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The Truth About Social Enterprise Funding With Tom Dawkins
The Truth About Social Enterprise Funding With Tom Dawkins
When you're building a new project, funding can often feel like the biggest engine for growth.
You see X climate startup getting millions in funding to change the world, and it looks enticing!
But getting funding doesn't solve all of your problems.
In fact, it can introduce more problems than you started with.
I've been interviewing impact founders to understand the strategies behind world changing businesses.
This week I sat down with Tom Dawkins, founder of LendForGood, to talk all things impact funding 👇
But first, there's a key question you need to answer before you seek any sort of funding...
"What do I actually need the money to do for me?"
These boots are made for strappin'
Money usually does 1 of 3 things for a business:
Expand the business to reach more people
Accelerate the business to reach those people faster
Streamline the business to work more efficiently
But none of this matters if you haven't actually validated:
The problem is worth solving
The market is large enough
Your solution is in demand
If you haven't validated these then adding money to the equation isn't going to solve anything.
You may want to consider bootstrapping your business until you can prove you know where you're going and what you need funding for.
I like to think of it this way:
Bootstrapping gives you immediate market feedback (to validate the problem, market, and solution)
Funding gives you the resources to move faster (once you've found that validation)
Plus, you're still technically getting funding for a bootstrapped business, it's just coming from your customers through sales.
Funding options for impact businesses
If you do decide that funding is for you, there are many options to explore.
I like to think about them in 3 main buckets:
1. Philanthropic (aka here take my money)
Philanthropic funding is a great way to get a project funded from people (or organizations) that are very mission-aligned.
Examples: grants, donations, crowdfunding
The upside: there's typically no repayment needed
Considerations: "no repayment" doesn't mean "easy money", philanthropy is highly competitive and likely requires a lot of impact reporting to prove you're doing good
2. Debt-based (aka take my money but I want it back)
Debt-based funding can be a great option for proven business models (cash-flowing businesses primarily).
Examples: loans, revenue-based financing
The upside: you keep full ownership of your company
Considerations: you take on regular repayment obligations (plus interest)
3. Equity-based (aka take my money but I want in on the action)
Equity-based funding is usually what you see headlines about, typically for high-growth potential businesses.
Examples: angel investors, venture capital, impact investors
Why you may go this route: you'll typically get larger amounts and strategic support from the funding team
The downside: you give up a portion of your company, and the bigger hurdle is that you'll face the double bottom line challenge
The double bottom line challenge means you not only have to prove business impact, you also have to prove social impact.
Essentially, you're playing the same game as all the other startups.
Just with harder rules.
And this double bottom line challenge usually surfaces just as businesses are picking up traction...
"The Missing Middle" and how to bridge it
Funders are doing TONS of due diligence to make sure they make the right investments, and that due diligence is expensive.
When you're an impact business who needs to report on business AND social impact, that due diligence is even more expensive.
This means that smaller deals will likely lose the investor money.
Which creates this strange scenario called "The Missing Middle" where a growing impact business is:
Too big for crowdfunding (>$50k)
Too small for major impact investors (<$1mm)
This gap is where impact businesses (even with traction) start to stagnate.
Or worse, die off.
But, there's good news! Tom Dawkins from LendForGood is solving for this exact gap.
LendForGood is a crowd lending platform that uses trusted partners (called syndicates) to vet new opportunities.
This creates a few key outcomes:
Helps impact businesses find middle-stage funding
Provides curated deals for impact investors
Cuts down on due diligence costs
Regardless if you're on the founder or funder side, you should definitely check them out!
Resources to dive deeper
Need some more impact funding in your life?
Check out these tools and resources from the community:
Tech non-profit funder database - a massive database of funders from all over the world (courtesy of Faiz فيض Jamdar)
Funding for impact founders - funding opportunities of all shapes and sizes (courtesy of Esme Verity, Considered Capital)
Alternative funding sources - alternative funding sources for impact projects (courtesy of Ben Chutz, Do Impactful Things)
When you're building a new project, funding can often feel like the biggest engine for growth.
