Top ten: Room to Grow
Pitching for Growth Capital: Questions Every Social
Enterprise Must Address.
A
social enterprise leader who is making a pitch for growth capital does
not have an investor’s ear forever. Here are questions to consider that
will help you make a compelling case.
-
What
type of investment are you seeking?
.
Before
designing your pitch, consider what type of capital you are seeking.
Equity? Debt? A grant? A donation? Different kinds of investors
seek different kinds of returns – from purely financial to purely
social, or somewhere in between. A social enterprise seeking
capital must design its pitch around the interest of a particular
investor.
-
What are the
investor’s key criteria for investment?
Every
investor is looking for a social enterprise that has specific
attributes or has reached certain benchmarks. In seeking investment
capital, a social enterprise leader should understand the investor’s
criteria and emphasize how the organization meets or exceeds those
expectations. In the December 2007 issue of the Community Wealth
Vanguard, Calvert Social Investment Foundation’s Gita Rao shared
that Calvert looks for strong financial track record, a good
management and production track record, and a diversified funder
and/or revenue base (article).
-
What
is the difference between the business plan and
the pitch?
If you
think of your business plan as an operating manual, think of your
pitch as a 30-second commercial. The investor does not need to know
the ins and outs of your business plan; your pitch should provide
evidence of the social enterprise’s ability to conceive and execute
a venture idea and validation of an enterprise concept.
-
What
elements of your business plan should you include in your pitch?
Include the key pieces of information that would assist the investor
in evaluating the organization: the problem or community need your
business addresses, your social enterprise’s solution, an overview
of the market, competition, expected financial and social return on
investment, and finally, the management team’s accomplishments.
-
What is the
problem your social enterprise is trying to solve?
An
effective way to connect with an investor is to describe a problem
that your target market faces, also known as the market need.
Further quantify the situation as much as possible to illustrate
your point. A social enterprise offering corporate volunteering
solutions, for example, could cite statistics on the growing
interest in community involvement in the current workforce.
-
What is your
social enterprise’s solution to the problem?
It is
important to keep this illustration simple, using a single example
and highlighting one product or service provided by your venture.
The social enterprise offering corporate volunteer solutions, for
example, could highlight its volunteer program consulting services
for corporations.
-
What is the size
of the market?
Identify the portion of the market your enterprise can realistically
capture. Investors do not want fluffy, over-inflated figures.
-
Who are the
other competitors in the market?
A
common mistake in pitching for capital is failing to highlight your
direct and indirect competition; an investor wants to know that you
have a strong sense of who else is in the market. After you outline
the competitive landscape for a potential investor, highlight what
you have to offer and its advantage over what others are offering.
-
What is the
social and financial return on investment?
A
social enterprise investor wants to know what financial and social
outcomes his or her investment will produce: how much revenue will
the corporate volunteering program generate? How will the
nonprofits benefit from utilizing the corporate volunteers? When
designing your pitch, explain how you developed those numbers. In
each pitch, outline the elements of your social and financial return
on investment starting with the one that would be most important to
that investor, with an emphasis on the return you would expect.
-
Why is your
management team well qualified to lead this enterprise?
Perhaps you’ve heard the maxim, “An investor is more likely to
invest in an A team with a C idea, than a C team with an A idea.” It
is important to demonstrate that your organization’s management team
possesses strong expertise in your enterprise area and emphasize
your team’s accomplishments over job titles and years of experience.
To learn more, please view the presentation,
Pitching for Growth Capital,
which was presented by CWV at the March 2008 Social Enterprise Alliance
Conference.
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