Tip 1: Make sure your social enterprise is investable
Key things investors look for are that the social enterprise has a track record of surpluses, has confirmed future income streams and revenues, has a solid business plan, the entrepreneur is receiving a wage (so that the surpluses are not a result of this person doing the work for nothing) and the social enterprise is not dependent on one individual for its success.
Tip 2: Pick the right type of investment
Nowadays there are a plethora of options available to social enterprises looking for investment. It is often all too easy to pick the wrong type of investment – and go with the first offer. My advice is to look at all of the following (plus any other options investors offer you) and decide on the pros and cons of each for your organisation.
- Loan with fixed or variable interest rates
- Ordinary share capital
- Preference or other types of share capital (that don’t involve giving away ownership of the organisation)
- Earn outs and revenue participation schemes
- Other types of quasi-equity products
- There will be a subsequent article that discusses the pros and cons of each of these in more detail.
