Once it’s time to level up from freebies given by family and friends, securing funding for impact-driven enterprises can be difficult because of the need to balance social ambition with financial reality. 

One of the biggest challenges social enterprises face is lack of access to capital. Traditional investors (like angel investors or venture capitalists) are, on the whole, less inclined to invest in such businesses because of their perceived high risk, as social entrepreneurs are often trying to solve problems that don’t have easy solutions and typically work in areas that are underserved, such as poor or rural communities. Impact investors, who actually count social impact as part of their ROI (return on investment), may be the solution, but for now they are fewer and further between.

This means socialpreneurs usually depend on grants and donations from foundations and governments, crowdfunding, and bank loans, which, while extremely helpful in the early stages, can be limited in scope and are not usually long term, sustainable financing sources.

For this week’s challenge, our lucky agents will have the chance to speed pitch to an impact investor. Impact investing is actually an investment strategy that prioritises both positive change and financial returns. Unlike pure philanthropy,  impact investors expect financial returns that are (at least) comparable to market returns.

So what are our agents’ best chances of impressing this impact investor?

Among other things, they’ll need to communicate a clear understanding of the needs and wants of their target demographic; explain their businesses’ USP (unique selling point) and how that solves the identified social problem; demonstrate exactly how they plan to use the requested investment; and break down thorough, realistic financials that project how the business will make money and grow over time. 

Our agents will have to ensure they understand all the risks involved with their business (such as legal, technological, regulatory or product liability risks) and be prepared to answer tough questions about how they plan to mitigate those risks.

And something that might surprise young entrepreneurs is how much importance investors place on them as people. Many investors closely assess a founder’s character – Are they passionate and determined? Will they be trustworthy and enjoyable to work with? Investors want to see that their funding goes to a start-up with a solid, cohesive team that works well together, and our agents must be prepared to convince the business angel that this is the case in their businesses.