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Triple bottom line efforts need capital. But securing this capital is often challenging, despite impactful value propositions and promising ROIs. Meanwhile, options for funding are expanding, creating a dizzying array of options for the entrepreneur. In this workshop, you’ll work with two experienced social enterprise funding advisors to get your efforts “game ready” for funding. You’ll learn how to package your venture to successfully raise the funds you need… and from the right type of capital source.
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Getting Your Venture “Game Ready”
for Funding
Net Impact Conference, Silicon ValleyOctober 25, 2013
Jenny KassanCEO
Cutting Edge Capital
Drew TulchinManaging Partner
Social Enterprise Associates
Workshop Outline
I. Introduction & BackgroundII. What does it mean to be “Game Ready”
Foundational Elements to raise moneyTraditional CapitalAlternative Forms of Capital
III. Pros / Cons of Each Capital TypeIV. Fundraising Role PlayV. Discussion: Steps to Readiness
I. Introduction & Background
About You!
Who’s is in the room & interests
Why are you here?
What questions do you want answered today?***
***Ask questions as you have them anytime
About Social Enterprise Associates
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
Impact Investing Focused Consulting FirmNetwork 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 Sustainable Business of the Year
“Game Ready” Consulting Examples
SW Native Green Loan Fund: Structured term sheet that recruited $1 million in impact investment
Solar Energy Loan Fund: Wrote business plan, financial projections and located investors that led to $400 K in funding
Restore the Earth Foundation: Developed investor pitch that quantified social value of 10,000 acre wetland reforestation
Sea to Table: Coached entrepreneurs and orchestrated $1 million funding package from multiple sources
World Food Program: Devised five year plan for $400 million private sector engagement strategy
Get Us Started
Group BrainstormNew, creative capital raising forms?
II. What does it mean to be “Game Ready”?
Need Your House in Order
• Accounting: Accurate financial statements - updated at least ¼, taxes tracked, vendors paid
• Legal: Incorporation, ownership, IP, employees
• Systems & IT: Be organized, show it! Email, accounting, CRM, database, info management, online tools, etc.
• Branding & Mktg: Logo, websiteIdentity, materials
People You Need for Success
DirectManagement Team
You - CEO?CFO
CIO / CTOBiz Dev / Sales
Advisors Board Members
Key VendorsBankerLawyer
Bookkeeper/CPAITPR
Indirect
Baseline Documents
1. Business Plan Feasibility Market Analysis
2. Financial Projections & Scenarios
Fundraising – what goes here?1. Pitch packet2. Brochure / Exec Sum /
2 pager3. E-mail intro4. Website5. Social media
The Pitch Deck
Your 10 slides should be:• Nice / clean• Easy to read. Few words. Tell a story (use visuals)• Very much you• A bit different, but not too much
I believe in Guy Kawasaki’s Art of the Starthttp://blog.guykawasaki.com/2012/01/how-to-create-an-enchanting-pitch-officeandguyk.htmlhttp://bestpitchdecks.com
What is in a pitch deck? How many slides?
The Hand Off
Strategy and compliance for creative capital raising
Software tools for capital raising
Full-service law firm for social enterprise
Entity choice has an effect on capital raising
choices
Entity Options
1. Corporation (taxed Subchapter S or C)
2. Benefit Corporation / Flexible Purpose Corp3. LLC (taxed under Subchapter S, C, or K)
4. Non-profit (many kinds! 501c3, c6, etc.)
5. Cooperative (many kinds!)
Or a combination…
Traditional Forms of Capital
Types of Investments
• Common stock• Preferred stock• LLC membership interests (units)• Loans (aka notes, debt)• Revenue share/royalty – equity or debt-like• Co-op memberships• “Memberships”• Presales
Capital: Traditional Ways to Raise It
BanksAngels & VCs – Accredited investors only
• Rule 506, Regulation D• Allowed to have up to 35 unaccredited
investors under Rule 506?• New Rule 506(c) - allows public solicitation• Usually convertible notes or preferred stock• Exit via acquisition, IPO
Giant Multinational Publicly Traded
Companies
Small Independent Businesses
Employees:56 million
Production:$7 trillion
Employees: 56 million
Production: $7 trillion
TOTAL US ECONOMY:
Two equal halves
Almost 100% of Americans’ investments are in only one-half of the economy – Wall Street companies
Source: http://earnmbadegree.com/jobs-act-crowdfunding-infographic/
So, you can go to the 1% (OK…the 7%)
But, money from VCs, Angelsis scarce and comes with strings attached.
OR . . .
Alternative Forms of Capital
Direct Public Offerings
What is a DPO?
• Made to the public
• Made to unlimited # of accredited AND unaccredited investors
• Directly to investors (no middleman)
LEGAL NOW!
Legal How?
1. Federal exemptions
2. State level registrations
3. Any kind of security can be offered
4. How does this relate to Title III of JOBS Act (crowdfunding exemption)?
DPO Examples
Farm Power Northwest
• Interest paid in credits toward product
• Raising funds from California residents – multi-year offering
• Have raised over $300,000 so far
• Massachusetts Worker Cooperative (conversion from sole proprietorship)
• Offered non-voting preferred stock
• Raised $500,000 from VT & Mass residents in 2 months
• Offering common stock
• Open to Washington residents
• $100 minimum
People’s Community Market
• Offering non-voting preferred stock, discount AND gift cards
• Raising up to $1,000,000 from California residents
$800,000 + so far!
• Offered 5-year revenue sharing agreements
• Raised over $150,000 from California residents
III. Pros / Cons of Each Capital Type
Activity: List Pros / Cons of Each
Traditional• DPO• Crowdfunding• Memberships• Pre-sales& more…
Consider time, complexity, cost, paperwork needed, who funding is for, etc.
• Debenture• Private placement• GrantOthers?
Newer
Activity: Funding Match
Traditional• Debenture• Private placement• Grant
Newer• DPO• Crowdfunding• Membership• Pre-sales
Match the type of funding to the appropriate audience
Audience Type• Friends & Family• Bank• Angels• Foundations• Impact InvestorsWhich others?
VI. Fundraising Role Play
Activity: Fundraising Pitch
Form groups of 3 / 4• Pick a venture (your own, or one example)
• Choose a target market to pitch• Identify form of capital for that group• Develop pitch
What is the hook?What kind of funding & why?How much, for what?What questions would potential investors ask?
Recap: Financing 2 Cents
Foundational thoughts:• YOU must be credit-worthy • Organization needs to document why worth investment• If you don’t put skin in game, why should an investor?• Be realistic; know market based risk costs
Options:• Go to outsiders earlier than later• Self finance: bootstrap, leverage assets, watch credit card debt• Friends, Family, Fools - put in writing with real docs • Peer to Peer Lending, Crowdfunding - caveat emptor
Recap
• What have we learned?• What questions do we still have?
Questions?Answers?
Thank you!
Jenny KassanCutting Edge Capital
Drew TulchinSocial Enterprise Associates
