Figuring out what type of business you actually want to start
According to Allyson Hewitt, one of our speakers for last week’s Entrepreneurship 101 lecture on Different Types of Entrepreneurship, “[social enterprise and for profit] are no longer a contradiction in terms as we once thought it was.” She and her co-presenter, Kerri Golden, shared the reasons why the startup and small business landscape is much more fit for a wider range of entrepreneurs, including social entrepreneurs, and what that spectrum looks like now. They also shared the things that social entrepreneurs need to be thinking about as they position themselves in the market place, prove their credibility and seek funding.
Do a self-assessment
Kerri said that, “There’s lots of room in Canada to grow bigger, bolder companies,” but before you decide to take on the world, give some thought to a few things:
- What is my motivation?
- Do I have the skills/aptitude to be an entrepreneur?
- What resources do I need?
- How do I fit into the rest of the world?
- What is my business structure? (e.g. for profit, not-for-profit, co-op, hybrid)
The motivation piece is not a smaller piece of the equation than any other. The longer I work in the startup space, is the more I hear advice similar to what Allyson shared with our audience, “If you don’t love it, don’t do it.” So give thought to why you are doing what you are doing and what impact you intend to have.
Be able to demonstrate your impact
If you’re a social enterprise, you need to be able to demonstrate your impact, or social return on investment (SROI). How have you made a difference? What is the current state of the area you are trying to change? What is the ideal state? What are you doing to move the industry/sector/environment from its current state to the ideal? Being able to demonstrate impact will strengthen the credibility of your pitch to potential investors and your likelihood of getting funding. If you are a social entrepreneur, this is particularly important, because some venture capitalists will not invest in you until you’ve raised your first $10 million. Don’t forget to demonstrate how you are differentiated in the market.
If you want money, do your homework
There are many ways to raise financing for your business, including: bootstrapping; crowdfunding; fundraising through grants, foundations, government to name a few and through angels investors, accelerator programs and venture capital funds. Its very difficult – near impossible – to access financing through a bank. Of course, the best way to raise money is always through sales because this not only provides you with the revenue to plough back into the business, but also provides you with the validation on your idea that you need. In every case, particularly those that require you taking someone else’s money, make sure that you do your research and know the audience you are targeting. Angel investors and venture capitalists prefer to mitigate risk as much as possible (including through investing as a group), and invest in social enterprises from sectors in which they have a genuine interest.
If much of this advice for social enterprises sounds very similar to the advice you’ve heard for most other types of entrepreneurial ventures, that’s because the ‘middle’ isn’t as messy as it used to be. Here at MaRS social innovation and social impact are very important to us, and we’re working toward economic growth while helping you, the budding social entrepreneur, to succeed.
Register for Entrepreneurship 101: The next lecture is on Wednesday, October 15, 2014.
- Video: Raising Capital as a Social Venture: Four Hot Tips for Startups
- Video: Meet the Entrepreneurs: Social Innovation – Entrepreneurship 101 2013/14
- Template: Create a business plan to win investors
- Financing: Social Venture Connexion
- Initiatives: MaRS Centre for Impact Investing
Want to connect?
- Join the Entrepreneurship 101 LinkedIn Group
- Follow the conversation on Twitter: #ent101
- Get updates on Vimeo
- Download the course schedule
- Download the course syllabus
Gina was the interim manager of MaRS’ Entrepreneurship & Innovation Series. Prior to joining MaRS, Gina worked in the small business and startup space in a variety of roles, with a focus on business development, project management and communications. She recently completed her MBA at the Rotman School of Management. See more…