You have the passion, drive and the big idea. Funding is the next important aspect, because without it, getting your idea of the ground will be impossible. Getting the initial funding is usually easy: friends, family and you can put in the funding required to get your startup off the ground.
But what after?
According to a study by Intellecap, more than 90 per cent of social enterprises claimed that they are in need of funding. Depending on the stage of the start-up, type of legal structure and maturity of the idea, there are various sources of funding. They includes seed and angel funds, big social impact VCs like Omidyar Network, Lok Capital and Aavishkaar, grant funding agencies and even debt funding.
Here are a few ways to secure funding while navigating from seed to the Series A stage, and beyond.
1) Business plan competitions, challenges and winning awards:
There are numerous business plan competitions in India and outside. These are usually suited startups begun by students. Some of these include Indian School of Business run iDiya competition and IIM-Calcutta’s Tata Social Enterprise Challenge.
Winning awards is another way to secure limited funding. Awardees at the annual Sankalp Forum, can pick up upto $ 70,000 in cash grants. The Artha Venture Challenge gives social enterprises access to upto Rs. 25 lakh in equity funding. Technology company Dell runs a global challenge dubbed the Dell Social Innovation Challenge for students, and has disbursed more than $450,000 in cash awards so far.
Anything from Rs 10,000 to a few crore.
2) Seed stage and angel funding:
One of the best ways to secure funding at the early stages is to secure for seed and/or angel funding. Unitus Seed Fund (USF) has been one of the most prolific social investors at this stage. The others include UnLtd India, Upaya Social Ventures and Chilasa. Of late there have angel investing has somewhat been institutionalized. Some of these angel networks with an emphasis to invest include I3N (Intellecap Impact Investment Network), Impact Circle and Indian Angel Network. A more complete list of seed and angel investors has been put together by USF here.
Anything from Rs. 10,000 to a few lakh.
3) Grants and donations:
Most grants and donations are usually given to non-profits. In India grants are awarded by foundations like the Bill and Melinda Gates foundation, philanthropy-based impact investors like Omidyar Network and MNCs like Google. But some grants are also awarded to non-profits. The World Bank, for example is awarding its $1 million 2014 India Development Marketplace grants to both for-profits or non-profits.
Anything from a tens of thousands to a few crores.
This is a relatively new concept but can be very effective when trying to raise funds for a specific cause or project. Indian crowdfunding platforms like Wishberry and Ketto can be leveraged or even international ones like Kickstarter and Indiegogo. Avasara Leadership Fellows for example have raised $4629 for a community literacy project and lending library in Dharavi, Mumbai on Kickstarter, this is more than the $ 1,000 they set out to raise, and they still have a few days to go.
Anything from a tens of thousands to a few lakh.
5) Social enterprise incubators:
Being part of an incubator provides more than just funding. It gives a start-up access to infrastructure, mentors, business advice and network with other social entrepreneurs. Villgro has a program where they offer a social entrepreneur infrastructure, business support and a stipend of Rs. 25,000 per month for a year. UnLtd India, Dasra and the Deshpande Foundation run Hubli Sandbox are some of the others that offer incubation support.
From a few thousands to number of lakh.
6) Social Venture Capital firms:
Most of the funding that is available in the impact investing space is the hands of social VCs like Omidyar Network, Lok Capital, Unitus Capital and Aavishkaar. These are other impact investors have close to a billion dollars waiting to be invested in social enterprises. Start-ups on a high growth trajectory addressing a significant market need stand a good chance of procuring funding. A word of caution here: the more money raised, the bigger the pressure of growth and scrutiny from impact investors. Remember the SKS Microfinance debacle post IPO?
Between Rs. 1 crore to Rs. 10 crore.
7) Debt financing:
Good-old debt financing is another option for social enterprises. Many of the banks and financial institutions offer loans. There are also impact investors like Chilasa and Grassroots Business Fund who provide debt financing. The government run National Skill Development Corporation (NSDC), besides providing equity and grants, also dishes out loans. Debt financing is a good idea, especially for short-term capital needs, and it comes with the added bonus of not having to dilute equity.
From a few lakh to multiple crore.