Where do you go to raise impact capital?
Note: This post originally appeared on GlobalNews.ca. It has been reposted here with permission.
Great business plan? Check. Solid product or service offering? Check. Committed team. Check. Money? No cheque – yet.
One of the biggest challenges for any startup or growing enterprise is raising capital. New investment is vital to hire new staff, buy or rent facilities and equipment, and/or support sales and marketing to take you to the next level of profitability and success.
If you are an early stage or growing impact enterprise like a local renewable power co-op, fair trade chocolate shop, or First Nations owned and operated company, the challenge is the same. You may have a great plan, a solid offering, a committed team, and a virtuous mission. But you need money. And this capital has to be looking for positive social and/or environmental impact.
So where do you go when you’re looking to raise capital?
Let’s assume an “all of the above” approach to capital, including: grants, loans or debt financing and equity. There are other important questions, like what you will need to do when you get there, and what type of capital you should raise. We’ll leave those issues for another post. (You can get a head start using the MaRS Entrepreneur’s Toolkit if you’re in a hurry.)
Top on my list of recommendations are events that allow impact enterprises to connect with capital. Today, for example, Toronto will be host to Impact Ontario, a landmark conference at MaRS Discovery District that brings world-changing Ontario ventures together with world-leading investors and intermediaries.
Designed to support deal flow and impact investing opportunities through pitch sessions, one-to-one meetings and plenary panels, Impact Ontario aims to increase capital directed to profitable ventures with a scalable, sustainable impact. Over 25 impact enterprises will be pitching for capital at the event, from Homestead Organics to JUMP Math. We’ll be posting an event recap next week, so stay tuned.
A search for impact capital will most likely include individuals:
- Many impact entrepreneurs reach out to friends and family for startup cash.
- Canada has a growing venture capital community with angels and angel networks as a source of potential venture capital. Angel networks like the Golden Triangle Angel Network (GTAN) and Maple Leaf Angels have shown a clear interest in impact enterprises through investments in companies such as Greengage and Chipcare.
- Impact enterprises can reach out to their neighbours through a variety of means including community bonds for non-profit organizations and shares and other security offerings for co-operatives.
- The most common source of capital for any enterprise is from the founder’s capital, through personal savings, a line of credit, or even a credit card for working capital.
Impact entrepreneurs also turn to mainstream and specialized institutions for capital:
- There is a diverse array of microloan and seed funds across Canada including Ontario Catapult Microloan Fund for Social Ventures, Carrot Cache, Youth Social Innovation Capital Fund, Canada Youth Business Foundation (CYBF), Saint John Community Loan Fund, New Dawn Innovation Fund, and the Toronto Enterprise Fund (TEF).
- Institutions like Canadian Alternative Investment Co-operative (CAIC), le Chantier de l’économie sociale, Caisse d’economie solidaire, represent the range of alternative funds and intermediaries making larger investments in impact enterprises.
- Credit unions and financial institutions like Alterna Savings, Desjardins Development Capital, Vancity, and the Business Development Bank of Canada (BDC) are excellent sources of financing, given their respective missions and track records working with impact entrepreneurs.
- Canada has a number of impact venture funds that target enterprises with a double or triple bottom line, including Renewal Funds, Investeco, and RBC Generator Fund.
- Federal, provincial and municipal governments have a variety of grants available for all types of entrepreneurs.
Not surprisingly, the web is also an excellent gateway to capital:
- There are a variety of “metaportals” to find different sources of capital like FundingPortal or MaRS’ impact fund directory.
- Crowdfunding portals are an increasingly common means of raising donations or driving pre-sales. There are a number of portals open to Canadians, including CSI Catalyst, Indiegogo and Kickstarter.
- Investment portals like MaRS’ Social Venture Connexion (SVX) are available for impact ventures looking for debt or equity financing from accredited investors. Launched six months ago with 12 ventures, SVX has already seen market traction with $650,000 in capital raised.
A few tips
As you begin to look at these potential sources of capital, here are a few tips to consider:
- Targets: Map out and steward your investor and funder base, starting with those closest to you.
- Regulations: Research relevant regulations (e.g., securities laws) that provide you with pathways and/or restrictions for raising capital. Make sure you align your capital-raising efforts with your corporate structure as a for-profit, co-operative, or non-profit organization.
- Timing: Raising capital can take a long time, and it is a long-term, ongoing endeavor.
- Bootstrapping: Don’t discount bootstrapping as a viable means of starting or growing your enterprise. You may find that your time is better spent developing your venture, rather than raising capital.
- Blended Financing: You can combine different types of capital (grants, loans, equity) from a variety of sources to achieve your capital-raising goal.
- Implications: Learn the implications of different types of capital, from simple grants to more complex equity arrangements.
- Human capital: It’s not all about the Bordens. Don’t forget about the mentorship and advice you may need from potential investors, as well as small business centres and innovation centres, such as your local Regional Innovation Centre, or MaRS.
Adam is the Director, SVX at MaRS. Adam helped found the MaRS Centre for Impact Investing and the School for Social Entrepreneurs – Ontario. Prior to MaRS, he was Executive Director of the Ontario Association of Food Banks (OAFB). See more…