creation Expectations PRI from a foundation ~0-2% year interest Socially responsible investors debt • Fewer obligations • ~3-5% in dollars or local currency (8-10%) Banks debt ~10% year interest Venture capitalist • Ownership expect • 20% returns a year in equity Low Risk / Return Expectations High
  20. 20. Places to Learn More Best sources we like Dictionary: a Forbes digital company provides a comprehensive financial dictionary/glossary The Dictionary of Sustainable Management: an online dictionary constructed by the Presidio Graduate School defines sustainability and business-related terms Glossary of Business Terms from Skoll Foundation: a glossary of business terms relevant to social entrepreneurship Glossary from Nonprofit Good Practice Guide: a glossary of terms and expressions that are commonly utilized in the nonprofit sector
  21. 21. Income Statement
  22. 22. Income Statement From Social Enterprise Associates Tip Sheet #12: Nonprofit Earned Income Strategies: Where to Start • Is social enterprise a fit for your organization? • What are steps in decision-making? • Does this solution match the problem?
  23. 23. Incremental Steps Step 1: Internal Organizational Assessment •Does organization have sufficient staff capacity? •Are there strong internal systems for new effort? •Does organization have sufficient knowledge, expertise in this area? •Is there sufficient cash flow to take on new projects?
  24. 24. Incremental Steps Step 2: Feasibility Study •What are the organization’s goals for this undertaking in terms of money and mission? •What are the costs and revenues associated with this new project? •How operational will the organization do this ‘new thing’? •What organizational changes and adjustments need to be made?
  25. 25. Incremental Steps Step 3: Market Analysis •How big is this opportunity? •Who else is doing this? •Who are the customers and what are they doing now to satisfy this ‘need’? •Is there space for us?
  26. 26. Incremental Steps Step 4: Business Plan •What is purpose of this social enterprise? •What is value proposition (special sauce)? •How will it make money? •Who is the management team?
  27. 27. Incremental Steps Step 5: Financial Projecting •How much money is needed in year 1, 3 and 5? •What type of financing is appropriate: donations, equity, debt, partnerships, contracts? •What are the key sources of revenue & major costs? •When does this project break-even, if ever? •What happens if expenses are 50% higher and/or revenues 50% lower?
  28. 28. Incremental Steps Step 6: Fundraising & Investment •Who are targeted ‘investors’? •What is value proposition for funders & investors? •Why should they choose this project? •How much ‘in the bank’ is needed to begin ops?
  29. 29. The Capital Pie Where you are now  your existing universe • How do you want to diversify (split the pie)? • How do you want to grow the pie? • What’s needed to be stable, increase revenue & manage cost?
  30. 30. Brainstorming List NGO Earned Income Options
  31. 31. Brainstorming List NGO Earned Income Options • • • • • • • • • • • Facility revenue Program service fees Events Grants Marketing partnerships Sponsorships Membership fees Book publication Earned interest Capital gains Bartering • • • • • • • • • • Product sales Consulting contract / service fee Training, expertise Honorariums, speakers Licensing Supporting organizations Advertising Awards, competitions Teaching Affiliate referrals – i.e. those dxmn bracelets
  32. 32. Example Projects Greyston Bakery “We don’t hire people to bake brownies, we bake brownies to hire people.”
  33. 33. Cash Flow
  34. 34. Internal Options for Capital • Accounts Receivable Money owed to you. High net sales to A/R ratio = faster collections • Accounts Payable Money you owe. Increasing purchases to average A/P amount = faster payments • Leverage Existing Assets Money earns money From Social Enterprise Associates’ “Finding Money for Your Business: Often Overlooked Options”
  35. 35. Cash Turnover Difference b/t your A/R and A/P Keep your cash the longest How? ASK & TRY Can you get paid before you do the work Offer incentives for invoices paid as soon as possible Negotiate w/ vendors to pay them later, slower
  36. 36. Crowdfunding Are you a good fit? 1. Benefit from small amounts of capital up to $15,000 2. Have product pre-sales, particularly to finance making something 3. Early stage specific project 4. Willing to do own marketing; have outlet to reach people: facebook, e-newsletter, etc. 5. Lack an existing payment processing mechanism online
  37. 37. Crowdfunding Websites More than 4 million people pledged $734 million since 2009 launch Average contribution $71, most common contribution $25 Successful campaigns average 40 days to fund Average contribution $86, most common contribution $25 Common perception better for smaller projects 3rd largest crowdfunding site Campaigns often focus on individuals: education, medical bills 37