You see X climate startup getting millions in funding to change the world, and it looks enticing!
But getting funding doesn't solve all of your problems.
In fact, it can introduce more problems than you started with.
I've been interviewing impact founders to understand the strategies behind world changing businesses.
This week I sat down with Tom Dawkins, founder of LendForGood, to talk all things impact funding 👇
But first, there's a key question you need to answer before you seek any sort of funding...
"What do I actually need the money to do for me?"
These boots are made for strappin'
Money usually does 1 of 3 things for a business:
Expand the business to reach more people
Accelerate the business to reach those people faster
Streamline the business to work more efficiently
But none of this matters if you haven't actually validated:
The problem is worth solving
The market is large enough
Your solution is in demand
If you haven't validated these then adding money to the equation isn't going to solve anything.
You may want to consider bootstrapping your business until you can prove you know where you're going and what you need funding for.
I like to think of it this way:
Bootstrapping gives you immediate market feedback (to validate the problem, market, and solution)
Funding gives you the resources to move faster (once you've found that validation)
Plus, you're still technically getting funding for a bootstrapped business, it's just coming from your customers through sales.
Funding options for impact businesses
If you do decide that funding is for you, there are many options to explore.
I like to think about them in 3 main buckets:
1. Philanthropic (aka here take my money)
Philanthropic funding is a great way to get a project funded from people (or organizations) that are very mission-aligned.
Examples: grants, donations, crowdfunding
The upside: there's typically no repayment needed
Considerations: "no repayment" doesn't mean "easy money", philanthropy is highly competitive and likely requires a lot of impact reporting to prove you're doing good
2. Debt-based (aka take my money but I want it back)
Debt-based funding can be a great option for proven business models (cash-flowing businesses primarily).
Examples: loans, revenue-based financing
The upside: you keep full ownership of your company
Considerations: you take on regular repayment obligations (plus interest)
3. Equity-based (aka take my money but I want in on the action)
Equity-based funding is usually what you see headlines about, typically for high-growth potential businesses.
Examples: angel investors, venture capital, impact investors
Why you may go this route: you'll typically get larger amounts and strategic support from the funding team
The downside: you give up a portion of your company, and the bigger hurdle is that you'll face the double bottom line challenge
The double bottom line challenge means you not only have to prove business impact, you also have to prove social impact.
Essentially, you're playing the same game as all the other startups.
Just with harder rules.
And this double bottom line challenge usually surfaces just as businesses are picking up traction...
"The Missing Middle" and how to bridge it
Funders are doing TONS of due diligence to make sure they make the right investments, and that due diligence is expensive.
When you're an impact business who needs to report on business AND social impact, that due diligence is even more expensive.
This means that smaller deals will likely lose the investor money.
Which creates this strange scenario called "The Missing Middle" where a growing impact business is:
Too big for crowdfunding (>$50k)
Too small for major impact investors (<$1mm)
This gap is where impact businesses (even with traction) start to stagnate.
Or worse, die off.
But, there's good news! Tom Dawkins from LendForGood is solving for this exact gap.
LendForGood is a crowd lending platform that uses trusted partners (called syndicates) to vet new opportunities.
This creates a few key outcomes:
Helps impact businesses find middle-stage funding
Provides curated deals for impact investors
Cuts down on due diligence costs
Regardless if you're on the founder or funder side, you should definitely check them out!
Resources to dive deeper
Need some more impact funding in your life?
Check out these tools and resources from the community:
Tech non-profit funder database - a massive database of funders from all over the world (courtesy of Faiz فيض Jamdar)
Funding for impact founders - funding opportunities of all shapes and sizes (courtesy of Esme Verity, Considered Capital)
Alternative funding sources - alternative funding sources for impact projects (courtesy of Ben Chutz, Do Impactful Things)
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200+
thinkers, builders, and investors
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200+
thinkers, builders, and investors
Get Field Notes straight to your inbox each week
200+
thinkers, builders, and investors
