Written by Nogah Kornberg, Executive Director, Young Social Entrepreneurs of Canada
In late September, the Young Social Entrepreneurs of Canada and the Acumen Fund Toronto Chapter joined to host “In the Investor’s Chair.” We used the time to go through a case study of EcoTact, a social enterprise operating in Kenya. Our goal was to sort through the information that was given, and decide whether or not to invest in EcoTact.
While our discussion was focused on EcoTact, there was a lot for young social entrepreneurs in Canada to think about when it comes to seeking investment. Three quick things to remember from the investor’s perspective:
Money and Time
Investors can add a lot more value to your enterprise than only money. Many investors have experiences and insight that can contribute positively to your growth. The question becomes how much involvement do you want from your investors? How much is your investor willing to give of their time?
Part of the investor’s answer might have to do with how much money they’re contributing to your enterprise. Would an investor be more willing to put in their time to help a 20K investment succeed or a 100K investment succeed?
There are some great investors who, regardless of the amount, want to include mentoring as part of an investment relationship. If that’s the kind of relationship you want, be sure to seek out those investors.
Funding Ideas vs. Funding Growth
Investors need proof that your enterprise is going to succeed. Entrepreneurs seeking investment for growth purposes will already have their proof of concept, a sales record, etc., making it easier to entice investors.
If you are in the idea stage, what proof do you have that this idea will succeed? This is where proving that you have a strong team, as well as having a solid business plan becomes critical. If you are seeking investment at the idea stage, you’ll need to have a strong foundation based on proof.
Proof
When looking at EcoTact, there was very little data for the Acumen Fund to base their decision on. For our discussion group, the lack of data made it especially difficult to build confidence in the idea. Many people expressed hesitation in investing in EcoTact because of this.
In Canada, we have access to a lot of data that already exists, and an ability to do our own market research. For investors, the data is only the beginning. How you analyze it, the conclusions your draw from it, and the strategy you develop based on the data, will allow an investor to develop confidence in the potential of your enterprise.
When we’re seeking investment, we tend to focus on our enterprise’s needs: amount of financing, amount of equity we’re willing to give, the investor’s level of involvement, etc. However, it is important to think from an investor’s perspective as we seek out their money, and ensure that we can meet the needs of the investors we’re pitching to, and that they can meet ours.
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