  38. 38. Crowdfunding Websites Tell a story; stand out. In 2012, Indiegogo campaigns with videos raised 114% more than those without. Cultivate donors & share. In 2012, 14% of Indiegogo campaigns had a single contributor refer more people to the campaign than the campaign owner Most give small amounts. 85% of backers give less than $50 Give something meaningful. Make the perk something people want: gift, memento, product 38
  39. 39. Who’s done crowdfunding? Kickstarter’s most funded projects: Food: Windowfarms Fashion: 10-Year Hoodie Technology: Affordable 3-D Printer
  40. 40. Example Projects Espanola Community Market is coop in NM (and a client). Open to general public; features foods made or grown locally Gofundme campaign to raise money for staff, longer hours, more inventory
  41. 41. Kickstarter success: Lucky Penny Farm raised funds for equipment to expand product offerings. Most gave $65 to $250. Project totaled $11,850 (above $10,700 goal). For… Backers Received: $15 A Facebook thank you $25 Bar of goat milk soap $65 Luck Penny t-shirt $100 New Product Sample $250 Plate of goat milk cheeses $1000 Farm outing $2500 Cheese pairing with 10 guests $3500 Presentation by owner
  42. 42. Direct Public Offerings “Crowdfunding meets fundraising” Laws vary by state Anyone can invest Best for small-to-medium sized companies & CO-Ops Made to unlimited # of accredited AND unaccredited investors Directly to investors (no middleman)
  43. 43. DPO Examples Thanks to: Cutting Edge Capital
  44. 44. Balance Sheet
  45. 45. Balance Sheet Assets = Liabilities + Equity Build credit over time Leverage Put what you own to work Treasury Management
  46. 46. Alternative Sources of Capital Practice what you preach to clients - build assets: • Community partners overlooked as donors • ‘Upselling,’ ‘cross-selling’ existing relationships • Fee for service: training, TA, consulting • Individual donors: high net worth, community wide, program alumni • Build relationships over time • In-kind value • Impact, social, faith-based investors; foundations’ PRIs/MRIs • Off balance sheet transactions • Crowdfunding
  47. 47. How to Work With Banks? 1. Understand what financiers’ value and how they make decisions 2. Establish long-term networks 3. Build credit history, credit score over time 4. Formalize and report on the organization 5. Have back-up plans (contingencies)
  48. 48. Financing 2 Cents Foundational thoughts: • YOU must be credit-worthy • Organization needs to document why worth an investment • If you aren’t willing to put skin in game, why should an investor? • Be realistic, know market based risk costs Options: • Go to funders earlier than later, when you have $ • Self finance: bootstrap, leverage assets. Watch credit card debt • Friends, Family, Fools – put it in writing with real docs • Peer to Peer Lending – cool new options but caveat emptor
  49. 49. The 5 C's of Credit Collateral Capital Capacity Conditions A complete & attractive loan package Character 49
  50. 50. The 5 C's of Credit - Defined I Capacity II Capital III Collateral (or guarantee)    Most important by bank to consider loan application Personal credit score diagnose how well you manage your finances Financial statements to evaluate financial health of your entity   For a bank to know how much invested in your entity Written & verbal credit information sharing reflects level of responsibility of the organization and its leaders    Often necessary to secure debt Independent appraisal can estimate value of collateral U.S. Small Business Association Guarantees increase opportunity   Reasons you are asking for a loan Written explanation of conditions state how you will use money    Most subjective factor Provide biographical summaries of key managers and advisors Get to know your lenders IV Conditions V Character 50
  51. 51. Leverage Existing Assets Treasury Management Defined: Administer financial assets and holdings Goal: Optimize liquidity, make sound investments, manage excess cash, and reduce financial risks Use $ to make $ (even when interest rates low): 1. Talk to your banker. Know by NAME 2. Use your cash to maximize $ 3. Leverage your assets when you have them (i.e. line of credit)
  52. 52. Peer-to-Peer Lending Ebay, for debt Borrowers request loans, amounts vary by site, range $2 K to $25 K Lenders invest as little as $25 Facilitated by website for fees This is DEBT, it must be PAID BACK
  53. 53. Peer-to-Peer Lending • Loans funded to date: $2.2 billion • Interest paid to investors to date: $192 million • 1,880,000 member lenders • $583,000,000 in personal loans funded • • • • Direct loans First loan max $5,000 (up to $50 K) 0% interest, repay w/in 24 months Share your story
  54. 54. Resources Global Impact Investing Network (GIIN) Aspen Network of Development Entrepreneurs Impact Investment Exchange Asia IdeaEncore Social Venture Network SoCap, PRI Makers, SRI in the Rockies, HUB Ventures
  55. 55. Let’s Sum Up Recap, Review Tips & Tricks Resources: William James Foundation, Skoll Social Edge, SoCap, BID Network, Soc. Ent. Alliance, competitions, SSIR, ClearlySo & more Free publications:
  56. 56. Thank you! Questions? Answers? Drew Tulchin Social Enterprise Associates