Have you seen Brent’s latest article on Inc? Here’s a recap!
At Roozt.com, an online marketplace for brands that give back, we engage with and analyze thousands of social impact businesses every year. This provides our team with a unique macro-perspective about what pains, issues, and problems there are in our industry at any given point in time. Hands down, the largest recurring pain we hear about from social entrepreneurs is: raising money.
We started Roozt with $500, a dream, and determination to succeed. So whoever tells you that you need a lot of money to start a company is wrong. Just get going with what you have and do one thing everyday that makes progress towards your goal. At some point you may realize you need more money and fundraising is an option.
There is no perfect formula for fundraising, but the following lessons are items I’ve learned from my first hand experience in raising money as a social entrepreneur. There are five things a social entrepreneur must know before starting their fundraising.
1. Know Your Product
I can’t tell you how many times I’ve talked to passionate social entrepreneurs who, after a 20-minute conversation with them, I still have no idea what they really do. It helps nobody if you have the world’s most inspiring idea but can’t communicate it in a clear concise manner.
Another term for this is: what’s your elevator pitch? If you got in an elevator at the top floor of the Empire State Building with Pierre Omidyar (if you don’t know who he is, Google now) and he asked you, “so what do you do?” would he understand and be excited by your company by the time you guys hit the ground floor?
Here’s my elevator pitch: Roozt.com is the world’s online marketplace to discover the sexiest brands that give back at members only prices. For every member who joins, Roozt will donate a meal to an American in need. One member. One meal.
Clean. Simple. Concise. Sure there’s a lot more to it, but unless you get someone’s attention, they’ll never ask any more questions.
2. Know Your Market
What pain in the market does your product solve? How big is the market opportunity? Who are your customers? How will they hear about you? Why will they care? You should be able to answer these questions with as much clarity and enthusiasm as your elevator pitch. The fundamental foundation of every business, and what every investor looks for, is the need to solve a problem or a pain in the industry you’re focused on. It’s not enough to merely integrate a cause. If the product isn’t something people actually want or need, then nobody will buy it, you will go out of business, and that helps no one. Even if your product is exclusively designed for social impact, i.e. building a well in Africa, you need to be focused on how your product will solve a pain that wasn’t currently met until you came into the picture.
3. Know Your Audience
This does not just refer to your customers. Knowing the audience of who you are pitching your investment opportunity is just as important. By understanding who’s in the crowd and what makes them tick, you will know how to structure your presentation to get their attention, keep them interested, and get them excited.
Here are the three types of investors you should know:
- The Impact Investor
Invests in organizations, entities, or ventures whose sole purpose is to create social impact, with or without a business model. These investors measure success of their investments by the SROI (social return on investment), which will vary based on the organization. They also can come in the form of grants or donations.
- The Financial Investor
This type of investor cares about one thing and one thing only–the ROI multiple of every dollar invested. They are driven by capital returns, not social returns. Some are industry agnostic, some invest exclusively in the areas they know best. They separate social good and business as two separate sectors. Traditionally this is the angel investment and venture capital community.
- The Financial Impact Investor
This is the hybrid investor category, of which we are beginning to see an influx of the above two sectors to form a well-rounded group of individuals who care about both financial returns and social impact. They believe that making money and making a difference do not need to be mutually exclusive. They are savvy, experienced business people with a social conscious about the world around them. They may seem like a mythical creature, but I promise you, every community in America has them. Having personally raised significant capital for Roozt from financial impact investors, I can promise you, they are out there if you look hard enough.
Knowing which of these investors you are pitching to will drastically change the tone, content, and focus of your pitch. Often times, social entrepreneurs will have three different versions of their pitch deck depending on who they are talking to. Each investor has different motivations, and you better know what they are before walking into that meeting, otherwise you’re in for a long (or short) pitch…
4. Know Your Numbers
Data–one of my favorite quotes pretty much sums it up: “In God we trust. All others bring data.”–W.E. Demings. If you do not know the key performance indicators (KPI’s) of your organization, what drives them and what affects them, it will be virtually impossible to convince anyone to give you money. This applies to both for-profit and non-profit organizations. Take the time to really understand the numbers around your business, industry, market, customers, product, COGS, and operations so you can know exactly what you need to do to be successful and explain that to investors. Your ability to take complicated matters and turn them into easy-to-digest chunks is critical because you generally only have a few minutes of an investor’s time to get them interested.
5. Know How to Pitch
Whether you realize it or not, you are pitching yourself, your product, your cause, and your company every time you open your mouth, write an e-mail, or hop on a call with someone. That means how you e-mail, the materials you share, what people can see about you on Facebook, Twitter, and LinkedIn, to the actual pitch presentation you give, are all critical in the closing process. If you make a bad impression at any given stage, you may kill your chances before you even get started. Spend time to craft thoughtful e-mails, do your research, control your online reputation on social media sites, and practice, practice, practice! To become an expert at something they say it takes 10,000 hours of practice, so don’t worry if you bomb your first pitch. When a potential investor says no, and you will hear a lot of no’s, learn to ask them why and for feedback. Then use that feedback to get better and fix things before you talk to the next potential investor. Howard Schultz, founder of a small company called Starbucks, heard over 200 NO’s when he was first pitching his crazy idea for a coffee shop to investors. Every no you hear is one step closer to a yes–so press on, learn, adapt, and never give up.
Ok, phew! Sorry I had to put on my stern pants on for a bit in this post, but more often than not so many inspiring social entrepreneurs lose site of these critical items and shoot themselves in the foot immediately out of the gate–and that’s the last thing I want to see happen.
Trust me when I tell you that there is nothing more exciting than getting that “I’m in!” e-mail, call, or meeting from an investor who believes in you, your concept, and the change you have set out to create.
If you find yourself having trouble with anyone of these tips, seek out the advice of someone who will shoot it to you straight. Constructive and candid feedback is the best way we learn what we’re doing wrong and get one step closer to achieving our goals.
“Twenty years from now you’ll be more disappointed by the things you didn’t do than the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.” –Mark Twain