5 Ms to make a social enterprise investment-ready

If there is one thing that social entrepreneurs (SEs) need aside from big, exciting, and noble ideas, it’s getting the right funding.

To help social entrepreneurs get the right funding from investors, BPI Sinag, the flagship program of BPI Foundation, invited Ms. Priya Thachadi, chief executive officer of Villgro Philippines—a social enterprise incubator that funds, mentors, and supports social entrepreneurs—to share some tips about becoming investment-ready.

“Investors want impact and return on investment. Social entrepreneurs have to show that they have serious impacts on their communities and beneficiaries, while demonstrating their ability to return investors’ money,” said Ms. Thachadi.

She listed five crucial “Ms”:

• Management team. Before making a pitch, social entrepreneurs must know their management team first. They must understand the sector that they engage in. They must have significant experience and the right skill set for the job.
  Investors initially look for a clear vision and ideas, but it is the capability of the social entrepreneurs to execute their plans that ultimately matters to investors.
• Market. Social entrepreneurs have to deeply understand the market in terms of its size and trends. Have they identified the gaps? Is their product fit for the market? Will people buy their product or avail of their service? Can they do it better than anyone else?
• Model. How are they going to make money? Will the business be a one-time thing or a recurring one? Who is the target market and which marketing channels are they going to use to reach this market?

Social entrepreneurs must be able to articulate their business and revenue model clearly. This is what investors look for in a social enterprise.

• Money. They have to make sure that money matters are discussed clearly and transparently. How much are they looking to raise? They also have to be clear about how they are going to use the funds to increase the value of their business and reach a successful exit. Where will the money get them in the early stage? What milestones are they aiming for? And most importantly, how are they going to return the money to investors? A clear and reasonable financial forecast will be helpful.
• Momentum. High-level investors would most likely look for business’ traction or momentum. Can the social entrepreneurs really reach the customers who will benefit from the solutions offered? Is the business moving to reach pre-defined goals that create value or mitigate risk?

Ms. Thachadi reminded social entrepreneurs to carefully vet their investors, too. It is, after all, a long-term relationship.

“Even if you are taking a loan or equity investment, I believe it is important to understand who you’re taking money from. What is their intention? What is their background? Do they believe in your vision? And what do they bring to the table other than money?” she said.