How to secure investment for your social enterprise
This resource explains the different types of funding sources for your social enterprise, and gives more detailed country-specific advice on funding sources for Scotland, Estonia, Finland, and Romania.
Download this learning resource as a PDF: Securing Investment
Fundraising or securing investment is the process of raising money for an intended purpose. Your enterprise can pursue one or more different types of funding. Identifying the lifecycle stage of a business venture can help you to decide which funding opportunities are most appropriate for your situation.
For example, start-up funding is commonly available for social enterprises who are in the initial stages of setting up and operating. On the other hand, there may also be funding or contracts which are only available to experienced enterprises who have a track record of performing well.
Sources of funding
Different stages of start-up or development require different sources of funding and capital. Typical sources of financing for start-ups include:
1. Government grants and other private grants
These are a great source of financing your rural social enterprise. Grants are non-repayable funds given by one party (often a government department, foundation, or trust) to a recipient (social enterprise, business, or individual). In order to receive a grant, you are usually always required to fill out a grant application – detailing what you will use the money for.
Grants are often made to fund a specific project or set of goals, and might require a level of compliance and reporting. You may have to prove that you are meeting the goals stated in your grant proposal and provide evidence of this.
The major providers of grant funding will differ from country to country, but are generally provided by governments, government agencies, and support organisations who exist to support and develop social enterprise. Grants are also commonly offered by foundations, private companies, and lotteries.
Getting grants can be tough – there may be strong competition and the criteria for awards are often stringent. Some grants require you to match the funds you are being given, the amount of match funding required varies, depending on the granter.
Generally, you will need to provide:
- A detailed project description
- An explanation of the benefits of your project
- A detailed work plan with full costs
- Details of relevant experience and background on key managers
At a European level, there are various funding programs and grants available, such as: the European Regional Development Fund, the European Social Fund, and the European Agricultural Fund for Rural Development. At an international level, there is also the International Fund for Agriculture Development.
2. Angel Investment
Angels are generally wealthy individuals or retired company executives who invest directly in small enterprises owned by others. They are often leaders in their own field, who not only contribute their experience and network of contacts, but also their technical and/or management knowledge.
In exchange for risking their money, they reserve the right to supervise the enterprise’s management practices. This often involves a seat on the board of directors and an assurance of transparency.
To meet them, you have to contact specialized associations or search websites on angels. At European level, there is the European Business Angels Network (EBAN), a non-profit association representing the interests of early stage investors across Europe.
Established in 1999, EBAN is today a pan-European organisation that connects early-stage market players from Europe and all over the world. Another network is Europe Angel Investors, whose website shows angel investors per country and location, and their history of investment.
3. Business Incubators
Business incubators or ‘accelerators’ provide support for new businesses in various stages of development. However, there are also local community development incubators, which focus on areas such as job creation for rural community members, community revitalisation, and partnering to host and share services.
Commonly, business incubators help new and start-up businesses to develop by providing services such as management training or office space. As well as sharing or providing premises, incubators may offer share their administrative, logistical, and technical resources.
Generally, the incubation phase can last up to two years, and once the product or service is ready, the social enterprise will leave the incubator’s premises to start out on its own.
The Welsh ICE (Innovation Campus for Enterprise) is based in Wales, in the UK, and offers co-working spaces at reduced rates for start-up enterprises. The benefits of working in close proximity to other start-up enterprises results in natural referrals, partnerships, and peer support networks. The Campus also host expert workshops, advice surgeries and mentoring.
Read more about the Welsh ICE here.
Crowdfunding is a modern tool for funding a project or venture by raising small amounts of money from a large number of people, typically via the internet. Crowdfunding is seen as a form of alternative finance, and has been used by a number of social enterprise projects.
ReTweed is a social enterprise in the Scottish Borders, providing support to women with training programmes in textile skills and a safe space for women to meet, talk, learn, create, and craft together. They launched a crowdfund campaign in 2019 to fund their activities.
Killin and Ardeonaig Trust is a community organisation in rural Stirlingshire, who raised investment via crowdfunding to purchase their local newsagent shop to enable them to lease it to a social enterprise for community benefit.
Read more here: https://www.crowdfunder.co.uk/more-than-a-post-office
There are different crowdfunding platforms depending on what you are raising funds for. Two of the most popular sites for business, social enterprise, or creative project crowdfunding are Kickstarter and Indiegogo. You can read more about the differences between crowdfunding platforms here: https://www.crowdfunding.com/selection/
This presentation given by Tim Wright from twintangibles (a leading crowdfunding consultancy organisation in Scotland) explains the 4 models of crowdfunding, top tips, and things to avoid: https://www.highlandtsi.org.uk/crowdfunding
5. Fundraising, Donations, and Sponsorships
Another source of financing for rural social enterprises is through fundraising, donations, and sponsorships. For rural and community-owned enterprises, fundraising and charity events can be a good way to raise funds via donations from individuals, groups, and businesses.
Holding fundraising events in your community can be a good way of encouraging local stakeholders to get involved and make a donation to your cause. You may also discover potential partnerships, and be able to pool resources and expertise.
6. Social Investment
Loans are an option to provide repayable finance to help an organisation achieve a social purpose. Charities and social enterprise can use repayable finance to help them increase their impact on society, for example by growing their business, providing working capital for contract delivery, or buying assets.
Some investors have a focus on social investment and some mainstream banks provide an element of loans with a social purpose. To secure loan finance you will need a solid business plan and financial projections.
Scottish Community Reinvestment Trust provide an outline of loan options here: https://scrt.scot/investment-options/
There is a useful page with country specific access to loan investment in other parts of Europe available here: https://europa.eu/youreurope/business/finance-funding/getting-funding/access-finance/search/en
7. Membership Fees
This is a source of financing for member-based organisations. Membership organisations offer specific benefits to their members, including:
- Professional association with a well-known and respected organisation
- Perks such as free consultancy and support, or discounts to conferences and other events
- Networking opportunities with people and groups (locally, regional, national, or international, depending on the type of organisation)
- Membership organisations also sponsor industry awards, which shine a light on outstanding work that should be showcased, but might otherwise remain undiscovered
It is important to understand what the best source of funding is for your organisation. This might be one, or a combination of several. As well as understanding which source of funding is best, it is crucial to be aware of the various investment rounds which take place.
- Click here to read about additional funding sources for Romanian and Estonian organisations.
- Click here to read about additional funding sources for Scottish and Finnish organisations.
Sources of funding in different countries
Some examples of sources of financing available for start-ups and small, medium-sized enterprises from the ViSEnet partner countries are offered below.
Estonia: Coming soon
Finland: Funding Sources Finland
Romania: Funding Sources Romania
Scotland: Funding Sources Scotland
Download this learning resource as a PDF here – Securing Investment
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